Business Social Responsibility: Poisoned by Lead and Vested Interests

The case of Baterías de El Salvador, SA de CV, which has been poisoning thousands of people with lead for years, has put the much-touted “business responsibility” strategy on the stand. While some businesspeople are surely concerned about “their” workers and the planet, we can’t let workers and communities, much less the planet, depend on their good will. It’s up to the state and governments to guarantee their population’s welfare.

Elaine Freedman

According to the impact evaluations of the free trade agreement known as CAFTA-DR, signed by the Central American countries and the Dominican Republic with the United States, very few Salvadoran businesses are enjoying any benefits from it. One of the lucky few is the car battery manufacturer Baterías Record, legally registered as Baterías de El Salvador, SA de CV and owned by the Lacayo family. It exports 85% of its production and benefited from tariff exemption even before the free trade agreement was signed, allowing its owners and stockholders to generate revenues of over US$60 million a year.

Worrying blood lead levels

On March 9, 2005, members of the environmental committee of the Sitio del Niño area, located in the municipality of San Juan Opico, department of La Libertad, filed a charge with the Office of Human Rights Ombudsman (PDDH) that around 7,250 people from six local communities were affected by contamination from this battery plant.

The materials used to make the batteries—including lead and acid—are highly toxic and harmful to human health. The discovery of a 300% lead saturation in the company’s residual waters, confirmed in a report by the Environment and Natural Resources Ministry, was one of the main complaints presented to PDDH by the communities of Nuevo Sitio, Joya de Cerén, Nueva Candelaria, Santa Fe, Prado II, Vía París and Vía Mónaco, all located in the vicinity of the plant.

Lead seriously affects both the environment and people’s quality of life and physical and mental health. According to the Salvadoran Health Ministry’s “Guide to Clinical Treatment of Lead-Intoxicated Patients,” lead smelters, the manufacture and dismantling of car batteries and the ceramics industry are the country’s main sources of workplace intoxication. Lead pollution in the air can contaminate the land or water then enter human beings via the food chain and drinking water. The World Health Organization (WHO) points out that ongoing exposure to even relatively low lead levels can have serious health effects, including anemia, the possible development of leukemia and nervous system-related disorders and injuries. Children are particularly vulnerable to lead’s neurotoxological effects, with relatively low exposure levels reducing their IQ, causing learning problems and aggressive behavior.

The WHO describes observing cases of acute lead poisoning among chronically-exposed children whose in which the level of lead in their blood can be so high it impairs their normal functions. These children suffer intense migraines, nausea and vomiting, abdominal pains, lethargy and can even go into a coma. The most serious cases can develop threatening and possibly deadly encephalitis or have irreversible neurological consequences. But more frequent, says the WHO, are low levels of lead exposure that can result in unspecific signs and symptoms that are not even subjected to any diagnosis.

Poisoned humans,
plants and animals

The internationally accepted norm for minors is 10 micrograms per deciliter of blood. The word “accepted” implies that one can live with that amount, albeit it with the damage it can cause in the human body. According to the WHO, there should be absolutely no lead in children’s blood. In 2005, 11-year-old Ángela Ester Gómez Carrillo was diagnosed with a level of 11.76 mg/dl . Earlier this year a blood test registered 52.46 mg/dl. By the time she was treated with chelants, the medicine prescribed for countering lead’s effects, Angela’s level had soared to 72 mg/dl. René Gómez, her father, says he didn’t find out about the last diagnosis until he took his daughter to the San Rafael Hospital after being referred there by the local health unit. “The doctor asked if we had come prepared because they were going to hospitalize my daughter and the other boy. We didn’t know what was going on,” explained Gómez, still unaware of the significance of this measure.

Local farmers and ranchers began to worry when their cows started to miscarry repeatedly with no obvious signs of illness. Moreover, their crops inexplicably developed symptoms associated with blight.

In 2007, a Health Ministry study of 358 inhabitants of Sitio del Niño revealed that 92 had lead in their blood, although many people consider these figures very conservative. Both the locally-organized Leadless Movement and humanitarian organizations believe that at least 500 people have lead poisoning and plan to file a negligence suit against Salvadoran state with the Inter-American Commission on Human Rights if the responsible national bodies fail to do something about the battery plant.

The company’s record

It’s not the first time that Baterías Record has featured prominently in the national press. In December 2000, La Prensa Gráfica published a report revealing the corruption or “conflicting interests” of Miguel Lacayo, who was both then-President Francisco Flores’ economy minister and the battery company’s board chairman. Basically this government official, who a few years later would be a signer of CAFTA-DR, used a fast-track “safeguard” measure to favor his company. According to the General Economic Integration Treaty, the Council of Economic Integration Ministers decides on common import tariffs applied to products from outside the Central American area, but
a “Safeguard Clause” in the Central American Tariff and Customs Regime Agreement establishes that the economic or treasury ministry from any of the countries can reduce or eliminate tariffs on extra-regional products during a national emergency.

Baterías Record benefited from this clause on five different occasions, first under Economy Minister Eduardo Zablah one week before he handed the post over to Lacayo—who was already working in the ministry at the time—and four times under Lacayo. According to an investigative report by La Prensa Gráfica’s magazine supplement Enfoques, the safeguard was applied to the importation of four inputs for car batteries, including sheet metal and terminals. The different ministerial decrees saved Baterías Record 145,000 colons in customs duties and over 300,000 colons in value added tax, all of which the company should have paid into the national budget.

In an interview given at the time, Lacayo, who was the company’s executive director before becoming chairman of the board, argued that there was no conflict of interests: “Look, the tariff policy in Central America and in our country is aimed at economic development and there are approximately 6,000 tariff codes…. Our economy isn’t very big; it’s normal in a small economy for tariff codes to affect one to three companies.... If you do a complete analysis of the economy and say how many cases have had an impact on one, two or three companies, you’ll find hundreds….” This bumbling explanation for why he had ruled in favor of his own company—the only car battery manufacturer listed by the Association of Salvadoran Industry—came from a man with a master’s degree in business administration who studied at the most prestigious universities in the United States.

National emergency?

According to the Safeguard Clause, a state is allowed to “unilaterally apply the modification of import tariff rights when one of the Contracting States is facing serious balance of payments imbalances; or sudden and generalized shortages in the supply of raw materials and basic finished goods; market disorganization; unfair trading practices or any other circumstance that threatens to lead to situations of national emergency.”

In mid-1999, the official gazette announced that supply problems for car battery inputs constituted a “national emergency.” The arguments on which that announcement was based were never made public, but not a single voice in the Flores government questioned the decision. In a year of national crisis related to the import of propane gas and oil—products that directly and indirectly affect most households—it was hard to believe that the production of car batteries could pose a threat to the Salvadoran people that constituted a real “emergency.”

Subsequent declarations by Álvaro Corpiño, Baterías Record’s sales marketing manager, suggested a situation quite contrary to the one being officially touted: “At no point have we had a supply shortage, not even during the war, because there was always a pretty healthy inventory policy... The company has never fallen into a production or supply crisis due to inputs or raw materials, thank God.”

The owner’s record

In May 2005, by which time Elías Antonio Saca was President of El Salvador and Yolanda de Gaviria was his economic minister, the head of the Supreme Court’s Probity Section, José Eduardo Cáceres, asked Banco Salvadoreño and Banco Agrícola to provide reports on the accounts of various former officials whose declarations of personal wealth provided cause for concern. The list included Miguel Lacayo, former President Francisco Flores and his wife Lourdes de Flores, former Presidency Technical Secretary Juan José Daboub and former Foreign Minister María Eugenia Brizuela de Ávila, who had recently been elected president of Banco Salvadoreño.

Rather than send the reports as requested, the two banks, backed by Banco Cuscatlán, sent a letter to Supreme Court Chief Justice Agustín García Calderón objecting to the Probity Section’s faculty to request reports. Calderón and nine other justices voted to approve the request by the financial institutions to de-authorize the Probity Section from requesting reports on those people.

Despite the lack of cooperation from finance capital, it was learned that in Lacayo’s case the Probity Section registered an increase in personal wealth of over US$3.7 million during his five years in charge of the Economy Ministry. Lacayo justified this by saying it came from selling off shares given him by his father. The head of the Probity Section reported that his offices could not investigate this “as all the transactions were made abroad.”

It is worth mentioning that in 2005, Miguel Lacayo resigned as board chairman of Baterías Record and sold his shares in the company. The buyers appear to have been several relatives of his, and they now hold five of the ten seats on the current board. That same year, Lacayo started Farmacias Económicas and is its president, prompting Leadless Movement representative Carlos Mejía to comment wryly that “he poisoned people with the battery company and now his pharmacy operation is surely going to bring over chelants to sell them to the Health Ministry.”

Struggle and organization

Starting in 2002, the communities in the area sometimes jointly and sometimes independently denounced to countless different institutions both the lead contamination and its effects on the health of children and adults. Between then and 2005, local inhabitants went to different offices of the Civil National Police; the Attorney General’s Office; the health, education and labor ministries, the San Juan Opico municipal government; the Salvadoran Social Security Institute and the Court of Accounts [the state public sector oversight institution].

Although they were more often met by silence than responses, the different forms of pressure—including an accusation filed with the Office of Human Rights Ombudsman by the Sitio del Niño Environmental Committee in 2005—led the government to set up a multidisciplinary team and invite the US Center for Disease Control (CDC) in Atlanta, Georgia, to run tests in the area. The CDC tested the blood of all 370 factory workers and took samples from the child population in nearby communities. It turned out that 10% of the workers had the maximum lead poisoning level (level IV), 14% had level III, 42% had level II (presence of poisoning) and only 35% had level I, which is considered “acceptable.”

Some successes

These tests would have been enough to present a case to the Labor Ministry had the factory workers or the local population known about them at the time. But they have only recently gotten access to the CDC report. Despite the secrecy, these first blood tests were an undeniably positive result. It was also revealed that three children in the community had lead poisoning, confirming the alarm bells sounded by certain communities about children and youths suffering inexplicable illnesses.

Another achievement was that after ten years operating in the zone, Baterías Record finally put up a sign with its name, for the first time publicly confirming its presence in the area. The company’s move to Sitio del Niño had been virtually in flight from the community called 22 de Abril in Soyapango, where it was previously located. That community’s inhabitants had a history of solid organization and conducted what proved to be an effective protest campaign against the contamination. The company tried to relocate as quietly as possible so as not to raise the suspicions of its new neighbors.

The birth of the leadless movement

The workers didn’t need the CDC’s results to tell them that their health was suffering. In 2006, workers in the factory formed a union to pursue a series of demands related to “labor rights and a health problem caused by defects in the industrial security programs.” Almost simultaneously to the workers signing up with the union, the company initiated a two-prong campaign involving both intimidation and cooptation of their leaders. Despite international protests, charges and other initiatives related to the violation of union freedom, the power of the owners won out and the union fell apart in less than a year.

Approximately six months later, 11 local communities organized the Leadless Movement, which buttressed all the earlier initiatives. They held street protests and a six-hour factory shutdown, made denunciations in the media and made contact with different national and international entities. “It was a struggle for us just to access information, documents about the scope of the contamination such as the CDC report rom the Environment and Natural Resources Ministry and the Salvadoran Social Security Institute. They know that information is power and we had to exert a lot of pressure to get the information, which was in government hands,” explained Carlos Mejía.

A government in cahoots

The government consistently provided the factory preferential treatment, with the Environment Ministry giving the company a fairly long deadline to comply with 18 technical recommendations and the health and education ministers telling locals they should change their children’s schools and go live somewhere else if they felt vulnerable in their homes.

According to the Leadless Movement’s representative, the normal procedure followed by the different government entities was to forewarn plant management about any inspections. Furthermore, all tests that appear in the Environment Ministry report were done by the factory management and given to the government, making the results suspect and the analysis of the contamination conservative at best.

When the Health Ministry did 85 blood tests of the child population in the first quarter of 2007, they took two samples per child. One remained in the Ministry and the other was given to the factory, without informing the parents or asking for their permission, thus providing Baterías Record with a chance to manipulate the tests and distort the results.

A surprising closure

Then suddenly on Monday, September 24, 2007, Health Ministry authorities, flanked by the Human Rights Ombudsman and Civil National Police officers, turned up to shut the plant down. The justification for the closure was a lack of operating permits dating back to 2005.

The deputy health minister argued that it was only happening after two years “because a process was being followed.” During the time this “process” was being played out the lead levels had quadrupled among many children.

A change of heart
or just a tactic?

The shutdown was a real surprise and demonstrated an apparently radical change of position among government officials. But only days after the closure, with the case still on the front pages of all national newspapers, Attorney General Félix Safie declared that he could not yet act as he had no proof that the population had been poisoned. This declaration came despite the fact that Human Rights Ombudsman Oscar Luna had urged him to open a criminal case against the company. Members of the Leadless Movement see this as evidence that the owners of Baterías Record and the government are in cahoots.

According to Carlos Mejía, the surprising closure can be understood within the government logic. The pressure exerted by the communities was effective and the image of both the company and the government bodies collaborating with it had been seriously tarnished by the bad press.

The closure must also be placed in the context of other government actions. The day before the factory was padlocked, President Saca gave a speech on climate change and the environment at the UN General Assembly in New York. He could hardly express his great concern for ecological matters in the UN without taking some kind of symbolic action in his own country.

Meanwhile, the decision mall well be overturned on procedural grounds. The lawyers responsible for the legal process suggest that the closure was not properly handled as the papers were signed by the deputy health minister, not the minister.

Baterías Record’s marketing manager, who became its spokesperson when the “little problem” began, said that the fact that his company didn’t have the corresponding operating permits doesn’t warrant its closure: “The contamination hasn’t been proven and operating without a permit carries a light penalty.” The plant has already appealed the closure with the Ministry of Health. Without expressing any strong support for the questioned company, Federico Colorado, who heads ANEP, the main Salvadoran business association, commented that by closing Baterías Record “the government is sending the private sector a confusing signal.”

Demands for justice and reparation

Given all this, the communities can’t afford to abandon their fight. Even while celebrating the factory’s closure, they recognize that it doesn’t solve the problem. The damage has already been done.

The Leadless Movement is currently preparing 25 suits for health contamination and individual damage to physical integrity. The local inhabitants will only feel satisfied and fully recompensed when justice is finally achieved, which they understand not only as reparation for the affected families but also the company’s permanent closure and the jailing of its owners for environmental crimes and of the government officials who committed acts of negligence or deceit.

Reparation must first include blood tests not only for former factory workers but for the whole population within the radius of contamination, the detoxification of all people found to be contaminated and the transferring of the families to a decent place to live.

Other kinds of damage can never be compensated. Eight-year-old Pedro has 20 micrograms of lead per decimeter in his blood. He’s taking first grade for the second time and hasn’t been able to learn to read or write. As Carlos Mejía asks, “What amount of money can compensate for the irreversible damage to the children’s intelligence? No amount. What happens if my grandchildren are born blind or with three eyes? The doctors say that lead can alter sperm. We won’t know the real consequences of this tragedy until many generations have passed.”

Business responsibility?

The case of Baterías Record puts a big question mark over the highly touted business social responsibility (BSR) strategy. Already inaugurated in the North, this strategy became fashionable in Latin America in the eighties and nineties with the implementation of the neoliberal model.

Neoliberalism preaches “less state and more market” and the BSR strategy used administrative restrictions and corruption in the already disappearing public companies to justify transferring what was previously public responsibility to the market.

BSR had its opponents in the heart of neoliberalism right from the start. None other than Nobel Economics Laureate Milton Friedman commented that “the social responsibility of business is to increase its profits.” The strategy’s proponents, however, claim that company interests can be reconciled with social values and demands based on the companies’ own political will, with no need for any state control or regulation. Contradicting Friedman, they argue that caring for the community and their workers is a good business investment.

And in fact, although they may just have been doing so to clean up their image, companies that have organized themselves to be socially responsible in their business dealings have been generously rewarded by the international finance organizations. Empresa, a continental alliance of NGOs is one of the finest examples. According to the conservative Chilean newspaper El Mercurio, Empresa was formed in Miami in 2001 and has received US$1 million from the Inter-American Development Bank and $400,000 more from other donors to develop a pilot project aimed at disseminating the BSR strategy. Four alliance members are participating in this project: Acción Empresarial from Chile, Perú 2001, Instituto Ethos from Brazil and the Salvadoran Social Action Foundation (FUNDEMAS).

In the Knowledge Fair promoted by FUNDEMAS in 2006 in coordination with other national and international bodies, businessman and former Vice President Carlos Quintanilla Schmidt defended the BSR strategy to other Salvadoran businesspeople. It is thus interesting to learn from the National Registration Census that Quintanilla Schmidt was Baterías Record’s legal representative while it was poisoning the soil, air, water table and thousands of children and adults. If this is an example of “business social responsibility,” God only knows what the parameters of business irresponsibility would be...

Empty promise

The Baterías Record case fuels the argument that BSR is just an empty hope. With such lamentable precedents as impunity for Monsanto and the notorious discovery of a toxaphene warehouse in San Miguel, acute social conflicts are still ahead in cases similar to that of Baterías Record, including Nejapa Power, the sanitary land-fill project in the Cutumay Camones area and the installation of transnational extractive industry projects.

While some business people are surely concerned about “their” workers, the local community and the planet, it’s not fair to leave workers, communities and the planet depending on the good will of private business. It’s up to the state to guarantee its population’s welfare through appropriate legislation and basic political will. It is the state, not private companies, that has the duty and must provide the power to guarantee the population’s welfare in the face of economic initiatives from a very limited sector of the international and national bourgeoisie.

Elaine Freedman is a grassroots educator and envío’s correspondent in El Salvador.

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