Christian Aid (2005) Unearthing the Truth, Mining in Peru. a Christian Aid Report

7/27/2019 Christian Aid (2005) Unearthing the Truth, Mining in Peru. a Christian Aid Report

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Unearthing the truth

Mining in P eru

A Christian Aid report

February 2005


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1Unearthing the truth

Contents

Executive summa ry 2

1. Is P eruvia n mining law helping people in poverty? 4

2. Co sts and benefits of mining in P eru 10

3. Will dia logue provide the answer in Tintaya ? 16

4. Environmenta l c ris is in La Oroya 25

5. Democracy in Tambogrande 29

6. A new vis ion for mining in P eru 37

Endnotes 45

Acknowledgements 48


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Executive summary

Peru implemented a series of reforms in the 1990s aimed at attracting foreign investment in the

mineral sector. It was thought that increased mineral investment would stimulate economic and

so cial development. The reforms had the initia l desired effect: mineral investme nt increase d.

However, this came at the expense of campesino1 land rights and the environment.

Cla ims by the mining indus try and interna tiona l financ ia l institutions (IFIs), s uch a s the World

Bank, that mining investment would contribute to sustainable development in Peru, have not

been borne out. In fact, poor people and their environments have suffered, while companies

have seen profits rise.

Using c ase studies a nd lega l, eco nomic a nd environmental data and a nalysis, this report show s

that the questionable benefits increased mining has delivered to the Peruvian economy in the

last decade or so cannot justify the suffering it has inflicted on poor communities. It calls on the

P eruvian government a nd the international community to rethink their approa ch to foreign

investment, and to develop regulations that ensure that poor people benefit from industrialdevelopment w here it takes plac e.

Chapter 1doc uments the lega l reforms undertaken by the P eruvia n go vernment to a ttractforeign capital. In Chapter 2we assess both the costs and benefits of the mining expansion.The a nalys is revea ls tha t the d eregula tion o f mining in P eru has ma inly benefited the priva te

sector and to a les se r extent the s tate. The high environmental and s oc ia l co sts have b een

bo rne by ca mpesino co mmunities, w hose livelihood s ha ve been jeopa rdised.

Chapters 3, 4 and 5 a re c ase s tudies . The Tintaya co pper mine disc uss ed in Chapter 3ha sdispla ced c ommunities tha t have lived in the a rea for genera tions . Left without their land o r with

contaminated water, air and soil, many people with whom Christian Aid spoke felt they werepoorer toda y than 20 years a go , w hen the mine w as built. The c hapter focuses pa rticula rly on

disc ussions be tween the loc a l co mmunity and the company. Although such d ia log ue has had

some positive results, it has also shown that the need for effective regulation of mining

companies is more pressing than ever.

A smelter in La Oroya, along with a number of surrounding mines, has been operational for

80 yea rs a nd is the s ubjec t of Chapter 4. This brief s tudy links environmenta l pollution todeva sta ting effects on hea lth espec ia lly that of c hildren and to ec onomic dec line a mong

farmers in the area. It argues that minimum standards applied in the home countries of foreign

compa nies a re not a dhered to when these compa nies o pera te ab roa d.

In Ta mbo grande, the subjec t of Chapter 5, a referendum sa w an as tonishing 94 per cent o fpeople rejec t a propo sed mining development. Only tw o per cent voted for it. Weighing up the

questionable benefits and the certain costs, they have chosen a more sustainable path to

development through a griculture. The s tudy discuss es why a nd s hows that the present

reg ula tory reg ime fails to protect the interes ts of po or communities , espec ia lly their right to

withhold c ons ent from c ertain forms o f development. The s tudy a lso illustrate s, how ever, tha t

organised community action can prevail.

In Chapter 6we look at what needs to happen if investment in mining is going to produce realbenefits for the people of Peru. At the very least, pollution and human rights abuses must be

prevented or punished. Local communities are organising themselves to confront the threat totheir livelihoods beca use of the s ta tes fa ilure to act in their interes ts. The s ituation in P eru


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therefore provides a strong case for international regulation that binds transnational companies

and ma nda tes sa nctions if brea ched . Furthermore, the trend tow a rds deregula tion to a ttra ct

foreign direc t investment should be reversed, and c ountries should be encouraged to a pply

sensible conditions to foreign investment in a climate of transparency and stability.


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1. Is Peruvian mining law helping poor people?

Peru is a mining country. Its territory is one of the most important mineral-producing areas in the

world, possess ing significa nt deposits of silver, tin, go ld, c opper, zinc, lead and iron. S maller

quantities of other metals, such as tungsten, bismuth and arsenic, are also present. Mining has

historically been a pillar of the Peruvian economy and it remains a priority today. Mineral exports 2

make up more than half of all Peruvian exports and the mining sector accounts for six per cent of the

countrys gross national product (GNP). Fifteen per cent of foreign direct investment is in mining.3

In the 1990s Peru found itself in the middle of a debt crisis, owing almost US$34 billion at its height in

1996.4 (In 2003, external debt repayments still consumed a quarter of Perus budget.)5 It desperately

needed to a ttract foreign exchange to meet its repayments. With help from the World Bank, Alberto

Fujimoris government began to implement a series of reforms w hose primary objective was to liberalise

the Peruvian economy and attract international investment by creating stable and profitable investment

conditions.6 According to a paper written for the US Geological Survey:

The promotion o f do mes tic and foreign priva te inves tment in P eru via the priva tiza tion o fGovernment-owned firms and the formation of joint ventures started off at a vigorous pace in

1991 and has co ntinued, although a t a s low er pace . Foreign investors view ed P eru a s a n

a ttra ctive La tin America n open-market ec onomy b eca use the S tate gua rantees property

ownership, investments, free remittance of profits, and capital repatriation and provides equal

trea tment w ith nationa l investors; the P eruvian G overnment a lso slashed subs idies and ta riffs,

freed foreign exc hange and interes t rate s , libera lized internationa l investme nt rules , s implified

the tax co de, esta blished co nces sions for cons truction a nd operation o f public infra structure

(telecommunications, roads, ports, and airports), and embarked on fiscal austerity and

investment in social development and agriculture.7

Mining w as heavily promoted a s one o f several produc tive sec tors in which P eru supposed lyenjoys a c ompa rative ad vanta ge. The government clea rly sta ted its intention to increase priva te

investment in mining and explore the national territory more extensively.8

Unfortunately, while some of these reforms helped to create transparency and stability, and

others so ught to protect the environment, their overa ll effec t w a s to s hift the lega l ba lance awa y

from protecting vulnerable communities and promoting sustainable development, in favour of

private sector interests.

In 1992 the General Mining Law was revised, firmly establishing a new role for mining in the

P eruvian eco nomy.9 Legal provisions that were formerly dispersed among various regulations

governing areas such as taxation, labour and the environment became centralised to createtranspa renc y a nd administra tive e ffic iency rega rding c orporate ob liga tions . Virtua lly a ll reg ula tory

functions that had been held by other ministries became the responsibility of the Ministry of

Energy and Mines, concentrating regulatory control. Environmental authorities, for instance, now

exercise very little influence over the mineral sec tor. P eru has no De pa rtment o f the Environment.

In 1993, the Peruvian Constitution was amended to provide the legal foundation for these

reforms.10 The upda ted Cons titution promotes free c ompe tition a nd private property ow nership,

a nd provides investors w ith a number of extra gua rantees. This cha pter looks a t some of the

reforms o f the 1990s a nd shows how the regula tory balance wa s shifted awa y from protecting

the rights of poo r people tow ards protec ting the investments o f la rge co mpanies.


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Investment

The 1991 Privatisa tion Law a llow ed priva te investo rs to beco me a ctive in sec tors tha t were

formerly reserved for the state.11 The P eruvian government has privatised 220 sta te-owned

corporations since the privatisation programme began, netting US$10.5 billion, about 17 per cent

of Perus GDP.12 Ninety per cent of the governments mining assets were privatised.13 Acc ording to

a 2002 poll by La tinobarmetro, a reg iona l polling o rganisa tion, less than a third o f P eruvia ns thinkprivatisation has been beneficial.14

The 1991 Law to P romote Investme nt in the Mineral Sec tor dec la res mining to be of general

interes t to the co untry and grants the sec tor a number of benefits. These include transpa rent

administrative regimes; beneficial tax and currency-exchange regimes; the freedom to repatriate

ea rnings ; a nd unhindered acc ess to foreign c urrency.15

The 1991 Regimen o f Leg a l S ta bility for Foreign Inves tment prohibits d iscrimina tion a ga inst foreign

investo rs, and e limina tes ma ny res trictions o n property ow nership by foreigners.16 The law a lso

permits co mpanies to enter into a greements w ith the go vernment to a llow fixed ta xation rates and

unlimited access to foreign currency.

Taxation

As pa rt of the policy changes to promote investment in mining, the ta x burden on the mining

sector was reduced.17 The ta x reforms inc luded eliminating a number of taxes and a do pting net

earnings as the basis of taxation.

Under the new regime, mining companies may also enter into agreements with the Peruvian

government tha t guarantee fixed ta xation rates . These a greements a re negotia ted for periods of

ten to 15 years, ensuring that the company is exempt from rises in taxation rates during that

period . C ompa nies ca n a lso benefit from ta x breaks for ea rnings that a re reinvested or that a re

invested in public-service infrastructure.18

The role of the international financial institutions (IFIs)Financial markets were hesitant to touch the mineral sector during the 1980s. International

financial institutions played a crucial role in the global expansion of mining in this period and

by the mid-1990s (a period known as the mining boom), multiple financiers, both private

and public, took an interest in the industry.

The World B a nk G roup ha s strongly supported the mining s ec tor by:

pushing for leg a l reforms tha t fac ilita te mining inves tment19

supporting a nd d irec tly fina ncing large mining p rojec ts. B eg inning in 1993, the mineral

sec tor beca me o ne of the principa l rec ipients of World B a nk fina ncing. The B a nk ha s

finance d 27 mining projec ts in Latin Americ a a t a co s t o f US $990 million. World B a nk

financing brings many benefits. One of the most important is the facilitation of further

private-sector financing

mine ow nership. The World B a nk ha s interests in se veral mining projects throug h the

Internat iona l Fina nce Corpora tion (IFC). For exa mple, the IFC holds five pe r cent o f

the sha res in the Ya nac oc ha mine in Ca ja ma rca , a nd 20 per ce nt of the sha res in the

Quella vec o mine in Areq uipa .


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Land rights

Land rights is a n a rea where the ba lance b etwe en a ttracting investment and ensuring tha t that

investment benefits poor people has been significantly altered. In Peru, surface and subsurface

property rights a re lega lly d istinct. The c entral government exercises exc lusive c ontrol oversubs urfac e resources, while the property that lies a bove a minera l deposit may b e owned

priva tely or by a community. This mea ns tha t in order to exploit a mineral depos it, a mining

company has to gain legal access to the surface property.

The 1979 Co nstitution w as protective in na ture, providing g uarantees for communally held

property.22 With few exceptions, campesino and indigenous land was inalienable, meaning that it

co uld not b e trans ferred to third pa rties . The leg a l reforms o f the pas t dec ade , how ever, have

made suc h transfers pos sible d espite the c onseq uences for loc a l co mmunities . The C onstitution

of 1993 repealed transfer prohibitions and paved the way for legislation that allowed third-party

ac ces s to c a mpesino property.

In 1995, the Land Law was adopted.23 Intended to promote agriculture in Peru and concerned

with land ow nership a nd use, this sta tute esta blished indigenous a nd c ampesino land rights

In res ponse to intense c ritic ism over its involvement in extrac tive indus tries , the World B ank

es tablished the Extractive Industries Review (EIR) in 2001. Its purpos e w as to c ons ider

whether the World Banks involvement in extrac tive industries wa s co nsistent w ith its

ob jec tive of a llevia ting poverty through sus ta inable developme nt.

The EIRs fina l report, w hich was relea se d in Dec emb er 2003, identifies se rious co ncerns

a bout extractive indus tries and raises important q uestions a bout the World B a nks role in

their promotion.20 It identifies three ma in precond itions for World Bank intervention to

promote the expansion of the extractive sectors in a given country.

1. Pro-poor public and corporate governancePro-poor governance is defined by the report as transparent, based on the rule of law

a nd respec tful of la bo ur sta nda rds a nd huma n rights , including those of indige nous

peoples. It should include effective environmental and social protection, and the

meaningful and fully informed participation of communities in decisions about

projec ts that a ffec t them. These co mmunities sho uld a lso enjoy a fair sha re o f the

revenues g enerated by mining.

2. The establishment by the World Bank of more effective social and environmental policiesThes e polic ies should include:

holistic environmenta l a nd so cial-impa ct a ss es sme nts for propos ed projec ts

the es ta blishment o f no-go zones where minera l development is not permitted

a n obliga tion to ob ta in the free a nd informed c ons ent of affected popula tions b efore

they are resettled

the de velopm ent a nd a pplic a tion of World B a nk guidelines for tailings 21 and other

wa ste d ispos a l, toxic s ubsta nce use a nd mine clos ure.

3. Respect for human rightsWorld B a nk-funded projec ts must b e d es igned a nd implemented in a ma nner

co nsiste nt with international huma n rights sta nda rds .

The World B a nk issued a res ponse to the EIR in Augus t 2004 rejecting ma ny of its key

recommendations. While it promises to take concrete steps to improve the impact of its

investments a nd policy advice, it rema ins to be see n how succ essful these will be.


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ba sed o n the free exchange of a gricultura l la nd on the c ommercia l market. B y trea ting c ommunal

property as marketable and guaranteeing access to third parties, regardless of their nationality, the

Land Law co ntinues the d angerous trend towa rds removing protec tion for ca mpesino land. In

1996 the Land Law was further modified in favour of mining investment and against the interests

of c ampesino communities .24

The easement procedure

The Land Law enda ngers c ommunal property by c rea ting an a dministrative proc ess ca lled

easement.25 Through easement, land ca n effec tively be expropria ted for use by c ompa nies ,

desp ite o ppos ition from the people who live on it. B ut w hile s tra ight expropria tion is

governed by a number of strict rules corresponding to the seriousness of removing people

from their land, the easement procedure is not.

Although in ea se ment title to the property is never transferred to the mining co mpa ny, a nd

the land is eventua lly returned to its orig ina l ow ners, it is often perma nently d ama ged. Mining

causes pollution, and in some cases the surface land is removed altogether to make way for

an open pit. It is therefore often impossible for campesino landowners to resume farming

when the mining company finally leaves.

In practice, the Ministry of Energy and Mines rarely grants easements to mining companies.

More often, companies26 initia te the easement proc ess to put pressure on communities to s ell

their land. Communities tend to give in and sell up because they believe they will get more by

selling the land than through easement. But communities often lack experience in these matters

and have little access to legal advice. As a result they lose out. For example, since 1992,

campesino families living near the Yanacocha mine have been forced to sell about 20,000

hectares of their land for US$25 per hectare, about a quarter of the market price.27

How does it work?

Be fore a mining c ompa ny ca n apply for eas ement, it must try to rea ch a greement with the

owner of the surface property. But if no agreement is reached within 30 days, the mining

company can initiate the easement process.28 The Ministry of Energy and Mines then c a lls a

formal meeting to allow for further negotiations. If these fail, the company can be granted

time-limited permiss ion to use the s urfac e property, rega rdless of c ommunity oppos ition. The

Ministry dec ides how much that right is wo rth and the co mpany pays the co mmunity

accordingly.

Easement or expropriation?

The ea sement process is tantamount to expropria tion, b ut it is no t sub jec t to the follow ingstrict legal provisions governing expropriation. Christian Aid believes that this legal loophole

must be c losed .

1. The 1993 Co nstitution protects the right o f la nd o wnership, a nd g uarantees that no

one will be deprived of that right, except for reasons of national security or public

necessity.29 Unde r Pe ruvia n la w, mining a ct ivity d oes not fa ll into e ither ca teg ory. The

General Mining Law only categorises mineral extraction as being of public utility and

sa ys that a contra ct must be negotia ted to a cc ess third-party property.30

2. Even in these ca ses , expropria tion requires the payment of fair compensation. P ast

experience shows that the value assigned by the government to time-limited mining rights

tends to be significantly lower than the market value. According to affected communities,

the compensa tion do esnt a llow them to purcha se new property of eq uivalent value.


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Environmental regulation

A number of laws were passed in the 1990s which modified aspects of Perus 1990 Environment

Code,31 a law that the g overnment felt imposed too g rea t a burden on co mpanies. The 1991 La w

for the Growth of Private Investment32 repea led Artic le 8 o f the C od e, w hich req uired the

sub miss ion o f an environmenta l impa c t a ss es sment for virtually a ny priva te o r public a ctivity.33

Now, fewer environmental impact a ss ess ments a re req uired and their submiss ion is g overned by

leg islation spec ific to ea ch sec tor. Likewise, Article 56, which permitted the esta blishment of

protec ted a rea s by na tiona l, regiona l and loca l go vernments, w as repea led. Tod ay, only the

national government has the power to establish protected areas.

The 1991 La w to P romote Inves tment in the Mineral Secto r34 also modified provisions in the

Environment Co de tha t dea l with the exploitation of na tura l res ources . In particular, s pec ific

environmenta l ob liga tions tha t were req uired of the mining industry w ere replac ed with general

principles . The effect o f this w as to w ea ken the Code s regula tion o f the mining s ec tor.

In co ntras t, so me legisla tion during this period was a imed a t protec ting the environment. The Law

to Promote Investment in the Mineral Sector, for example, established Environmental Impact

Assessments (EIAs) and Environmental Management and Mitigation Programs (Spanish acronym:

PAMAs). The Reg ula tion for Environmenta l P rotec tion in Mining a nd Meta llurgica l Activity,35

adopted in 1993 to minimise the environmental impact of the mining industry in Peru, further

spec ifies tha t thes e P AMAs be developed for all operating mining and meta llurg ica l facilities .

How ever, thes e measures have ha d very little e ffec t. The fa ilure o f these a ppa rently positive

regulatory instruments to adequately control the environmental impact of the mining sector is

discussed in Chapter 6.

Growth in mining investment

The w ide-ranging leg a l reforms d es cribed in this cha pter grea tly s trengthened the position o f the

mining se cto r in the P eruvian ec onomy. The s ec tor expa nded s ignific antly during the 1990s.

While in 1991 mining concessions covered 2,258,000 hectares, by 1997 that figure had reached

15,597,000 hectares, an increase of over 700 per cent. By the end of 1999, mining rights had been

assigned to approximately 12 per cent of Perus territory. Metal mining had an average annual

growth rate of more than eight per cent in this period. Mining exports more than doubled between

1990 and 2000, from US$1.5 billion to US$3.2 billion. Direct investment in the mining sector

reached US$1.6 billion in 2000 and investment commitments until 2007 total US$11 billion,

according to non-updated official figures.36

Although projections for new mining investment from the Ministry of Energy and Mines remain very

high, there ha s been a significa nt fall in mineral investment in rec ent yea rs . This is beca use of

external fac tors (low er meta l prices and mo re c ons ervative trends in g lob a l mining investment), a s

we ll a s internal fa ctors (propos ed cha nges to the lega l framewo rk and uncertainty a bout the

politica l and ec onomic situation in P eru).

3. The law governing expropria tion in P eru do es not permit expropria tion to further the

interests of an individual party. Only the state may initiate an expropriation process

a nd a spe cial la w is req uired to a uthorise it.


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The expa nsion in mining took place bo th in traditiona l mining zones and in a rea s tha t had never

been mined before. Campesino territories traditionally dedicated to agriculture and livestock

rea ring were hea vily a ffec ted . Thirty-nine per cent of the land used for mining in P eru belongs to

campesino communities. By 1994, 3,126 of the 5,680 communities in Peru (55 per cent) were in

areas affected by mining activity.37

The expansion w as mirrored throughout the co ntinent. In the ea rly 1990s, La tin America wa s

allocated barely 12 per cent of global investment in mining, but by the end of that decade, its

sha re ha d a lmos t trebled to approxima tely 30 per cent.38

Trends in the global mining industryGlobal trends during the last few decades can be broken down into three distinct stages:

A c ris is pe riod , influenc ed by trend s during the 1980s, e nded in ea rly 1993. This

period was characterised by declining production, decreased investment in many

mining reg ions wo rldw ide, a ge nera lise d price do wns wing (with the exce ption o f

copper, mineral prices reached their lowest levels in decades), mine closures andgeneral instability.

The yea rs from 1993 to 1997 sa w a so -ca lled mining b oom. The price s of mos t

meta ls rec overed, creating a favourable ec onomic c lima te for minera l development.

During this period Peru experienced an exploration boom which resulted in the area

allocated to mining expanding six-fold. Public mining companies were privatised,

la rge multina tiona l mining c omp a nies , s uch a s B a rrick, Tec k Com inco , Anglo

America n a nd B HP, es ta blished a pres ence in the co untry; new projec ts w ere

a nnounced a nd there w a s s ignifica nt growth in prod uction.

The Asian cris is in 1998 se nt meta l pric es falling a nd s low ed new inves tment. Theimpa ct w a s felt immediately in P eru, w here the explora tion b oom slowe d c ons idera bly

a nd s everal key projec ts w ere pos tponed , creating a clima te of uncertainty that

remains today. Despite this context, production of some metals continued to grow as

operations es ta blished during the mining b oom beg a n prod uction.


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2. Costs and benefits of mining in Peru

Given the lengths to which the Peruvian government has gone to attract foreign investment in

mining, one might expect the d evelopment benefits o f such investment to be a ppa rent. The

go vernment, a long with the international financial institutions and soc ia lly respo nsible mining

co mpanies , c erta inly promotes minera l investment on the b a sis that it lea ds to ec onomic growthand reduces poverty. According to its proponents, the benefits of mining investment include

increa sed tax revenue for the government and enha nced se rvices, increas ed employment and a

thriving local economy (through increased demand for goods and services) for local communities.

However, a n increa sing number of ana lyses revea l a d ivide betw een thos e w ho b enefit from

mineral development overwhelmingly private sector companies, and sometimes the national

excheq uer and thos e w ho bear the c os ts: largely ca mpesino c ommunities . A deta iled

macroeconomic analysis of the impac t of mining o n the P eruvian ec onomy is not w ithin the sco pe

of this report. This section looks briefly a t the ma croec onomic impac t of mining, a nd c onc ludes

that the jury is out on whether it contributes to pro-poor growth. In this context, the impact of the

industry on loc a l co mmunities , w hich is looked a t next, is a ll-important. The s ec tion c onc ludesthat in its current form large-scale mining is not reducing poverty at a local level, and may be

entrenching it.

Macroeconomic impact of mining

Along with the construction sector, mining was considered by some to be a key driver behind

strong economic growth in 2002 and 2003, especially as the massive Antamina mine ramped up

to full production.39 In a study o f 51 countries published in 2002, the World Bank argued tha t

countries with mineral reserves had experienced stronger economic growth than non-mining

countries in their regions, growing at an average of 1.6 per cent per year during the 1990s.

But an increasing number of economic experts have begun to question the contribution of miningto economic grow th let a lone poverty a llevia tion. Michael Ross of the University o f Ca lifornia in

Los Ange les looked a ga in at the World B a nks res ults a nd show ed tha t if you disc ount China ,

India and Egypt, which have all grown faster than average and have large internal markets for their

produc ts, the a verage G NP growth is actua lly nega tive, a t -1.15 per cent.40 The Extrac tive

Industries Review provides further evidence for a phenomenon known as Dutch Disease:

In some cases, structural reform processes have exacerbated macroeconomic imbalances

and increased vulnerabilities. Case study examples [including Peru] include increased

vulnerab ility to external sho cks a sso ciated w ith s ignific ant reliance on extrac tive indus tries (EI)

and fluctuating international EI commodity prices; decreased tax revenues; increased

eco nomic depend ency on primary co mmodities (that is, ma nufac turing of value-add ed go odsdec rea sed ); s ignifica nt nega tive pressure on ba lance of pa yments from increas ed energy

imports, largely to support the expanding mining sector; and domestic private-sector

development stifled by significant concentration of foreign-controlled EI assets.

Extractive Industries Review (2004)

Even where a thriving mining sector has led to higher economic growth, this has not necessarily

been ass oc ia ted w ith susta inab le d evelopment a nd poverty reduction. There a re ma ny rea sons for

this, including the g overnments failure to ca pita lise on the ta x inco me mining co uld g enerate .

Tax exemptions

According to the Na tiona l S uperintendent fo r Tax Administra tion (S UNAT), only 29 of the 61

companies involved in mineral exploitation in Peru paid income tax in 2000.41 Following the tax


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reforms described in the previous chapter, 28 mining companies signed fixed taxation contracts

with the Peruvian government between 1992 and 2001, for a total investment of more than

US$4.1 billion.42 According to their investment agreements and estimated production levels, some

of these companies will cease to pay tax altogether, by reinvesting their Peruvian earnings in the

country and benefiting from the corresponding tax breaks.

According to official statistics, total tax exemptions in Peru mean the treasury loses more than

four billion soles 43 (approximately US$1.16 billion) per year.44 Peru already imposes the lowest

tax rate in Latin America taxes pa id in P eru represent 12.5 per cent o f G NP, w hile o ther

go vernments in the region dema nd, on a verage , 18 per cent of G NP.45 Mining contributes only

two per cent of the sta tes tota l yea rly revenue.46

The changes in tax law in the 1990s w ere presumably intended to a ttrac t more investment, so

tha t the excheq uers overall revenue w ould rise . Evidence from the g overnment is difficult to

extrapolate, but it appears that while mining production and exports continued to rise year on

yea r during the 1990s, the tota l tax pa id by the mining s ec tor on net ea rnings did not keep pa ce.

In March 2003, reg iona l go vernments in Peru ca lled on the Ministry of Eco nomy a nd Finance to

eliminate fixed tax contracts and other tax exemptions. In response, Peruvian President Alejandro

Toledo req ues ted deta iled informa tion o n these instruments from the Ministry of Ec onomy a nd

Finance . S ta ff at the Ministry a rgue tha t w hile it is impos sible to eliminate a ll tax exemptions , they

ca n g radua lly be reduc ed in future c ontracts .

Does mining reduce poverty at a local level?

It is increasingly questionable whether mining leads to economic growth at national level. But

does it have a role to play in loc a l ec onomic d evelopment in Peru, as its proponents c la im? The

ca se studies in this report sugges t not, and this is b acked up by the s tatistics . The EIR sta tes tha t:

From 1991 to 2000, the po verty reduction tha t too k pla ce in P eru (which was only short-term)

occurred in Lima and urban Sierra, not in the rural highlands and the Amazon where the

mining a nd hydroc a rbon d evelopments a re c oncentra ted.47

The P eruvian governments C ompensa tion Fund for Soc ia l Development (Foncodes) prod uces a

national poverty map that presents the relative poverty levels of the provinces and districts of Peru,

according to a Relative Poverty Index. Mineral production occurs in 45 of Perus 194 provinces.48

The 2000 poverty map s how ed the follow ing results:

Without time-comparative data it is impossible to prove that mining activity actually contributes to

poverty in Peru. However, these results do call into question the claim that mining has a positive

impact on the quality of life in neighbouring communities. In one example, Cajamarca, site of the

Poverty status Mining provinces(per cent)

National average(per cent)

Extremely poor 11.8 6

Very poor 40.2 26

Poor 36.4 36

Regular 10.6 19

Acceptable 1 12


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huge Yanacocha gold mine since 1993, has moved from being the fourth poorest region in Peru in

the 1980s to the s eco nd poores t a fter ten yea rs of mining.49 Mining has failed to alleviate poverty in

P eru pa rtly bec ause o f a lack of proper planning a nd analysis. Acco rding to one World B ank paper:

The WBG [World B ank Group] could be more effective in mea suring the true impa ct of

private investment in the mining sector. Currently, the WBG utilizes certain indicators (iemacro ec onomic, la bor, persona l income) a s the mea ns o f measuring impac ts; how ever,

these indica tors a re g enera l, a t bes t, a nd d o not form a co nvincing a rgument supporting

mining investment as a means of generating equality and wealth distribution. 50

We w ill now loo k at a number of wa ys in which the mining indus try claims it is reducing poverty,

and a sk if the evidenc e s upports its claims.

Local benefits? Tax distribution

A percentage of the income the Peruvian government receives from the exploitation of natural

resources is meant to be transferred to the municipal and regional governments, under what is

known as the Mining Canon. In 2002 a new law meant that half the income tax revenue receivedby the central government from mining was to be distributed in the following manner:

20 per c ent to g o to the p rovincia l munic ipa lity w here the natural res ource is loc a ted

60 per cent to be d ivided betw een the districts a nd provinces of the reg ion

20 per cent to the reg iona l go vernments.51

But this law appea rs to have done little to reduce poverty. B ecause the g overnment co llects so little

in taxes, not much money is available for redistribution through the canon. Moreover, the central

government cons istently fails to transfer even those funds that ha ve been co llec ted. B etween 1992

and 2001, the P eruvian government fa iled to d istribute US $98 million to the regions.52 Acc ording to

a World B ank study of the gold mine in Ca jamarca ea ch individua l in the immed ia te mining a rea has received approximately US$34 during the nine years of production.53

The EIR shares these c oncerns: In Peru and Indonesia , la ws were c rea ted to ensure tha t EI

revenue would be returned to local communities or the government. Due to the design of the

laws and the lack of transparency, however, little revenue actually reached the communities.54

A number of parties, including municipal governments, mining companies and some non-

governmental organisations have proposed changes to the mining canon so that:55

it includes a ll income that the g overnment rec eives a s a co nseq uence o f natura l-res ource

exploita tion a nd not just inc ome ta x. This w ould ensure that loca l c ommunities do notjust b enefit from the ta x a cc rued from mining co mpa nies ea rnings

co mmunities that a re a ffec ted by mining a ctivity a re the principa l and direc t b eneficiaries

of the c a non. In a dd ition, the d istribution of the c a non ta kes a cc ount of environmenta l

impa ct (ie w hen a n area experience s e nvironmenta l da ma ge , it rec eives c ompens a tion

via the ca non)

it is enforced in a timely, effec tive ma nner.

Local benefits? J obs

Histo rica lly, the mining industry ha s employed significa nt numbers of people. As a result, d espite

the negative impact of mining, local people have also benefited from decent jobs while the mine


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wa s in opera tion. B ut the introduc tion of new tec hnolog y mea ns tha t far few er jobs a re now on

offer. Moreover, most of the employment tha t is ava ilable req uires skills tha t loc a l people tend no t

to have, so mining companies hire people from outside the region, often foreigners.

Unemployment in Peru is rising. In 2002, more than 15 per cent of young people w ere

unemployed up from 12.6 per cent in 1999.56

But despite minings large contribution to GDP(minerals and hydrocarbon accounted for 11.2 per cent of GDP in 2001)57 only 72,170 people

were economically active in the mining sector in 2002, just one per cent of the national total.58

Evidence from the case studies in this report suggests that while mining creates a certain number

of job s, its environmenta l impa c t lea ds to a co rrespond ing loss of livelihoods in the a gricultura l

sector. While mining jobs last only as long as the mine is active, the effects of a mine on the local

agricultura l economy c an be permanent.

Most of the people Christian Aid interviewed claimed that many of the jobs created by mining did

not go to loca l people as promised , b ut went instea d to more q ualified perso nnel from o utside the

region. In the case of the Antamina mine, around 1,500 people were employed, of which onlyaround 400 were recruited locally.

Local benefits? Social services

G enerally, mining centres in P eru are found in remote, mo untainous a rea s, often more tha n 3,000

metres above sea level and far from b a sic se rvices a nd ma rkets. P rior to 1992, co mpanies were

req uired to provide a range o f se rvices for their workers, including the d rinking wa ter, ed uca tion

and healthcare, all of which also benefited neighbouring populations.

However, under the new laws, mining companies are no longer obliged to offer these services. In

some c ases, c a sh-strapped loca l go vernments or other institutions a re now responsible for

providing them. In La Oroya, for example, the education and health facilities available to smelteremployees and the wider population were discontinued, following the privatisation of the

plant in 1997.

Local benefits? Economic stimulation

The mining industry relies on a range o f go od s including c hemica l and petroleum produc ts, iron

and s teel prod ucts , food , fores t prod ucts and general indus tria l prod ucts . The industry a lso

co ntracts out a number of se rvices , including the ma intenance of ma chines and eq uipment,

security, food preparation, engineering consulting, administration and accounting, transportation

and c onstruction.

There is evidence tha t mining d oes c ontribute to the loca l ec onomy through its d ema nd for thesegoods and services, although its contribution could be significantly larger. According to the

Ministry of Energy and Mines, 58 per cent of the goods and services mining needs are provided

by the loc a l ma rket a t an approximate va lue of US $800 million per yea r. The rema inde r a re

imported,59 as many of the g ood s tha t a mine req uires a re highly technica l and a re not

manufactured in Peru.

Local costs Environmental impacts

The most direc t co st of mining is its environmenta l impa c t, for which it is infamous . Maria

Chappuis, direc tor general of mining in the Ministry of Energy a nd Mines , w as dismiss ive o f the

claims made by local people about contamination. She told Christian Aid that communities

always complained about contamination, but that studies showed them to be wrong.60


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Our resea rch c ontrad icts this. In Tintaya and La Oroya , s tudied here, there is sc ientific evidence

of serious pollution, backing up the testimonies of local people. Moreover, in our interviews with

loc a l co mmunities, we found tha t people did not exagg erate. For example, they ma de it clear

that a nima ls ha d s uffered, b ut crops had not been affected. Environmental degrad a tion lea ds to

los s in income, a s communities have to cope w ith polluted land, a s we ll a s health problems. S o,

far from reducing poverty, mining appears to actually increase poverty in some regions.

Chemical use

Mining a ctivity involves the use of c hemica ls to extrac t minerals. In La Oroya , a ir- and wa ter-

q uality mea surements revea l dang erous levels of toxic contaminants.61 Studies s how that

children in La Oroya have alarmingly high concentrations of lead in their blood and display signs

of lead poisoning.62 Deteriorating hea lth lea ds to reduced income, bec ause peo ple a re unab le to

wo rk as hard or for as long.

Tailings

Tailings a re the roc k wa stes left behind fo llow ing ore extrac tion. They o ften conta in hea vy meta ls,

ac id-forming minerals a nd residue from to xic chemica ls used in the extrac tion process, includingcyanide and sulphuric acid. Containing these tailings is technically difficult and the contamination

of water, soil and air is frequently associated with tailings dams.

Transport of chemicals

Chemica ls a re not a lwa ys transported o r handled properly. In 2000, in the villa ge of

Choropampa , s co res of residents w ere expos ed to the po tent toxin mercury when a truck from

the World B a nk-financed Ya naco cha mine spilled its loa d. B etw een 200 and 300 people w ere

subsequently hospitalised with mercury poisoning. According to the EIR, the companys Spill

Prevention, Control and Response Plan did not even mention mercury or highlight chlorine gas

as a hazardous material, although 125 tons are used in the mine every year. 63 The res ide nts , who

show symptoms consistent with long-term mercury poisoning, have never been properly

compensated, nor have they received adequate medical treatment.64

Physical damage

Mining is by na ture a highly d isruptive a c tivity. It req uires la rge tracts of land and c ons umes

significant quantities of water. In addition, the construction of a mine and its supporting

infra structure req uires the d es truction of a ny veg eta tive c overing. Modern mining prefers

open-pit techniques to underground mines, leading to longer-lasting damage.

Local costs Loss of land

The a rrival of a mining c ompa ny ca n lea d to los s of land through s eizure, forced s a le o r pollution.Communities can either be forcibly relocated to make way for mine development, or choose to

move to esc ape the a dverse environmental effec ts of a mine. With less land, peo ple a re less able

to raise anima ls a nd pla nt crops .

The peo ple o f Espinar ha ve suffered reduced herds and floc ks since losing much o f their land to

the Tintaya mine. Ra ther than making mo ney by se lling c rops , they now buy c rops , lea ving them

les s to s pend o n other things . The few job s the mine has c rea ted for loc a l people a re more than

nega ted by the resulting reduced a gricultural employment. The picture w ould be bleaker still if

so cial a nd environmental cos ts w ere ta ken into acc ount.


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Local costs Social impacts

Mine c ons truction a nd operation a lways involve the a rrival of o utsiders. This routinely g enera tes

tension within communities and threatens traditional practices, especially when the affected

co mmunities a re indigenous . As the Mayor of Tambo grande, a co mmunity s tudied la ter in this

pa per, puts it: S ince Manhatta n arrived, the peaceful na ture of this town has cha nged. We a re a

pea ce ful tow n and a lwa ys ha ve been, b ut unfortuna tely this c ompa nys presenc e has trigg eredviolence.65

It is not uncommon for prostitution, alcoholism, domestic violence, family breakdown and health

problems to increa se in co mmunities that c oexist with mining. Repo rts from C a ja marca sugg est

that girls as young as 14 are involved in a booming prostitution trade fuelled by the mine.66

Conclusion

This b rief ana lysis pos es se rious q uestions to those who seek to paint mining inves tment a s a

route to s usta inab le de velopment. It sugges ts tha t the q uestionable b enefits a t both na tiona l and

local levels, which often accrue to the already well-off, are easily outweighed by the high costs

borne by the poor. Ra ther than reducing poverty, the evidenc e s uggests that mining ma y b eentrenching it.

Furthermore, things now appea r to be ge tting w orse. New tec hnology mea ns tha t far few er

people are employed by the mining s ecto r toda y than 20 or even ten years a go . And the lega l

changes over the last decade or more, while successful in attracting foreign investment in mining,

have not led to improvements in the lives of the rural poor who have to live near mines. Social

services have been los t, a nd ta x revenue reduc ed and not properly distributed.

As the c ase studies show, many of those a ffec ted b y mines believe their sta ndard o f living ha s

deteriorated significantly since the early 1990s. Campesino populations affected by mining activity in

Peru rightly question whether their interests are being taken into account in the push for more mining.


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3. Will dialogue provide the answer in Tintaya?

The province of Espinar is loca ted in southern Peru nea r Cusc o, the a ncient ca pita l of the Inca s.

The region, which is 4,000 metres abo ve sea level, is overwhelmingly a farming region a nd ha s

been for centuries , with most families ow ning c ow s, llamas, s heep a nd a lpa ca s w hich g raze the

open spaces. P otatoes, oats and cinchona68 a re the ma in crops.

Beneath the farming land lies great mineral wealth. During the 1980s, the Peruvian government

developed a co pper mine here a nd the Tintaya S tate Mining C ompa ny wa s formed. In 1994, a s

part of the privatisation process described in Chapter 1, the state company was sold to an

American consortium for US$215.7 million and the cancellation of US$55 million of Perus

external debt. A short time later, this consortium was absorbed by the Australian company

Broken Hill P roprieta ry (BHP ). Then, in 2001, BHP merged with the British compa ny B illiton,creating one of the most important mining companies in the world.69 Tod ay, a s ubs idiary of this

co mpa ny, B HP B illiton Tintaya , ope ra tes the mine.

The limited b enefits the mine has b rought to some have been outweighed b y the ca lamitous

effect it has had o n ma ny others, including those who live w ithin metres o f the mine or ta ilings

dams,70 and ma ny more w hose co mmunities a re w ithin a few miles. Loc a l people have s een the

land on which they have lived for centuries taken and polluted.

An innovative roundtable consisting of community leaders, BHP Billiton and NGOs has been

trying to reso lve c onflic t. The Dia log ue Roundtable has been a n important ste p in the right

direction, and in Dece mber 2004 a ma jor succ ess emerged a s hundreds of displac ed peoplewere provided with replac ement la nd. The e fforts of loca l people, supporting NG Os (including

the international NGO Oxfam) and company employees have led to real progress out of a

situation of little hope. But much irreversible damage has already been done.

This s ec tion s ta rts b y se tting out the prob lems fac ed b y the people of Tintaya . It then as ks

whether dia logue is the a nsw er. It c oncludes that w hile d ia log ue ca n a meliorate s ome of the

mos t devasta ting e ffec ts of mining, it is ultima tely just o ne pa rt of a so lution tha t must involve

better reg ula tion a t bo th na tiona l and internationa l levels .

Lost livelihoods

After 20 yea rs of exploration a nd prod uction Espinar is still one of the poores t provinces in P eru.Many in the campesino communities say they are actually poorer than before the mine came

because of land loss, environmental pollution and poor health.

Communities have lost land

In the case of Espinar, were talking about communities that have been left without land, with

environmental impacts , a nd w ith strong social impacts . There a re drama tic c ases such a s the

community of Tintaya Ma rq uiri whos e la nd w a s expropria ted b y the sta te a nd w hich w as

prac tica lly obliga ted to s ell the little land tha t remained.

Miguel Palacn, president of CONACAMI, a national mining network71


.

Nothing good has come from the mine. It would be better if it had never come.

Ernesto Umasi, community leader, Alto Huancan67


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Five c ommunities tha t a re c los e to the s ite o f the Tintaya mine ha ve lost land: Tintaya Marquiri,

Alto and Bajo Huancan, Huano Huano and Alto Huarca. An investigation by CooperAccin, a

P eruvian NG O, undertaken at the req uest of these c ommunities , sta tes tha t in most c ases the

land was either expropriated or sold under duress.72 However the la nd w a s lost, the effec ts o f the

los s ha ve been deva sta ting, b oth ec onomica lly and cultura lly. Ca rmelo Sa ico Ta ipe, o f the Huano

Huano community, shares his experience:

My so ns w ould not have left this a rea if the mine had nt come. They wo uld ha ve sta yed and

studied a nd ended up w ith better educ a tion and b etter wa ges . The land sa le has ca used

tension in the family and the community we talk about it a lot and sometimes fight amongst

ourse lves. My sons sa y: Dad , why d id you s ell our la nd?

The principa l conc lusions of the a na lys is o f the Tinta ya Marquiri community follow be low .73

Tintaya MarquiriIn 1981, the Peruvian government approved a resolution expropriating 2,368 hectares of land

belong ing to the community o f Tintaya Marquiri, b ec ause the c ommunity lived direc tly on top ofthe area on which the state wanted to drill. In 1996 BHP Billiton initiated a process which saw the

community under pressure to sell an additional 1,263 hectares of its land.

Over 20 years later they were still waiting to be relocated to land where they could settle and

rebuild their lives. Finally, at the end of 2004, replacement land was purchased one of the great

successes of the Dialogue Roundtable. In their temporary settlement, over 50 per cent of the

co mmunity have been without toilets a nd sewa ge connections, a nd 30 per cent of households

have included c hildren who ha ve not a ttended s cho ol. These figures co mpa re w ith 24 per cent

and four per cent na tiona lly.74

An a nalysis b y C ooperAcc in identifies irregula rities in the e ase ment proces s initia ted by thecompany in 1996. Before submitting an application for an easement to the Ministry of Energy and

Mines, mining companies are obliged to approach the communities which live on the land they

wa nt to develop a nd to try to neg otia te a n agreement. But in the ca se of Tintaya Marq uiri,

a cc ording to Co operAcc in, the co mpany did no s uch thing. Instea d, it applied for an ea sement

weeks before starting negotiations with the community. It later emerged that these negotiations

had been far from a deq uate: a cc ording to a survey ta ken in 1999, 74 per cent of the res idents of

Tintaya Marquiri did not even know tha t any land neg otiations had ta ken place.

As the ea sement applica tion moved a head , the c ommunity ca me under pressure to sell its land.

Know ing tha t the company would proba bly rece ive an easement, the community dec ided to sell

its land, aware that this was the lesser of two evils. At least they made slightly more money.

The a nalysis further sta tes tha t the 1996 land s a le fa iled to c omply with the law go verning the s a le

of community land (the Land Law, 1995) in the following four ways:

1. The c omm unity never expres se d a n interest in se lling its la nd.

2. The co mmunity represe nta tives w ho neg otiate d the sa le la c ked leg a l a uthority and

co mmunity a pprova l.

3. The community wa s not awa re of the terms of the negotia tions and had not a pproved them.

4. Any nego tia tions that d id ta ke plac e w ere not g enuine. For example, the c ompa ny

unila terally es ta blished land va lues . They w ere not disc uss ed w ith the co mmunity.


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The results of the ana lyses of o ther communities a re s imila r. In Alto Hua nca n, the signa tures on

the agreement are illegible and are not accompanied by proper identification. In Huano Huano,

the co mpany reportedly brought an easement doc ument to a community meeting, putting

immense pressure on the community assembly to sell land rather than lose out completely.75

B HP ha s promise d a lternative land but we a re s till wa iting. We hope we w ill ge t some better

la nd soon; otherwise we might a s w ell a ll just disa ppea r q uietly, sa ys C armelo Sa ico Ta ipe.

their environment is polluted

An analysis, conducted by CooperAccin in 2000, provided scientific evidence supporting the

testimonies of many community members that rivers, springs and pasture have been polluted

by the Tinta ya Mine.76 These resources a re used in lives toc k rea ring, the ec onomic b a ckbone of

the c ommunities, a s we ll as everyda y household activities.

Water

The principal prob lem for our community ha s been the conta mination o f the HuinumayoRiver. Ta ilings entered the river, dama ging it. In ad dition, the river has dried up we ve b een

left w ithout w a ter for our anima ls and for huma n consumption. Theres s imply no wa ter.

Gavina Cuti, Alto Huancan77

High concentrations of contaminants, principally metals, were discovered in water sources in

the communities that neighbour the mining operations. None of the water sources that were

a nalysed were s a fe for human c onsumption. They pos ed a serious risk to loca l people.

Moreover, the physical and chemical characteristics of this water mean that is has limited use

for agriculture and livestock rearing.78 In a 1999 survey of reside nts of Tinta ya Marquiri, 50 per

cent thought that wa ter conditions ha d g ot w orse and blamed the compa ny.79

SoilThe report showed tha t area s nea r the villa ge o f Alto Huanc an that ha ve bee n inunda ted w ith

ta ilings a re highly co ntaminated with all tha t implies for pasture land, plant life a nd

neighb ouring populations .80 In recent interviews some community members report a

deterioration in the quality of plants and therefore worse pasture for the animals.81 In 1999, 42

per cent of Tintaya Marquiri res idents b elieved tha t the q uality of fa rmland ha d d eteriorated in

the last few years.82

AirInterview s undertaken b y C hristian Aid revea l the impact on human hea lth of living nea r a

tailings dam. Christian Aid met the Coutenounka family cutting oats just 20-30 metres awayfrom the Tintaya mines ma ss ive ta ilings da m. After part of their land w as expropria ted by the

sta te, the fa milys home a nd remaining fields border the dam. The ta ilings da m is a huge lake,

surrounded by low w a lls of pow dery white s tone.

S tand ing o n the s ite of his grandmo thers old house, now part of the d am, Victor Coutenounka

explains:

When the w ind b low s, the dust from the da m c omes with it. We c a n feel it in our lungs and it

smells ba d. In the dry sea so n you ca n even see it covering the g round. The co mpany has

taken analyses of our blood three o r four times but we have never been s hown the results,

des pite a sking. We ha vent hea rd b a ck and the tes ts w ere ta ken a yea r ago. You rea llynotice the conta minated a ir when you first g et ba ck from the co ast. B ut after a week you get

used to it and s top noticing.


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His fa ther Florentino add s: The c hildren of this c ommunity a re thinner, our bones hurt and w e a re

genera lly w ea ker. The co mpany sa ys there is no c ontamina tion. B ut we know we have b its o f

copper inside us.

Thirty-year-old Victo r spends mo st o f his time on the co ast now, bec ause the la nd there is b etter

and the atmosphere is better for his children. I dont want my children risking their health by livinghere. They a re b etter off on the c oa s t. If there w a s no mine I would d efinitely s ta y a nd b ring up my

family here, he says.

and their incomes reduced.Proponents of mining claim it has a positive impact on the local economy. Many of the

communities in Espinar say the opposite is true. Not only have they seen no benefits from the

mine, they sa y they a re a ctua lly w orse off than they we re b efore it wa s built. Los s of land a nd the

pollution of land, rivers and air have made them poorer and less healthy.

We a re left without land a nd w e do nt have a nywhere to g o. It was b ad luck that our land lies

on top o f a minera l depos it the wea lth has do ne nothing for us. Tod ay there a re more than120 families tha t ha ve nothing a nd tha t live on the little p iec e o f la nd tha t w ere left w ith.83

Justino Quispe, former community president of Tintaya Marquiri

Be fore the mine I had my ow n anima ls a nd sow ed c rops pota toes , onions a nd cinchona . It

wa s b etter then. The wa ter wa s c lea n; you co uld g o a nd fish for trout. Now there is no trout in

the rivers. My husband used to go and get gold from the river and sell it in Cusco we

wanted for nothing before the mine. Now we dont have enough to eat our standard of living

is far lower.

Catalina Saico , Tintaya Marquiri

Our see ds dont grow a s w ell. We have les s land a nd so les s a nima ls. Our horses and co wsare s ick more freq uently... P eople dont wa nt our cows so much as they a re c onsidered

conta minated. Their va lue ha s fa llen. Their fles h is ug ly.

Florentino Cutenounka, Alto Huancan

We ha ve los t la nd, a nd our rivers a nd s prings have been conta mina ted . We a re c ommunities

that raise livestock we live from this. Since the mine arrived, our animals have been affected.

Co mmunity memb ers ha ve fewer lives toc k than before. We a re poorer now.

Francisco Cordova, Huano Huano community84

A socio-economic analysis undertaken by CooperAccin in 1999 revealed that the vast majority of

the ca mpesino c ommunities in Espinar were s o po or tha t they co uld no t sa tisfy their bas ic needs .

The c ommunities of Espinar had a grea ter incidence o f poor-qua lity hous ing tha n co mmunities in

other reg ions , w ith only 20.8 per cent o f homes in Tinta ya Maq uiri having running w a ter. They a lso

had no a cc ess to ad eq uate health services .85

J obsS ome people from the a rea have secure job s a t the Tintaya mine. B ut for the vas t ma jority the

employment that was one of the mines biggest selling points has failed to materialise.

They say the loc a l people do not have the skills, in which c a se they should train us. P eople

from Puno and Areqipa work in the mine, but not us, despite 20 years of promises. I go to the

mine every day asking for work.

Victor Cutenounka, Alto Huancan


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No-one w orks in the mine. P eople in my community w ant w ork there b ut there is none. Only

four young people from the co mmunity w ork for mining s ubc ontrac tors The mine d id

promise w ork, even to my very old fa ther (a c lea ning job ), but nothing c a me o f it.

Carmelo Saico Taipe, Huano Huano

When asked in 1999 whether they wished their children to grow up in the area, 53 per cent ofTinta ya Marquiri res idents s a id no , with a further 34 per cent b eing unsure.

The Dialogue RoundtableBeg inning in 1998, the co mmunities in Espinar have been effec tively orga nising thems elves by

enhancing the skills of their leaders, and elaborating local development plans. With the support of

NGOs such as CooperAccin, they have also created new organisational structures that have

begun to focus on violations of land, environmental and human rights.

In November 1999 Espinar community representatives were among approximately 1,000

delega tes from across P eru who pa rticipated in the First Na tiona l Congress of C ommunities

Affec ted by Mining in Lima . The Cong ress sa w the c rea tion o f the Nationa l Coordinator ofCommunities Affected by Mining (CONACAMI) and a number of Regional Coordinators

(CORECAMIs). By working at the regional level, isolated communities are able to exchange

information a nd experiences . Esteb an C hac n, c ampesino lea der in Espinar, po ints o ut that:

Be fore the existenc e o f the Reg iona l Co ordinator, ea ch community nego tia ted sepa ra tely w ith

the mining compa ny a nd tried to reso lve their pa rticular co nflicts . The neg otiations took pla ce

in unfair conditions that prejudiced the communities and without doubt, benefited the

company. The c ompa ny view ed us a s being weak and divided . Also , they b rought their

engineers and law yers a nd w e d idnt have resources to hire our ow n profess iona l a dviso rs. In

this type o f negotia tion, we have a lmos t alwa ys los t.86

The w ork of the c ommunities to defend the ir interes ts culminated in Dec emb er 2001 w ith the

creation of a Dialogue Roundtable, under the oversight of Oxfam Australias Mining Ombudsman,

and including representatives of BHP Billiton, the communities, CONACAMI, CORECAMI, Oxfam

America and CooperAccin.87 By joining the Roundta ble the c ompa ny ac knowledged the

problems associated with its operations, although it continues to refute many of the allegations

made b y the communities.

It is worth noting tha t thos e involved in the Dia log ue have c hosen not to invite the P eruvian

go vernment to the Roundta ble. This reflec ts the la ck of trust a nd c onfidence tha t the va rious

participants have in the government as well as the communities perception that the

government is biased in favour of the company.

At its first working session in Lima in February 2002 the Dialogue Roundtable process was

defined as:

Voluntary a nd c olla bora tive, ba se d in dia log ue and free pa rticipation, open to d iverse interests

that seek to find solutions to existing problems, as well as opportunities to develop the area

tha t is influenced by the operations of B HP B illiton Tintaya .88

At the meeting, Franc isc o C ordova , then P res ident of CORECAMI Cusc o, s a id: The communities

a re w illing to enter into d ia log ue but w ith the goa l of finding a so lution. Many times we have

had dia log ue but w e never arrived a t so lutions. We w ant that to cha nge.


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Four commissions, which include the participation of Roundtable members, have been set up to

add ress land, human rights, the environment and s usta inab le d evelopment. How have they fa red?

The Land CommissionA Land Commission has been assessing the land-sale negotiations that took place between the

co mmunities and the co mpany. It has agreed tha t communities that ha ve los t land should b egranted equivalent land by the company, plus 25-50 per cent, depending on its quality, should be

relocated to the replacement land and should receive support from the company for the

development of these areas.

In 2004, two parcels of land totalling more than 3,000 hectares were acquired for the relocation of

a number of fa milies from Tintaya Marquiri. This co mplements more tha n 1,000 hecta res tha t w ere

purcha se d before the Roundta ble was se t up. Tintaya Marquiri originally los t a little over 3,600

hec ta res . Other families and o ther communities a re s till in the proces s of identifying potentia l

replacement land.

S pea king in April 2004, be fore the Dec emb er 2004 ag reeme nt, Carmelo S a ico Ta ipe w as hopefulbut rea listic. The Roundtable has nt achieved a ny so lutions yet [for the Huano Huano

community], although it is our best bet for getting back our land. If we dont get our land back I

foresee conflicts , he s a id.

The Human Rights CommissionA series of allegations of abuse of human rights have been levelled against BHP, including sexual

abuse by c ompa ny subc ontra ctors, a nd violence during forced remova ls of people from their

land. So far, only four of 34 cases of alleged human rights violations have been dealt with,

although a number have been dismissed because they couldnt be substantiated.

The Instituto de Defensa Lega l, a n NGO c ontracted by the Human Rights Co mmiss ion toinvestiga te the ca ses o f alleged human rights a buses , has rec ommended that B HP Billiton should

be more vigila nt ab out its employees w elfare. It has a lso advised that the Roundtab le s hould o ffer

educational opportunities and legal orientation for company workers and community members to

avoid future accusations of human rights violations.

The Human Rights C ommiss ion has a lso helped in the ca se o f Ca talina S a ico , whos e husba nd

died while working for a company that was contracted by the mine in October 1995. While not a

human rights abuse in the normal sense, her story illustrates the importance of the dialogue

proc ess, and its limitations. He w ent to w ork a s usual one morning. He w as wo rking on the

construction of a bridge. He was giving directions to a tractor but it failed to follow his instructions

and it went right through him, she said.

Almos t ten years later and a fter a lengthy and distres sing lega l proc ess, no-one has a cc epted

respo nsibility for the dea th of Ca talinas husba nd. S he believes tha t the compa ny wa s

respo nsible, b eca use it owned the land a nd ma chinery but the P eruvia n co urts ruled that the

dea th wa s a n ac cident. At one sta ge , Ca talina a cc epted 10,000 soles (about US $3,000), in

exchange for not pursuing the case. Out of this she had to pay a lawyer and share the remainder

with her husba nds six sons.

In April 2004 Ca talinas c a se wa s resolved b y the Roundta ble. C a talina has rece ived a house in

the town of Espinar worth 13,000 soles (US$4,000) and 700 soles (US$200) per year to put her

son, Edwin, through s choo l. The c ompa ny does not a cc ept responsibility for the d ea th of her

husband, and calls its payment an act of humanity.


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Without the Roundtable, Catalina might still be waiting for compensation. But despite the support

she received from NGO members of the Roundtable throughout the negotiations, she feels

unhappy w ith the proc ess. Yes I have b een helped. But I wa s press ured to s ign pa pers I couldnt

read. I was told by the notary that if I didnt sign I would end up with nothing, she said.89

The Environment CommissionThe Environment Commiss ion is implementing eva luation a nd monitoring plans, is in the proc es sof c ompiling b a seline hea lth da ta for loc a l res idents a nd their livestoc k, a nd ha s agreed to

develop early warning systems in the case of spills or other possible environmental accidents.

Drinking water is being provided to those communities that need it.

Francisco Cordova, who is still close to the Roundtable process, says that progress has been

made: The Roundta ble has had g ood impac ts co ntamination is do wn. But we need better

evaluations of air pollution and subterranean water.

However, other community members are yet to see any improvements:

We ha ve been in dialog ue w ith Tinta ya for three yea rs. They keep saying they w ill do things

but we ha ve seen nothing. The environment c ertainly has not been sorted out.

Victor Cutenounka

P eople have been g iven new la nd a nd there is movement on human rights a buses . But

regarding our environment all we get is promises, nothing else.

Ernesto Umasi

The Sustainable Development CommissionThis co mmiss ion is in cha rge of eva luating soc ia l a nd ec onomic d evelopment proposa ls. The

company has pledged to donate a total of US$900,000 over three years to a new developmentfund for the co mmunities . The fund w ill be c ontrolled by the Dialogue Roundta ble a nd reso urce s

will be used to s upport developme nt projec ts identified by the c ommunities in their strateg ic

development plans. All members of the Dialogue Roundtable have committed themselves to

seeking additional funding for the sustainable development of the five communities.

Francisc o C ordova is hoping the c ompa ny will financ e a projec t he has been w orking o n to g et

irrigation to 80 families in the Huano Huano community. He explained:

The irriga tion s cheme will provide ea ch family w ith four hec ta res of g ood pa s ture. You c a n

keep 12 cows on four hectares. If each cow produced 60 litres of milk per day at a price of 80

centimos (23 US cents ) per litre ea ch family c ould ma ke 48 so les (US $14) per da y. This is

about long -term d evelopment for our children and g randc hildren.

Is dialogue working?In 1999, before the Ro undtable wa s se t up, a n overwhelming majority 83 per cent o f Tintaya

Marquiri residents, said that the mining company did not comply with agreements, while the rest

didnt know. Only five per cent of the people questioned said that talking with the company might

help resolve disputes.90 Tod ay, those s ta tistics might not b e so s ta rk. The Dia log ue Roundta ble

represents an important attempt on the part of its members, including BHP Billiton, to create an

effective mechanism for res olving the ma ny conflicts tha t ha ve a risen in the Espinar province . It is

one of the most important conflict resolution initiatives in Peru.

Taking pa rt in suc h an initia tive ha s b een a new experienc e for the c ommunities of Espinar. They



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have had to organise themselves better, identify allies and formally document their complaints. For

example, a t the moment ea ch c ommunity is in the proc ess of naming Environmental Delega tes to

pa rtic ipa te in a n Environmenta l Watchd og Co mmittee. As Ingrid McDona ld, Oxfams Mining

Ombudsman, puts it: They a re ta king co ntrol of their destiny.91

Their hard work, a nd tha t of the NGOs that s upport them, has led to c oncrete improvements in theirlives. The company too has show n good faith in some of its a ttempts to remedy da mag e. Its

recognition of the different community organisations (national, regional and local) as legitimate,

representative actors is certainly a step forward. All those interested in resolving mining conflicts

should study the initia tive and the impressive ag reement signed in December 2004, which c ements

the right of communities to w ithhold their consent from developments w ith which they disa gree.92

Des pite this important brea kthrough there is still a high degree of s ce ptic ism in the c ommunity.

The proc ess has been slow and c oncrete benefits a re, in most c ases, yet to mate ria lise . Only four

out of ab out 30 huma n rights c ases have be en dea lt with a nd this ha s ta ken two yea rs. Many in

the communities are not optimistic that environmental pollution will be dealt with effectively.

Speaking in April 2004, one of the community founders of the Roundtable expressed

disa ppointment ab out a perce ived lac k of genuine c ommitment from the co mpany:

I wa s a founder of the Roundta ble proc ess . B ut now I am really disillusioned. We a re fa lling

into a tra p. The co mpany has money a nd ma nag es people, forming its ow n lea dership. Many

fall for what is on offer such as money, jobs, even just a lunch. Leaders fall. Power is the key.

The tab le ha s fa iled. The co mpany alwa ys g ets its ow n wa y.93

This view is typica l of the impa tience felt by ma ny in Tintaya . Even w here progres s has been

made, such as in reducing pollution and resolving human rights cases, people either do not see it

yet, or believe they are compromising more than they should be.

The most ob vious ba rrier to rea l prog ress is the inherent power imba lance . One o f the pa rtic ipa nts

in the dialogue is a large mining company with considerable financial and professional resources.

Des pite the efforts of the co mmunities and their allies , s ignific ant ineq uities persist in the

nego tia tion proces s. Ma ny co mmunity members a re c oncerned that their represe ntatives a re

effectively being bought off by the company.

At the Roundta ble, the c ommunity represe ntatives a re ma nipula ted and ma nag ed by the mine.

They sometimes work for the mine so c ant sta nd up for the community. Tintaya sto ps

everyone w orking together by d ividing us. They ta ke us out one a t a time. We a rgue among st

ourse lves a bout prices and things .

Florentino Cutenounka, Alto Huancan

Even more fundamentally, although there is a Sustainable Development Commission with a pot of

money to spend, much of the Roundtables work is taken up by trying to remedy injuries done to

loc a l people including forced land loss , pollution a nd huma n rights abuses . This is not

development, but a melioration of neg a tive impac ts and, hopefully, prevention o f further los s. It

fails to address the underlying conditions that create mining conflicts in Peru, such as the lack of

full leg a l rec og nition o f community rights , a nd a government tempted to fill its ow n co ffers a t the

expense of pow erles s communities .

The a nger and mistrust resulting from 20 yea rs of mistrea tment was never going to eva pora te

overnight, and it would be wrong to judge the Roundtable too harshly for its slow progress.

Things a re c ertainly better toda y than they were tw o yea rs ago . In the ab senc e of a dec isive


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intervention by the government, the Roundtable is still the only hope for progress, and is

therefore the foc us o f much c ommunity energy.

The unw illingnes s and/or ina bility o f the g overnment to intervene in existing mining conflic ts and

to w ork to prevent future c onflicts , is indefens ible. If the g overnment a do pted effective po licies to

regulate mining and to protect the communities affected by it, initiatives such as the EspinarDia log ue Roundta ble would b e even more succ ess ful. The a pplica tion of international leg a l

sta ndards, ba cked up by sa nctions, w ould ma ke it harder for companies to do da mag e a nd

wo uld empow er communities a ttempting to remedy a nd c ompensa te for it.

In 2003, further conflic t w ith a number of previous ly uninvolved Tinta ya communities was

ge nerated by the c ons truction of a new ta ilings co nta inment a rea by B HP B illiton. This unila teral

move by the co mpany ha s outra ged co mmunities and NGOs involved in the Dia log ue proc ess . It

illustrate s where the pow er continues to lie in Tintaya , de sp ite the s trides ma de by the

Roundtab le, a nd d emons tra tes the urgent need for better regula tion.


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4. Environmental crisis in La Oroya

In the 1920s, the American Cerro de Pasco Copper Corporation built a large polymetallic smelter

high up in the Andes, about three hours drive from Perus capital, Lima, triggering an influx of

people hoping to find w ork.94 Eighty years on, the city of La Oroya stands right next to the

complex, whose tall chimneys pump out smoke onto the hillsides.

The smelter has provided job s for many people over the la s t eight d ec ades. As w ith a number of

mines in the Yauli area, it has undoubtedly stimulated the local economy. But at what cost?

Toda y, the reg ion is o ne of the most c ontamina ted a rea s o f Pe ru. Both tow ns a nd the co untryside

have been a ffec ted by mining a ctivities : rivers a re visibly polluted, farmlands have been rendered

unusa ble a nd the a ir q uality is s o b ad tha t there have been extremely se rious c a ses of lea d

poisoning. Doe Run, the American owners of the smelter, continue to make profits, but the 36,000

res idents of La Oroya rema in overwhelmingly poor. The P eruvian government is e ither unab le o r

unwilling to improve the situation. Doe Run has chosen not to respond to the specific issues

highlighted in this case study.

Health damageAccording to its website, Doe Run Peru is working towards achieving the development of its

activities in harmony with a healthy environment to contribute to the regions and the countrys

susta inab le development.95 Unfortunate ly, c ond itions in La Oroya do nt conform to this ros y

image of environmental stewardship.

The smelter in La Oroya relea ses a toxic mixture o f contaminants tha t includes lea d, a rsenic,

cadmium and sulphur dioxide, all of which have proven adverse health effects.96 Enormous

mounds of jet-black slag lie just outside the smelter complex, exposed to the elements. Resident

Wilmer Eliseo Mac ha desc ribes the s ituation:

The living cond itions in La Oroya , the environmenta l cond itions , a re d ifficult. For exa mple, we live

in a camp thats 300 metres from the refinery, the smelter, the chimneys, the smoke and the

contamination just 300 or 400 metres. One can clearly feel the gases that the chimneys

relea se. There a re moments w hen the ga ses fall and they burn your throa t and your nose.

That happens .

Christian Aid supports a consortium of three Peruvian non-governmental organisations which has

set up an association of environmental delegates, who serve as local environmental watchdogs

for the community.97 The de lega tes environmenta l monitoring uneq uivoc a lly demons tra tes tha t La

Oroya s a ir, s oil and w a ter are s erious ly polluted.

Measurements of air quality taken in the region were compared to national standards, including

ma ximum permiss ible limits (MPL)98 and na tiona l amb ient a ir-qua lity s tanda rds (NAQS ).99 Where

there were no national standards, international standards were used such as those established

by the World Hea lth Orga nisa tion (WHO).

The findings revea l tha t a ir co ntaminant levels mea sured a t various points in La Oroya exceed

these standards sometimes greatly. Several measurements during 2002 from the neighbourhood

of Old La Oroya, immediately adjacent to the smelter, are astonishing and very disturbing:

Lea d levels exceeded the MP L by over 1,000 per cent a nd the NAQS by o ver 300 per cent. Ca dmium levels exceed ed WHO stand ards by a lmos t 4,000 per cent.

S ulphur dioxide c onc entrations were 500 times tha t of the NAQS .100


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The co nsortium has a lso undertaken studies to a ss ess the d egree o f lea d po iso ning a mong La

Oroya s res idents. The s tudies have foc used on c hildren and expecta nt mothers two groups

which are particularly vulnerable to the toxic effects of lead exposure.101 G iven the high

atmospheric lead levels discovered through monitoring, the blood-test results are not surprising. A

2000 study s how ed tha t the a verag e b lood lead level for children wa s o ver four times the World

Hea lth Organisa tions guideline (of 10g/dl).102

Such concentrations have a serious impact onphysical development. Similar concentrations were found in expectant mothers. Both groups

showed symptoms associated with lead poisoning. A similar study carried out in 1999 by the

P eruvian Minis try o f Hea lth ha d shown s imila r res ults. Of the 346 children tes ted , only 0.9 per cent

had blood -lea d levels tha t w ere be low 10g/dL.103

Ros a Laza ro Villaneras fa mily ha s lived in La Oroya for 20 years. Her eldest da ughter, ten yea r-old

Carol, explained how it felt to have 16 micrograms of lead per decilitre of blood: I get headaches,

then pa in in my shoulder, then in my hands until my w hole a rm goes to s leep. I feel pain all

the time.

She also gets stomach-aches and therefore eats less than she should. Other families had to movetheir children out of the area after they repeatedly lost consciousness.104 Rosa expla ins w hat it is

like to live nea r the smelter: When the s moke c omes out, you feel it in the throa t a nd it a ffec ts the

eyes . You feel different, a b urning in the eyes. .. We ha ve thought about moving, b ut we ow n a

house here a nd w ouldnt have one e lsewhere. The kids a re in sc hool.

Doe Run responded to Christian Aids requests for an interview by sending brochures setting out

the positive impa ct it is having in La Oroya . The broc hures document Doe Runs claims to be

handling dangerous substances carefully, promoting a culture of health and hygiene, and

supporting social development projects. While Christian Aid welcomes all attempts by Doe Run to

mitiga te its nega tive impact, o ur analysis show s that the prob lems persist.

Economic decayAlthough some benefit from jobs at the smelter and surrounding mines, most people are still

depend ent on a griculture. They s a y tha t, be ca use of environmental deg rada tion, they a re a ctua lly

poorer toda y than they w ould ha ve been if mining ha d never come to the region. C ampesino

Andrs Nolasco J imnez explains:

We p lanted ba rley a nd now Im c ollec ting it. B ut its dry, its no g ood its only good for big

anima ls . The s ma ll anima ls w ont e a t it. The people tha t s till work in their fields do it a s a

co mplementa ry a ctivity, nothing more they have to w ork in the mine, if they c an, or a s a

vendor or in trans port. They c a n no longer wo rk exc lusively in their fields like our grandparents

did b efore there w as the smelter and the c oncentra tor.105

Other farmers complain that their animals are also suffering the effects of lead poisoning and other

contamination. While the company and the state enjoy the profits of mining, the same cannot be

sa id o f loc a l people. J anio G ora is one of them:

[If] you ta ke a look at mining a ctivity, it beco mes clea r tha t it has been a n important fac tor in

the national economy but the benefits have only been received by small groups before it

wa s the Cerro d e P a sc o C orpora tion a nd now its other groups that b enefit from mining. In

co ntra st, the c ommunities in the area rec eive nothing. This needs to cha nge .106

Acc ording to Ena Rojas, urba n direc tor at Cenca , a loc a l development NGO in La Oroya, ha lf the

population of the town live in extreme poverty, despite the claims of the glossy magazines

produced by Doe Run.


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Privatisation has made life even more difficult for local people. Of 72,000, only 3,500 work in the

mine down from 7,000 in 1997. One thousand of these are on short-term contracts. In the past,

the sta te-ow ned s melter had to provide hea lth and educa tion for employees and other residents.

Thats no long er the ca se . Its no w o ptiona l for the c ompa ny to provide so c ia l benefits. The peo ple

of La Oroya a re not holding their brea th.

The impact of privatisationIn 1974, the La Oroya complex was nationalised by the Peruvian g

Christian Aid (2005) Unearthing the Truth, Mining in Peru. a Christian Aid Report

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