WASHINGTON — Peru may face a crisis that could hinder the long term viability of the nation's mining industry, says international aid agency Oxfam America. The Peruvian government, the mining industry, international donors and civil society must act quickly to help the country break the current cycle of conflict and ensure that mining helps reduce poverty and contributes to Peru's development.
Since 2006, Peru has seen an impressive annual economic growth rate of more than six percent. Mining has been the main driver of this impressive growth with copper production doubling and gold production up 30 percent over the past five years. Peru's mineral wealth has attracted investment from a wide range of foreign mining companies, including 13 of 17 members of the International Council on Mining and Metals (ICMM). Mining exports surpassed $17 billion in 2007, amounting to 62 percent of the country's total exports.
"In the midst of this economic windfall, Peru's regulatory infrastructure remains weak and under-resourced," said Raymond C. Offenheiser, President of Oxfam America. "Forty percent of all Peruvians remain in poverty; in the mineral-rich Andes region, poverty rates exceed 70 percent."
Since large scale resource extraction generates relatively few jobs, mining benefits must trickle down to communities through government programs that redistribute revenues. In Peru, this redistribution process has proven highly problematic because of limited governmental capacity to regulate the industry. Currently, the Ministry of Energy and Mines is tasked with both promoting mining investment and enforcing social and environmental regulations—a problematic conflict of interest. The new Ministry of the Environment should assume this role to regulate mining and strengthen the independence of this ministry.
"There is a justifiable sense of frustration among the Peruvian people impacted by mining who have not reaped the benefits of resource wealth generated from their lands," said Offenheiser. "They have not seen these revenues translate into health services, education, or infrastructure to improve their everyday lives."
In many areas around large-scale mining operations, this frustration has lead to conflict and violence. The Peruvian government's public defender's office, Defensoria del Pueblo, recently counted more than 70 active conflicts around mining operations spread across the country.
"Communities do not trust the government to address their concerns and protect them from pollution and other harms that mining can cause," said Offenheiser. "They're left believing organized protesting is the only option for making their voices heard."
The Peruvian government has cracked down on social protests and criminalized activities defined "anti-mining" for fear that local protests could potentially disrupt foreign investment in mining. To make matters worse, some mining companies have exacerbated social tensions by using private security forces that have been accused of violating human rights.
Several steps, outlined in a new paper from Oxfam America, need to be taken by government, mining companies, international donors and civil society groups to reduce conflict and preserve the long term viability of the mining sector in Peru. These include recognizing the right of community consent; condemnation of all threats and harassment; strengthening government capacity and independence; and full disclosure of information on the social, environmental and economic impacts of mining.
At a minimum, mining companies should actively participate in Peru's Extractive Industries Transparency Initiative (EITI) process, a global initiative designed to promote disclosure of revenue payments by oil, gas and mining companies. Members of the US Congress can help take this a step further by supporting legislation to make revenue disclosure mandatory. The Extractive Industry Transparency Disclosure (EITD) bill was introduced in the House and Senate in 2008. This legislation, expected for reintroduction in 2009, would require all oil, gas, and mining companies registered with the SEC to disclose their payments to host countries and extend transparency as a truly global standard for company operations.
"By publishing what they pay to the government, mining companies could help communities hold the government accountable for ensuring local economic development," said Offenheiser.
International donors, like the International Finance Corporation, can support these efforts by insisting on transparency, backing government efforts to strengthen capacity, supporting civil society efforts to hold mining companies accountable for compliance with human rights and environmental standards, and helping the Peruvian government diversify its economy in order to the reduce the country's dependence on resource extraction.
"Acting with full transparency and involving affected communities in the process from the start will go a long way to address the underlying cause of conflict," said Offenheiser. "This would open lines of communication that could foster the long term viability of the industry and the ability of mining to contribute to the development in Peru."