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Peru is a country with mineral wealth to rival any other territory. The Andes mountain range runs from northern to southern border, providing the deposits that have led the nation to rank number 1 globally in silver production, second in copper and zinc and sixth in gold. Mining is not a new activity in Peru, but it has changed significantly in recent years in terms of tax regulation, environmental controls and investment girth. The different national governments in power over the last 20 years have maintained policies to encourage business and foreign direct investment. As in many other countries, mining has fattened Peru’s export revenues and GDP and brought economic activity and infrastructure to some of the poorest, most isolated areas.
But with US$35bn worth of projects sitting in the pipeline, Peru is suffering a serious case of discord. The national government’s pro-mining policies often clash with the fears of those who live near a mining project that their livelihoods and customs will be affected, that the mine will have detrimental
effects on the environmental and that they will not really perceive significant economic benefits from its presence.
While the country has numerous mechanisms in place that attempt to ensure that none of this happens, convincing the locals is not always easy. Mining companies often fall short in their communicational strategies, local authorities oppose mine projects as a political technique and a multitude of NGOs and community organizations with different agendas serve mainly to confuse. A lack of effective institutional framework for structuring dialogue is one explanation for these problems afflicting the social license process.
Of course, each case is different and a number of miners operating in Peru have been highly successful in getting the local population on board with their projects. But most experts agree that this country of 29mn inhabitants, where some 36% live in poverty, needs to have a serious think about mining’s role in its future and reach a common agenda for going forward.
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April 2010
EXECUTIVE SUMMARYthis month’s series:
Social license in Peru: Exploring the roots of discord
Points of conflictThe main tangible issue at play in the social license process is water. Multiple projects have stalled over water sourcing and fears of contamination, the current subject of attention being Southern Copper’s Tía María project in Arequipa province.
Lack of frameworkNGOs, community organizations, local politicians, state government and company representatives all have a role in the dialogue process, but in some cases roles are poorly defined or not adhered to. Peru’s institutional framework is largely inadequate in guiding the process, often leading to communicational chaos, negative sentiment toward a project and protests.
What’s in it for me?Peru has very specific systems for sending mining wealth back to the communities where the mines are, but what happens with this money once it is back in local hands is a different story. Communities often believe that mining does not economically benefit them.
TintayaThe Tintaya mine in Cuzco region has had to work hard on social license like any other project, but thanks to certain strategies has become one of Peru’s main success stories in community relations.
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Social conflicts at end-2008, by type
Source: Instituto del Perú (USMP)
Socio-environmental 93Local government issues 28Regional government issues 8National government issues 19Municipal issues 11Union/labor 15Land demarcation 9Electoral 6Illegal coca farming 4Other 4Total 197
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Our service is a comprehensive daily information source that covers the Mining and Metals industry in Latin America. BNamericas publishes news coverage on the business associated with the entire chain of production. The Mining & Metals newsletter also provides information and news coverage on specific issues such as regulatory and legal issues, financing, earnings reports, M&A activities, the capital markets, and environmental and social issues all from a business perspective. Coverage of the metals markets centers on the London Metal Exchange, the London Bullion Market and Comex (New York) is also included.
Mining DAILy
Written and researched by Laura Superneau
Business Intelligence
DirectorRaúl Ferro
Executive editorHenriette Iraçabal
Financial services analystMaría Alejandra Moreno
Mining analystLaura Superneau
Telecom analystPhil Anderson
Energy analystMichael LaGiglia
Financial data analystMaría José Arredondo
ResearchersGonzalo VergaraCarlos Montoya
BNamericas Mining Group
EditorDavid Roberts
BogotáHarvey Beltrán
Sao PauloFernanda de Bagio
SantiagoMark HelmantolerVíctor Henriquez
Designed byTamara Lorca
