Chinese Banks Ignore Pleas of Ecuador Mining Campaigners

The failure to respond to an NGO letter challenging investment in the Mirador mining project has played to Ecuadorian fears about China's growing clout

The Mirador copper mining project in Ecuador's richly biodiverse Cordillera del Condor is under the control of Chinese state-owned companies. Photo credit: Acción Ecológica.

Pleas by civil society organisations and indigenous leaders in Ecuador to meet with six Chinese banks following the Chinese takeover of a controversial copper mining project in the Amazon have met with silence.

The Mirador project is one of the first Chinese ventures into large-scale mining in Ecuador. It lies in the Cordillera del Condor, a richly biodiverse area and the territory of indigenous Shuar and Awajún people, which extends across the border into Peru.

The company running Mirador, Ecuacorriente, was bought in 2010 by subsidiaries of the Chinese state-controlled China Railway Construction Corporation and the Tongling Nonferrous Metals Group Holding Company. Six Chinese banks are understood to have approved loans to Tongling, and Ecuadorian NGOs believe these loans are facilitating the Mirador mining development.

The main thrust of their concern is that funding Mirador violates China's Green Credit Directive, a Chinese government policy requiring banks to consider the socio-environmental impacts of projects and conform to "international norms" and "good international practices" in overseas lending.

"As Ecuadorians, we view La Cordillera del Condor, where El Mirador is located, as a precious symbol of our nation and home," states the letter to the banks, sent more than three months ago, on January 28. "Developing the copper mine would irreversibly devastate the region's fragile ecosystem and violate the legal rights of indigenous peoples to live, develop and control their land and territory."

It continues: "China is becoming a leader in sustainable finance and development, even exceeding Western institutions in establishing new models of green finance. As such, we are interested in the Green Credit Directive as a compelling model to promote sustainable finance in Ecuador. We hope you will honor it."

Copies of the letter were sent to the Bank of China, the China Development Bank, China's Export-Import Bank, the China Merchants Bank, the China Construction Bank and the Industrial and Commercial Bank of China, as well as the China Banking Regulatory Commission and Ecuador's embassy in China. They were signed by six NGOs, including Acción Ecológica (AE), the Centre for Economic and Social Rights (CDES) and the Ecuadorian Committee for Nature and Environment Defense (CEDENMA), by the Kichwa federation ECUARUNARI, and by 18 indigenous leaders and representatives from Mirador's area of influence.

The signatories go on to propose a meeting between the banks and the campaigners: "To assist in implementing the directive, we would be happy to invite [your bank] to a meeting and offer informal guidance on why El Mirador is a poor choice as a development project for both China and Ecuador.

"As you know, Ecuadorian people hold a history of battling foreign corporations in order to ensure that local communities are treated with respect and fairness, so we sincerely hope that banking institutions in China will not follow the same path of its Western counterparts. We believe that [the] implementation of the Green Credit Directive is a first step in this direction."

Despite the letter being sent more than three months ago, and project operations continuing to advance at Mirador, not one reply has been received. The only response of any kind has been the return of the copies of the letter sent to the China Construction Bank and Industrial and Commercial Bank of China, and a telephone call from the Bank of China to AE asking for a copy of the letter in Spanish.

"It was a real odyssey to send them," says AE's Gloria Chicaiza. "The banks are inaccessible. Apart from that phone call from the Bank of China, there's been no reply at all."

Growing unease over Chinese investment

The decision by so many Ecuadorian organisations to lobby the six Chinese banks illustrates growing concern over the power China wields in the country – and a lack of confidence that Chinese civil society can hold its government and banks to account.

A flurry of recent reports – by AE and CDES as well as US-based NGO Amazon Watch – has brought home the extent to which these fears have taken hold among Ecuadorian social and environmental groups.

AE points out that Ecuador, following a series of high interest loans, now owes more money to China than it has ever owed to one country before. "The debt is spiralling," states its report, Chinese mining companies in Ecuador: a new dependency. "In just three years, between 2008 and the end of 2011, Ecuador's debt to China went above US$8 billion."

AE calls these loans the "perfect business for the [Chinese] dragon", pointing to Chinese involvement in seven of eight new hydro-electric power projects and two large-scale mining projects. Of five foreign companies to have signed new oil contracts, two are Chinese, it says. The result, AE claims, will be new debt, increasing dependency on natural resources, social, cultural and environmental impacts, less democracy, and "the import from China of deplorable labour and environmental practices".

"While Chinese mining didn't invent the abuse and violation of human rights and the natural world associated with extractivism," AE states, "it should be noted that it is exporting social and environmental practices of extreme severity equal to, or worse, than those already practiced in Ecuador by transnational companies from the [global] North."

Gloria Chicaiza, the report's lead author, told chinadialogue that the safety record of China's mining industry was a particular concern, pointing out that more miners die in China per year than anywhere else in the world – the death toll in 2010 alone was above 2,400. "It's these practices that are being transferred to Ecuador," she said.

Similar concerns are expressed by Amazon Watch in Beijing, Banks and Barrels: China and Oil in the Ecuadorian Amazon, which says China was providing Ecuador with more than 60% of its financing by 2013, and will obtain almost 90% of Ecuador's oil in return. The oil is slated to come from "vast tracks of pristine rainforest with record levels of biodiversity and home to 10 indigenous nationalities, many of whom are vehemently opposed to drilling," it says.

"The recently acquired debt is driving a new Amazonian oil boom, setting the stage for a major battle over rights and resources that will shape the future of the Amazon and its people," states the report.

Pointing the finger at China for the Ecuadorian government's decision last year to abandon an initiative to marshal international funds to restrain oil extraction within the Yasuni National Park, the NGO  also accuses Chinese investors of threatening Ecuador's self-determination. China's power is "not only the greatest threat to the Ecuadorian Amazon and the indigenous communities defending their ancestral territories – it is also the greatest threat to its national sovereignty," the NGO's Leila Salazar-Lopez told chinadialogue

The implementation gap

As in China itself, one of the key grievances of civil society groups in Ecuador is that activity on the ground fails to abide by the rules laid down on paper. Although Ecuadorian regulations, and those of Chinese banks, are satisfactory, "implementation and supervision is very weak," says Paulina Garzon of CDES.

"On the bright side, we do need to recognise that China's Exim-Bank has adopted World Bank regulations – a step beyond any other national bank in the world – and requires an EIA [environmental impact assessment] for all projects, unlike the World Bank," says Garzon, author of a recently-published legal manual on social and environmental regulations for Chinese loans abroad.

Katharine Lu, from Friends of the Earth-USA, goes even further: "It would be fair to say that China is the only country we've seen that has issued a banking regulation to govern its environmental and social impacts for overseas investments, and deserves some credit for going above and beyond in that sense."

None of the six Chinese banks could be reached for comment.

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