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El Salvador, Central America’s smallest nation, has become the first country in the world to ban metals mining nationwide following a long-running dispute with a Canadian-Australian company over an environmentally questioned gold project.

“It’s a historic day in El Salvador. It’s a historic day for the whole world,” Lina Pohl, environment minister, told reporters after a vote in Congress. “This is a brave step, an extraordinary step, and an enormous step towards reverting the environmental degradation in this country.”

The bill was passed by 69 votes in favour. Robin Broad, a professor of development at the American University in Washington and supporter of the ban who was in San Salvador for the vote, said only 43 ballots had been needed.

The ban, which united officials, lobbyists, academics and the powerful Catholic church, came after World Bank’s arbitration tribunal, Icsid, last October threw out a $300m suit filed by Pac Rim Cayman, a unit of Canadian-Australian company OceanaGold over a gold project in the north of the country.

The law passed on Wednesday is the latest victory for grass-roots communities in developing countries against mining industries, and is sure to be widely watched.

OceaneaGold was ordered last year by Icsid, to pay $8m to El Salvador. Lobby groups say the company has not paid up.

Icsid this week increased the fine by ordering OceaneaGold to “pay simple interest on the order for legal costs … in the principal amount of $8m … at the rate of an average of 12 months US$ Libor … starting from the date of the claimant’s receipt of the award (namely 14 October 2016) until payment to the respondent”.

OceanaGold could not immediately be reached for comment.

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