Exploration social licence in peru

Social license in Peru: Exploring the roots of discord

April 2010

Co nte nt S

Introduction 2Figure 1 - Social conflicts at end-2008, by type 3

What are we fighting for? 3

Representation, competing voices and lack of framework 5Figure 2 - What’s at stake: Main mining projects in Peru 7

Perceived lack of economic benefits and recognition 9Figura 3 - Voluntary Contributions 9Figura 4 - Voluntary contributions - Local funds by investment area 10Figure 5 - Mining canon generated 11Figure 6 - Projects sent to national public investment system (SNIP) for evaluation 11

Pro-mining state 12Figure 7 - Canon / royalties before and after Tía María 13

Tintaya - A positive case study 13

Conclusion 15

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Social license in Peru: Exploring the roots of discordApril 2010

IntroductionPeru has become one of the world’s primary destinations for mining investment. According to a report by the consulting firm PriceWaterhouseCoopers published in February 2010, in the next six years we can expect to see investment worth US$35.5bn in mining projects in the country. The tax regime is attractive and the country now has several years of regulatory stability under its belt. The different governments that have come to power over the last 20 years have maintained an attitude of business and investment promotion.

But this investment boom faces an obstacle that may not stymie it entirely but does threaten to complicate its proliferation: the ever more difficult relations between mining companies and the communities near their operations and projects. Examples abound, from the stalling of the Tambogrande and Río Blanco projects to the problems now hindering Tía María, a US$934mn copper project that Southern Copper is trying to advance in southern Peru’s Arequipa region.

Conflicts between miners and communities in Peru did not just pop up recently. They began to gain strength in the 1990s during a different mining boom and when the sector started to see privatizations. Around the same time, globalization became a buzzword and multinational companies were pushed toward greater accountability at home for their actions in all countries of operation, meaning a developing country’s local environmental and social standards were no longer enough. Communities started to realize that they had power to demand environmental responsibility and economic benefits, with the help of NGOs.

But unlike in other countries such as Argentina, where the debate between miners and community organizations has turned into a dialogue of the deaf, in Peru a number of mechanisms and instances of dialogue emerged. And despite the virulence of some of the conflicts, these mechanisms, though imperfect, together with the growing sensitivity of miners, do allow some degree of optimism for the future.

However, while investment has continued, conflict has not abated and in some cases it has even escalated. What has happened? What is behind this increasing unrest? And where is the situation headed?

The answers vary depending on who you ask - someone close to the companies or the communities (or rather, the NGOs that support them in many cases) - although there are points in common, such as the lack of effective institutional framework for structuring dialogue. This basic need appears to be the mother of at least part of the biggest problems that feed such conflict in Peru today.

Over the last decade or so, successful social relations have become as critical to a mining project as defining an economic deposit. This report will take a look at the flaws still plaguing this side of the business in Peru and the road ahead for overcoming the conflicts complicating billions in investment.



What are we fighting for?Some of the nastiest conflicts in Peru’s recent mining history have a common undercurrent: water. In many cases, el agua has been the only hard, justifiable opposition point. The impact of a mine’s water usage can have real and tangible effects for a community beyond cultural impacts or the mere modification of the visual landscape. As in Chile, much of Peru’s mineral wealth sits in arid regions where hydro resources are scarce, or high in the

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Social conflicts at end-2008, by typeFigure 1

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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mountains where concerns of downstream contamination and volume reduction are often valid. Mining regularly competes with agriculture for water rights, meaning there are economic interests and questions of livelihood at hand, too.

In southern Peru’s Arequipa region, which is not only relatively dry, but fertile, the Tía María copper project operated by Peru/US-based, Mexican-owned Southern Copper (SCC) in Islay province is facing serious opposition related to its water usage. The US$934mn, 120,000t/y cathode project needs 7 million cubic meters per year (Mm3/y).

The company has presented three sourcing alternatives: construction of a dam and reservoir that would hold 40Mm3/y to be shared with other users, the use of Tambo River groundwater pumped up through wells or the use of desalinized seawater.

SCC says that the first option is the most recommendable, though the second would not affect the environment or agriculture and would be the most cost effective, and that the third would be very expensive and reduce canon payments and other socioeconomic benefits. Local farmers have rejected the dam idea.

But the Paltiture dam project has been under consideration by Peruvian authorities for some time as a 30Mm3/y project to provide water to Tambo Valley farmers in the dry season. SCC has said it would take on construction of the project as part of Tía María.

The company was scheduled to present the project environmental impact study (EIS) with its latest water use proposals in a public hearing on April 19, but Peru’s energy and mines ministry (MEM) suspended the event for a third time on April 17. SCC requested the suspension after Islay province authorities issued a resolution rescinding authorization to use the designated meeting site, and MEM said the suspension is in the interest of complying with rules on citizen participation in mining. The company said it will provide information about the project through a local media campaign and does not plan to schedule another public hearing.

Local opposition to Tía María is deep-seated. What would have been the third and final public hearing had already been suspended twice since local residents voted in a September 2009 popular referendum to reject the project based on their fear of its impact on water supplies. Southern Copper rejected the vote, saying it was not legal and that anti-mining groups had created a negative climate for the final hearing, originally planned for September, forcing the company to suspend it at the last minute.

The mayor of Islay province’s Cocachacra district, where the Tía María deposits are located, is categorically opposed to the project. Mayor Juan Guillén López is also president of the Coordinadora Provincial contra la Agresión Minera de Islay (Islay Province Coordinating Committee against Mining Aggression), which called an indefinite general strike in protest of Tía María starting April 14; The strike was carried out April 14-20 and included blockades on the Panamericana highway.

Arequipa region president Juan Manuel Guillén and the ministry continually called for dialogue in an effort to avoid the strike in the lead-up to the hearing, and the ministry said it would not push the hearing back because of the strike. SCC presented the project EIS to MEM in mid-2009 for review, and the public consultation process is a requirement for its approval.



Tía María is one of numerous mining projects where water has been the main point of conflict. Cases of note in Peru include the Tambogrande polymetallic project in Piura where Canada’s Manhattan Minerals pulled out entirely in 2005 after investing US$60mn, and the 3.7Moz Cerro Quilish gold deposit, part of the Yanacocha mine operated by US-based Newmont Mining, where development stalled in 2004 after local protests. In September 2009, Newmont said it was looking for independent consultants to show that water resources could be managed at Cerro Quilish.

Peruvian President Alan García signed into law in March this year new regulations on the use and control of water resources in the country, which define water as a human right that cannot be bought or sold. The regulations also hand over sole responsibility for managing water resources to national water authority ANA and prioritize the use of water for agriculture.

The idea is to create a legal framework to provide clear limits and certainty for potential investors and protect rural and indigenous communities’ rights to use hydro resources located in their territories.

But Laureano del Castillo, lawyer and hydrological expert with the national center for social studies (Cepes) said in a recent interview with BNamericas that the new regulations are unlikely to solve social conflicts rooted in water disputes. “I feel the issue was not properly addressed. The law will help to clear up some of the conflicts we’re seeing, but it really doesn’t get to the bottom of the issue,” Del Castillo said.

SCC manager of legal affairs and natural resources, Guido Bocchio, called the new law a responsible attempt to manage Peru’s water resources and believes it will not affect mining investments in the country.

There are some 244 social conflicts over water resources currently in Peru, mainly related to mining, fishing and agriculture, according to ANA.

Representation, competing voices and lack of frameworkWhile water is still probably the main tangible issue in social license across the industry, the social license process in Peru is also suffering precisely because there is no official procedure. Companies are responsible for informing communities and local authorities of the details of their projects and organizing public hearings with little coherent government guidance, leaving all manner of gaps into which opposition easily seeps. Companies have in recent years created their own internal methods for approaching the issue, but in many cases they are still falling short. And while that might not doom a project to demise, it could provoke delays and negative local sentiment well into the mine’s life.

A complicating factor in the dialogue process is the large number of NGOs operating in the country and the multitude of local organizations that they support, such as coordinating



committees and community “defense fronts”. The sheer quantity of entities makes informed, structured debate difficult and generates communicational chaos.

Among the NGOs are those that carry their own agendas or aim to “ideologize” negotiations, and in many cases the legitimacy of their representation of the people is also questionable, says Martin Scurrah, associate researcher at Cepes and former researcher for Oxfam America.

“We are experiencing a process of construction of identity. Unlike in other countries, in Peru the peasants do not claim indigenousness. Claiming identity in Peru has traditionally been frowned upon due to the history of exclusion that exists in the country,” says Scurrah.

“But that is changing, and 10 years from now it is likely that all peasant movements will emphasize the recovery of their identity. There are reasons why these movements take advantage of this phenomenon. They are discovering that by involving the element of indigenousness, their power of negotiation is greater.”

The International Labor Organization’s Convention on Indigenous and Tribal Peoples in Independent Countries, or Convention 169, which was born in 1989 and ratified by Peru in 1994, is playing a key role in pushing communities toward recognizing the value of the indigenous factor.

Some NGOs are anti-mining or anti-market, while others do aim to foster development that happens in a responsible, sustainable way, even working together with mining companies in some cases. The organizations behave differently according to the interests they are defending, whether public or private, and though not all are against mining, only some of the ones that are actually justify their opposition, notes Juan Carlos Cortés, president of private think tank Ciudadanos al Día (CAD).

Gerardo Damonte, associate researcher with private research center Grupo de Análisis para el Desarrollo (GRADE), says the problem is that the work of NGOs in Peru is based solely on denunciation and lacks proposals for advancing the country forward. “NGOs [in other countries] have specific, programmatic agendas, but at the same time they have a political agenda that is generally supported by an existing political apparatus. In Peru, the political apparatus does not exist... There is no solid political platform.”

NGOs often go where there is conflict, and when the specific conflict has ended, they leave, he says. Meanwhile, companies organizing public hearings sometimes avoid inviting the most radical groups in a bid to bypass their demands and obtain favorable results at the hearing, according to Damonte, killing the legitimacy of the hearing process and sparking violent reactions from the marginalized groups.



In the companies’ view, NGOs and other players in mining conflicts have learned to manipulate the existing regulations on social process, says Hans Flury, president of Peru’s national mining, energy and oil industry society SNMPE. “They request dialogue, but they use legal appeals to thwart hearings. A good example is the mayor of Cocachacra, who has used all sorts of legal mechanisms to impede the hearings that aim to discuss the Tía María project,” he says.

Convention 169 has made the process more difficult for companies in many cases, as NGOs lean on the legislation in making demands or leading locals to make demands that Flury says often go beyond what is “sensible and reasonable.” The convention gives indigenous populations access to privileged information about government plans for the areas where they live, complicating negotiations, he notes.

Companies also see the current EIS approval process as opening the door for strategies aimed at drawing out the social license process, as the documents are very long and technical, yet must be delivered to community representatives in full.

Project Investment estimate Operator Location Main metal Production Startup Status (Millions of US$) (Region) forecast target (as of April 2010)Toromocho 2200 Chinalco Perú Junín Copper 273,000t/y copper 3Q 2012 EIS submitted, undergoing public consultation processLas Bambas 4200 Xstrata Apurímac Copper 300,000t/y copper, 2014 EIS to be submitted 2H 2010 5,000t/y molybdenumMichiquillay 2000 - 2500 Anglo American Cajamarca Copper 150,000t/y copper; 2018 Drilling required for molybdenum, gold and feasibility study stalled silver as byproducts due to protestsRío Blanco 1500 Zijin Consortium Piura Copper 191,000t/y copper n/d Stopped due to social problemsQuellaveco 2500-3000 Anglo American Moquegua Copper 225,000t/y copper 2014 Feasibility study due for completion in May 2010Los Chancas 1200 Southern Copper Apurímac Copper 80,000t/y copper 2013 Feasibility study completion imminentTía María 934 Southern Copper Arequipa Copper 120,000t/y copper 2012 Final public hearing postponedduetoconflicts over water supply; works temporarily suspendedAntamina - 1288 BHP Billiton, Xstrata, Ancash Copper Increase throughput 2012 Approved, enteringExpansion Teck, Mitsubishi 38% to 130,000t/d construction phasePampa 3280 Nanjinzhao Nasca Iron ore 15Mt pellets, 2012 Scoping study completede Pongo Group, Zibo 20,500oz/y gold, 10,000t/y copperMinas Conga 2500-3400 Minera Yanacocha Cajamarca Gold 780,000oz/y gold 2014 Awaiting (Newmont, construction permits Buenaventura)Antapaccay 1500 Xstrata Cuzco Copper 160,000t/y copper 4Q 2012 Public consultation process complete, EIS approval expeted 2Q 2010

What’s at stake: Main mining projects in PeruFigure 2

Source: Companies



Meanwhile, the lack of strong political parties with clear agendas in Peru, especially at the local level, means random candidates sprout up as elections near, backed by different, sometimes momentary, interests or looking to gain favor by feeding people’s fears about a mining project, and opposing it.

When there is little clarity in the regulatory system, projects can be easily politicized, according to Fred McMahon, director of the Fraser Institute’s Centre for Globalization Studies. While Peru’s permitting and tax systems are better than in many other countries, experts within the country criticize a weakness of institutions, which McMahon says is the deciding factor in whether a nation suffers from the so-called resource curse.

Peru just barely scrapes into the “resource blessing” category as measured by the Fraser Institute. Perhaps it should not come as a surprise, then, that communities often feel vulnerable to unwanted changes in their ways of life and fear that mining will jeopardize their wellbeing more than foster it.

Political institutions that are inadequate in channeling conflicts between mining companies, national and local governments and communities can lead to social protest or radicalization. Although, a law to create a framework for the public consultation process - based on the ILO’s Convention 169 - is under discussion.

According to Daniel Kerner, research analyst for New York-based global political risk consulting firm Eurasia Group, “There is an underlying problem there that is more structural, that has to do with both the fact that you have this big distrust in certain areas of natural resource and mining companies and also a very dysfunctional political system.”

“There is a very widespread structural rejection of the political present status quo, and you can see that both in the protests and the fact that Alan García’s approval ratings are very low even though the economy has been doing very well,” he adds.

The people’s disenchantment with the system opens the doors for populist candidates at the national level, like Ollanta Humala who received more than 47% of the vote in the 2006 presidential run-off and who talked vaguely of nationalizations during his campaign.

Or dark horse Father Marco Arana, a rural activist who today appears in the polls as taking just 1% of the presidential vote in 2011 but who represents the “mixture of economic populism and [being a] political outsider” that appeals to the marginalized voter, says Kerner. Arana was named one of Time Magazine’s 2009 Heroes of the Environment, and has said he is not anti-mining, but that the activity must “find a balance that meets the population’s needs while satisfying socio-environmental conditions.”



Perceived lack of economic benefits and recognitionOld fears still exist among rural communities that an influx of outsiders mining activity will bring to a community will change the social landscape, both in terms of overshadowing ancestral traditions and proliferating alcohol consumption and prostitution. Enter large machinery, shiny new trucks and outsiders with a bit of money, and everything feels different. Historic feelings of a lack of recognition, consultation and participation in decision making processes do nothing to help build trust between miners and communities.

But mistrust goes beyond the mining companies to the government, as communities often see the state as catering to the companies rather than protecting the citizens’ interests. Miguel Santillana, lead researcher at Universidad de San Martín de Porres think tank Instituto del Perú and a professor of economics at the University, notes that during the 2006 presidential campaign both the winner Alan García and the close runner up Humala talked about ignoring tax stability contracts and instating windfall taxes. However, once in office President García did just the opposite and negotiated a voluntary contribution scheme with the country’s main miners consisting of 3.7% of profits, adjustable depending on metals prices.

Good for miners, but perhaps disappointing for voters who hoped García would make good on this campaign point. Mining companies jumped on board with the scheme partly to avoid any further tax increases, but also because it would allow them to administrate the funds directly, which seemed like an opportunity to demonstrate efficiency and good will in terms of providing infrastructure and services for the local communities. But administrative red tape has largely prevented the desired agility of spending, except in a few specific cases, Santillana says.

Total funds Committed: 1.08bn % Execution of committed funds: 67.5 Deposited: 1.39bn % Execution of deposited funds: 52.5 Executed: 725mn Local funds Committed: 740mn % Execution: 65.9 Executed: 488mn Regional funds Committed: 334mn % Execution: 71.1 Executed: 238mn

Voluntary Contributions, 2007 - 2009 (in soles)Figure 3

Source: Energy and mines ministry (MEM)



Peru already had an established legal framework before the voluntary contribution scheme, designed to ensure that a significant portion of mining revenues gets back to the regions where mining takes place. The mining canon, as it is known, refers to the distribution of a percentage of the income tax revenue collected by the central government from mining activity directly to regional and local governments of areas where mining takes place. The canon came into effect in 1997 distributing 20% of miners’ income tax payments, and in 2002 the portion was increased to 50%.

Of the total, 10% of the canon funds from a mine are given to the municipal government where the operation is located, 25% goes to the district or provincial government, 40% goes to the departmental government and 25% goes to the regional government. 100% of the funds are to be spent on public investment projects and cannot be used for general expenses.

But local governments lack the capacity to effectively invest the money. In order to apply canon funds, local and regional governments must first go through a participatory process with residents to prioritize projects then send the selected proposals to a national government agency in charge of evaluating the projects, the Sistema Nacional de Inversión Pública, or SNIP. Booming mineral prices have generated exceptionally large canon payments but local leaders do not have the technical capacity to move a project proposal through the system, generating long delays in the startup of projects and leading residents to wonder where the money has gone and why works are not being carried out to benefit the population, says CAD’s Cortés.

Sector Projects Committed Executed Funds spent Quantity % Soles % Soles % %Nutrition and diet 55 6 85,133,963 11 50,251,914 10 59Education 242 26 109,233,033 15 79,412,525 16 73Health 142 15 80,096,329 11 63,082,461 13 79Infrastructure 252 27 284,939,496 38 147,676,470 30 52Development and 77 8 39,431,659 5 34,642,779 7 88strengthening of skillsProductive projects 132 14 94,650,165 13 74,418,088 15 79Other 26 3 46,909,261 6 38,438,933 8 82Total 926 100 740,393,906 100 487,923,170 100 66

Voluntary contributions - Local funds by investment areaFigure 4

Source: MEM



Once a project has been approved and the funds granted, local leaders often do not have the capacity to execute. And perhaps the most dubious part of the system is that there is no legal mechanism to ensure that funds are actually spent on the projects decided in the participatory process, which according to Santillana is itself influenced by local economic powers.

These factors combined with a local political desire to demonstrate progress lead to simpler and simpler projects that generate attention, but do not address quality of life on a more essential level. Projects that aim to meet the basic needs of very underdeveloped communities - such as installing potable water and sewage systems - take longer and are not immediately visible like fresh asphalt or a football pitch, and so are ignored in many jurisdictions. Lack of a coherent development plan at the national, regional or local levels also leads to redundant spending.

Thus the impression is often that what little is done is not even very useful.

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Mining canon generated (billions of soles)

Figure 5

Source: MEM - SNMPE

Projects presented by regional governmentsProjects determined viable by SNIP 15847Projects rejected 1186Projects under evaluation 1667Projects under formulation 2132Projects with viability pending 25Total projects presented 20857Total worth of viable projects (soles) 21.2bn

Projects presented by local governments (provinces and districts)Projects determined viable by SNIP 54887Projects rejected 1400Projects awaiting evaluation 3288Projects with viability pending 4974Total projects presented 64549Total worth of viable projects (soles) 33.2bn

Projects sent to national public investment system (SNIP) for evaluation Figures through July 2009

Figure 6

Source:InstitutodelPeru(USMP)withdatafromeconomyandfinanceministry(MEF),SNIP



As is common in the industry, miners in Peru often operate in remote areas where the government has never done much in the way of providing infrastructure and services to its citizens. The companies have to build roads and bring electricity to the zone, because there is none. And while the local people do realize that the government is doing nothing for them, when the company arrives it is viewed as the one in charge and receives the blame when public investment projects do not advance.

“These people have primary needs. They do not have water, they do not have electricity. They have bad schools, they have a subsistence economy. When we see a company arrive in an area, it is seen as the person who is going to replace the state and solve all my problems. There are great expectations when these companies arrive. And to a certain extent, the presence of the company has replaced the state,” says Santillana.

Local leaders and hopefuls have been known to use the stagnation and lack of meaningful public projects as an opportunity to assert that mining companies do not benefit the areas where they extract their riches - or worse, that they pay no taxes at all. Politicians and NGOs often end up playing to old environmental and social fears instead of taking on a role of facilitator in generating constructive, informed dialogue.

Pro-mining statePeru’s national government promotes a pro-mining, pro-investment policy that is often deaf to local opposition, leaving those against a project no choice but violent protest.

The energy and mines ministry (MEM) is generally the highest government agency involved in community relations and dialogue processes, and is also the entity that decides whether to approve an EIS. MEM recently reported on a public meeting it held for residents of Islay regarding SCC’s Tía María project to dispel rumors that the point of the hearing scheduled for April 19 was to approve the project EIS.

In reality, the hearing aims to present the EIS to residents of the area of influence of the mine, who will have 30 days to submit observations, MEM said. A 90-day period for dialogue between MEM and the company to address the observations will follow.

Ministry officials told locals that those spreading the rumor are groups against the project that aim to confuse and impede dialogue, and reassured them: “You can be certain that if the technical observations regarding the EIS are not addressed satisfactorily, the mining authority simply will not approve it.”

But the ministry is by nature pro-mining and, by extension, pro-Tía María. Ministry officials emphasize the importance of the project in terms of income tax and canon payments, and have even said it is likely that the Tía María EIS will be approved during the second half of 2010.

While it is probable that MEM will ensure the EIS adheres to high standards, this conflict of interest does not help to generate an air of trust and impartiality, as the decision that the project will in fact go ahead has essentially already been made. Those against



a project have no recourse through government channels already determined to move mining forward, and are forced to use other tactics. Even local government has no upward articulation and leaders like Cocachacra district mayor Juan Guillén start organizing roadblocks.

“In Lima the game is one of stigmatizing that population as people who don’t know anything, who are being manipulated, and that population has no coherent voice in this high-level game,” says GRADE’s Damonte.

“We are turning violence into the search for citizenship… Neither the state nor any political party has the capacity to take these concerns to a real, national level of discussion and the local population has discovered that the only way [to command attention] is by breaking everything.”

Arequipa region Islay province Cocachacra district 2009 572mn 13.7mn 3.35mnWith Tía María* 909mn 90.9mn 43.8mn

Mining canon and royalty payments before and after Tía María(in soles)

Figure 7

Source: SCC - MEF

*Figures estimated by SCC using US$3/lb copper

Tintaya - A positive case studyIn June 2006, Swiss multinational Xstrata acquired the Tintaya mine in Cuzco region - one of Peru’s poorest - from BHP Billiton, and in March 2010, communities voted in favor of Xstrata’s US$1.5bn project to develop the nearby Antapaccay deposit, extending Tintaya’s life by more than 20 years and expanding output 60%. The company expects to receive final EIS approval by mid-year and start construction in the third quarter.

Both Xstrata and BHP Billiton before it have blazed a determined social relations trail over roughly a decade to keep the mine running smoothly. In 2002, a few years after Australia’s BHP acquired Tintaya though its takeover of Magma Copper (which had in turn acquired the mine from the state in 1994), BHP Billiton addressed a series of accusations of prior human rights abuses through a negotiating table with communities. NGOs played a positive role in facilitating dialogue, and eventually a compensation agreement was signed with five communities.

BHP Billiton also developed a scheme known as the framework agreement (convenio marco) with local leaders in 2003, which destines 3% of pre-tax profits or a minimum US$1.5mn/y to social investment in Espinar province, which Xstrata has continued to honor.



Instituto del Perú lead researcher Miguel Santillana attributes Xstrata’s continued success at Tintaya to its capacity to advance meaningful investments in local public works through the framework agreement as a way of making the community realize the benefits of mining.

The framework funds are managed by a committee of eight representing the provincial and district governments, the company, the Río Salado and Río Cañipía communities and three local community defense organizations, while the project execution committee includes one representative each from the provincial government, social organizations and affected communities, and two Xstrata Tintaya reps.

The relationship is essentially company-community, without involvement of the Peruvian state, and communities decide in a participative process what works will be carried out each year.

The communities’ recent approval of Antapaccay at a public hearing happened transparently and without scandal, notes Santillana. “If the Antapaccay expansion doesn’t happen, Tintaya closes. But the population understands that the framework agreement is something that has worked for the community.”

The experience in Peru has been that the communities themselves will defend a project against radical opposition when they are truly behind the endeavor, and Tintaya provides a good example.

“For me, Tintaya is Peru’s social benchmark,” he says.



ConclusionLet us not forget that Peru is, and has been for centuries, a mining country. It is too late to decide that mining will not form an important part of the country’s future; on the contrary, it is fundamental that foreign investment in mining continue to flow. The industry generates more than 60% of Peru’s export revenues, 6.3% of its GDP and brings economic activity to some of the poorest, most isolated areas. In many communities, the majority does want mining.

In that context, Peru needs to hold a serious, participative discussion to generate a common vision and agenda for the future of mining in the country that lays out what the population wants from mining and what it is willing to sacrifice. The starting point for this debate is trust.

“Years of unresolved conflicts have left a major build up of negative capital that feeds negativity in negotiations. The blame falls on both sides, though I must say that the most authoritarian and manipulative players are state officials,” says Cepes’ Martin Scurrah, adding Peru needs an autonomous institution to deal with such conflicts.

Trust comes with greater quantity and quality of information and follow-through from all players. Duly informed communities who see substantial benefits from a mining company’s presence rarely oppose a project.

“On the companies’ side, we still have to learn to listen,” says SNMPE’s Hans Flury. Miners must improve their ways of approaching a community and of explaining the costs and benefits of a project.

Major efforts are needed in the short term to establish relationships of confidence and generate the conditions necessary for reaching that common ideal. In the meantime, while ongoing conflict does not threaten to eradicate mining in Peru, it slows the advance of projects and prevents all sides from perceiving the benefits efficiently.

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