Comparative Analysis of Social Conflict Around Mining in Latin America

Canadian Mining Firms and the Causes of Social Conflict: Quantitative Evidence from LAC Research Presentation to CIM (Canadian Institute of Mining, Metallurgy, and Petroleum) Presented by: Paul A. Haslam, University of Ottawa, 11 June 2019

FacultĂŠ des sciences sociales | Faculty of Social Sciences uOttawa.ca

Haslam: Research Presentation to CIM

Mining, CSR and Social Conflict Context: o A boom in commodity prices, contributes to a rapid growth of mining activity in Latin America (and worldwide) in mid-2000s o Mining activity occurs outside “historic� mining zones, and brings rural and agricultural communities into contact with mining for the first time o Civil society organizations and academics draw attention to the emergence of social conflicts between mining companies and nearby communities, and human rights violations sometimes associated with those conflicts. o In Canada, the question of what to do about Canadian firms involved in social conflicts becomes politically salient (beginning with the National Roundtables (2007) and culminating, for now, with the appointment of a Canadian Ombudsman for Responsible uOttawa.ca Enterprise, 2019)

Haslam: Research Presentation to CIM

Mining, CSR and Social Conflict Research Questions: o Interested in the connection between mining and social conflict, intent to move beyond single-case studies that characterized the literature, with greater methodological rigour. o What factors contribute to the emergence of social conflict? o What role does nationality of the firm play in social conflict? o How to characterize Canadian firms and social conflict?

Research Publications: o

Haslam, Paul Alexander and Nasser Ary Tanimoune, “The Determinants of Social Conflict in the Latin American Mining Sector: New Evidence with Quantitative Data” World Development, 79: 401-419, February 2016.

o

Haslam, Paul Alexander, Ary Tanimoune, Nasser, and Razeq, Zarlasht M. 2018. “Do Canadian Mining Firms Behave Worse Than Other Companies? Quantitative Evidence from Latin America” Canadian Journal of Political Science, 51 (3): 521-551.

o Haslam, Paul Alexander, Ary Tanimoune, Nasser, and Razeq, Zarlasht M. “Is ‘Being Foreign’ a uOttawa.ca Liability for Mining Companies? Locational Liabilities and Social Conflict in Latin America” Resources Policy [Accepted].

Haslam: Research Presentation to CIM

Better Data for Better Research New combinations of micro-level data o Firm-level data on mining companies (783 geo-located properties at « advanced exploration » and above) … mostly from Infomine o Ownership; nationality; size (market cap); minerals; reserves; exploitation method; GIS location and altitude o GIS mapped « Neighbourhood data » o 5km-150km radii around each property: population; land use (cultivated); surface water; presence of parkland; rainfall; altitude o Census data from 3rd administrative level o % indigenous o % literate; poverty proxies (house construction); age structure; educational level; o Access to public services (lighting; electricity; water; sewage) o Known Firm-community conflicts (1998-2012) o Researcher-coded from activist websites (OCMAL; MAC): accounts of conflicts coded according to existence; severity; principal issue ; scale of network (local to international); outcome o CSR Commitment of Companies (2012-2013) o Researcher-coded from company reports « compliance likelihood »

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Haslam: Research Presentation to CIM

Better Data for Better Research – GIS

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Haslam: Research Presentation to CIM

The Determinants of Social Conflict in Mining

o Before this study (2016, World Development), few big picture (large-n) analyses using “objective” data, so case-study hypotheses had not been subject to rigorous testing… additionally, case studies assume conflict, which is incorrect and methodologically problematic o We organized data to test two big hypotheses (that had emerged from individual case-studies): (1) socio-environmental causes of conflict (threat to livelihoods); and (2) distributional concerns (want more benefits from firm) o We added “alternative hypotheses” that had been neglected by the literature, notably related to firm-characteristics (size, ownership, type of mineral extracted, altitude) o Also tested a number of “minor” hypothesis (juniors; gold; altitude) o We were unable to test “institutional hypotheses” at a local level (lack of local measure of institutional quality) uOttawa.ca

Haslam: Research Presentation to CIM

The Determinants of Social Conflict in Mining Results: o Descriptive Stats.: 21% of 640 properties had a “known social conflict�; o Firm-Level Variables that o increase likelihood of social conflict include: mine type (open-pit); altitude; state ownership; mineral (silver); firm size (mid-tier) o reduce likelihood of social conflict include: local ownership; mineral (gold) o Socio-economic (Distributive) variables that o increase likelihood of social conflict include: poverty (housing) + absence of state services (sewage) o reduce likelihood of social conflict: wealth (housing); % economically active population (more job-seekers); % with primary and secondary education uOttawa.ca

Haslam: Research Presentation to CIM

The Determinants of Social Conflict in Mining o Socio-environmental (Livelihoods) variables that o increase likelihood of social conflict include: less land suitable for intensive cultivation; overlap with protected parkland (all at 25km buffer) o reduce likelihood of social conflict: population density (25km buffer) Findings Overall: o As economic opportunities for people become more scarce, the likelihood of social mobilization increases (in other words, it is not just competition between mining and other livelihood options, but the intensity of that competition that is important) o Poor communities, underserved by the state are particularly prone to conflict o National (host) institutional frameworks are not that important, as compared to highly local factors, indicated above.

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o Some firm-level factors are also very important to the likelihood of conflict

Haslam: Research Presentation to CIM

Do foreign mining firms “perform” differently than locals?

o It was immediately apparent (from our first paper) that foreign firms were much more likely to be involved in a social conflict that local firms o Since we had a rich set of firm-level variables, we decided to examine these characteristics more formally (and in relation to the occurrence of “known conflict” o This fits with business literature on “liability of foreignness” (Zaheer 1995), which suggests that firms face discrimination in foreign markets due to “institutional distance”, specifically: o Social costs related to unfamiliarity with the environment o Relational disadvantages (weak local networks) uOttawa.ca

o Discriminatory hazards (gov’t policy; nationalism; antiimperialism)

Haslam: Research Presentation to CIM

Do foreign mining firms “perform” differently than locals?

o Investigation of how “place-based characteristics of a location can interact with foreign ownership to become locational liabilities” o Define locational liabilities as “socio-environmental characteristics of a locational environment that raise the cost of doing business, by affecting stakeholder expectations of firm behaviour” – reflected in performance cost of social conflict o Look at how being foreign-owned or locally-owned interacts with the place-based variables used in the earlier 2016 study. o Look at mitigation of “locational liabilities” (negative stakeholder perceptions) through management learning, CSR practices uOttawa.ca

Haslam: Research Presentation to CIM

Do foreign mining firms “perform” differently than locals?

Findings o Foreign mining firms do experience a performance liability (greater likelihood of social conflict) as compared to locally-owned mining firms…. “being foreign” is a liability o Interact “distributional” (poverty), and “livelihoods” (intensive cultivation, overlap with parkland) variables with local and foreign firms o For both foreign and local firms social conflict increases with increase agricultural scarcity (livelihoods) o But, only foreign firms have a problem with “overlap with parkland”

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o Distributional pressures are worse for foreign firms, as local firms seem to be able to manage poor communities better (especially in context of indigenous populations)

Haslam: Research Presentation to CIM

Do foreign mining firms “perform” differently than locals?

Findings (Part II) o Use of management expertise and higher-quality CSR to mitigate “locational liabilities” cannot be proven in our study o Yet a puzzle: better CSR by foreign firms, not connected to better outcomes in terms of social conflict o Suggests that foreign firms may be expected to do better CSR for the same social results (as local firms)…. o First evidence that the ability to gain and maintain social licence to operate (SLO) may be conditioned by the ownership status of the firm (harder for foreign firms)

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Haslam: Research Presentation to CIM

Do Canadian Mining Firms Cause Conflict? o The “performance” differential between foreign and local firms led us to consider whether there were also differences between different nationalities of firms. For statistical reasons, we could only split our sample of foreign firms into Canadian and nonCanadian foreign firms o Case-study literature on social conflict between firms and communities has implicated Canadian firms, and argued for the complicity of the Canadian government (Clark, North, Patroni 2006; Coumans 2010; CCRSC 2007; CNCA 2007; DPLF 2014; Imai 2017 [“Canada Brand”]; Keenan 2013…etc.) o Policy implications in so far as Canadian firms are believed to perform worse than other nationalities, “weak” home-country legislation (weaker than other countries) is hypothesized to be the cause. This is a logical argument for enhanced home-country oversight.

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Haslam: Research Presentation to CIM

Do Canadian Mining Firms Cause Conflict?

Worth explaining how our research is different o Other studies (using the similar sources of data on conflicts) have been based on counting-up problems of CDN firms… and not controlling for other possible causes o What we did is contextualize problems (of all nationalities) in the larger universe of firms (gets away from selection on dependent variable to include non-conflict cases, non-CDN firms)… o The statistical analysis allows us to assess a potentially causal variable (Canadian ownership) against a large range of alternative casual variables (controls) o For example – a key finding of the “leaked” CCRSC report (2007) often cited (34% of conflicts CDN, 3x AUS), but offered VERY WEAK evidence for Canadian firms behaving worse than others; BECAUSE also indicated 75% of companies’ hq in Canada. The uOttawa.ca proportional basis is key for findings of statistical significance.

Haslam: Research Presentation to CIM

Do Canadian Mining Firms Cause Conflict?

Specific Research Question: Do Canadian firms behave worse than firms of other nationalities (ie., is “Canadian-ness” of the enterprise a cause of conflict)?

Possible Mechanisms for a Country-of-Origin Effect: o Home-country institutional environment (focus on shareholders; self-regulation; reporting)… the main claim of literature in the “Imperial Canada” tradition o Management practice (CSR practices; implicit vs. explicit) o But, factors unrelated to nationality could drive conflict, particularly other firm-level factors and host-country factors (null hypotheses) uOttawa.ca

Haslam: Research Presentation to CIM

Results: Canadian vs. Foreign non-Canadian

o Strong evidence for a difference between local and foreign firms, with latter being more associated with social conflict at mining properties o Strong evidence for a difference among foreign firms, between Canadian and foreign non-Canadian firms, with the former being less associated with social conflict o These findings are extremely robust across specifications, and variations in the sample (inclusion or non-inclusion of additional conflict cases) o Local and Canadian firms seem to do better in managing distributive pressures (poverty)

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Haslam: Research Presentation to CIM

Probability of Conflict (marginal effects)

Local vs. Foreign (full set)

Local vs. Foreign (-51 cases)

Foreign hq

24%***

Foreign hq

18%***

Local hq

5-7%*

Local hq

4% (not sig.)

Local vs. CDN vs. foreign non-CDN (full set)

Local vs. CDN vs. foreign non-CDN (-51 cases)

Local hq

5-7%*

Local hq

4-5% (not sig.)

CDN

21%***

CDN

15%*

For. non-CDN

28%***

For. non-CDN

22%*

Note: Column on right (-51 cases) is a robustness check for the effect of a bias we introduced into the sample to permit universal coverage of “known social conflicts�. The uOttawa.ca results hold even when we correct for this bias.

Haslam: Research Presentation to CIM

Conclusions o The analysis shows a clear country-of-origin effect which is extremely robust across specifications and even sample variation o Bottom line is that local firms perform a lot better (in terms of being less associated with social conflict), than foreign firms (perhaps enjoying a legitimacy premium, fewer “locational liabilities�) o Among foreign firms, Canadian firms perform better than foreign nonCanadian firms o Seems like Canadian and local firms perform better in poorer communities (ie., manage distributional concerns better) o Social licence to operate may be much harder to obtain for foreign firms (CSR does not fully compensate for liabilities of foreignness) o Firm-level, socio-environmental and distributive concerns remain salient drivers of social conflict uOttawa.ca