1. April 2010
Social license in
Peru: Exploring the
roots of discord
ContentS
Introduction 2
Figure 1 - Social conflicts at end-2008, by type 3
What are we fighting for? 3
Representation, competing
voices and lack of framework 5
Figure 2 - What’s at stake: Main mining projects in Peru 7
Perceived lack of economic benefits and recognition 9
Figura 3 - Voluntary Contributions 9
Figura 4 - Voluntary contributions - Local funds by investment area 10
Figure 5 - Mining canon generated 11
Figure 6 - Projects sent to national public investment system
(SNIP) for evaluation 11
Pro-mining state 12
Figure 7 - Canon / royalties before and after Tía María 13
Tintaya - A positive case study 13
Conclusion 15
2. Social license in Peru: Exploring the roots of discord
April 2010
Introduction
Peru has become one of the world’s primary destinations for mining investment. According
to a report by the consulting firm PriceWaterhouseCoopers published in February 2010, in
the next six years we can expect to see investment worth US$35.5bn in mining projects
in the country. The tax regime is attractive and the country now has several years of
regulatory stability under its belt. The different governments that have come to power
over the last 20 years have maintained an attitude of business and investment promotion.
But this investment boom faces an obstacle that may not stymie it entirely but does
threaten to complicate its proliferation: the ever more difficult relations between mining
companies and the communities near their operations and projects. Examples abound, from
the stalling of the Tambogrande and Río Blanco projects to the problems now hindering Tía
María, a US$934mn copper project that Southern Copper is trying to advance in southern
Peru’s Arequipa region.
Conflicts between miners and communities in Peru did not just pop up recently. They
began to gain strength in the 1990s during a different mining boom and when the sector
started to see privatizations. Around the same time, globalization became a buzzword and
multinational companies were pushed toward greater accountability at home for their actions
in all countries of operation, meaning a developing country’s local environmental and social
standards were no longer enough. Communities started to realize that they had power to
demand environmental responsibility and economic benefits, with the help of NGOs.
But unlike in other countries such as Argentina, where the debate between miners and
community organizations has turned into a dialogue of the deaf, in Peru a number of
mechanisms and instances of dialogue emerged. And despite the virulence of some of the
conflicts, these mechanisms, though imperfect, together with the growing sensitivity of
miners, do allow some degree of optimism for the future.
However, while investment has continued, conflict has not abated and in some cases it has
even escalated. What has happened? What is behind this increasing unrest? And where is
the situation headed?
The answers vary depending on who you ask - someone close to the companies or the
communities (or rather, the NGOs that support them in many cases) - although there are
points in common, such as the lack of effective institutional framework for structuring
dialogue. This basic need appears to be the mother of at least part of the biggest problems
that feed such conflict in Peru today.
Over the last decade or so, successful social relations have become as critical to a mining
project as defining an economic deposit. This report will take a look at the flaws still
plaguing this side of the business in Peru and the road ahead for overcoming the conflicts
complicating billions in investment.
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3. Social license in Peru: Exploring the roots of discord
April 2010
Figure 1
Social conflicts at end-2008, by type
160
140
120
100
80
60
40
20
0
08
08
08
8
08
08
8
08
08
08
08
08
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ar
ay
n
g
p
ct
ov
ec
Ju
Ap
Ju
Ja
Fe
Au
Se
O
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N
D
Active
Latent
Resolved
Socio-environmental 93
Local government issues 28
Regional government issues 8
National government issues 19
Municipal issues 11
Union/labor 15
Land demarcation 9
Electoral 6
Illegal coca farming 4
Other 4
Total 197
Source: Instituto del Perú (USMP)
What are we fighting for?
Some of the nastiest conflicts in Peru’s recent mining history have a common undercurrent:
water. In many cases, el agua has been the only hard, justifiable opposition point. The
impact of a mine’s water usage can have real and tangible effects for a community beyond
cultural impacts or the mere modification of the visual landscape. As in Chile, much of
Peru’s mineral wealth sits in arid regions where hydro resources are scarce, or high in the
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4. Social license in Peru: Exploring the roots of discord
April 2010
mountains where concerns of downstream contamination and volume reduction are often
valid. Mining regularly competes with agriculture for water rights, meaning there are
economic interests and questions of livelihood at hand, too.
In southern Peru’s Arequipa region, which is not only relatively dry, but fertile, the Tía
María copper project operated by Peru/US-based, Mexican-owned Southern Copper (SCC)
in Islay province is facing serious opposition related to its water usage. The US$934mn,
120,000t/y cathode project needs 7 million cubic meters per year (Mm3/y).
The company has presented three sourcing alternatives: construction of a dam and
reservoir that would hold 40Mm3/y to be shared with other users, the use of Tambo River
groundwater pumped up through wells or the use of desalinized seawater.
SCC says that the first option is the most recommendable, though the second would not
affect the environment or agriculture and would be the most cost effective, and that
the third would be very expensive and reduce canon payments and other socioeconomic
benefits. Local farmers have rejected the dam idea.
But the Paltiture dam project has been under consideration by Peruvian authorities for
some time as a 30Mm3/y project to provide water to Tambo Valley farmers in the dry
season. SCC has said it would take on construction of the project as part of Tía María.
The company was scheduled to present the project environmental impact study (EIS)
with its latest water use proposals in a public hearing on April 19, but Peru’s energy and
mines ministry (MEM) suspended the event for a third time on April 17. SCC requested the
suspension after Islay province authorities issued a resolution rescinding authorization
to use the designated meeting site, and MEM said the suspension is in the interest of
complying with rules on citizen participation in mining. The company said it will provide
information about the project through a local media campaign and does not plan to
schedule another public hearing.
Local opposition to Tía María is deep-seated. What would have been the third and
final public hearing had already been suspended twice since local residents voted in a
September 2009 popular referendum to reject the project based on their fear of its impact
on water supplies. Southern Copper rejected the vote, saying it was not legal and that
anti-mining groups had created a negative climate for the final hearing, originally planned
for September, forcing the company to suspend it at the last minute.
The mayor of Islay province’s Cocachacra district, where the Tía María deposits are located,
is categorically opposed to the project. Mayor Juan Guillén López is also president of the
Coordinadora Provincial contra la Agresión Minera de Islay (Islay Province Coordinating
Committee against Mining Aggression), which called an indefinite general strike in
protest of Tía María starting April 14; The strike was carried out April 14-20 and included
blockades on the Panamericana highway.
Arequipa region president Juan Manuel Guillén and the ministry continually called for dialogue
in an effort to avoid the strike in the lead-up to the hearing, and the ministry said it would not
push the hearing back because of the strike. SCC presented the project EIS to MEM in mid-2009
for review, and the public consultation process is a requirement for its approval.
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5. Social license in Peru: Exploring the roots of discord
April 2010
Tía María is one of numerous mining projects where water has been the main point of
conflict. Cases of note in Peru include the Tambogrande polymetallic project in Piura where
Canada’s Manhattan Minerals pulled out entirely in 2005 after investing US$60mn, and
the 3.7Moz Cerro Quilish gold deposit, part of the Yanacocha mine operated by US-based
Newmont Mining, where development stalled in 2004 after local protests. In September
2009, Newmont said it was looking for independent consultants to show that water
resources could be managed at Cerro Quilish.
Peruvian President Alan García signed into law in March this year new regulations on the
use and control of water resources in the country, which define water as a human right
that cannot be bought or sold. The regulations also hand over sole responsibility for
managing water resources to national water authority ANA and prioritize the use of water
for agriculture.
The idea is to create a legal framework to provide clear limits and certainty for potential
investors and protect rural and indigenous communities’ rights to use hydro resources
located in their territories.
But Laureano del Castillo, lawyer and hydrological expert with the national center for
social studies (Cepes) said in a recent interview with BNamericas that the new regulations
are unlikely to solve social conflicts rooted in water disputes. “I feel the issue was not
properly addressed. The law will help to clear up some of the conflicts we’re seeing, but it
really doesn’t get to the bottom of the issue,” Del Castillo said.
SCC manager of legal affairs and natural resources, Guido Bocchio, called the new law
a responsible attempt to manage Peru’s water resources and believes it will not affect
mining investments in the country.
There are some 244 social conflicts over water resources currently in Peru, mainly related
to mining, fishing and agriculture, according to ANA.
Representation, competing voices and lack
of framework
While water is still probably the main tangible issue in social license across the industry,
the social license process in Peru is also suffering precisely because there is no official
procedure. Companies are responsible for informing communities and local authorities
of the details of their projects and organizing public hearings with little coherent
government guidance, leaving all manner of gaps into which opposition easily seeps.
Companies have in recent years created their own internal methods for approaching the
issue, but in many cases they are still falling short. And while that might not doom a
project to demise, it could provoke delays and negative local sentiment well into the
mine’s life.
A complicating factor in the dialogue process is the large number of NGOs operating in the
country and the multitude of local organizations that they support, such as coordinating
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6. Social license in Peru: Exploring the roots of discord
April 2010
committees and community “defense fronts”. The sheer quantity of entities makes
informed, structured debate difficult and generates communicational chaos.
Among the NGOs are those that carry their own agendas or aim to “ideologize”
negotiations, and in many cases the legitimacy of their representation of the people is
also questionable, says Martin Scurrah, associate researcher at Cepes and former researcher
for Oxfam America.
“We are experiencing a process of construction of identity. Unlike in other countries, in Peru
the peasants do not claim indigenousness. Claiming identity in Peru has traditionally been
frowned upon due to the history of exclusion that exists in the country,” says Scurrah.
“But that is changing, and 10 years from now it is likely that all peasant movements will
emphasize the recovery of their identity. There are reasons why these movements take
advantage of this phenomenon. They are discovering that by involving the element of
indigenousness, their power of negotiation is greater.”
The International Labor Organization’s Convention on Indigenous and Tribal Peoples in
Independent Countries, or Convention 169, which was born in 1989 and ratified by Peru
in 1994, is playing a key role in pushing communities toward recognizing the value of the
indigenous factor.
Some NGOs are anti-mining or anti-market, while others do aim to foster development that
happens in a responsible, sustainable way, even working together with mining companies
in some cases. The organizations behave differently according to the interests they are
defending, whether public or private, and though not all are against mining, only some of
the ones that are actually justify their opposition, notes Juan Carlos Cortés, president of
private think tank Ciudadanos al Día (CAD).
Gerardo Damonte, associate researcher with private research center Grupo de Análisis para
el Desarrollo (GRADE), says the problem is that the work of NGOs in Peru is based solely
on denunciation and lacks proposals for advancing the country forward. “NGOs [in other
countries] have specific, programmatic agendas, but at the same time they have a political
agenda that is generally supported by an existing political apparatus. In Peru, the political
apparatus does not exist... There is no solid political platform.”
NGOs often go where there is conflict, and when the specific conflict has ended, they
leave, he says. Meanwhile, companies organizing public hearings sometimes avoid inviting
the most radical groups in a bid to bypass their demands and obtain favorable results
at the hearing, according to Damonte, killing the legitimacy of the hearing process and
sparking violent reactions from the marginalized groups.
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7. Social license in Peru: Exploring the roots of discord
April 2010
Figure 2
What’s at stake: Main mining projects in Peru
Project Investment estimate Operator Location Main metal Production Startup Status
(Millions of US$) (Region) forecast target (as of April 2010)
Toromocho 2200 Chinalco Perú Junín Copper 273,000t/y copper 3Q 2012 EIS submitted, undergoing
public consultation process
Las Bambas 4200 Xstrata Apurímac Copper 300,000t/y copper, 2014 EIS to be submitted 2H 2010
5,000t/y molybdenum
Michiquillay 2000 - 2500 Anglo American Cajamarca Copper 150,000t/y copper; 2018 Drilling required for
molybdenum, gold and feasibility study stalled
silver as byproducts due to protests
Río Blanco 1500 Zijin Consortium Piura Copper 191,000t/y copper n/d Stopped due to
social problems
Quellaveco 2500-3000 Anglo American Moquegua Copper 225,000t/y copper 2014 Feasibility study due for
completion in May 2010
Los Chancas 1200 Southern Copper Apurímac Copper 80,000t/y copper 2013 Feasibility study
completion imminent
Tía María 934 Southern Copper Arequipa Copper 120,000t/y copper 2012 Final public hearing
postponed due to conflicts
over water supply; works
temporarily suspended
Antamina - 1288 BHP Billiton, Xstrata, Ancash Copper Increase throughput 2012 Approved, entering
Expansion Teck, Mitsubishi 38% to 130,000t/d construction phase
Pampa 3280 Nanjinzhao Nasca Iron ore 15Mt pellets, 2012 Scoping study complete
de Pongo Group, Zibo 20,500oz/y gold,
10,000t/y copper
Minas Conga 2500-3400 Minera Yanacocha Cajamarca Gold 780,000oz/y gold 2014 Awaiting
(Newmont, construction permits
Buenaventura)
Antapaccay 1500 Xstrata Cuzco Copper 160,000t/y copper 4Q 2012 Public consultation process
complete, EIS approval
expeted 2Q 2010
Source: Companies
In the companies’ view, NGOs and other players in mining conflicts have learned to
manipulate the existing regulations on social process, says Hans Flury, president of Peru’s
national mining, energy and oil industry society SNMPE. “They request dialogue, but they
use legal appeals to thwart hearings. A good example is the mayor of Cocachacra, who has
used all sorts of legal mechanisms to impede the hearings that aim to discuss the Tía María
project,” he says.
Convention 169 has made the process more difficult for companies in many cases, as NGOs
lean on the legislation in making demands or leading locals to make demands that Flury
says often go beyond what is “sensible and reasonable.” The convention gives indigenous
populations access to privileged information about government plans for the areas where
they live, complicating negotiations, he notes.
Companies also see the current EIS approval process as opening the door for strategies
aimed at drawing out the social license process, as the documents are very long and
technical, yet must be delivered to community representatives in full.
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8. Social license in Peru: Exploring the roots of discord
April 2010
Meanwhile, the lack of strong political parties with clear agendas in Peru, especially at
the local level, means random candidates sprout up as elections near, backed by different,
sometimes momentary, interests or looking to gain favor by feeding people’s fears about a
mining project, and opposing it.
When there is little clarity in the regulatory system, projects can be easily politicized,
according to Fred McMahon, director of the Fraser Institute’s Centre for Globalization
Studies. While Peru’s permitting and tax systems are better than in many other countries,
experts within the country criticize a weakness of institutions, which McMahon says is the
deciding factor in whether a nation suffers from the so-called resource curse.
Peru just barely scrapes into the “resource blessing” category as measured by the Fraser
Institute. Perhaps it should not come as a surprise, then, that communities often feel
vulnerable to unwanted changes in their ways of life and fear that mining will jeopardize
their wellbeing more than foster it.
Political institutions that are inadequate in channeling conflicts between mining
companies, national and local governments and communities can lead to social protest or
radicalization. Although, a law to create a framework for the public consultation process -
based on the ILO’s Convention 169 - is under discussion.
According to Daniel Kerner, research analyst for New York-based global political risk
consulting firm Eurasia Group, “There is an underlying problem there that is more structural,
that has to do with both the fact that you have this big distrust in certain areas of natural
resource and mining companies and also a very dysfunctional political system.”
“There is a very widespread structural rejection of the political present status quo, and
you can see that both in the protests and the fact that Alan García’s approval ratings are
very low even though the economy has been doing very well,” he adds.
The people’s disenchantment with the system opens the doors for populist candidates at
the national level, like Ollanta Humala who received more than 47% of the vote in the
2006 presidential run-off and who talked vaguely of nationalizations during his campaign.
Or dark horse Father Marco Arana, a rural activist who today appears in the polls as taking
just 1% of the presidential vote in 2011 but who represents the “mixture of economic
populism and [being a] political outsider” that appeals to the marginalized voter, says
Kerner. Arana was named one of Time Magazine’s 2009 Heroes of the Environment, and
has said he is not anti-mining, but that the activity must “find a balance that meets the
population’s needs while satisfying socio-environmental conditions.”
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9. Social license in Peru: Exploring the roots of discord
April 2010
Perceived lack of economic benefits
and recognition
Old fears still exist among rural communities that an influx of outsiders mining
activity will bring to a community will change the social landscape, both in terms
of overshadowing ancestral traditions and proliferating alcohol consumption and
prostitution. Enter large machinery, shiny new trucks and outsiders with a bit of money,
and everything feels different. Historic feelings of a lack of recognition, consultation and
participation in decision making processes do nothing to help build trust between miners
and communities.
But mistrust goes beyond the mining companies to the government, as communities often
see the state as catering to the companies rather than protecting the citizens’ interests.
Miguel Santillana, lead researcher at Universidad de San Martín de Porres think tank
Instituto del Perú and a professor of economics at the University, notes that during the
2006 presidential campaign both the winner Alan García and the close runner up Humala
talked about ignoring tax stability contracts and instating windfall taxes. However, once
in office President García did just the opposite and negotiated a voluntary contribution
scheme with the country’s main miners consisting of 3.7% of profits, adjustable depending
on metals prices.
Good for miners, but perhaps disappointing for voters who hoped García would make good
on this campaign point. Mining companies jumped on board with the scheme partly to
avoid any further tax increases, but also because it would allow them to administrate
the funds directly, which seemed like an opportunity to demonstrate efficiency and good
will in terms of providing infrastructure and services for the local communities. But
administrative red tape has largely prevented the desired agility of spending, except in a
few specific cases, Santillana says.
Figure 3
Voluntary Contributions, 2007 - 2009 (in soles)
Total funds
Committed: 1.08bn % Execution of committed funds: 67.5
Deposited: 1.39bn % Execution of deposited funds: 52.5
Executed: 725mn
Local funds
Committed: 740mn % Execution: 65.9
Executed: 488mn
Regional funds
Committed: 334mn % Execution: 71.1
Executed: 238mn
Source: Energy and mines ministry (MEM)
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10. Social license in Peru: Exploring the roots of discord
April 2010
Figure 4
Voluntary contributions - Local funds by investment area
Sector Projects Committed Executed Funds spent
Quantity % Soles % Soles % %
Nutrition and diet 55 6 85,133,963 11 50,251,914 10 59
Education 242 26 109,233,033 15 79,412,525 16 73
Health 142 15 80,096,329 11 63,082,461 13 79
Infrastructure 252 27 284,939,496 38 147,676,470 30 52
Development and 77 8 39,431,659 5 34,642,779 7 88
strengthening of skills
Productive projects 132 14 94,650,165 13 74,418,088 15 79
Other 26 3 46,909,261 6 38,438,933 8 82
Total 926 100 740,393,906 100 487,923,170 100 66
Source: MEM
Peru already had an established legal framework before the voluntary contribution scheme,
designed to ensure that a significant portion of mining revenues gets back to the regions
where mining takes place. The mining canon, as it is known, refers to the distribution of
a percentage of the income tax revenue collected by the central government from mining
activity directly to regional and local governments of areas where mining takes place. The
canon came into effect in 1997 distributing 20% of miners’ income tax payments, and in
2002 the portion was increased to 50%.
Of the total, 10% of the canon funds from a mine are given to the municipal government where
the operation is located, 25% goes to the district or provincial government, 40% goes to the
departmental government and 25% goes to the regional government. 100% of the funds are to
be spent on public investment projects and cannot be used for general expenses.
But local governments lack the capacity to effectively invest the money. In order to
apply canon funds, local and regional governments must first go through a participatory
process with residents to prioritize projects then send the selected proposals to a
national government agency in charge of evaluating the projects, the Sistema Nacional
de Inversión Pública, or SNIP. Booming mineral prices have generated exceptionally large
canon payments but local leaders do not have the technical capacity to move a project
proposal through the system, generating long delays in the startup of projects and leading
residents to wonder where the money has gone and why works are not being carried out to
benefit the population, says CAD’s Cortés.
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11. Social license in Peru: Exploring the roots of discord
April 2010
Figure 5
Mining canon generated (billions of soles)
6
5
4
3
2
1
0
05
06
07
08
09
20
20
20
20
20
Source: MEM - SNMPE
Once a project has been approved and the funds granted, local leaders often do not have
the capacity to execute. And perhaps the most dubious part of the system is that there is
no legal mechanism to ensure that funds are actually spent on the projects decided in the
participatory process, which according to Santillana is itself influenced by local economic
powers.
These factors combined with a local political desire to demonstrate progress lead to
simpler and simpler projects that generate attention, but do not address quality of life on
a more essential level. Projects that aim to meet the basic needs of very underdeveloped
communities - such as installing potable water and sewage systems - take longer and are
not immediately visible like fresh asphalt or a football pitch, and so are ignored in many
jurisdictions. Lack of a coherent development plan at the national, regional or local levels
also leads to redundant spending.
Thus the impression is often that what little is done is not even very useful.
Figure 6
Projects sent to national public investment system (SNIP) for evaluation
Figures through July 2009
Projects presented by regional governments Projects presented by local governments (provinces and districts)
Projects determined viable by SNIP 15847 Projects determined viable by SNIP 54887
Projects rejected 1186 Projects rejected 1400
Projects under evaluation 1667 Projects awaiting evaluation 3288
Projects under formulation 2132 Projects with viability pending 4974
Projects with viability pending 25 Total projects presented 64549
Total projects presented 20857 Total worth of viable projects (soles) 33.2bn
Total worth of viable projects (soles) 21.2bn
Source: Instituto del Peru (USMP) with data from economy and finance ministry (MEF), SNIP
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12. Social license in Peru: Exploring the roots of discord
April 2010
As is common in the industry, miners in Peru often operate in remote areas where the
government has never done much in the way of providing infrastructure and services to
its citizens. The companies have to build roads and bring electricity to the zone, because
there is none. And while the local people do realize that the government is doing nothing
for them, when the company arrives it is viewed as the one in charge and receives the
blame when public investment projects do not advance.
“These people have primary needs. They do not have water, they do not have electricity.
They have bad schools, they have a subsistence economy. When we see a company arrive
in an area, it is seen as the person who is going to replace the state and solve all my
problems. There are great expectations when these companies arrive. And to a certain
extent, the presence of the company has replaced the state,” says Santillana.
Local leaders and hopefuls have been known to use the stagnation and lack of meaningful
public projects as an opportunity to assert that mining companies do not benefit the areas
where they extract their riches - or worse, that they pay no taxes at all. Politicians and
NGOs often end up playing to old environmental and social fears instead of taking on a
role of facilitator in generating constructive, informed dialogue.
Pro-mining state
Peru’s national government promotes a pro-mining, pro-investment policy that is often
deaf to local opposition, leaving those against a project no choice but violent protest.
The energy and mines ministry (MEM) is generally the highest government agency involved
in community relations and dialogue processes, and is also the entity that decides whether
to approve an EIS. MEM recently reported on a public meeting it held for residents of Islay
regarding SCC’s Tía María project to dispel rumors that the point of the hearing scheduled
for April 19 was to approve the project EIS.
In reality, the hearing aims to present the EIS to residents of the area of influence of
the mine, who will have 30 days to submit observations, MEM said. A 90-day period for
dialogue between MEM and the company to address the observations will follow.
Ministry officials told locals that those spreading the rumor are groups against the project
that aim to confuse and impede dialogue, and reassured them: “You can be certain that if
the technical observations regarding the EIS are not addressed satisfactorily, the mining
authority simply will not approve it.”
But the ministry is by nature pro-mining and, by extension, pro-Tía María. Ministry
officials emphasize the importance of the project in terms of income tax and canon
payments, and have even said it is likely that the Tía María EIS will be approved during the
second half of 2010.
While it is probable that MEM will ensure the EIS adheres to high standards, this conflict
of interest does not help to generate an air of trust and impartiality, as the decision
that the project will in fact go ahead has essentially already been made. Those against
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13. Social license in Peru: Exploring the roots of discord
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a project have no recourse through government channels already determined to move
mining forward, and are forced to use other tactics. Even local government has no upward
articulation and leaders like Cocachacra district mayor Juan Guillén start organizing
roadblocks.
“In Lima the game is one of stigmatizing that population as people who don’t know
anything, who are being manipulated, and that population has no coherent voice in this
high-level game,” says GRADE’s Damonte.
“We are turning violence into the search for citizenship… Neither the state nor any
political party has the capacity to take these concerns to a real, national level of
discussion and the local population has discovered that the only way [to command
attention] is by breaking everything.”
Figure 7
Mining canon and royalty payments before and after Tía María
(in soles)
Arequipa region Islay province Cocachacra district
2009 572mn 13.7mn 3.35mn
With Tía María* 909mn 90.9mn 43.8mn
*Figures estimated by SCC using US$3/lb copper
Source: SCC - MEF
Tintaya - A positive case study
In June 2006, Swiss multinational Xstrata acquired the Tintaya mine in Cuzco region - one
of Peru’s poorest - from BHP Billiton, and in March 2010, communities voted in favor of
Xstrata’s US$1.5bn project to develop the nearby Antapaccay deposit, extending Tintaya’s
life by more than 20 years and expanding output 60%. The company expects to receive
final EIS approval by mid-year and start construction in the third quarter.
Both Xstrata and BHP Billiton before it have blazed a determined social relations trail
over roughly a decade to keep the mine running smoothly. In 2002, a few years after
Australia’s BHP acquired Tintaya though its takeover of Magma Copper (which had in turn
acquired the mine from the state in 1994), BHP Billiton addressed a series of accusations
of prior human rights abuses through a negotiating table with communities. NGOs played a
positive role in facilitating dialogue, and eventually a compensation agreement was signed
with five communities.
BHP Billiton also developed a scheme known as the framework agreement (convenio marco)
with local leaders in 2003, which destines 3% of pre-tax profits or a minimum US$1.5mn/y to
social investment in Espinar province, which Xstrata has continued to honor.
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Instituto del Perú lead researcher Miguel Santillana attributes Xstrata’s continued success at
Tintaya to its capacity to advance meaningful investments in local public works through the
framework agreement as a way of making the community realize the benefits of mining.
The framework funds are managed by a committee of eight representing the provincial and
district governments, the company, the Río Salado and Río Cañipía communities and three
local community defense organizations, while the project execution committee includes
one representative each from the provincial government, social organizations and affected
communities, and two Xstrata Tintaya reps.
The relationship is essentially company-community, without involvement of the Peruvian
state, and communities decide in a participative process what works will be carried out
each year.
The communities’ recent approval of Antapaccay at a public hearing happened
transparently and without scandal, notes Santillana. “If the Antapaccay expansion doesn’t
happen, Tintaya closes. But the population understands that the framework agreement is
something that has worked for the community.”
The experience in Peru has been that the communities themselves will defend a project
against radical opposition when they are truly behind the endeavor, and Tintaya provides a
good example.
“For me, Tintaya is Peru’s social benchmark,” he says.
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15. Social license in Peru: Exploring the roots of discord
April 2010
Conclusion
Let us not forget that Peru is, and has been for centuries, a mining country. It is too
late to decide that mining will not form an important part of the country’s future; on
the contrary, it is fundamental that foreign investment in mining continue to flow. The
industry generates more than 60% of Peru’s export revenues, 6.3% of its GDP and brings
economic activity to some of the poorest, most isolated areas. In many communities, the
majority does want mining.
In that context, Peru needs to hold a serious, participative discussion to generate a
common vision and agenda for the future of mining in the country that lays out what the
population wants from mining and what it is willing to sacrifice. The starting point for this
debate is trust.
“Years of unresolved conflicts have left a major build up of negative capital that feeds
negativity in negotiations. The blame falls on both sides, though I must say that the most
authoritarian and manipulative players are state officials,” says Cepes’ Martin Scurrah,
adding Peru needs an autonomous institution to deal with such conflicts.
Trust comes with greater quantity and quality of information and follow-through from all
players. Duly informed communities who see substantial benefits from a mining company’s
presence rarely oppose a project.
“On the companies’ side, we still have to learn to listen,” says SNMPE’s Hans Flury. Miners
must improve their ways of approaching a community and of explaining the costs and
benefits of a project.
Major efforts are needed in the short term to establish relationships of confidence and
generate the conditions necessary for reaching that common ideal. In the meantime, while
ongoing conflict does not threaten to eradicate mining in Peru, it slows the advance of
projects and prevents all sides from perceiving the benefits efficiently.
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