Identifier
Created
Classification
Origin
05GUATEMALA1751
2005-07-19 22:21:00
CONFIDENTIAL
Embassy Guatemala
Cable title:  

POLITICALLY DRIVEN LOCAL REFERENDUMS SEEK TO BLOCK

Tags:  EINV ENRG EMIN PGOV EAID SENV SNAR PHUM ELAB GT 
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192221Z Jul 05
C O N F I D E N T I A L SECTION 01 OF 03 GUATEMALA 001751 

SIPDIS

PASS OPIC FOR BARBARA GIBIAN

E.O. 12958: DECL: 07/18/2009
TAGS: EINV ENRG EMIN PGOV EAID SENV SNAR PHUM ELAB GT
SUBJECT: POLITICALLY DRIVEN LOCAL REFERENDUMS SEEK TO BLOCK
MAJOR U.S. INVESTMENTS; GOVERNMENT HOLDING FIRM


Classified By: EconCouns Steven S. Olson for reason 1.4 (d)

Summary
-------
C O N F I D E N T I A L SECTION 01 OF 03 GUATEMALA 001751

SIPDIS

PASS OPIC FOR BARBARA GIBIAN

E.O. 12958: DECL: 07/18/2009
TAGS: EINV ENRG EMIN PGOV EAID SENV SNAR PHUM ELAB GT
SUBJECT: POLITICALLY DRIVEN LOCAL REFERENDUMS SEEK TO BLOCK
MAJOR U.S. INVESTMENTS; GOVERNMENT HOLDING FIRM


Classified By: EconCouns Steven S. Olson for reason 1.4 (d)

Summary
--------------

1. (C) Referendums organized by two municipalities in
different parts of Guatemala attempted to demonstrate massive
local rejection of a large gold mine and a hydroelectric
project. Organizers then declared that the people had spoken
and demanded that the projects be stopped. The process of
conducting the referendum appeared seriously flawed in each
case, and neither was able to produce a simple majority of
voters, even by the organizers' estimates. Both investment
projects involve U.S. interests and enjoy the government's
strong support. A local NGO that receives significant
European funding and promotes a radical environmental agenda
was deeply involved in both cases. Most elite opinion
concludes that the referendums are legally meaningless, even
if they had been credibly conducted. Many conclude that
radical politics, not the investments themselves, is the
issue, and some ponder parallels with Bolivia. We describe
the two projects briefly -- they are in our minds clearly
good for the country. The government recognizes the dangers
to future investment if the two projects were to fail but is
cautious to avoid being tarred as "against local democracy."
End Summary.


2. (U) Guatemala's press, op-ed writers and others of the
political class have been discussing the significance of two
recent "popular consultations," a sort of referendum governed
by the Municipal Code, convoked by the mayors of Sipacapa and
Rio Hondo to protest major investments by foreign companies.
The two towns are geographically and demographically distant,
with Sipacapa in the indigenous highlands of San Marcos and
Rio Hondo in the ladino lowlands of Zacapa, but there is no

question among observers that the two events are linked.
Organizers claim that the referendums demonstrated
overwhelming local opposition to a gold mine (Sipacapa) and
hydroelectric project (Rio Hondo),but the processes for
gauging opinion were suspect and participation was sparse.
One common denominator has been the involvement of local
environmental NGO Madre Selva, which receives significant
financing from foreign sources, thought principally to be
European. It is also listed as a "partner" of Oxfam America
on the latter's website.

Sipacapa and Glamis Gold's Marlin project
--------------

3. (U) Canadian-American Glamis Gold's Marlin project,
operated by Glamis subsidiary Montana Exploradora, lies
almost entirely within San Miguel Ixtahuacan municipality,
though a small portion of its mining license extends into
neighboring Sipacapa. Current plans call for extraction only
in San Miguel, which will receive a 1% royalty on the value
of gross production of gold and silver under Guatemala's
modern mining law. Sipacapa is not legally entitled to
anything, but Glamis has volunteered to provide it an
additional 0.5%. The entire area is desperately poor and
unfit for commercial agriculture. In terms of modern jobs,
the mine is a godsend. Glamis has an approved environmental
impact assessment and reclamation and remediation plans, much
of which are validated by reputable international
specialists. It has identified a water source in deep wells
that, to date, have shown to be entirely independent of
surface water supplies used by area inhabitants. Glamis
plans to invest at least $140 million in the project and has
identified proven and probable reserves of 2.3 million ounces
of gold and 36.3 million ounces of silver.


4. (C) Sipacapa municipality has 13 villages with 5,720
registered voters. Slightly under half (a reported 2,600
people) participated in the June 18 referendum. Eleven
villages reportedly voted "against mining," while one was in
favor and one declined to participate. Two journalists who
witnessed some of the voting told us separately that
assembled villagers were lectured by referendum organizers on
the dangers of mining and then asked to agree or disagree
through a show of hands. Montana Exploradora claims that
threats had been made against any who supported the project.
San Miguel Ixtahuacan, where the mining will take place, has
not sought to organize its own referendum, though its mayor
suggests that good relations may depend on continuing
largesse, including a new stadium and hospital for his town.

Rio Hondo's hydroelectric project
--------------

5. (SBU) The Rio Hondo project is a 32 MW high head
generating facility that brings water through a penstock
(pipe) down a 1 kilometer vertical drop into a powerhouse and
then returns the water to its original stream bed. It
requires a relatively small dam and reservoir (1.5 million
cubic meter capacity covering about 16 hectares) in the
ecologically sensitive Sierra de las Minas protected area.
The project has the support of the mainstream environmental
organization Defensores de la Naturaleza because of the
operator's commitments to protect the watershed and keep
illegal loggers out. The operator, Alaska Power and
Telephone subsidiary Hydrowest, has already planted over one
million trees in areas were illegal logging had been taking
place. Guatemala has modified its renewable energy
legislation for the specific purpose of encouraging
investment in clean low-cost energy in order to avoid
emergency bids for thermal generating capacity as happened
when the country faced brownouts in the early 1990s.
Detractors of the Hydrowest project allege that it will
pollute water and make it unavailable for consumers in the
drought-prone Rio Hondo region. Hydrowest and GoG officials
counter that the project stores very little water, is
therefore little different from a "run-of-the-river" project,
creates no pollution, protects the watershed, and provides
some limited defense against flash floods.


6. (C) Rio Hondo's July 3 referendum permitted Madre Selva
and the likeminded to declare that an overwhelming 97% of
voters disagreed with the Hydrowest project, and they
demanded respect for "local democracy." However,
participation as reported by the partisan organizers was only
28% of registered voters. President Berger's son told
EconCouns afterwards that he had driven through the area the
day of the referendum and had come across busses in another
municipality, Teculutan, recruiting voters for the
referendum. Guatemalan associates of Hydrowest have been
telling us for several years that they believe that
opposition to the project comes from the mayor, who wants a
payoff, and illegal logging interests. More recently, we
have heard rumors that major narcotics trafficking interests
from nearby Zacapa (presumably the Lorenzana family) have
joined the opposition.

Government is Standing Firm
--------------

7. (C) EconCouns has maintained contact on this issue with
Presidential Commissioner for Investment and Competitiveness
Miguel "Mickey" Fernandez, his deputy Emmanuel Seidner,
Presidency Manager (and former Minister of Energy and Mines)
Roberto Gonzalez, and current Minister Luis Ortiz. They have
formed a working group together with Presidential
Coordination Secretary Eduardo Gonzalez and Solicitor General
Roberto Molina to ensure that Madre Selva and its friends
fail in their efforts to stop the two projects. They believe
the government's legal case is unassailable, as the national
government's authority for energy and mining is embedded
firmly in the Constitution and must be defended at all costs.
They also believe it would be a disaster for the investment
climate if either project were blocked, and they draw
comparisons to what has happened in Bolivia. They are
currently exploring having the courts reaffirm that, under
Articles 65 and 66 of the Municipal Code, a "consulta" is
binding only on issues within the scope of municipal
decision-making. Mining licenses and energy project approval
are the purview of the national government.

Invoking ILO Convention 169 on Indigenous Rights
-------------- ---

8. (SBU) To sidestep the clear delineation of authorities
in Guatemalan law, referendum organizers have seized on
Guatemala's obligations under ILO Convention 169 to consult
with indigenous and tribal people on the use of their land.
Madre Selva and others have been careful to restrict their
specific arguments to Sipacapa, where the population is
predominantly indigenous (Rio Hondo's is not). Former
president Alvaro Arzu told the Ambassador July 11 that he
insisted on the reservation that ILO 169 would not take
precedence over the Guatemala Constitution or law when
Guatemala acceded to the Convention. Since then, the
Guatemalan Congress has never enacted legislation
implementing the vaguely worded ILO 169 or regulating how
these "169" consultations should take place. The GoG has not
argued that it undertook any sort of consultation in the
spirit of the ILO 169 prior to issue Glamis its mining
license. Glamis, which has conducted extensive outreach in
San Miguel Ixtahuacan and created a foundation to finance
development projects and vocational training, notes that it
purchased freehold title to the land where it intends to
mine, paying more than the going market price, so the issue
of indigenous or tribal lands doesn't arise.

Comment
--------------

9. (C) We were not witnesses to the voting at either site,
but we conclude that it was more along the lines of
nationally scripted street theater than a demonstration of
considered local sentiment. Most Guatemalans seem to have
reached the same conclusion, and the issue has largely faded
from news reporting. However, it has inspired continuing
discussion in op-ed columns on the purpose and powers of
representative government and the role of NGOs. Elite legal
opinion has pretty well concluded that the state is
constitutionally empowered to approve the Montana and
Hydrowest projects and that the referendums could not change
anything, even if they had been conducted credibly. We
certainly see no backpedaling by the Berger Administration,
though there has been restraint so as not to be cast as
"opposing local democracy."


10. (C) It remains to be seen how recent events will play
internationally, where the press has given this issue some
attention. Some NGOs with the best of intentions were caught
up in the moment. CARE, for instance, helped organize the
Sipacapa referendum but pulled back as best it could after
Montana complained and we provided some background on how the
project and protests had evolved. The idea of more local
awareness and participation is obviously attractive and
difficult to be "against," no matter that it may be
manipulated. It would be unfair, however, were the
impression to spread based on these two referendums that the
government was trampling the rights of local inhabitants and
carelessly ignoring environmental threats. That simply has
not been the case. That leaves the pending question that
many are asking about who is financing the recent activism.
Most observers seem to think that it's mostly European
organizations channeling funds through remnants of the
guerrilla left and groups like Madre Selva, but some are
starting to wonder if something more nefarious isn't afoot,
such as some Bolivarian "solidarity" from Venezuela. So far
there is no evidence, but few in business or government we
speak with consider it implausible.

WHARTON