The social licence as a key factor for the peaceful development of infrastructure

January 2020 | EXPERT BRIEFING | SECTOR ANALYSIS

financierworldwide.com

Our modern civilisation is built on several fixed ideas which are treated as dogmas, but that have begun to be questioned not only by scholars, but due to the reality itself. The idea of linear, unstoppable progress tied to never-ending economic growth is currently in crisis. During most of the 20th century and the first decades of this century, the classification of developed versus underdeveloped countries has been used to differentiate those countries that have achieved an optimum level of infrastructure against those which have not.

So-called underdeveloped countries find themselves in a position in which, in order to achieve the elusive goal of economic prosperity, they need to attract foreign investment to fuel infrastructure construction at standards comparable to those of developed countries. On this path, economic liberalism has led to the national legal framework being amended to facilitate and protect foreign investment. In turn, a market in which underdeveloped countries basically compete to attract foreign investment was created, to the great benefit of transnational companies in the fields of oil and gas, mining and infrastructure construction. The early success of this ‘market’ is represented in the relative success of bilateral investment treaties (BITs) and, in general, in the growth of investment arbitration across Latin America.

Notwithstanding the above, the economic rewards that large infrastructure was promised to bring have not materialised. To further complicate the matter, some of these infrastructure projects, either because of corruption, bad planning or poor execution, have devastated ecosystems, contaminated rivers destroyed sacred sites. All this has understandably disenchanted the communities affected by such infrastructure projects and what they represent. Thus, communities affected by large infrastructure projects now often oppose them – in many cases through violent action. Social resistance has become a factor that must be taken into account. Investors, together with the government, must consider this risk before commencing any project. This is true not only in underdeveloped countries, but also in large economies, such as the US (a good example being the Dakota pipeline).

In order to achieve a balance between developing infrastructure, preserving the environment and respecting ancient cultures and traditions, scholars, non-governmental organisations (NGOs) and other interdisciplinary groups have created an interesting corpus of studies on the subject. From a purely legal perspective, the so-called ‘social licence’ is the key concept that aims to address and resolve the matter. Convention 169 of the International Labour Organization (ILO) is the most accomplished instrument of its nature. It introduces the need to obtain a prior licence or authorisation from communities potentially affected by an infrastructure project. The Convention imposes on governments a duty to protect the human rights of indigenous and tribal communities.

Among these rights, the Convention establishes the right of affected communities to be consulted in any matters that may affect them and to put forward their own priorities in the development process, since it will affect their lives, beliefs, institutions and spiritual wellbeing. Basically, the Convention ensures that if a large infrastructure project affects a community, the government is obliged to consult them. This process must provide all the relevant information about the scope of the project and its material consequences on the land that will be affected.

Although Convention 169 is without a doubt a landmark instrument that strikes a balance between progress and respecting communities, its implementation in practice has been defective. Most governments do not respect its provisions and carry out a simulated or deficient consultation processes. As government officials search for immediate and impactful results for the benefit of their own political agendas, they look to push projects forward in a manner incompatible with the slow-paced consultation process. Moreover, investors have distanced themselves from the consultation process, with many seeing it as a duty of the government or believing the process is manipulated by misinformation campaigns.

Ultimately, none of these strategies has worked well for projects. Communities often complain about the shortcomings of consultation and in some cases become violent in protesting specific infrastructure projects. In turn, some politicians attempt to gain an advantage and start supporting communities, creating, in some cases, huge social movements that jeopardise not only the project, but also the stability of local and national governments.

The solution resides in responsible application of the consultation process, in which the investor and the state recognise that a successful project can only be achieved if it is deemed a real ‘partnership’ with the communities affected. Those communities, on the other hand, can contribute not only with manpower, but with knowledge and culture that blends with the project to achieve better results. Social human rights are a priority over blind profit, but they should not be perceived as an obstacle. The future of our world and economies lies in the hands of a much more balanced understanding of progress – not as a goal to obtain economic profit, but as a tool to enrich human coexistence.

Marco Tulio Venegas Cruz is a partner at LITREDI, S.C. He can be contacted on +52 (55) 5206 7051 or by email: mtv@litredi.legal.

Marco Tulio Venegas Cruz

LITREDI, S.C.