Blouin Beat: Business - Nicaragua bets on gold but fears social backlash

Nicaragua bets on gold but fears social backlash
W. Alejandro Sanchez
Blouin Beat: Business
January 21, 2014
Originally published:  http://blogs.blouinnews.com/blouinbeatbusiness/2014/01/21/nicaragua-bets-on-gold-but-fears-social-backlash/

Nicaragua’s industrial future is looking bright and shiny. According to the vice-president of Nicaragua’s Chamber of Mining, in 2013 gold became the country’s major export.

In 2013, gold mining in Nicaragua grew by 20%, reaching 257,000 troy ounces (at $435 million). Meanwhile, beef, the country’s second major export, reached $389 million. Coffee crops came in third, exported for $349 million (coffee production has suffered in Central America over the past year due to an outbreak of leaf-rust fungus). The Nicaraguan government is hopeful that by 2014, gold exports will increase by an additional 15%

Over the past years, Nicaragua has experienced a mining boom. One of the country’s major excavations is La Libertad, controlled by the Canadian company B2Gold and located in the Chontales department. A June 2013 article in the Nicaraguan daily El Nuevo Diario reports that six thousand tons of dirt and rock are processed daily and that the aforementioned mine works non-stop, 365 days a year, 24 hours a day. The Canadian company operates another gold mine in Nicaragua, known as El Limon, which reportedly produced 58,000 troy ounces of gold in 2013. A B2Gold officer has declared that the company has invested some $60 million in the Limon mine in the past six years, while La Libertad costs around $32 million annually to operate.

The general internal stability of Nicaragua, as compared to neighboring El Salvador and Honduras, seems to be a major incentive for international companies to invest in mining initiatives in the Central American state. Besides the Canadian B2Gold, Colombian company Mineros S.A. is among international investors in Nicaragua – Mineros bought 90% of Nicaraguan company Hemco in early 2013. Hemco has a major mining project, called Bonanza, in Nicaragua’s Atlantic coast. A recent report explains that Hemco aims to upgrade the mining operations in Bonanza from artisanal to advanced methods. A leader of a local miners union has declared that the hope is that by 2016, the extraction operations for gold will be free of mercury, which is highly toxic for both humans and the environment.

In spite of this positive industry news, not all is so well-burnished in Nicaragua. As the mining sector advances, tensions over natural resources, the protection of the environment and the treatment (including salaries) of miners also rise. Protests against mining operations have increased over the past years across Latin America, notably in Colombia and Peru. Nicaragua is no exception to this trend. In October, environmentalists of the NGO Centro Humbolt, miners and members of the general population protested in Nicaragua’s northern department of Matagalpa against a mining project by B2Gold. Moreover, in December a summit of anti-mining organizations from across Central America took place in Managua. One expert from El Salvador that attended the summit argued “the companies take advantage of people’s poverty, they offer them jobs to stop being poor, who would not accept a job? But they [the miners] are not informed of the real impact of mining.”  And even when miners are paid for their hard work, this money is not usually put to good use. A leader of a mining union in Bonanza has declared that, sadly, drinking and playing with coin slot machines are widespread vices around the Bonanza mine; bars and casinos tend to be where miners spend their hard-earned cash.

Nicaraguan President Daniel Ortega made international headlines in 2013 when he announced that an obscure Chinese company was going to build a new inter-oceanic canal that will rival the one in Panama. The combination of this ambitious project – currently valued at $40 billion – and several investments by international mining corporations: it is fair to argue that Nicaragua is entering a golden age of investment. The new era, however, will bring with it a similar resurgence of grassroots political activism.