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Mining Watch | 1 March 2023
Ecuador-Canada Free Trade Agreement: a new attack on communities, Indigenous peoples, and the environment
In light of the start of negotiations for a Free Trade Agreement (FTA) with Canada, as announced by President Guillermo Lasso, as territorial social organizations, environmentalists, and research centres, we warn about the serious effects that this agreement would have on human and collective rights and the rights of nature, which are the pillars of the Ecuadorian Constitution. We recognize FTAs as instruments of transnational corporate power, expressed through rules that grant excessive legal protections to investors while they deepen extractivism, deregulate labour and environmental protections, abandon measures to protect small-scale family agriculture, privatize basic services, among other things. These agreements are negotiated under conditions that are fundamentally unequal, starting from the premise of overturning norms that protect rights hard-won through social struggle, making them succumb to the calculations and profit-making strategies of big business.
This is why FTAs are negotiated behind closed doors, in order to limit public debate on the effects they will have. In Ecuador, for example, the information gathered during the negotiations of Trade Agreements negotiated by the State1 was classified RESTRICTED by the Ministry of Production, Foreign Trade, Investment and Fisheries, through the Ministerial Agreement MPCEIP-MPCEIP-2022-0001-A issued on 6 December 2022 (Official Register - Supplement No. 203).
In addition to the lack of transparency, we are also concerned that an FTA with Canada will guarantee greater impunity for Canadian investments in the extractive sector, mainly mining, in Indigenous and peasant territories, water recharge areas, and forests, where mining projects are being opposed due to evidence of water contamination. We are concerned that an FTA will lead to deforestation, the destruction of the páramos, forced displacement, a rupture of the social fabric, as well as violence, criminalization, and prosecution of those who defend human rights and the environment.
Ecuador’s four main exports to Canada in the last 12 years have been mining, agricultural, food and fish products. Among agricultural products, cacao (49%) and cultivated flowers (41%) accounted for nearly 90% of the value of exports. The case of cacao reveals the primary pattern: just over USD 39 million of unprocessed cacao was exported in 2022, while very little processed cacao was exported. In terms of agricultural imports from Canada, wheat accounted for 91% of imports in 2021, followed by lentils and oats; in the case of frozen potatoes, which currently account for a low percentage of imports, this will likely increase with an FTA, which will threaten the production of potatoes from small-scale family farms, who will not be able to compete with products coming out of highly-subsidized systems like in Canada.
Canadian investment in Ecuador
According to information from the Chamber of Mining of Ecuador, at least eleven companies backed by Canadian capital are operating in nine provinces of Ecuador with extremely high levels of socio-environmental conflicts caused by violations of the law and the constitution, often with the complicity of regulatory authorities. The territories are treated as sacrificial – a mentality which will be even more difficult to reverse if an FTA further cements legal protections for these investments.
Here are a few examples of what is happening on the lands of Indigenous and peasant communities, in the páramos and forests where Canadian mining companies are operating:
The Loma Larga mega-mining project (Azuay, Cuenca, Victoria del Portete), located on 7,960 hectares of the Kimsacocha páramo, is owned by Dundee Precious Metals Inc. as of 2021. Previously, it was owned by the Canadian companies Iamgold Corporation and INV Metals Inc., during a period in which the State Comptroller General’s Office identified several administrative and legal irregularities (Report DR2-DPA-0064-2018 of 10/12/2018).
The headwaters for key rivers are found in the Kimsacocha páramos, including the Irquis, Tarqui, and Yanuncay rivers that flow through the Santiago River basin into the Amazon basin. Kimsachocha also feeds the community water systems and water table, as well as the municipal water catchment that supplies water to more than 600,000 residents of the city of Cuenca.
Public pressure has led to two binding referendums related to this project: the first, in Girón in 2019, where 86% of participants voted to prohibit mining in the Kimsacocha páramos; the second, in Cuenca in 2021, where 80% of participants voted to prohibit mining in water recharge areas (the projects affects the Yanuncay and Tarqui water recharge areas). However, the government and the company insist on advancing the project, in violation of the rights to political participation.
The right to free, prior, and informed consent and the right of Indigenous communities to self-determination, as well as the rights of environmental consultation for other populations, have been violated. For this reason, the project is currently suspended (although Dundee plans to start exploitation in 2023). Furthermore, the company’s refusal to hand over documentation such as the Environmental Impact Study – arguing that it will only provide the study to certain sectors of direct influence at the appropriate time – violates the right to access information.
The Fruta del Norte project (Zamora Chinchipe, Yantzaza canton, Los Encuentros parish), owned by Lundin Gold, has been operating since 2016. Previously, the Canadian junior Aurelian Resources was conducting exploration activities between 2003 and 2005. During this period, the company used perks and parties to entice community members, while effectively carrying out the proletarianization of people who, until then, had enjoyed economic and food sovereignty. This boom was reduced with the arrival of Kinross, the Toronto-based major, which bought Aurelian in 2008. During this period, the State’s Comptroller General identified multiple and important irregularities and lack of environmental licenses for its operation.
Lundin Gold has failed to comply with its own promises to benefit local populations. The company relies on temporary/occasional labour contracts; in 2017, the only bridge connecting dozens of communities with the centre of the parish Los Encuentros collapsed as a result of Lundin Gold’s constant heavy truck traffic2; there are additional impacts on water systems and housing. In addition, processes of subtle dispossession or induced migration (due to development-induced displacement) are gaining momentum with the closure of more community schools. In 2015, schools were closed in the communities of Santa Lucía, La Libertad and Jardín de Cóndor. To date, two communities have disappeared — the community of San Antonio in 2012 and El Playón in 2015.3
The Fierro Urco mining project (Loja and El Oro) involves, among others, the Canadian companies Cornerstone and Adventus. According to a report by the Universidad Técnica Particular de Loja and other organizations, the project covers 72,676 hectares in a fragile páramo ecosystem that is the source of 50% of the water consumed by the 225,000 residents of Loja and Saraguro and the 50,000 residents of El Oro.
At the Gualel parish, mining companies seeking to exploit Fierro Urco have used strategies to divide communities, generate tensions between them, and destroy the social fabric. They also use favouritism to take advantage of the needs of the population, and obtain their consent to mine. None of these companies have respected their right to free, prior and informed consent, to environmental consultation. Nor are they concerned about the impacts that mining activity may have on a fragile ecosystem such as the páramo.
Primarily the women of the Kichwa Saraguro people are leading the resistance to mining in this area, defending their territory, water, and agricultural production which provides jobs and sustains the food sovereignty of the communities and the region. Through their struggle, they have successfully prevented the companies from carrying out advanced exploration activities. Some of the companies, such as Newcrest, have abandoned their support for Cornerstone in its advanced exploration efforts. These achievements, however, have also meant the prosecution of those who defend human, collective, and environmental rights, although these processes were suspended by the Amnesty declared by the National Assembly.
After the June 2022 national strike, the so-called peace agreements included modifications to the national government’s mining action plan to guarantee non-intervention in Indigenous territories, water sources, archaeological areas and protected areas. In this context of social movement organizing, the issue of mining has become prominent in national debate.
The Fortuna project (Azuay, Morona Santiago and Zamora Chinchipe) is concessioned to the company Lucky Minerals (and its Ecuadorian subsidiary Goldmindex S.A.) with twelve concession blocks that affect seventeen communities in four parishes in the canton of Nabón, Oña and Sigsig, in Azuay; four communities in two parishes in the canton of Gualaquiza, in Morona Santiago; and five communities in the canton of Yacuambi, in Zamora Chinchipe.
On 12 August 2022, el Colectivo de Lucha y Defensa del Agua y la Vida del Cerro El Mozo (Nabón) sent a letter to President Lasso in which they "directly and clearly stated that in the territories of the canton of Nabón, we will not allow the development of metallic mining, especially when it seeks to operate within our water sources, which originate in the high altitude páramos in the territories of Morona Santiago and Zamora Chinchipe, which not only feed our canton but the entire region.” They also say that the great biodiversity of their territories is their motivation for opposing mining, based on the constitutional rights to resistance and social protest, the rights of nature, free and informed prior consent and the precautionary principle.
This decision to "prioritize water, ecosystems, and life over the promises of development made by mining companies" led to the prosecution of eight community leaders following complaints filed by Lucky Minerals’ manager for Ecuador and the former president of the Chamber of Mines of Ecuador.
The "Technical report on field inspection and location of water concession points requested by the mining company Goldmindex S.A., which is located within the Yacuambi Municipal Ecological Conservation Area,” published in October 2022 concludes that: 1) the concession is located within the territory that makes up the Yacuambi Municipal Ecological Conservation Area, the "Podocarpus el Cóndor" Biosphere Reserve and the Podocarpus-Sangay Connectivity Corridor; 2) concessioning this water resource for mining purposes puts fragile ecosystems at risk, such as the high Andean páramo and water recharge areas; 3) large-scale mining would leave no water recharge in the area; 5) the requested water capture points are located within the ecosystem known as páramo grassland, which is characteristic of water recharge zones and which would affect the Zabala, Yacuambi and Zamora-Santiago river basins; 6) in the case of water use for large-scale mining operations, contamination puts at risk large areas of life, human settlements, and agricultural areas that form the basis of the economy and are a source of food for families in the area.
The Warintza project (Morona Santiago, Cordillera del Condor in the southern Amazon), of Lowell Minerals Exploration (a subsidiary of Canada’s Solaris Resources Inc), is located within conservation areas and on the ancestral territory of the Warints, Maikiuants, and other communities of the Shuar Arutam People (PSHA). Leaders of the Shuar have denounced the contamination of the Warints, Congo, and Santiago rivers – a river corridor for the communities – as well as deforestation and dumping of chemicals used for underground drilling, drone surveillance between 2019 and 2020, and helicopter fly-overs in the Warints community that intimidate families, especially children.
Lowell is operating in violation of the right to consultation, given the State did not carry out a free, prior, and informed consultation as established in Article 57.7 of the Constitution, nor does the company have the consent of the Warints or the PSHA government. In a response to these claims, a high-ranking representative of the company issued an unprecedented threat to slit the throats of the leaders, especially that of Josefina Tunki, president of the PSHA. Complaints filed with the Canadian embassy and national authorities about these events have gone unaddressed.4
All of these are instances of worsening the ecological debt the extractivist model and its corporate actors have with the peoples and communities of Ecuador, who will be further harmed by the signing of an FTA with Canada.
Mining projects are located in fragile páramo ecosystems, which are water recharge areas; in areas of great biodiversity and forests; in water sources that supply communities, towns and cities. The construction of mining infrastructure involves deforestation, a loss of biodiversity, and the disruption of ecosystem connectivity. Explosives are used to extract the material, harming the soil, sources of water, and causing air pollution. In terms of the raw material extracted, up to 98% is left as toxic waste to be disposed of in tailings dams that threaten the entire environment: from groundwater contamination to collapse in the event of an earthquake.
Arbitration claims against Ecuador in international tribunals
Article 422 of the Ecuadorian Constitution states: No international treaties or instruments may be signed in which the Ecuadorian state cedes sovereign jurisdiction to international arbitration in contractual or commercial disputes between the state and private natural or legal persons. However, the signing of Free Trade Agreements and Bilateral Investment Treaties (BITs) contravenes this constitutional prohibition because these instruments contain clauses related to the Investor-State Dispute Settlement Mechanism (ISDS), which gives companies the possibility of filing multi-million-dollar arbitration claims against the Ecuadorian State in international tribunals such as ICSID (part of the World Bank), UNCITRAL, PCA, LCIA – tribunals which typically find in favour of the companies.
Ecuador is one of the countries in the region most affected by this issue, according to the Transnational Institute’s 2020 report. Nevertheless, President Lasso insists on continuing down the same path that has permitted the raiding of public funds and expanding the frontiers of devastation in the name of granting investment opportunities. On 16 July 2021, with Decree 122, Lasso re-ratified the ICSID and is determined to sign new BITs – after the 16 in force at the time were denounced in 2017.
This ability to sue the state is used by companies to ensure, through blackmail, the protection of their interests over human rights and the environment, and to obtain sometimes considerably more than what they have invested.
Canadian companies have resorted to this strategy. The case of the Llurimagua project (province of Imbabura) is emblematic for the 25-years-plus of resistance by communities of Intag to stop the advancement of mining that would destroy their water resources and biodiversity. In 2011, this opposition led to an arbitration claim filed before the Permanent Court of Arbitration (PCA) by Copper Mesa Mining Corporation against the Ecuadorian state for 70 million dollars.
The ruling found that the company had engaged in reckless escalation of violence (...) in particular the use of organized armed men in uniform who used tear gas and fired on villagers and local officials. But it blamed these actions on the company’s local representatives and ruled that management in Canada was only negligent, for which the court reduced the compensation award by 30%. It also claimed that the Government of Ecuador did not do enough to help the company deal with the protesters and that the state treated the investor unfairly and inequitably.
Another claim came from the Canadian oil company Encana in 2003. Encana filed an arbitration claim at the London Court of International Arbitration (LCIA), alleging that the changes in tax regulations affected Encana’s subsidiaries. Yet they continued to operate and export oil - at a price that increased during the period under consideration. The ruling found in favour of the Ecuadorian state, but it still had to assume legal costs of USD 711,065.21 (of which USD 330,267.44 had to be reimbursed to Encana).
The conclusion is obvious. A Free Trade Agreement between Ecuador and Canada is not in the interests of Indigenous peoples, territories or the environment. The FTA will only be another instrument of corporate power, wielded by the national elites to deepen the rationale for devastation, which is the invisible face behind the narratives of corporate success. This brief account shows the illegitimacy of mining projects – a central pillar to the FTA that is being imposed – which are just as illegitimate as the government promoting it.
Cabildo por el Agua de Cuenca (Watershed Water Council)
Collective for the Struggle and Defense of Water and Life of Cerro El Mozo, Nabón [Colectivo de Lucha y Defensa del Agua y la Vida del Cerro El Mozo, Nabón]
Unión de Comunidades Indígenas del Azuay, UCIA
Defensa y Conservación Ecológica de Intag (DECOIN, or Defense and Ecological Conservation of Intag)
Shuar Arutam People
Área de Salud Colectiva UASB (Collective health area -UASB)
Frente de Defensa de Fierro Urco (Defense Front of Fierro Urco
Red Ecuador Decide Mejor sin TLC
Estudio Jurídico Kuska
Frente Nacional Antiminero (Antimining National Front)
Vida de Loja
1 President Lasso has stated his intention to “sign FTAs with 10 countries” before the end of his term in 2025
2 Information provided by Amazon Watch, MiningWatch Canada, PSHA, Acción Ecólogica. In addition, https://www.planv.com.ec/sites/default/files/cordillera-4.jpg
3 The Significance of Memory and Monitoring: Resistances from the Valle de las Luciernagas. María Fernanda Solíz Torres, Milena Alía Yépez Fuentes, William Sacher Freslon. 2019. https://miningwatch.ca/blog/2019/1/17/investigators-study-canadianswedish-mining-project-ecuador-yields-disturbing-results
4 Information provided by Amazon Watch, MiningWatch Canada, PSHA, Acción Ecológica