Saving Iceland

Ethical Consumer.org
September/October 2002

Scott Clouder profiles the company that links BacoFoil with the US treasury secretary, a Mexican sweatshop and an Icelandic wilderness.

At the end of July Alcoa, the world’s largest producer of aluminium, signed an agreement with Iceland’s national Landsvirkjun power company and the Icelandic government to build a large smelting plant in the country’s eastern wilderness. Alcoa is offering to finance the construction of an adjoining hydropower plant in an undisturbed area north of Vatnajokull Glacier, including access roads and a large dam. This will enable it to buy electricity cheaply – which is useful considering around 60 percent of the cost of producing aluminium is the cost of energy. The project is set to be one of the largest investments ever in Iceland, and will change the course of two of the country’s largest glacial rivers and turn various valleys and canyons into reservoirs. All this is proposed for an area which, at three thousand square kilometres, is the second-largest wilderness in Europe. Nature conservation organisations all over the world have campaigned to have the place designated as a national park but the construction will disturb about half of its 22 protected sites of special natural interest and an important reindeer calving area.(1)

Paradise Lost?
Iceland’s State Planning Agency originally vetoed the plan because of the environmental impact, but the decision was overruled by the environment minister, Sif Fridleifsdottir. Currently, a coalition of environmental groups (including WWF) is offering to commission a study for the park, with a full environmental impact assessment featuring alternative sources of income for the communities of the Eastern Fjords region. A 2001 economic feasibility study carried out by the Icelandic Nature Conservation Association (INCA) concluded that the project is “a highly unfeasible investment for Landsvirkjun as the investment could not be recovered based on the expected energy price”.(2) They have also just won a ruling that allows them to take Ms Fridleifsdottir to court over her planning decision. Arni Finnsson of the INCA said that sadly Fridleifsdottir is “part of a government that is extremely keen to make this project happen”.

Political Influence
Based in Pittsburgh, USA, Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets as well as marketing consumer brands including Reynolds Wrap in the USA, and BacoFoil in the UK. The company has a huge influence over American politics as well as Icelandic affairs – in fact the company’s operations in the world of political influence have been a near textbook example of how to win friends in high places. The current US Treasury Secretary, Paul O’Neill, was chairman and CEO of Alcoa from 1987 to 1999. He retired as chairman at the end of 2000 and was given a ‘golden parachute’ of $117million in stocks. Back in 1996, Alcoa took the decision to dissolve the company’s PAC (Political Action Committee).(3) “What’s going on with campaign financing has reached well beyond a reasonable limit,” O’Neill told Fortune magazine. “Some people said we’d have a problem with access [to elected officials]. That hasn’t been the case.” This is due in no small part to the tireless work of Alcoa’s law firm, Vinson & Elkins, which just happens to be one of George W Bush’s largest donors, giving over $200,000 during his campaign year.(4)

Top Polluter?
The law firm has also helped create legal loopholes for Alcoa’s facility at Rockdale, Texas. It ensured that state environmental regulations allowed Alcoa to continue emitting 60,000 tons of sulphur dioxide annually into the air, maintaining Alcoa’s position as one of Texas’ top polluters. “Whereas all other companies must adhere to a standard of three pounds of sulphur dioxide per million British thermal units produced, the code contains a special exception for ‘fossil-fuel fired steam generators located in Milam County which began operation prior to 1955.’ Only one source meets that description: Alcoa’s Rockdale smelter.”(5)
Now the company has got further embroiled in a local issue that affects more than just a handful of environmentalists and rural homesteaders – the Texas water supply. Alcoa’s supply of lignite (low grade coal used as fuel) at Rockdale is diminishing, and instead of taking the more expensive and marginally cleaner-burning options of other coal or natural gas, the company decided that building a ten-thousand acre (40.5 sq. km) strip mine on the outskirts of Austin would do the trick. The Texan city of San Antonio owns the land upon which Alcoa intends to mine, so a deal was brokered. The city is under a federal mandate to reduce its dependence on the nearby Edwards Aquifer as its sole source of drinking water. So the authorities will allow Alcoa’s new mine to go ahead – provided that the city can pump water from the aquifers located there to its rapidly expanding population.

Legal Battle
Alcoa appears not to have bargained for the thorn in its side that is Neighbors for Neighbors, a highly organised opposition group, based in rural Texas. They were one of the plaintiffs which filed to sue Alcoa in 2001, citing the Rockdale plant’s violations of the Clean Air Act. They are still waiting for progress on this issue, but the story isn’t over yet. To compound the problem, Alcoa is threatening to sue Bastrop County (where the strip mine is to be located) if the company is not allowed to move various country roads and two state highways in order to accommodate the mine. Alcoa lawyers have suggested that Bastrop County could be liable to pay up to $120 million in damages if it objects – that’s a lot of money possibly at risk for a local government whose annual budget is roughly $10 million. Ron Giles from Neighbors for Neighbors believes that this is just a scare tactic and explained that local residents and officials aren’t that easily put off. As residents erect huge ‘Say NO to Alcoa’ yard signs, the group readies itself to defend Bastrop County from any legal onslaught. When asked by ECRA if a national or global consumer campaign (e.g. a boycott of BacoFoil) would help, Ron said that “being so embattled locally, it is hard for us to isolate an individual product and get the message out to such a huge audience”. He has, however, been overwhelmed by messages of ‘commiseration’ that have come in from anti-Alcoa campaigners involved in their own localised struggles all over the world.

Workers’ Rights
Alcoa operates 13 ‘maquila factories’ just over the Texan border in Mexico where 15,600 workers assemble wire harnesses for export to US car makers, including Ford, Volkswagen and Subaru. These factories operate under ‘favourable’ conditions in terms of workers’ rights and taxation. In August 2001, when workers threatened to organise, the company threatened to take its operations to other countries such as China. It is also currently building a 5,000-person factory in Nicaragua where it apparently hopes to pay workers as little as 38 cents per hour. Another tactic used last year was to fire and blacklist over 200 Mexican workers, and replace them with a corrupt ‘yellow’ union.6 A National Labor Committee report of June 2002 states that “Alcoa wants to pit workers in the United States against the desperately poor workers in Mexico – and other developing countries – in a race to the bottom over who will accept the lowest wages and least benefits, the most miserable living and working conditions.”(6)

The 49-page report found that in Piedras Negras, Mexico, at least one third of Alcoa workers were regularly walking across the border to the USA in order to sell their blood for extra cash. The very highest wage a senior Alcoa worker could earn, including all benefits, was $86.58 per week. Local prices at the time of the survey meant that the most basic diet and living arrangements cost $92.69 per week. The underlying assumption – that Alcoa could pay its Mexican workers such low wages because the cost of living is lower than in the USA – was refuted by the report. Prices for basic food items such as milk, eggs, chicken and potatoes were all higher in Mexican stores, sometimes by as much as 100%, and the difference gets larger all the time with the Mexican inflation rate averaging 12.4 percent per year between 1997 and 2002. Alcoa’s wages are roughly half what local garment workers get for stitching cheap clothes to export to the US.

References
1 Letter to the president of Alcoa, 5 July 02 – Icelandic Nature Conservation Assoc.
2 “Estimate of Profitability for The Karahnjukar Hydroelectric Power Plant” by Thorsteinn Siglaugsson, MBA
3 A popular term for a political committee organised for the purpose of raising and spending money to elect and defeat candidates, to which businesses, individuals and unions can contribute.
4 Center for Responsive Politics www.opensecrets.org accessed 10/09/02
5 Austin Chronicle 3rd Sep 1999 www.auschron.com/issues/dispatch/1999-09-03/pols_feature.html
6 National Labor Committee “Alcoa’s High Tech Sweatshop in Mexico” June 2002 ALCOA’s High-tech Sweatshop in Mexico – National Labor Committee for Worker and Human Rights (Here you can download the highly illuminating pdf ‘THE STRUGGLE TO CLIMB OUT OF MISERY’)

http://www.ethicalconsumer.org/magazine/corpwatch/alcoa.htm

Alcoa Sweatshops in Honduras – Alcoa Pits Auto Parts Workers in Mexico Against Its Employees in Honduras. July 2005

CNN / Lou Dobbs Tonight, July 22, 2005 –
Bill Tucker reports on U.S. companies moving auto parts production from the U.S. to Mexico and then to even cheaper labor in Honduars