In a guest blog post for Oxfam America, Keith Slack, Extractive Industries Campaign Manager wrote that Peru’s new President Ollanta Humala “is generally viewed as bad news for the country’s mining industry. Indeed, Lima’s stock market – which primarily trades mining and minerals companies – promptly crashed on Monday following the election. The concern is that Humala – seen by some, erroneously, as the second – coming of Venezuela’s Hugo Chavez – will nationalise mining operations and/or impose major new mining taxes, thus scaring off investment in Peru’s most important economic sector. These fears seem unfounded. While few people appear to know exactly how Humala will govern, it is highly unlikely that he will do anything that would significantly curtail investment in the sector that has driven Peru’s strong economic growth over the past ten years. He has indeed proposed a ‘windfall’ tax on mining operations that would bring the country’s generous tax rate more in line with other countries in the region; including mining and development poster-child Chile.
“This seems only fair given the incredible bonanza mining companies in the country have enjoyed since the sector was opened up to foreign investment in the early 1990s. But Humala has also gone out of his way to ease investors concerns about his long-term intentions. An advisor told the Los Angeles times on Monday that the new government “won’t expropriate even a dog.”
“Rather than seeing a more progressive Peruvian government as a threat, mining companies should embrace the opportunity that it presents to try to find solutions to the country’s mining-related conflicts. For the last five years or so, the country has been in a crisis of mining-related conflict with one major project after another hit by protests and violence. In February this year, three people were killed by police in protests against Southern Peru Copper in Arequipa. In May, 3,000 people protested mining operations in the southern province of Puno. The Defensoria del Pueblo, a government human rights institution, lists more than 100 active resource-related conflicts. This level of conflict and violence has become untenable and it – more than Humala’s proposed tax hike – poses the greatest threat to the continued viability of the country’s mining sector.
“The problem at the root of these conflicts is that Peru’s mining wealth has not trickled down to the poor communities that live in the mining areas. They have felt excluded from the wealth being generated from the land on which they’ve lived for forever. That, combined with Peru’s poor environmental management, most notably in the industrial nightmare of La Oroya, have contributed to an environment in which communities simply do not trust mining companies to not contaminate their land and water and don’t trust the Peruvian government to defend their rights and protect their livelihoods.
“Raising taxes alone won’t solve these problems. In some sense, money is not really the issue (although, clearly, the existence of more funds to address social problems would be beneficial). Record gold, copper and other commodity prices have meant that mining money has been flowing into the Peruvian government’s coffers. The problem is that these funds are often not distributed equitably to areas that most need them, and when they are, there is very little government capacity to spend them wisely or invest them in productive activities that can provide jobs, raise incomes and reduce poverty.
“Whether Humala has a plan for addressing these distribution and capacity issues – and the environmental management issues — isn’t clear at this stage. These are deeply rooted problems that will take longer to fix than Humala’s five-year term-limited mandate will allow. And Humala doesn’t appear inclined to help Peru imagine a “post-extractivist” future, as our Peruvian partner organization Cooperaccion and others have called for. Still, he as at least acknowledged the need to try to address these problems, including through the adoption of an indigenous peoples consultation law. And having been in Lima this week, I can say that there is palpable sense of hope among civil society organizations that have been trying for years to get the government to address these issues. At the very least, the new government should have a more enlightened approach to dealing with resource-related conflicts; it could hardly be worse than the previous one, which relied on threats, oppression, and force. The resource extraction companies operating in Peru should embrace a chance for a new beginning that could lead to less conflict and more cooperation. This would be to everyone’s benefit, including the companies’-even if they do have to pay higher taxes to get it.”
“Minera IRL, the Latin American focused gold mining, development and exploration company, welcomed statements from the newly elected government “confirming that the current economic model in Peru will be maintained and extended in order to improve the economic well-being of the communities in the countryside.
“We believe that Peru will maintain its exceptional economic growth and continue to be an important focus of investment in Latin America.” said Courtney Chamberlain, Executive Chairman of Minera IRL. “We have consolidated exceptional opportunities in South America and are well funded to continue the advancement of these as quickly as practical.”
Minera IRL says it “will continue with its stated business plan of operating the successful gold mine Corihuarmi and the prefeasibility study at its flagship Ollachea project, both in Peru, as well as the Don Nicolás feasibility in Patagonia, Argentina. The company also has a very active, plus $10 million exploration program in Peru and Argentina. Nearly 1,000 Peruvian investors are shareholders in Minera IRL.”
“Minera IRL manages extensive community development programs that have fostered excellent relationships.” said Diego Benavides, President of Minera IRL S.A. “These programs, along with the employment of over 500 Peruvians, are contributing substantially to the social and economic well being in the districts that we are active.”
