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Mary Anastasia O'Grady: Why Central America stays poor

Section: Daily Dispatches

By Mary Anastasia O'Grady
The Wall Street Journal
Sunday, October 7, 2018

The July 2017 idling of the Escobal silver mine in southeastern Guatemala displaced more than 850 workers and endangered the livelihoods of thousands more whose jobs are indirectly supported by the project. The loss of family income has harmed communities in the municipality of San Rafael Las Flores and in some cases sent the unemployed north to look for work in the United States.

Nature can be cruel in underdeveloped countries. Yet it wasn't fire, flood, mudslide or volcano that served this economic gut punch. This is a manmade travesty, courtesy of Guatemala's Constitutional Court. It is a saga worth recounting because it goes to the heart of the country's intransigent poverty.

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The mine is owned by Minera San Rafael, or MSR, a Guatemalan subsidiary of Nevada-based Tahoe Resources. Tahoe spokesman Edie Hofmeister told me that since 2010 MSR has invested $1.7 billion in the "development and operation" of the mine. "This includes more than $136 million paid to the Guatemalan government in taxes, royalties and voluntary payments" as well as "$66 million in salaries" and "$600 million spent on local suppliers," Ms. Hofmeister said last week.

Tahoe put more than $10 million into "social investment and economic development programs," including "community education, health and nutrition, infrastructure, capacity development, entrepreneurship and local governance initiatives," Ms. Hofmeister said. One notable project was a vocational training center into which it invested more than $1 million.

Then came a legal complaint filed against the government's Ministry of Energy and Mines at the Supreme Court by the Center for Legal, Environmental and Social Action, an antimining nongovernmental organization known in Guatemala by its Spanish acronym Calas.

There was no charge of environmental or labor violations on MSR's part. Instead Calas said the Ministry of Mines hadn't adequately consulted a local indigenous people—known as Xinca—about the mine before granting MSR a license to extract silver in 2013.

The mine isn't on Xinca communal lands. But the United Nations International Labor Organization's Convention No. 169 states that indigenous peoples living in the area of development projects need to be consulted. Guatemala is a signatory to the convention. Yet its Congress has never passed the implementing legislation that would spell out the process required for compliance.

On July 5, 2017, Guatemala's Supreme Court sided with Calas in a preliminary injunction ordering the "provisional suspension" of the mine. The ministry of mines immediately appealed to the Constitutional Court, the highest court in the country. The high court upheld the lower court. The mine remained closed.

Tahoe says this ignored a precedent set by the Constitutional Court only months before in a similar case involving a hydroelectric project. In that case the company was allowed to continue operations while consulting with local indigenous people.

On Sept. 10, 2017, the Supreme Court issued a final ruling: The mine could be reopened while the government conducted indigenous consultations simultaneously. Calas appealed, and the mine remained closed while the Constitutional Court called a public hearing for Oct. 25, 2017.

By law the high court should have ruled within five days after the public hearing. Instead it delayed for nearly a year. This Sept. 3 it issued a preliminary ruling in which it acknowledged a 2002 national census that found only two Xinca living in the municipality of San Rafael Las Flores, where the mine is located. Nevertheless it ordered that the mine remain closed and instructed the ministry of mines to investigate whether there are perhaps more. By law, the high court was obligated to issue a final ruling in 48 hours. The parties are still waiting.

Despite the court order to halt operations, MSR maintained its staff through 2017 in the expectation that the mine could reopen. But by January the company began laying people off. It still has local personnel employed for maintenance, but direct salaries and benefits earned have fallen by nearly 40%. Indirect repercussions are far greater. MSR has had to shut down its vocational training center and curtail its many community programs.

Ms. Hofmeister told me that "MSR has been subject to extortion attempts by individuals who have presented credible evidence that -- in return for bribes -- they could ‘guarantee a favorable outcome' not only at the Constitutional Court but also at the Ministry of Energy and Mines and the tax authority." There were also threats of violence if such approaches were reported. She says it met with the U.N.'s International Commission against Corruption in Guatemala, known as CICIG, in late 2017 to report this and court irregularities. I asked CICIG if it had acted. It didn't respond to my query.

The mine could easily be reopened while respecting the rights of the Xinca. Apparently the high court doesn't want to see that happen, no matter the cost to the Guatemalan people.

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