NICARAGUA: Ortega on mining push

This article is featured in Latin News.com 

Earlier this month a Nicaraguan delegation took part in the 2013 Prospectors & Developers Association of Canada (PDAC) Convention, the world’s leading mining event. This is in line with President Daniel Ortega’s declared intention of boosting the mining sector, which has become one of the country’s most important exporters. These efforts are not without controversy, however, and have recently attracted concern from the Catholic Church and a leading environmental organisation, Humboldt.

According to ProNicaragua, Nicaragua’s official investment and export promotion agency, a delegation which included Nicaragua’s presidential delegate for investments, Alvaro Baltodano; the Nicaraguan ambassador to the US and Canada, Francisco Campbell; the general director of mining at the ministry for energy and mining (MEM), Carlos Zarruk; and the president of Nicaragua’s chamber of mining (Caminic), Sergio Ríos; gave a seminar on 5 March at PDAC highlighting investment opportunities in Nicaragua.

Mining activity in Nicaragua is currently concentrated in three main areas — Mina El Limón and La Libertad, in León department (both operated by Canada’s B2Gold), as well as the Nicaraguan-owned Hemco mine, in the north Caribbean. At the end of last year, Caminic vice-president, Denis Lanzas, said that there were plans to open two new mining centres by 2014 (but failed to specify where). In August last, Ortega highlighted the increasing significance of the mining sector in attracting foreign direct investment (FDI) to the country. At the time he said that inflows to the sector registered between 2007 and 2011 were US$227.6m. Of the total US$227.6m, 88% went into metallic mining. Ortega also flagged up the contribution of B2Gold, which invested US$94.5m between 2007-2011, of which US$66.6m corresponds to the La Libertad mine and US$27.9m to the Limón mine.

The Frente Sandinista de Liberación Nacional (FSLN) government has also hailed the growing importance of metallic mining – and gold in particular — as an export sector. Metallic mining exports increased by 20% in 2012 to reach US$436m, of which US$423m was gold. This is a huge increase on the US$60m in total mining export revenue registered in 2006, the year before Ortega took office for the second time. Gold has gone from being Nicaragua’s fifth main export in 2006, when it accounted for 5.3% of total exports, to its third in 2012, when it accounted for 16% of total exports, just behind traditional leading export products like coffee and meat. Indeed Nicaragua’s centre for export processing (Cetrex) released figures last month which revealed that in January, gold became Nicaragua’s leading export, totalling US$40.4m, above meat (US$37.4m) and coffee (US$22.5m). This is in line with predictions made both by Ríos and Cetrex’s executive director, Jorge Molina, that gold could become the best-selling export for 2013 due to continued investment and average prices of US$1,670 per troy ounce last year.

Opposition

The government’s interest in boosting the sector is proving controversial. On 6 March the diocese of the northern province of Matagalpa issued a statement urging the Ortega government to put a stop to mining in the area, citing environmental concerns. The statement, signed by the 43 priests in the diocese, is in response to efforts by B2Gold to develop the Pavón gold mine in the municipality of Rancho Grande, 83km north of Matagalpa City. In March 2012, B2Gold officials confirmed that after six years of exploration, consultations were underway with the local community about the project. The statement by the Matagalpa diocese came two days after Bishop Sócrates René Sandigo, president of Nicaragua’s Bishops’ conference, expressed concerns this time about human rights violations during the repression of anti-mining protesters in the municipality of Santo Domingo, in the central province of Chontales. This followed clashes back on 10 February between locals opposed to the development of a new (sector-4) high-grade gold zone by B2Gold in the area which resulted in 47 arrests and 17 police officials injured. Protesters cite concerns about water contamination while local artisan miners fear the threat to their livelihood if B2Gold’s plans go ahead.

These concerns by the Church have been echoed by the local environmental organisation, Humboldt, which on 4 March issued a statement against the government’s promotion of mining activity. According to Humboldt, the percentage of the national territory under concession for mining activities has increased to 11% at the end of 2012 (or some 15,000km2), from 6% in 2009. According to the most recent MEM figures (up to end November 2012), 155 metallic mining concessions have been granted. Of these, seven are currently being exploited, 11 are being explored, 16 are for prospecting while 121 are inactive. Already back in August, the Humboldt pointed out that protected areas were included under the mining concessions – namely the Bosawás biosphere reserve and South-eastern Nicaragua’s biosphere reserve (Refugio de Vida Silvestre del Río San Juan y la Reserva Biológica del Río Indio Maíz).

In its latest statement, Humboldt also noted various problems related to the increase in mining activity in recent months. These include the contamination of the Mico River in Chontales with cyanide (which is used in the gold recovery process), the deaths of two people in the Santa Pancha community, in the Malpaisillo municipality, in the department of León as a result of landslides caused by mining activity; and the imprisonment of 12 environmental activists.

Family cabinets
President Ortega and his FSLN government have triggered fresh civil society concerns regarding the threat to individual privacy in the country. On 21 February, the FSLN-dominated 92-member unicameral legislature ratified the so-called “cabinets of family, health and life”, the brain child of powerful First Lady Rosario Murillo.

A lack of clarity surrounds the nature of these new entities which are tasked with promoting “family values, responsibility and well being” in the family home. Opposition politicians as well as civil society activists are warning that they pose a threat to privacy and represent the latest incarnation of the controversial citizen power councils (CPCs), the flagship project of Ortega’s previous administration (2007-2012). The government initially spun the CPCs as part of efforts to boost citizen participation. The councils then became an extension of the executive by presidential decree in November 2007 which led civil society groups to complain that they serve as an extension of the FSLN party structure, blurring state/party lines.

Association Agreement
The Association Agreement between the European Union (EU) and Central America was signed in June last year but has yet to be ratified by Guatemala, Panama, El Salvador and Costa Rica. Once the agreement takes effect, Central America will immediately liberalise 69% of its existing trade with the EU. Central American import duties on industrial goods and fisheries will be lifted gradually over a ten-year period, with tariffs remaining on only 4% of such goods after 15 years.

Minimum salary increase
On 7 March the government of President Daniel Ortega, unions and the private sector agreed a 12% minimum wage increase for this year. The increase takes effect in two stages, 6% as of 1 March and 6% as of 1 September. The changes will affect all sectors bar agriculture (which will see an increase of 12.5%) and free trade zones (which received a 10% increase as of 1 January). The changes will raise the average monthly wage to some US$155 in March and then to US$164 in September. According to the local press, unions initially called for a 15% increase, but declared themselves satisfied with the final deal.

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