Glamis Gold and the IFC: Gross Mismanagement in Guatemala

Glamis Gold and the IFC: Gross Mismanagement in Guatemala

by The Halifax Initiative & FoE Canada

10th December 2005

The Marlin mine in the western highlands of Guatemala is the subject of a recent investigation by the World Bank's Compliance Advisor Ombudsman (CAO). The mine, which is owned by Canadian company Glamis Gold, is financed by the International Finance Corporation. In its report, the CAO reveals a series of institutional failures in project assessment and management on the part of the IFC's Oil, Gas, Mining and Chemicals Department.

The CAO began investigating allegations relating to the Marlin mine in May 2005, following receipt, in March, of a complaint by MadreSelva, a Guatemalan environmental organization. The claim alleged that the Guatemalan government failed to consult local indigenous groups about the mining concession, in violation of Convention 169 of the International Labour Organization (ILO). The claimants also alleged that they were not informed of the dangers associated with the use of cyanide in gold extraction, that the excessive use of water by the mine compromised scarce community water resources and that the construction of the mine exacerbated social tensions, creating conditions for violence.

The CAO report was released in September 2005. While the CAO dismisses complainants' concerns regarding water resources in Sipacapa, the area least affected by the mine, it reveals glaring oversights on the part of the IFC. The Report found numerous instances "where increased clarity and greater rigor on behalf of IFC would have been helpful to addressing issues raised by complainants" (p. 39) . A partial list of the most serious shortcomings identified in IFC due diligence and project management includes:

· The IFC failed to guarantee that adequate consultations were carried out with affected populations (p. 33). The CAO confirms findings made by the Guatemalan Human Rights Ombudsman. In May 2005, the Guatemalan Ombudsman issued a report arguing that the licence for the Glamis mine should be revoked because the government failed to consult affected communities about the concession, in violation of ILO Convention 169.

· The Environmental and Social Impact Assessment (ESIA), which the IFC used to review the project, prior to loan approval, was fundamentally flawed. Moreover, several environmental management plans were formulated post project approval, and in some cases, after construction began (p.19).

· The IFC failed to ensure that the project met each of the IFC's relevant environmental and social safeguards and other basic procedural requirements (p.20).

· The IFC failed to indicate how it expected the company to address concerns identified by an independent audit of the company's ESIA or how the IFC planned to monitor the implementation of recommended improvements (p.20-21).

· The IFC failed to adequately assess the adverse socio-economic impacts of the mine (p. 26).

· The IFC failed to assess the potential security and human rights issues associated with mine development in a country with a long history of violence and social marginalization (p. 34).

· The IFC failed to assess the Guatemalan government's capacity to effectively mitigate conflicts that might arise in the region and to regulate the project, a capacity that the report describes as very weak or nonexistent (p. 32-33, 39).

The IFC's response to these damning findings is both ruefully inadequate and highly misleading. In a September 8 press release, the IFC disregarded the multitude of institutional failures identified by the CAO and the series of recommendations made by that office to address these failures. Instead, the IFC held the CAO report out as vindication of its involvement in the project.

Given the CAO's finding that the IFC inadequately assessed the Marlin project prior to loan approval, the community of Sipacapa demands:

· an immediate end to all project-related activity in Sipacapa. The community opposes mineral development in Sipacapa. The community demands that the company leave Sipacapan territory, and that it remove all machinery and installations;
· that the Bank offer Sipacapa real development support that responds to community needs.

If these demands are not met, IFC must recall its loan.

Finally, the IFC's extreme mismanagement of the Marlin mine and its unwillingness to adopt institutional reforms call into question its role in the extractive industries. Recent criticism regarding Marlin comes in the wake of the World Bank Extractive Industries Review. The Review called on the World Bank Group to dramatically reform its involvement in these sectors, ensuring that such involvement is consistent with the Bank's poverty alleviation mandate.

In keeping with this assessment, the IFC's Oil, Gas, Mining and Chemicals Department must either be dramatically reformed to reflect the recommendations of both the Extractive Industries Review and the CAO, or should be shut down.