Into Arcadia we go: Canadian companies digging for gold in South Eastern Europe *


Published on March 22nd 2013

By Barbara Van Haute 

Canada has a long reputation of following others in terms of international economic and military interventions. Where we did promote international intervention, the general record demonstrates that we did so with an underlying sense of caution and fairness. Lester Pearson’s development of the concept of peacekeeping to address the Suez Crisis of 1956 is a clear case in point. Economically speaking, our history demonstrates heavy reliance on the favour and acceptance of major foreign powers; specifically Great Britain and the United States. Seeking favour and acceptance includes developing policies and international agreements that are in sync with the expressed interests of those major foreign powers.

The goals and strategies of nation-states change over time. In 2006, Prime Minister Stephen Harper announced that Canada would be the ‘energy superpower’ of the 21st century. Few political pundits and analysts saw this as a potential reality. Their argument against this happening was that Canada did not have the population, resources and infrastructure to attain this stature. Based on 20th century history and statistics these negative assessments were accurate.

Within the last 6 years, however, some of those statistics are changing, as is our international reputation. Canada has become a more credible power in terms of influence at the international table. This increase in credibility stems from economic policies implemented prior to and throughout the Great Recession. These polices were focused on public fiscal restraint while at the same time ‘growing’ business and markets. Mark Carney’s (outgoing governor of the Bank of Canada) assumption of the governorship of the Bank of England stands as a symbol of increasing respect for Canada’s role in international political economics. According to The Guardian, Carney is enthusiastic about the US Federal Reserve’s tactic of “forward guidance”; which is just another way of promoting gradual and coordinated change in policy. This is similar to the moves undertaken by the Government of Canada under Stephen Harper.

 As an example of Canadian ‘forward guidance’ in economic policy, one only has to acknowledge that corporate tax rates have declined in recent years and we are now the lowest among G7 countries. Fiscal policy management has resulted in Canada having one of the lowest debt to GDP ratios among developed countries. Without question the forward guidance policy of Harper, Carney and Flaherty has been good for Canada. Nevertheless, there is another side to the outcomes of this process; one that few Canadians are aware of.

Canada has become, according to Forbes magazine, ‘the best place in the world to do business’.  While the comment serves as a good sound bite to promote Canadian business development, the background information tells us that the bait for attracting global business entrepreneurs to Canada is not simply low corporate taxes, but the fact that whatever the outcome of their business operations in foreign countries they can never be held responsible in a Canadian court of law. The reason for this lack of foreign investment accountability is the defeat of the private member’s Bill C-300, The Responsible Mining Law, in 2010. This measure was defeated by only six votes after extensive lobbying by Canadian gold mining companies. As a result, Canadian companies with foreign operations cannot be held accountable for their activities (degradation of local environment, health, culture, etc.). This is not an example of Canada following the American lead which has enacted legislation to deal with overseas corporate responsibility.

Canada is becoming a safe haven for unsafe and/or unethical business practices.

And, interestingly enough, the Canadian banking system is insulated from the risk of foreign investment. Canadian banking regulations regarding risk limits associated with credit distribution promote the security of the banking system, and assure that credit will be available largely for low-risk domestic investments. While the regulation makes it more difficult for Canadian businesses to access loans for foreign operations, significant credit is available for international operations through the major global banks and investment firms based in the U.S. and Europe. In short, Canada gets to maintain and improve its record of financial stability while at the same time encouraging businesses to register in Canada with the assurance that they will be lightly taxed and protected against law suits for unsafe operational practices in foreign countries.

The preceding commentary provides the context for Canada’s relations with the European Union in general and southeastern Europe in particular. First off, Canada and the EU are negotiating the final details of the Comprehensive Economic and Trade Agreement (CETA), but obstacles remain. The major impasse, according to some, results from the EU’s desire to modify Canada’s ability to oversee the domestic financial sector (National Post, 13/02/27). Apparently, European financial institutions want less restricted access to the Canadian market. Given that both Ed Fast and Karel De Guch (Canada/EU trade ministers) seem cautiously optimistic about resolving this problem, most analysts see a final agreement being signed before the EU and US begin free trade negotiations in June. The benefits of the agreement for both Canada and the European Union would be easier access to a larger market for foreign investment opportunities in various sectors (financial services, commodities, and precious metals to name a few), and balancing trade deficit/surplus ratios.

 Second, even though these negotiations have been underway since 2009, Canada has also been working to establish better economic and trade relations with individual member states, most notably those in southeast Europe. Great opportunities for private foreign investments develop when recipient states are desperate for foreign investments to combat political and economic challenges. Even though there may be an increase in threats to the success of these ventures, investments in active operations are made if the state government is willing, and able, to ensure the security of these operations. In the case of Romania and Greece, both have experienced some degree of political and economic challenges in the last 5 years. Crucially, their governments have demonstrated their willingness, and ability to protect foreign interests.

In Romania’s case, the challenge is related to its accession to the EU in 2007. Interestingly, Canadian direct investment in Romania more than doubled between 2004 and 2009, and most of that increase has been associated with the burgeoning mining operations.

In Greece’s case, the challenge has been the impact of the on-going economic crisis. Unfortunately, statistics on Canada’s direct foreign investment in Greece since 2008 are difficult to find. But it is clear that Greece, like Canada, has a low corporate tax rate, and the Greek constitution contains a specific clause to protect foreign investments regardless of potential adverse social consequences. In addition, as discussed previously, Canada has declined to enact legislation to ensure corporate responsibility from Canadian mining operations overseas.  These three developments provide a legal framework for natural and human resource exploitation that threaten the security of any Greek community.

Admittedly this interpretation is somewhat controversial, but some of the outcomes of these policy changes tend to substantiate this proposition.  In both Greece and Romania, Canadian business interests are focused, for the most part, on the mining of precious metals, specifically gold. In both countries, the operations have received strong objections from many in the local population as well as a combination of national and global environmental and health advocacy groups. Also, in both cases, respective national governments have demonstrated a commitment to protect those ‘foreign interests’, regardless of vigorous opposition by their citizens. The Canadian government has supported the interests of the Canadian gold mining companies in both countries in spite of clear local opposition.

The opposition, for the most part, is based on concerns about environmental degradation and its associated threats to human health. When these types of concerns are voiced, even by environmental scientists at the University of Thessaloniki, the governments’ responses have tended to be either glib claims of addressing the problem or dismissing the validity of the concerns. But natural resource extraction operations do pose significant threats to both the local environment and the people who live within it. That’s why Environment Canada has specific regulations for the creation, management and maintenance of tailings ponds that handle the usually toxic effluents that result from processing extracted minerals before they are shipped to market. Those toxic substances include, to name a few, arsenic, cadmium and methylmercury. In fact, a 2006 study done on the fate of gold tailings substances in New Brunswick found that the residual cyanide found in these tailings (effluents) causes ‘persistent’ release of methylmercury into the ground and surface water systems. Whether in Canada, Greece or Romania, these substances are either proven or thought to be associated with the onset of various forms of cancer, neurological and respiratory disorders and type 2 diabetes.

A Canadian-based gold mining company, Gabriel Resources, is in the process of getting approval to begin operations in Romania. According to Professor D.C. Popa, (writing for a Canadian Defence and Foreign Affairs Institute publication, 2012) the Rosia Montana gold project in Transylvania has become a “lightening rod” for a collection of groups who oppose the exploitation of Romania’s natural resources, especially by foreign investors. CriticAtac journalist, Victoria Stoiciu of Romania, has also noted in private conversation that in the results of a September 2012 local referendum only 36% of the vote was in opposition, but 80% of the local population is unemployed.

Many of the environmental and health concerns are based on the results of a major cyanide spill that took place in 2000 near Baia Mare (north-western Romania). The spill released over 100,000 cubic meters of cyanide-contaminated water into major river systems in Romania, Hungary and Yugoslavia. The incident was called the worst environmental disaster in Europe since the Chernobyl nuclear leak in 1986. While the accident may have been related to poor safety standards or poor maintenance of the facility, individuals and groups do have a justifiable concern about trusting business and government operations.

In Greece, recent demonstrations against the development of the Hellas Gold operation in Skouries/Halkidiki of northeastern area of Greece have resulted in claims of excessive police responses. The use of tear gas on a noisy, but non-violent mass of people is clearly non-proportional; as is extracting DNA samples from high school students who were apparently suspected of being the perpetrators behind an earlier coordinated attack on the mine site itself. The development of peaceful and now violent demonstrations against Canadian mining operations in northern Greece is a clear indication that Canadian policies and interests are adding to the civil unrest that Greek citizens have to contend with. As with Romania, many of the local objections stem from concerns about degradation of the local environment with the use of cyanide in the gold extraction process.

Although both Gabriel Resources and Hellas Gold have submitted environmental assessment reports to the respective governments, it should be noted that such studies are conducted by geologists, biologists, etc. who are under contract with the mining corporations to validate the most cost effective method of extracting metals that are within acceptable environmental parameters. Seldom are those criteria based on long-term human health impacts.

The question could be raised as to why Canadian firms have become global leaders in gold recovery. Canada has few gold reserves of its own. The corporate expertise resides in Canada because of our low corporate tax rate, and the fact that we do not have federal legislation demanding corporate responsibility of Canadian firms operating in foreign countries. Canada has a become a global leader in mining because the government wishes to protect our mining corporations operating internationally as part of our goal of becoming an energy superpower of the 21st century.

Interestingly, although few people are aware of it, 75% of the world’s mining companies are based in Canada with 58% of publicly owned mines being listed on the Toronto Stock Exchange. As a specific example, not only has Canada replaced Australia as the overall global leader in mining businesses in the last five years, but of the top ten gold companies in the world (based on annual production and cost per ounce), 5 are based in Canada; Barrick Gold, Goldcorp, Yamana, Kinross and Eldorado.

Barrick Gold is the largest gold mining company in the world operating 26 gold mines internationally with a heavy emphasis on the Americas. Similarly Goldcorp, Yamana, and Kinross have assets primarily in the Americas. Eldorado, after its friendly takeover of European Goldfields (a Yukon based mining corporation) has become a significant presence in Greece and Turkey. Eldorado is unusual in having a European focus, as compared to other Canadian mining companies, and has been rapidly expanding its operations as a relative newcomer in the mining sector.

Gabriel Resources is also a Toronto-based exploration and extraction company that operates in Romania (Rosia Montana). IAMGOLD is another Toronto-based firm that operates, in Africa (specifically in Mali along with 10 other Canadian mining corporations), and South and Central America.

Toronto has become a global hub for mining financing accounting for 40% of global mining equity capital (2011 figures). Some economists are also predicting that Toronto will replace London as the centre for financing all mining operations by 2020.

All of this information, quantitative and qualitative, included should tell us 2 things about Canada’s emerging objectives and how those objectives are affecting foreign communities. One, we are no longer a passive follower in economic terms; and we are moving toward becoming a competitor to major powers rather than continuing to seek meekly their favour and acceptance. Two, having the objective of becoming more globally competitive and therefore more influential, particularly in global mining developments, results in our promoting direct foreign investments in potentially or actually unstable countries where some degree of security can be assured. Medium risk foreign investments with a good probability of high returns translate into international capital returning to Canada in the form of dividends and future investment opportunities.

However, this strategy to increase our global economic power also translates into the greater potential of more negative impacts in foreign communities. The chance of negative repercussions increases in direct proportion to the number of natural resource extraction operations that are undertaken. As Canadians, all we have to do is take a quick look at the oil sands operation in Fort McMurray. The environmental, health and social threats have grown in direct proportion to the territorial expansion and increasingly long term implementation of oil company operations.

The big question we have to face now is whether or not Canada should continue on its current course of laissez faire international mining development, or should we push our elected representatives and business executives to accept (as a first step) legislation to ensure Canadian corporate responsibility in other countries. If the governments of Greece and Romania find it difficult to protect their own people and communities, then perhaps as a hopeful economic superpower Canada should take on this responsibility to serve as a model of what ‘good’ leadership really means.  The reality of corporate social responsibility should better match our self image as responsible global citizens.  We need to weigh the costs as well as benefits of pursuing our current path towards becoming an energy superpower.

* The title is a play on the title and content of 2 of Nicolas Poussin’s work ‘Et in Arcadia Ego’, apparently depicting life and death in an idyllic rural area of ancient Greece.




Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s