Magazine article New Internationalist

Pulp Fiction [Ex-Metals Dealer Tells of Exploitive Practices Used by Large Mining Companies in Poor Countries]

Magazine article New Internationalist

Pulp Fiction [Ex-Metals Dealer Tells of Exploitive Practices Used by Large Mining Companies in Poor Countries]

Article excerpt

Making $200,000 profit in a single day armed only with a telephone can give you quite a buzz. For 20 years I worked as an international metals dealer and gained something of a reputation as a speculator. Metals are regulated far less than other markets. With a bit of luck, a willingness to take a risk and a good understanding of how the market works, it's possible to make a lot of money.

Risk-taking is part and parcel of the industry. The buccaneering culture fits nicely with a free-market global economy. But now the free-trade economists have lost control of their own creation -- they claimed the market would regulate the price of scarce metals by increasing their cost, reducing their demand and promoting efficient use. Instead the opposite is happening. More minerals are being extracted, but the cost of raw materials is decreasing. Taking inflation into account, the prices of most metals are about half of what they were 20 years ago.

When I first started in 1965 the industry was dominated by the giants established during the colonial era: Rio Tinto Zinc, Anglo-American, Union Miniere and Hudson Bay Mining. These companies did not have large-scale manufacturing divisions and were dependent on profits from their mining operations. 'Gentlemen's agreements' existed to maintain the price of metals at levels that ensured a good return.

In the 1970s governments decided to gatecrash these 'gentlemen's' clubs. Countries introduced higher taxation, demanded shares in the mines and even nationalized them outright. Corporations were quick to realize that future profits would not come from the extraction process itself. One by one the gentlemen's agreements collapsed and prices tumbled.

Today many major mining operations are unprofitable -- yet companies continue to extract minerals and metals in ever-increasing quantities. For instance, the Selebi-Pikwe nickel mine in Botswana, owned by the Government and a consortium of major mining companies, has been making a loss for over a decade.

Transnational companies can afford to carry on because most of them now manufacture products made with the metals and minerals from the mine. They benefit from cheap raw materials to make everything from window frames to jewellery. Meanwhile, poor countries have become dependent on mining but are getting less money for the minerals they produce. And the constant pressure to make a quick buck through selling natural resources has been heightened by the Majority World's increased debt to international banks.

Over the last ten years I have acted as an advisor to governments in their unequal struggle to understand the secretive and all too often dubious corporate activities. In 1990 I was asked to look into allegations made against Alusuisse, the Swiss mining and manufacturing conglomerate, concerning their operations in Sierra Leone.

In theory, control of national mineral wealth in Sierra Leone is in the hands of the Ministry of Mines. The Ministry occupies the fifth floor of a shabby tower block in the centre of Freetown, the country's capital and the setting for The Heart of the Matter, a torrid novel about betrayal by Graham Greene. The lifts have long ceased to operate and office workers have to scramble up and down the crumbling staircase, sweating in the Turkish-bath climate. The Ministry has no fax machines, no photocopiers and no computers. The electricity supply and telephone lines work only intermittently. Listless clerk sit on broken furniture leafing through sheaves of dirty, dog-earned forms.

Not surprisingly, the Government found it impossible to negotiate on equal terms with a company whose annual turnover is 30 times larger than the total value of the country's exports. Alusuisse spent more on its senior managers' recreation club at the mine than the country spent on its largest hospital.

The Government had. been convinced by the company that the mines were barely profitable. It agreed to take a small annual fee rather than tax Alusuisse's profits. …

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