International Corporations vs. Developing Nations: The Story of El Salvador

(With the first vote announced by the World Bank Tribunal, the battle wages on between El Salvador and Pacific Rim Mining Corporation.)

In a disappointing turn of events, the government of El Salvador has lost the first round in its battle against Pacific Rim Mining Corporation. This is a painful loss, but not the end for the government and people of El Salvador. This is merely the first round in what is sure to prove to be a long, arduous and expensive fight for this developing nation.

As detailed in my June 25 blog post, “International Corporations and the Developing World,” Pacific Rim Mining Corporation has filed a $77 million lawsuit against the country of El Salvador. Their suit against El Salvador is argued on the basis that as an international corporation they have the right, under CAFTA, to mine within the borders of this developing country. The government and people of El Salvador beg to differ.

On August 3, 2010, the International Center for the Settlement of Investment Disputes (ICSID), a World Bank Tribunal, ruled against El Salvador’s objections that the suit had no merit. This unanimous vote enables Pacific Rim to move forward with their suit, aiming for a big payout from a developing country already struggling to stay afloat. The next step for the ICSID is to rule on El Salvador’s specific objections involving the jurisdiction of the case.

Cameron Herrington of CISPES Seattle explains the complicated matter of jurisdiction, referring to Pacific Rim’s “nationality of convenience.” According to Herrington, El Salvador is arguing that Pacific Rim is in reality a Canadian corporation, and as such is not party to CAFTA. “El Salvador refers to the U.S. nationality of Pacific Rim's Nevada-based subsidiary as a ‘nationality of convenience,’ noting that the company moved to the U.S. from the Cayman Islands about 18 months after CAFTA had come into effect, and 3 years after Pacific Rim's dispute with the Salvadoran government had begun.” This move is suspiciously convenient in light of the subsequent law suit filed by the corporation.

According to Mining Weekly, Salvadoran President Maurico Funes is not just intent on stopping Pacific Rim. His aim is to stop all mining within his country. Though this has ignited some debate, there are major concerns in the region involving the environmental impact of mining. Just recently, Guatemala was forced to suspend mining in their Marlin mine due to concerns over contaminated water. This is a very possible outcome for El Salvador should Pacific Rim be allowed to mine in their country.

International groups in support of the people of El Salvador are currently working on next steps. To find out how you can help support the people of El Salvador in their fight against Pacific Rim Mining Corp., check out the CISPES website. You can also call on Congress to pass comprehensive trade policy reform, ensuring that corporations like Pacific Rim are no longer able to sue governments to challenge environmental and health protections.

Photo Credit: Corrie Hulse