Mining Code Reforms

Case Study

Direct Support in Colombia

Through its Energy, Mining and Environmental Project, the Canadian International Development Agency (CIDA) provided technical and financial support to redraft Colombian mining legislation. The revised 2001 Mining Code (Law 685/01), which was adopted without consulting with potentially-affected indigenous communities, created investment conditions that are extremely favourable to foreign companies. The Code weakened a number of existing environmental and social safeguards and created significant financial incentives including dramatically reduced mining royalty and tax rates.¹

Indigenous groups in Colombia argue that the lack of consultation on this new legislation contravened International Labour Organization Convention 169, which was ratified by Colombia and formally adopted into national legislation in 1991. They argue that the Code places limitations on the concept of indigenous territory that violate the Colombian Constitution. Moreover, the legislation eliminates prior requirements that local communities receive economic benefits deriving from mining activity.²

Case Study

Indirect Support in Africa

The World Bank has played an important role in encouraging countries–by some accounts over 100–to "reform" their mining legislation in order to attract foreign investment. The result has been a dramatic increase in foreign direct investment in this sector in many areas of the world that previously had not experienced such activity, particularly in developing countries.³

The World Bank has promoted African mining code reform since the 1980s. As part of a World Bank–sponsored reform process, Ghana lowered income taxes and royalty rates, and created other financial incentives to encourage private sector investment in the mining industry in 1986. The ensuing mining boom benefited foreign investors over local communities. Guinea changed its laws in 1995 to make private companies, rather than the state, responsible for environmental protection. A 2001 study found a dramatic deterioration of air quality around Guinean mines and massive deforestation, among other environmental problems.

As a member of the World Bank, Canada has supported these reforms, which benefit Canadian companies. Tanzania is a case in point. By the early 1990s, Tanzania was generating about US$30 million in official gold exports; artisanal miners were responsible for the bulk of this wealth. In the mid-1990s, mining code reforms encouraged Canada's Sutton Resources Ltd. to acquire exploration rights in the country. Artisanal miners were removed from the concession area with little or no compensation, as they were considered to be illegal squatters. By 2001, Canada's Barrick Gold Corp. had bought the Bulyanhulu concession and expected annual profits of US$60-75 million. By "reforming" its mining sector, the Tanzanian government gave up US$60–75 million in gold exports and a source of livelihood for at least 30,000 small-scale miners. In return, it received annual royalties of $5 million, an estimated $10 million per year in local goods and services, and 600 local jobs.⁴