The bauxite-alumina industry has been in Jamaica now for over 70 years. From being the world’s largest producer of bauxite in the early 1960s, we are now in seventh place with just a two per cent global share.

Inward foreign investment in the industry in the 1960s helped spur rapid economic growth. The earnings at times have been significant, especially when the bauxite levy was first introduced in 1974. But, by 2021, these amounts had dropped to about 1.4 per cent of gross domestic product (GDP); five per cent of foreign exchange earnings; 0.6 per cent of government revenue; and no more than 5,000 jobs. Some of the reduction was due to the 2008 world recession, then there was the novel coronavirus pandemic, and more recently the fire at Jamalco. But the biggest factor is the competition from larger and more efficient producers, and this will only get worse.

In the early days there was intense debate as to whether such a capital-intensive industry, controlled and mostly owned by corporate imperialists (as Professor Norman Girvan described them) was worth the damage and effective loss of economic sovereignty. A viable alternative was to develop a modern and extensive agricultural sector, including agro-processing. But, instead, expansive open-cast mining has torn up communities that have been around since Emancipation, creating, at the same time, very real health and environmental hazards which have never been properly regulated. No amount of so-called rehabilitation can restore the land to anything better than poor pasture — land that had previously provided a secure (if modest) livelihood for thousands of small farmers. The provision of community amenities and compensation has been tokenistic at best. The damage done by the four alumina refineries has also been significant, especially as regards air and water pollution.

Jamaica Environmental Trust (JET) produced, in 2020, a comprehensive report called ‘Red Dirt’, examining aspects of the industry that the Government should have but never has, partly due to push back from the companies involved. JET admits that the findings are incomplete because much-needed data has not been collected over the years and they did not receive the full cooperation of government entities/regulators.

What the report does establish, however, is that just two of the more measurable social costs — human health costs and the social cost of carbon — calculated at between US$4.7 billion and US$ 19 billion per year, far outweigh the economic benefits which some suggest amount to US$1 billion per annum. JET’s conclusion is that there must be much tighter regulation of the industry (bauxite mining and alumina production) along with a detailed exit plan, both of which must be effectively monitored and implemented.

The intention of this column is to take these conclusions a little further. Using data from the Economic and Social Survey of Jamaica 2021 (ESSJ) published by the Planning Institute of Jamaica (PIOJ) and the Interim Fiscal Policy Paper (FPP) from the Ministry of Finance tabled in September 2022, I wish to argue that the export of crude bauxite is of such little value and causes such damage that it should be immediately phased out.

This matter has commanded national attention in recent years because of threats to the Cockpit Country, the boundary of which has been subject to extended debate. In 2018 the Government promulgated a Cockpit Country Protected Area (CCPA) which was not only 30 per cent smaller than the community-preferred Cockpit Country Stakeholders Group (CCSG) boundary, but it had no buffer zone and excluded a large area in the north-east part of St Ann. It turned out that, at about the same time, the Government had granted a lease to mine this omitted area, known as Special Mining Lease 173 (SML173), to Noranda Jamaica Bauxite Partners II, which operates out of Port Rhodes (Discovery Bay).

There is a clear conflict of interest because the Jamaican Government, whilst purportedly being the regulator of the industry and responsible for protecting both the people and the environment, owns 51 per cent of Noranda, the other managing 49 per cent being held by Concord Resources based in London. Whilst the situation was developing back in 2018, there were demonstrations by worried stakeholders who also delivered a petition with over 15,000 signatures to the Office of the Prime Minister. Yet nothing has changed and the limited CCPA was gazetted in March 2022 and a permit to begin mining was granted in January 2022 even though the required Environmental Impact Assessment (EIA) had not yet been completed. As of this week, in late November 2022, signs have been erected near Industry Pen (within the SML173 area) that land clearance operations are imminent.

Chapter 11 (Mining and Quarrying) of the ESSJ 2021 is very revealing. It lays out the very modest performance of the industry in recent years and also its increasing costs. With such strong competition from the countries ahead of Jamaica, in terms of both production and reserves, the future of the industry is surely not very secure. Thus the pressing need for an exit strategy. From 2020 to 2021 there was a 12.9 per cent reduction in the output of crude bauxite, due to “lower demand”, even though global consumption of aluminium increased by nine per cent. There has been a downward trend in both production and export of crude bauxite for the five years shown in the report with the bauxite capacity utilisation rate now only 48.9 per cent, the seventh consecutive year of decline (it was 90 per cent in 2012).

For the period 2020 to 2021 there was an 18.9 per cent decrease in earnings from raw bauxite “due to the combined effect of a 14.9 per cent decline in the volume exported and the price decreasing from US$28.95 to US$27.59 per tonne”. The local cost of production of bauxite rose from US$22 per metric tonne in 2017 to US$36.4 in 2021, a 64 per cent increase in just four years. The performance and outlook of the crude bauxite subsector do not look good.

What is most striking from the data in ESSJ 2021 is that the claims of US$1 billion per year earnings from the bauxite-alumina industry are spurious. For the period reviewed export value from the bauxite-alumina industry in Jamaica was just US$470 million, with crude bauxite exports earning only US$71 million. Worse still, net foreign exchange inflows for the whole industry amounted to only US$266 million once repatriated amounts were subtracted. By proportion, this suggests a benefit of only about US$40 million from crude bauxite exports. This represents just 0.9 per cent of total exports in 2021 (U$4,385) and 0.4 per cent of total foreign exchange inflows (US$8,579). As for GDP, Mining and Quarrying as a whole contributed just 1.5 per cent and, again, if this is mostly bauxite and alumina, then by proportion crude bauxite exports contributed at best 0.2 per cent of GDP.

Turning now to the contribution to government revenues as shown in the FPP in 2021-2022, the bauxite levy contributed $2,261 million toward total revenue of $720,000 million, that is just 0.3 per cent, which is forecast to rise to 0.6 per cent by 2026. By the same proportion used above, raw bauxite contributed perhaps $340 million (0.05 per cent) by way of the levy. The taxes paid by the 5,000 workers in the industry earning, let’s say, $1 million per annum with a tax rate of 25 per cent (income) + 15 per cent (GCT) would come to $2,000 million, giving an overall revenue amount of $4,261 million, which is about 0.6 per cent for the industry as a whole and 0.09 per cent for crude bauxite.

These figures show that the earnings from the export of crude bauxite are minimal and their loss would hardly be noticed. For the industry as a whole, of which crude bauxite is about 15 per cent from the aforementioned, the earnings are larger but could be replaced with an effort to encourage other sectors, especially agriculture and agro-processing, which would be the direct alternative to mining in the Cockpit Country and elsewhere.

As such, I would argue that the export of crude bauxite be immediately phased out, sparing all the concerns about damage to the Cockpit Country. Noranda can be told to extract what they can from their current mining sites and then wind down over no more than two years. Any compensation due to broken contracts, which should not have been signed by the Government in the first place, can be repaid over time, taking a cue from the very delayed payments often made by the players in the industry. In that two-year period, the displaced workers in the Noranda mines and in Discovery Bay can be offered training, with emphasis placed on agriculture.

I write against a background of continued resistance to bauxite mining, especially in the Cockpit Country. Mining operations in SML173 look to be starting very soon, even though a case has been lodged in the Supreme Court to prevent the mining on the grounds of Section 13.l of the Jamaica Constitution, viz “the right to enjoy a healthy and productive environment free from the threat of injury or damage from environmental abuse and degradation of the ecological heritage”. This case should have been heard at the end of October 2022 but has been put back a year to October 2023. In the meantime, an injunction application has been filed, which is expected to be heard on December 3, 2022, to stop any mining activities until the constitutional case has been decided.

I do hope that the courts examine this issue in a holistic way. If they feel obliged to rule in favour of more damage and destruction, there is still space for the Government to take a more enlightened view since there is clearly nothing less than a chasm between the massive costs and minimal benefits.

pgward72@gmail.com