Aid that hurts

Lawrence Solomon
Hamilton Spectator
July 18, 1985

When the public isn’t involved, foreign aid can backfire on us and on the Third World

The United Steelworkers called it “the worst blow to hit Sudbury in memory”, as Inco laid off 2,800 workers in 1977 to spark One of the most bitter – and frightening – periods in this northern community history.  National columnists raised the spectre of Sudbury becoming a ghost town. In Ontario, the NDP called for nationalizing Inco while the Liberal Opposition berated the ruling PCs for allowing Inco to operate in Guatemala and Indonesia while laying off workers in Sudbury.

Four years later, Sudbury was in the throes of another wrenching shutdown, with 14,000 miners and 10 per cent of its population out of work, the highest unemployment rate in North America. This devastating new round of hardships was reported almost daily. Some blamed the mining companies for developing more mines than necessary, either through greed or poor planning. Some blamed the oil crisis and the recession. Some just blamed “the system”.

A key culprit: aid

But overlooked in the finger pointing of the day was a factor almost no one likes to think about or speak against, but a factor which nevertheless may have dwarfed all others: foreign aid.

“In the good old days in the 1950s there were only three of us,” says Falconbridge’s Peter McBride, recalling the era when Falconbridge, Inco, and a French firm had a corner on the market. “Then the field expanded when other companies tried to cash in.”

And try they did, with an avalanche of mines in two dozen countries – many of them financed by foreign aid – joining the ranks of the nickel producers. In the process, the market was glutted with nickel, corporate coffers started to empty, and Sudbury’s unemployment queue was filled with miners.

“Whenever a project can be competitive, we don’t object to the international aid agencies financing it,” Inco’s government affairs chief Keith O’Brien explained. “But the World Bank was basing its estimates on never-ending growth in nickel consumption. That was completely unrealistic. They were off in their own dream world.”

Third World pain

When aid agencies like the World Bank finance losers instead of winners – as happened with their nickel ventures – countries are worse off than if nothing was developed. Anticipated revenues disappear, and countries are forced to borrow to make up the shortfall – getting deeper into debt to repay the aid agencies and private financiers. Third World countries – not the international lenders – pay for the mistakes.  Echoing Inco’s dismay is its perennial foe, the United Steelworkers. “We’re in favour of helping the Third World but not to the extent that it puts our own people on the breadline,” says Canadian union official Maurice Keck.

“The aid agencies are pouring money into projects no one needs. That money should be redirected to useful purposes.”

Public hearings needed

Mr. Keck would like to see public hearings to determine the merits of projects being proposed by aid agencies like the World Bank and the Canadian International Development Agency (CIDA).

“Eventually, it’s our people who suffer,” he argues, claiming that the, aid agencies operate in a shroud of secrecy: “The damned mines are already being developed when we first hear of them.”

The Steelworkers’ frustration in dealing with aid agencies is understood by the corporate giants: “In the 1970s we talked to CIDA and the World Bank repeatedly,” Inco’s Mr. O’Brien says, explaining their efforts to prevent ill-advised projects. Falconbridge’s Mr, McBride says the practice of giving foreign aid and other subsidies to governments to bring otherwise uneconomic projects on stream is “like slitting our own throats.”

Falconbridge, Inco, and the rest of the mining industry support the Steelworkers’ call for public hearings to weed out counter-productive projects.

“A public forum is needed,” says George Miller, a former top federal civil servant and now head of the Mining Association of Canada. “Decisions are warped by foreign aid funds.”

Sudbury may be facing more shocks in future as more mines – like Colombia’s Cerro Matoso, a white elephant that has lost money since it opened in 1983 – threaten to destabilize the marketplace. But nothing scares the mining world as much as the Grande Carajas, a huge iron mine built with $500 million in World Bank funds in the Brazilian jungle that came into production this year.

By 1988 it is scheduled to produce 35 million tons a year – as much iron as is produced in all of Canada. “Its effect will be severe,” the Mining Association’s Mr. Miller states. To Mr. Keck of the Steelworkers, who have seen the number of their iron ore miners plummet from 15,000 to about 6,500, “severe” is an understatement. “Fifty per cent of our guys on the North Shore (of Labrador and Quebec) are laid off now, even without Carajas,” he thunders.

The Grande Carajas is being built for the presumed benefit of the Third World’s poor. But the cruel irony is that this project – like most of these mining ventures – was bitterly opposed by those it was to help.

People displaced

Forty-two thousand people are being flooded off their land to make way for the hydro dams that will power the Grande Carajas, which covers an area the size of France. If Brazil’s track record is any indication, many will receive little or no compensation for their land, and the 12,000 Amazon Indians affected will be treated especially badly. The environment, as well, is destined to suffer from widespread deforestation whose long-term effects are ominous.

Other Third World countries will suffer too, as subsidized iron from the Carajas floods the world’s markets and forces teetering Third World economies to slash their iron prices or close up shop. The losers in this foreign aid venture are everywhere – in the Third World, in Canada, in Brazil. The only possible winner is the state-owned Brazilian company developing Carajas, whose profits, if any, will be used to repay Brazil’s enormous debt to Western bankers.

But even this win would be fleeting: when the next unnecessary project is brought on stream next month or next year, it will be Brazil’s turn to watch as its iron prices tumble.

Also watching will be Labrador City, Noranda, Timmins, Thompson, Logan Lake, and all the other mining communities in Canada whose fates are made all the more tenuous by events taking place around the world, events of our own making in which the public has no say and no rights.

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