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Congo renegotiates mining contracts

Bob Moon Feb 22, 2008

Congo renegotiates mining contracts

Bob Moon Feb 22, 2008


Kai Ryssdal: The Democratic Republic of Congo wants some big mining companies to dig deeper… into their own pockets.

The African nation is demanding new contracts from BHP Billiton, the world’s largest miner, and De Beers, which sells almost half the world’s rough diamonds.

All the companies will say is that they’re in ongoing negotiations with the government of Congo.

But they may have no choice, because Marketplace’s Bob Moon reports more and more countries have been throwing out deals they’ve made with foreign companies.

Bob Moon: You’ve got to figure there’s a phrase that translates into any language on the planet:

[clip from “Jerry McGuire”]: Show me the money!

In fact, something of a trend seems to be developing when it comes to governments making that very demand — seeking better terms once they’ve seen foreign investors hit pay dirt:

William Dodge: You saw it with the Russian government over the last few years, you’re seeing it with several governments in South America — Venezuela has taken something of a leadership role here under Hugo Chavez — and now, apparently, with governments like Congo.

William Dodge is a professor of international law at the University of California’s Hastings College. He says the success of some countries in rewriting mineral rights and other lucrative deals seems to be giving others the same idea:

Dodge: I think it’s easier to do it if other people are doing it too and you can point to other countries that have asked for it and to other companies that have, in the end, agreed.

Villanova law professor John Gotanda suggests rising prices for commodities around the globe are also fueling the trend:

John Gotanda: As the marketplace fluctuates greatly, it changes the economic structure of the contract and when that changes, parties are then more likely to then seek renegotiation and that’s probably why we’re seeing it more.

In other words, the pie is a lot bigger than we thought, so we want a bigger slice. But Professor Dodge at UC Hastings says the companies can argue the flip side:

Dodge: We took a lot of risk up front and we invested a lot of money and if it hadn’t turned out that there was oil in this place or copper in this place, we’d be out that money.

Dodge says companies can demand their host countries live up to the bargains they made and, in some cases, international treaties. In the end, though, the foreign governments often have the leverage:

Dodge: The company can’t just pick up and move the copper mine or the oil well.

The countries do need to consider their own reputations though. Dodge says they could discourage other companies from investing in the future.

In Los Angeles, I’m Bob Moon for Marketplace.

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