Latest Developments, December 15

In the latest news and analysis…

Park eviction
The Guardian reports on allegations that members of Kenya’s Samburu community have suffered violent abuse since being evicted from land sold to a pair of US-based charities.
“The London-based NGO Survival International said the Samburu were evicted following the purchase of the land by two American-based charities, the Nature Conservancy and the African Wildlife Foundation.
The groups subsequently gifted the land to Kenya for a national park, to be called Laikipia National Park.

A community leader, who did not wish to be named, described police harassment as enormous. He said police beat people, burned manyattas or traditional homesteads and carried out arbitrary arrests during the period leading up to and including the eviction last year. He said they also confiscated many animals and the intimidation has continued.”

State sues investor
Reuters reports that Brazilian prosecutors are suing Chevron and Transocean for $10.6 billion and are seeking to suspend their Brazilian operations over a November offshore oil spill.
“The case will add to already-large legal headaches for both companies. Chevron has already faced years of litigation over alleged pollution by Texaco, a company it bought, in Ecuador’s Amazon region decades ago.
Chevron was ordered by Ecuadorean courts in February to pay damages of $18 billion. The suit is now under appeal in Ecuador, and the dispute is also being reviewed by an international arbitration tribunal. Transocean was the rig operator in the giant four-billion-barrel Deepwater Horizon spill in the Gulf of Mexico in 2010.”

Investor sues state
The Inter Press Service reports on a protest outside a World Bank tribunal that is hearing a lawsuit brought by a Canadian mining company against the government of El Salvador for refusing to grant permits for a project along the country’s main water source.
“Pacific Rim, which has insisted long insisted that it would use the most up-to-date environmental technology and methods to ensure the integrity and health of the river, brought its suit under an “investor-state” provision of the 2005 Dominican Republic-Central American Free Trade Agreement (DR-CAFTA).
That provision allows corporations to sue governments over actions that allegedly reduce the value of their investments.

DR-CAFTA is an agreement strictly between the U.S. and Central American countries. Because Pacific Rim is based in Canada, which is not party to DR-CAFTA, it created a U.S. subsidiary in Nevada in 2009 to press its case before the tribunal, after it could not persuade the Salvadoran government to back the mining plan.”

Investment regulation
A new report released by the Bretton Woods Project warns of the dangers of international financial flow volatility and argues poor countries must take measures to guard against foreign investment surges and stops.
“Even more effective would be policies in rich countries to tackle the risks from capital flows at their source. This includes better overall financial regulation, but consideration should be given to specific capital flows policy in source country. More regional and international coordination on capital account regulation, particularly enforcement of rules, would help developing countries deal with financial flows more effectively. Ultimately, a more ambitious global framework agreement could reinforce mutually consistent management techniques across source and destination countries.”

Mining fraud
The Financial Times reports on resentment in Ghana resulting from the perception that foreign mining companies are getting rich off the country’s resources and giving little back in return.
“One lawyer employed by a gold miner in the 1990s told the FT that the company he worked for systematically falsified its accounts to underestimate profits, thereby depriving the state of millions of dollars in taxes.
There are growing suspicions in government circles that similar tax fraud, known as transfer pricing, has been exercised systematically by companies in the sector.”

Illicit financial flows
A new report released by Global Financial Integrity estimates “developing” countries lost $903 billion to illicit financial outflows in 2009 (which is actually lower than the 2008 figure), capping a decade in which they lost $8.44 trillion.
“It would be encouraging to find that the 2009 reduction in illicit outflows occurred because of stronger governance within countries and more transparent financial dealings between countries. There is little indication that this is yet the case. The need for combined global effort to curtail illicit financial flows is more urgent than ever. We are pleased to note that the G20, OECD, World Bank, and others are beginning to take this issue much more seriously.”

An important distinction
ECONorthwest’s Ann Hollingshead draws a distinction between the concepts of “ill-gotten money” and “illicit financial flows,” which have markedly different economic impacts on poor countries.
“The [World Bank] authors study what they term ‘ill-gotten money,’ which they define as ‘money derived (illegally acquired) from crime and tax evasion.’ This includes not only illicit cross-boarder transfers and assets held abroad, but also illicit transfers and assets held and transferred domestically. The difference between this concept and illicit financial flows is important. The economic effect of a criminal activity alone is quite different than the economic effect of a criminal activity with a corresponding transfer of cash internationally. Or the economic effect of an illicit cross-boarder transaction where the underlying activity itself was not illicit.”

Legal corruption
The New York Times reviews Harvard law professor Lawrence Lessig’s new book, Republic, Lost, in which he explores the idea of legal corruption.
“There is, in his view, one thing holding back America, a legal but corrupt system of campaign finance. ‘Practically every important issue in American politics today is tied to this ‘one issue,’ ’ he writes. Mr. Lessig’s agenda (invoking Thoreau) is to attack ‘the root, the thing that feeds the other ills, and the thing that we must kill first.’
Existing campaign finance reforms, particularly donor disclosure and contribution limits, have done as much harm as good, leading to ‘a corruption practiced by decent people’ and legitimizing what Mr. Lessig calls ‘a gift economy.’ Disclosure of the identities of contributors has made the venal routine. The system ‘normalizes dependence,’ Mr. Lessig writes. ‘There’s is no shame in the dance.’ ”

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