Poorest left trailing as companies exploit commodity prices, says report

By staff writers
January 25, 2007

Poor people in mineral-rich developing countries are missing out on the benefits of higher commodity prices while large transnational oil and mining corporations make record profits, a new report says.

Christian Aid suggests that a spate of privatisation of national government assets and low levels of taxation for international firms have meant poor countries are not reaping the rewards from owning most of the world’s valuable mineral and oil and gas deposits.

A Rich Seam seeks to demonstrate how poor countries like Zambia, Bolivia and the Philippines have entered into one-sided, often secret, deals that allow corporations to dig for oil, gas, copper, nickel and other precious resources without having to give much back to the country in taxes or royalty payments.

The relatively weak position of many poor countries to make money out of their own resources is highlighted by the recent surge in world commodity prices to an all-time high, says the report. Between 2002 and 2006, the price of copper rose almost five-fold while gold, nickel and oil all increased significantly in price.

While mining companies have done extremely well out of the deal, boasting a profit level eight times higher in 2006 than in 2002, poor countries have not been able to cash in.

“It is a terrible indictment of the power of transnational companies that they can continue to make vast profits while the countries that actually own the goods in the ground make absurdly little out of the deal,” said Claire McGuigan, Christian Aid’s senior economic policy adviser. “This glaring imbalance shows that there is an urgent need for poor countries to renegotiate their tax and royalty deals.”

The report suggests secret deals in Zambia have tied the government into contracts with copper companies for 20 years that mean mining companies investing in newly privatised copper mines pay next to no taxes or royalties. Zambia only receives around 0.1 per cent of the value of its copper resources.

It actually cost Bolivia more to attract and host companies to run the newly privatised oil and gas industries than they got back in taxes, royalties and other benefits.

In the Philippines mining companies paid less than 15 per cent of their profits in taxes and royalties to the government.

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