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FINAL REPORT

International Conflict Resolution Practicum

School of International and Public Affairs

Columbia University

Dialogue Processes in Peru: Challenges and Opportunities

Authors:

Riza Aryani

Felipe Camargo

Michael Gibbons

Devin Glick

October 2015

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LIST OF ABBREVIATIONS

ANA Autoridad Nacional del Agua (National Water Authority)

ANMA Antamina Mining Corporation

AAP Anglo American Plc.

ARMA Autoridad Regional del Medioambiente Arequipa [DG1]

(Regional Environmental Authority, Arequipa)

BGC Barrick Gold Corporation

CARE Cooperative for Care and Relief Everywhere International

CIFOR Center for International Forestry Research

CRV Sociedad Minera Cerro Verde (Cerro Verde Mining Society)

CSR Corporate Social Responsibility

DAR DAR Acciones Reales (DAR Live Action)

DDP Defensoría del Pueblo (Ombudsman Office)

FDI Foreign Direct Investment

FUDIDECH Del Frente de Defensa de los Intereses del Distrito de

Challhuahuacho (The Chuahuhuacho District Front of Interests)

GDP Gross Domestic Product

GDMDS Grupo de Diálogo, Minería y Desarrollo Sostenible

(Group of Dialogue, Mining and Sustainable Development)

GXP Glencore Xstrata PLC

HRWB Human Rights without Borders

ILO International Labor Organization

IDMA Instituto de Desarrollo y Medio Ambiente (Institute of Development

and Environment)

INGEMMET Instituto Geológico Minero y Metalurgico (Geologic, Mining, and

Metallurgic Institute)

MINAGRI Ministerio de Agricultura (Ministry of Agriculture)

MINAM Ministerio del Ambiente (Ministry of Environment)

MINCU Ministerio de Cultura (Ministry of Culture)

MINEM Ministerio de Energía y Minas (Ministry of Energy and Mines)

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MINSA Ministerio de la Salud (Ministry of Health)

MEF Ministerio de la Economía y Finanzas (Ministry of Economy and Finance)

MMC MinMetals Corporation

MNC Multinational Corporation

OEFA Organismo de Evaluación y Fiscalización Ambiental

(Environmental Evaluation and Auditing Office)

ONDS Oficina Nacional de Diálogo y Sostenibilidad

(National Office of Dialogue and Sustainability)

PCM Presidencia del Consejo de Ministros

(Presidency of the Council of Ministries)

PRODUCE Ministerio de la Producción (Ministry of Production)

SCC Southern Copper Corporation

SENACE Servicio Nacional de Certificación Ambiental (National Environmental

Certification Service)

SNMPE Sociedad Nacional de Minería, Petróleo y Energía (National Society of

Mining, Petroleum, and Energy)

UNDP United Nations Development Program

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Table of Contents

I. Background

Natural Resources Governance and Politics in Peru

I.1 Mining Activities and Peruvian Economy

I.2 Democratic Transition and Decentralization Process

I.3 Regulatory Framework Related to Mining in Peru

I.4 Dealing with Mining conflict in Peru : Dialogue Tables in Peru

I.5 Dialogue Table : Case Studies

I.5.a Moquegua Dialogue Table

I.5.b Arequipa Dialogue table

I.5.c Espinar dialogue table

I.5.d Challhuahuacho dialogue table

I.5.e Hudbay Dialogue Table

I.6 Grupo de Diálogo, Minería y Desarrollo Sostenible

II. Research Methodology

III. Strategic Considerations for Dialogue

IV.Research Findings

IV. 1 The Contemporary Roots of Conflict Are Consistent With Previous Studies

IV. 1.a Environmental Problems Related to Mining Operation: Perception and Reality

IV.1.b Managing Expectations and Underdevelopment in The Andes

IV.1. c Weak Governance and Decentralization

IV. 2 Evaluation of Dialogue Processes in Peru

V. Conclusion

VI. Recommendations

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I. Background

Natural Resources Governance and Politics in Peru

The management of natural resources is one of the most difficult challenges facing developing

countries today. Natural resources extraction is often identified as one of the key factors

triggering, escalating or sustaining conflicts in countries endowed with natural resources1.

Mismanagement of natural resources can lead to long-term negative consequences for

developing countries. Conflict will become problematic especially when there is lack or absence

of mechanisms and institutions to manage conflict and ensure the prevention of violence. In the

case of Peru, its natural resources wealth, multicultural nature, geography, economic and social

structure, regulatory framework, as well as its democratic transition and decentralization process

provides a complex background for developing institutions and mechanisms to prevent and

manage conflict2.

I.1 Mining Activities and Peruvian Economy

Peru is a mineral-rich nation that is heavily dependent on its extractive industry. Currently, Peru

is ranked second in the world in the amount of silver and copper extracted, sixth for the amount

of gold, and also extracts many other minerals found primarily in the country’s Andean region3.

Nearly six percent of Peru’s GDP and 66 percent of its exported goods come from its extractives

industry4. It is one of the most important sources of fiscal revenue for Peru5. About 32 percent of

government revenue is from extractives. Mineral sector will continue to become significant part

of Peru’s economy, and this dependency on extractives makes it likely to favor expansion of the

industry.

1 UN Interagency Framework for Preventive Action. Extractive Industries and Conflict. 2012.p. 2 UNDP. 2014. Democratic Institutionality for Dialogue and Conflict Prevention : The Case of Peru. pg. 20 . This report provides information related to the current tools and mechanisms to address social and environmental coflict 2 UNDP. 2014. Democratic Institutionality for Dialogue and Conflict Prevention : The Case of Peru. pg. 20 . This report provides information related to the current tools and mechanisms to address social and environmental coflict 3 KPMG. “Peru: Country Mining Guide.” KPMG International, 2013. 4 Extractive Industries Transparency Initiative, Peru. 12 Feb. 2012. https://eiti.org/Peru 5 Ernst & Young, 2015

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Throughout the 1980s, the Peruvian economy started to decline following nearly two decades of

nationalization policies in the mining and petroleum industries6. Following the economic crisis,

President Alberto Fujimori (1990-2001), with assistance from the International Monetary Fund

and the World Bank, pushed mining-friendly legislation to encourage FDI to open the economy.

The privatization of the mining sector spurred an unprecedented amount investment throughout

the 1990s into the turn of the century. The rise in global demand for Peru’s mineral resources has

generated an increase in proposal to undertake mining projects in Peru. In 2011 government

granted 3,100 mining permits, this figure increased dramatically in 2012 to 4,668 permits issued

to 582 companies7. An estimated USD 59.5 billion is expected to flow into Peru in the next few

years. About 62% will be invested in copper projects. Mines and project expansion are expected

to more than double Peru’s copper production by 2016. Peru’s overdependence on minerals and

metals expose the country’s economy to fluctuations in world prices8.

President Ollanta Humala took office in July 2011. Ever since he has maintained pro-business

policies and he is determined to attract foreign investment to maintain Peru’s economic growth9.

Concessions in Peru are granted on first come, first served basis without any preference given to

technical and financial qualification of the applicant With the exception of mining located in

urban expansion area, mining concession is granted indefinitely provided the titleholder fulfills

all obligations10. Government of Peru is eager to attract investor and seems very careful not to

upset the companies, this often created tension with Peru’s effort to protect its environment or

fulfill demands from communities.

In order to combat a recent two-quarter decline in economic activity, Peru has attempted to

attract more Foreign Direct Investment (FDI) in the mining sector, as to maintain its economic

growth, but seemingly at the cost of upholding environmental safeguards11. In 2012, Peru

6 Eliana Carranza, Jorge Fernández-Baca and Eduardo Morón. 2003. Peru,Markets Government and the Sources of Growth, Universidad del Pacifico . 7 Council on Hemispheric Affairs. (2013). Corporate Conquistadores: Peru’s Mineral Extraction Industry Boosts Economy While Rural Poor Continue To Suffer–Analysis. eurasiareview.com (pp. 1–11). 8 Ernst & Young. (2015). Peru’s mining & metals investment guide 2014 / 2015. 9 Ernst & Young. (2015). Peru’s mining & metals investment guide 2014 / 2015.p. 12 10KPMG International. (2013). Peru Country mining guide.p. 9 . 11 Al-Jazeera. “Is environmental deregulation in Peru's best interest?”. 24 Aug. 2014. http://www.aljazeera.com/indepth/opinion/2014/08/environmental-deregulation-per-2014812111722135954.html

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implemented a new oversight function to improve the reliability of its Environment Impact

Assessments (EIA) by removing sole granting authority from the Ministerio de Energia y minas,

(MINEM, Ministry of Energy and Mining), which has traditionally been responsible for

promoting new investments in the industry. Instead, The Servicio Nacional de Certificación

Ambiental (SENACE, National Environmental Certification Service), which is comprised of 6

ministries, will approve all EIAs12. In this approval process each of the six ministries (MINEM,

Ministerio del Ambiente, (MINAM, Ministry of Environment), Ministerio de la Agricultura

(MINAGRI, Ministry of Agriculture), Ministerio de Economía y Finanzas (MEF, Ministry of

Economics and Finance), Ministerio de la Producción (PRODUCE, Ministry of Production), and

the Ministerio de la Salud (MINSA, Ministry of Health)) carry an equally weighted vote towards

the approval of EIAs.

I.2 Democratic Transition and Decentralization Process

Following Fujimori’s impeachment in 2000, President Alejandro Toledo swiftly decentralized

power to regional and local levels of government. This rapid decentralization of authority placed

social development projects, education, food programs, and healthcare at the direction of local

leaders, most of whom had little experience managing and implementing these programs.

A well-implemented decentralization may generate welfare gains, but a poorly managed one has

the opposite effect13. There has been little initiative from the Peruvian government to build local

leaders’ capacities; this lack of local capacity is exacerbated by major political turnover every 4

years. Reports from our research show the lack of continuity as a major source of incentives to

bad spending and corruption, while not only have little or no capacity to govern under the

institutions of the country, but also lead to discontinuity of public servants and policies given the

rotation of workers indicated by each of the elected officials. The rapid and poorly executed

decentralization process was a major reason for contemporary deficiencies of development,

which will be discussed later.

12 Jonathan Watts and Dan Collyns. 2012. Peru’s Environment Minister Hail’s Landmark Mining Reforms 13 Stephen Calabrese, Dennis N. Epple, Richard Romano. Inefficiencies from Metropolitan Political and Fiscal Decentralization: Failures of Tiebout Competition. 2011. p.2-3

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President Alan Garcia’s second term (2006-2011) coincides with the largest increase in social

unrest relating to mining. Garcia was praised for increasing Peru’s GDP growth by seven percent

and keeping inflation low14. However, he is also criticised for allowing increased environmental

damage, which is the base for the increased social conflicts that followed. In 2004, the number of

conflicts peaked and then started to decline in 2007. Near the end of 2014, there were 276

conflicts registered with the central government, of which 161 were active15.

Many local and regional leaders suffer from the lack of technical expertise needed to promote

local development and meet the needs of their constituents. While money is often assumed to

solve development problems, in Peru, mismanagement of funds and a lack of local capacity have

actually created more development problems in regions with a heftier public budget. Canon

Minero is the government revenue from mining that is distributed to local communities. The

Canon system was created in 1979 under the Constitution to compensate regions affected by

extractive operations. Although only 25 percent of canon is allocated to the central government,

nearly 75 percent is distributed to district municipalities and local communities16. However,

these funds lack specific expenditure conditions – they can be expended at the discretion of

regional and municipal governments. Districts with mineral production receive more government

transfers than other districts, calculated as a percentage of mining revenues in the area. The

rationale behind this distribution is that mining operations negatively impact mining districts and

therefore require greater compensation. The inequality of distribution has fostered jealousy and

contention between non-mining districts and those that receive more transfers. We could access

this behavior in the field when, in many occasions, community leaders would have the inclusion

of its village in closer circles of influence from the mine as their main concerns in the dialog

table, or when companies representatives mention the difficulty to define the same circles of

influence because of interests among different communities. This case is not unique to Peru.

Designing a proper benefit sharing mechanism is often challenging, especially in developing

countries like Peru. The remaining twenty-five percent of government revenue is distributed at

the central levels of government, the Mining and Metallurgical Geological Institute, and the

14 aft-Morales, Maureen.”Peru In Brief: Political and Economic Conditions and Relations with the United States.” Congressional Research Service. 2013, pg. 1. http://fas.org/sgp/crs/row/R42523.pdf 15 “18th Annual Report Jan.-Dec. 2014.” Office of the Ombudsman, 2015. http://www.defensoria.gob.pe/modules/Downloads/informes/anuales/Decimoctavo-Informe-Anual.pdf 16 “Wealth and Sustainability: The Environmental and Social Conditions in Peru.” The World Bank, 2005.

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Mining Public Registry17. For example, the central government received 12.2 billion dollars from

taxes and royalties in 2013, of which 55 percent was from the extractive industry18. This

generates 6.71 billion dollars in government revenue, with nearly 5 billion circulating back to the

local level. With the limited ability to generate taxes due to a lack of employment opportunities,

local communities are increasingly dependent on these government transfers to fund their

budgets, which must be made every four years and carry immense political weight at the local

level19. Additionally, there has been little coordination between districts and communities for

development projects. The canon minero also creates coordination problem between national,

regional and local government that causes poor monitoring these problems are compounded by

lack of capacity to manage the fund20. This result in poor quality spending that does not generate

sustainable and long-term growth, but instead create more inequality between regions. Of the

few development efforts that have been created, most are aimed at entertainment, monuments, or

infrastructure that is not used and poorly maintained21.

In addition to the inequality between districts, there is also an increasing disparity between

political elites in the coastal urban areas who receive a huge share of profits compared to rural

communities, even those who are within the producing district22. This inequality is exacerbated

by limited transparency at all levels of government and its inability to reduce corruption and

foster trust23.

The use of force has dominated the political atmosphere in Peru, which was exemplified by

President Fujimori’s alarming use of harsh military action against the Shining Path in the 1990s.

This force, coupled with decades of false promises, repeatedly ignoring environmental

safeguards in the name of investment, a long history of racism, and numerous corruption charges

against political figures with a low conviction rate, has produced very distrustful relationship

17 “Wealth and Sustainability: The Environmental and Social Conditions in Peru.” The World Bank, 2005. 18 Extractive Industries Transparency Initiative, Peru. 19 Feb. 2014. 19 Loayza, Norman. “Poverrty, Inequality, and the Local Natural resource Curse.” Institute for the Study of Labor, IZA http://ftp.iza.org/dp7226.pdf. 20 Javier Arellano-Yanguas. “A Thoroughly Modern Resource Curse : The New Natural Resources Policy Agenda and the Mining Revival in Peru”.IDS Working Paper 300.2008 21 Interview notes 22 “Mining Conflicts In Peru: Critical Condition.” Oxfam America, 2009. 23 “Wealth and Sustainability: The Environmental and Social Conditions in Peru.” The World Bank, 2005.

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between Peruvians and their government24. A 2011 poll on corruption indicated that Peruvians

view corruption as a greater national concern than unemployment, poverty, and drug use25.

Between 2002-2009, Chief of Cabinet Javier Velasquez, told Congress that 11,876 public

employees had been accused of corruption charges, of which only 1,000 were found guilty26.

The most notable corruption case in recent history is the former President Fujimori, who was

impeached in 2000 and fled the country to avoid corruption charges that are estimated between

600 million to 2.4 billion U.S. dollars. Fujimori was later apprehended and sentenced to 25 years

in prison. In 2010, the Office of the Auditor General released a statement that nearly 350 million

soles (116 million USD) was missing due to government corruption27. In 2008, a joint effort by

the Ombudsman office and Transparency International focused on corruption within the

education system, which has traditionally been used to reward political supporters. This is

exacerbated by the limited accountability; the exact number of which is unknown28.

24 Interview Notes 25 2011 Transparency International Corruption Index Report. 26 “Velásquez: Más de 11 mil funcionarios públicos fueron procesados por corrupción desde 2002.” Andina. 30 Oct. 27 Contraloría: 350 millones de soles están vinculados a delitos de corrupción.” El Comercio, September 2010. 28 Samuel Rotta Castilia. “Corruption Free Education.” CMI Michelsen Institute. Bergen, Norway. http://www.cmi.no/publications/file/3004-corruption-free-education.pdf

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I.3 Regulatory Framework Related to Mining in Peru

The legal framework that guides Peru’s extractive industries has changed throughout the 1990s

and 2000s. Before this, legal guidelines did not heavily restrict extractive companies’ actions.

The mining boom of the 1990s onward and the privatization of the mining industry amplified the

destruction inflicted by mining companies. On July 11, 2014 Peru introduced a law that

streamlines EIA putting them on 45 days maximum fast track. This was initially designed to

reduce bottlenecking in business-permit process application, to ease investment in the country.

However, it engendered loopholes in the environmental preservation that may be exposed by the

company. Failure to meet the 45 days deadline will result in automatic project approval. This law

also halved fines for all environmental violations by extractive industries except for the most

egregious ones. This deregulation also limit the ability of the MINAM’s body for Assessment

and Audit (OEFA) to penalize companies for breaching environmental safeguards for three years

unless the circumstances are exceptional29. It currently has 20 technicians to review EIAs

submitted by mining companies. They are understaffed and under-resourced to properly perform

their assessments.

The Law of Prior Consultation was passed in 2008 following protests by indigenous

communities in the Amazon region. The law’s focus is to reduce conflict by consulting

indigenous and native communities prior to granting any concessions that could affect their

identity as a community or way of life.30 The Law of Prior Consultation, however, only applies

to indigenous communities. Additionally, the classification of what actually constitutes an

indigenous person has raised many concerns considering many Andean communities have

maintained their land for hundreds of years. Another factor is due to years of discrimination

towards indigenous people that causes some indigenous people to not associate themselves with

the term.

The government encourages community involvement in the EIA process. The law for the

Sustainable Use of Natural Resources (N* 26821) encourages community participation in the

EIA process; however, the government retains authority to grant concessions regardless of

community participation or discrepancy31. When communities do participate, the issue of

29 Frank Bajak. July 2014. New Peru Law Weakens Environmental Safeguards. Associated Press 30 2013 Columbia ICR study pg. 25 31 2013 Columbia ICR study pg. 25

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asymmetric information arises and the difficulty of digesting technical information. It is the

community's responsibility to seek outside assistance through NGOs or consultants to

disseminate this information. Many of these services are difficult to receive either due to the

limited number of NGOs or the high price for consultancy. As a result, there is a lack of

community participation in the EIA process. The Instituto Geológico Minero y Metalurgico

(INGEMMET) grants exploration rights to lands that have been managed by people for decades

or longer which only exacerbates social unrest.

Authority for the extractive industry and environment reside within the national government.

Legislation to address corruption was passed in 2003 with the law number 27.806 and protection

for Whistleblowers in June 2010. However, the ability to enforce these laws has proved to be

minimal at best. Anti-corruption is a main point for political discourse and was the foundation of

current president Ollanta Humala’s campaign in 2011.

I.4 Dealing with Mining conflict in Peru : Dialogue Tables in Peru

In an effort to reduce conflicts throughout the country, the government created the Red de Alerta

Temprana (Early Alert Network)32. There are now roughly 13 offices throughout the country that

register conflicts and alert the national government to take action. The main form of action is

usually a dialogue table to mitigate the conflict before it becomes intractable33. However, this

nascent alert system resides within the MINAM and is only utilized when the conflict involves

environmental damage34. A government official must submit a form to the Ministry to register

the conflict. ONDS, which is the primary state facilitator of dialogue, is only involved in the

Early Alert Network when the conflict involves other ministries in addition to MINAM.

Otherwise, if the conflict is treated, it is only treated within each ministry’s own conflict

management system.

President Humala’s administration decided to promote dialogue as conflict prevention and

resolution tool35. In 2012, the Council of Ministers, under the administration of President Ollanta

Humala, created ONDS. The creation of ONDS represents an attempt to organize and ensure 32 The Ministry of Environment with the objective of conflict prevention created the "Red de Alerta Temprana" (Early Alert Network). The regional offices register conflicts related to environmental issues. For more information http://www.minam.gob.pe/oaas/que-es-la-rets/ 33 Interview Notes 34 Interview Notes 35 UNDP. 2014. Democratic Institutionality for Dialogue and Conflict Prevention : The case of Peru.

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consistency in the state’s general strategy for conflict prevention and dialogue36. ONDS

performs its function in five areas : prevention, dialogue management37, public policy making,

citizen education and systematization and documentation38.This bureau is responsible for

analyzing and cataloging each of the conflicts, giving it a score of intensity and danger level.

Another agency, La Defensoría del Pueblo (The Ombudsman’s Office), also has been doing a

similar cataloging and monitoring role years before the existence of the ONDS. Additionally

ONDS is responsible for creating dialogue tables and solving conflicts to maintain peace in the

region, the people’s wellbeing and the mining production. ONDS has different approaches to

different cases of conflict they classify dialogue tables as39:

● Dialogue table: The purpose of the dialogue table is to solve a conflict after it has

already started. Its objective is to resolve the conflict by providing the medium for the

stakeholders to meet and exchange their differences to reach agreement.

● Technical tables (or working tables): They are composed of specialists or technical

experts in certain areas. There are often multiple technical tables formed by a dialogue

table to provide solutions and technical assistance.

● Development tables: These tables are the preventive tool of ONDS, implemented before

conflict starts to reach agreements on long-term solutions or analyze plans and funding

for sustainable development.

I.5 Dialogue Table : Case Studies40

The type of conflict, the characteristics of the dialogue table, its institutional design, and

participating actors all affect the efficacy of a dialogue table41. There are numerous dialogue

tables in Peru related to mining. Only a handful of dialogue tables that are considered successful.

So far there is no mechanism to evaluate a dialogue table. For example, Espinar dialogue table

led by PCM was considered successful by the government because the table managed to bring

together various stakeholders to discuss the issue. However when talking to members of civil

society organizations, this table is considered flawed and it has not addressed the roots of the

36 UNDP. 2014 37 This function entails designing and participation in dialogue, mediation or negotiation process. In our interview one of the respondents stated that ONDS is expected to identify and encourage stakeholders turnout throughout their vast network of regional and local offices. 38 UNDP.2014 39 Metals and Mining Daily Volume 1, Issue 79. Oct 4, 2013. 40 We obtained information regarding dialogue tables from interviews and reports provided by respondents from both company and civil society that we visited during our fieldwork. 41 Frewer. 2000

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problem. 42 Each dialogue table is unique. This section seeks to highlight the lessons learnt from

each of the dialogue table.

I.5.a Moquegua Dialogue Table43

This table was considered one of the very few successful examples of dialogue process in Peru.

The presence of a table calmed the population in Moquegua. As a result of the table, the

company was also willing to adjust the design of the mine to better accommodate the

community’s claims and concerns.

This table took place before the construction of the project. It was set up in April 2011 and was

formalized by PCM resolution in May 201244. The process lasted for 18 months. This dialogue

table initiated in response to community’s rejection to Quellaveco project in Moquegua. In 2010

the company (AngloAmerican) obtained the permit however, the community in Moquegua

rejected the project. This table has been concluded and reached 26 agreements.

The table was governed by a written set of rules that was developed and agreed upon in the

beginning of the dialogue. The rules define the table, participants of the table, and most

importantly topics that will be discussed. The table has a plenary, special invitees, technical

commissions, and technical secretariat. The table agreed to discuss three things:

1. Water- the dialogue seeked to identify and agree on the mechanisms needed to ensure supply

and optimal use of water resource for population use, farming and mining.

2. Environmental issues- identify and agree on mechanisms to ensure compliance with and

monitoring of environmental commitments

3. Social Investment- identify and agree on sustainable development projects in the area of

Moquegua.

This dialogue was facilitated by a representative from the MINEM. Eduardo Rubio a

representative from AngloAmerican mentioned that the dialogue in Moquegua worked because

they worked with the right stakeholders at the local level. Rubio acknowledged the national 42 We interviewed civil society organizations who were involved from the inception of the dialogue table. They are currently working on a study evaluating the Espinar dialogue table. 43 Source : Interview with Eduardo Rubio, Director of External Affairs- AngloAmerican; AngloAmerican.Dialogue Table in Moquegua : Summary Report. 44 Annegret Flohr. May 2014.Corporate- Community Conflict and Dialogue in Peru’s Mining Sector. Paper presented at the Latin American Studies Association.

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government is very weak. Approval from the national government was considered insufficient by

the company. However, it should be noted that in the case of Anglo-American the government of

Peru withheld the permit until the company resolved the dispute with the population. There was

an element of leveling the power relations between the company and community that may have

contributed to the success of this dialogue table45.

I.5.b Arequipa Dialogue table

Arequipa has two primary conflicts. The first is over the mine Tía María, which is centered

around the company not obtaining a social license from the community while still pursuing its

interests. Currently this is one of the most active conflicts in Peru. The second is Cerro Verde,

which is viewed by many as a responsible company that has a positive working relationship with

Arequipa. Cerro Verde did obtain a social license; however, there has been much dispute over

water contamination from the company and its future projects. The company is expanding its

operations and has a proposal for a water treatment plant. This water treatment facility is not

only going to provide Cerro Verde the increased supply of water it needs for its expansion, but

also a source of potable water for Arequipa. The point of contention is that many of Arequipa’s

citizens believe the mine will take too much of the water for its operations and leave them with a

insufficient amount. Cerro Verde is funding 80 percent of the treatment plant because the

municipal government refused to provide the service. As a company, Cerro Verde is unique in

that it has its headquarters in the city of Arequipa which is also where the mine is located, which

places the company senior leadership closer to the city it impacts. Cerro Verde only maintains a

small governmental affairs office in Lima. The effect on the city of Arequipa is notably different

than mines near small towns because Arequipa’s size can accommodate the influx of workers

during the summer months.

I.5.c Espinar dialogue table

Espinar is a small town of around twenty-thousand people in the region of Cusco. It has had

more than twenty years of mining operations and ore exploitation, through changes in companies

who possess the mining permits. Espinar’s citizens’ complaints are related to a lack of local

development and the company’s and federal government’s responsibility to promote investments

to increase the well being, education and health care. Lorenzo Cappa believes, the conflicts are 45 Annegret Flohr. May 2014.Corporate- Community Conflict and Dialogue in Peru’s Mining Sector. Paper presented at the Latin American Studies Association.

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long-standing, and the dialogue is led by the government. Community leaders claim that

companies are not fulfilling their part of the agreements.

In the past, conflict had existed there without a solution, even with the use of dialogue. Oscar

believes, the region had many strikes in the 1990’s under the government of Alberto Fujimori.

Government who led the police to break a strike in the region and accused the mayor of the time

for inciting violence. Until now, people on the city who participate in the strakes and were

involved in manifestations face prosecution.

I.5.d Challhuahuacho dialogue table

The Challhuahuacho dialogue involves the Las Bambas mine. Recently, the mine undergoing its

construction phase and has recently changed ownership between Glencore Xstrata Plc. and the

Chinese dominated consortium consisting of MGM Limited, Guoxin International Investment

Corp., and CITIC Metal Corp.46 The Challhuahuacho table is one of two dialogues related to Las

Bambas. The first is the provincial table (Cotabambas) which consists of support groups focused

on economic development, education, health, and the environmental problems of the

unsustainable use of water for mining operations. The Challhuahuacho table is primarily

multilateral and includes the company, municipal government, community representatives and

state ministries. The district table focuses on development, the lack of jobs in the mine for locals,

and the limited amount of water in the areas reservoirs. This table is unique in that

Challhuahuacho is a “boomtown.” Before the mine started its construction phase,

Challhuahuacho had 800 residents, now it has nearly 20,000 that rotate through to work at the

mine. The mines have a diverse labor force from Spain, Colombia, Argentina, and other regions

of Peru.

In the town of Challhuahuacho, the price for consumer goods is high and most people’s income

is derived directly from mining or indirectly from the influx of business that is provided by

mining workers entering the town. When mining operations slowed in 2013-2014 fewer workers

were coming through town and businesses started to decline. This created a great deal of

economic strain that led to a further increase of prices and cost of living that resulted in locals

not being able to afford to live there and businesses failing. One drastic effect of this was the

46 http://ftalphaville.ft.com/files/2014/04/Sale-of-Las-Bambas-Copper-Mine-Project.pdf

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lack of teachers that wanted to relocate to Challhuahuacho due to their inability to afford the cost

of living. Because of these problems, development goals are a priority for the community and

have subsequently the focus of dialogue.

Many interviewees believe that if the government had had more presence in Challhuahuacho and

had engaged in dialogue with the companies the amount of conflict would have been less. The

signatories on the agreements that came out of the dialogue tables are important because they

will ultimately dictate the follow-up assessments that will hold parties accountable to the

agreement.

I.5.e Hudbay Dialogue Table47

Hudbay dialogue table is centered around the Constancia project located in the district of

Chamaca, Chumbivilcas province in the region of Cusco. This projects is owned by a Canadian

company, Hudbay. The source of conflict was related to inability of the company to fulfill its

commitments with the local populations. This project is worth US$1.8billion and expects an

annual production of 80,000 tonnes of metal. It’s one of the most important copper projects in

Peru48.

The dialogue table was initiated in January 2015. It was initially planned for five months.

However, no agreement was reached after five months. The table, led by the mayor of Chamaca,

is now being extended. There were 35 community groups that were involved in this dialogue

table. PCM acts only as an observer in this table. The table is ongoing and the community

member that we interviewed expressed disappointment over the lack of participation from

community. There are currently twelve agendas being discussed in this table. Another

community member that we interviewed expressed his expectation that PCM should be involved

in this dialogue table

In contrast to the dialogue spaces held by GDMDS, dialogues led by ONDS have more specific

goals and defined beginnings and ends. The goal of the ONDS is to avoid violence by using

47 This is an ongoing dialogue table. We were not able to obtain enough information about this table. 48 Cooperacion. 2014.Peruvian Community Denounces Hudbay Minerals for Human Rights Violantions over Constancia Project. www.miningwatch.ca . Cooperacion is a Peruvian NGO focuses on social, economic, political and cultural and other aspects of development in order to promote alternative to extractive development.

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dialogue to achieve mutually beneficial agreements and enforce fulfillment of commitments

made in those agreements. One ONDS representative that we interviewed stated that the moment

a dialogue should be implemented is “whenever one of the stakeholders comes to ask for help”,

and the dialogue process ends when the parties reach an agreement. After the dialogue process

ends, the bureau follows up with the signatories to ensure that they follow through with their

commitments.

The argument in favor of ONDS’ dialogue style, in comparison with GDMDS’, is that the results

are tangible and can be measured, while GDMDS’ dialogue is loose and it is difficult to measure

its benefits. On the other hand, dialogue created by ONDS are more comparable to negotiations

where the communities ask for compensation in return for the company to explore the area and

extract minerals.

As members of relevant governments institutions, ONDS can attend GDMDS dialogues,

although many interviewees mentioned that it can be very difficult for a government official to

divorce herself from her title, as they are never there representing themselves as GDMDS would

say is the best platform to create transformative dialogue.

I.6 Grupo de Diálogo, Minería y Desarrollo Sostenible49

Grupo de Diálogo, Minería y Desarrollo Sostenible (GDMDS, Group of Dialogue, Mining and

Sustainable Development) was founded by Jose Luis Folegatti. The idea of the group was born in

a meeting in 1999, during which time relations between LABOR (the NGO where José Luis

Follegatti was working) and the company Southern Peru were in bad shape50. Follegatti’s idea

was to make your “enemy” your “friend”. With the help of other stakeholders, Follegatti created

a dialogue space where people could listen to each other without the prejudice and implications

of viewing the other as the “enemy”.

49 Diálogos que transforman is a book written by José Luis López Follegatti about his idea of dialogue and his experience with GDMDS. 50 Folegatti used a lot of anecdotes to illustrate his point in his book One anecdote he used to illustrate situation that influence his idea on dialogue was his encounter with a new manager from Southern, who didn’t know the NGOs representatives. He went to the dialogue group meeting with only one piece of information: “[the NGOs] are the devil”. When he met José Luis Follegatti, they began to talk and decided to leave their ideological differences aside for a moment and just get to know each other. In doing so, this meeting was much more successful than previous meetings. Because of this personal connection that began to grow, future meetings became more productive and enlightening. Follegatti realized this was a new concept that could be used to improve dialogue in the context of conflict resolution in Peru, where ideology plays a big role.

18

José Luis López Follegatti is primary leader, driver, and face of the GDMDS, although on paper

he shares executive direction with two others. Follegatti has been responsible for implementing

GDMDS since 2001, when it was first started in Lima and supported by companies and other

civil society actors to open a non-binding space with the objective of bringing together

companies, NGOs, civil society members, community leaders, and all actors willing to

participate on the basis of Transformative Dialogues. In his book Diálogos que transforman, Mr.

Follegatti put forth 6 lessons to be learned from dialogue: dialogue spaces are schools to learn

how to listen; the bonds transforms the participants; the role of the facilitators grow with

dialogue; consensus is created from shared truths; dialogue reinforces peace not violence;

development has to be present in dialogue.

In his book, Folegatti explains the theoretical framework behind GDMDS. GDMDS’s dialogue

space is meant to be an open space, where anyone is welcome to talk about their experiences,

express their feelings and be heard by others. While the people who attend these dialogue spaces

may be government officers, community leaders, or CEOs, within this space all people are equal

and represent themselves rather than their position or institution. Now, GDMDS connects

around 600 people in Peru, representing 120 institutions, accounting for 80 percent of

stakeholders from the mining sector in the country. The only goal of the dialogue group is to

create a space for interaction among the stakeholders.

GDMDS is concentrated in Lima. Lima is Peru’s capital with one third of the country’s

population, making it the center for most of the main offices of mining companies and the central

government. This centrality makes Lima the principal place of direct action for GDMDS. The

dialogue space is not limited to Lima specifically, so representatives from other parts of Peru are

travel to the meetings. To be more accessible to all the stakeholders, GDMDS provides some

financial support to cover travel costs of those who live further away from Lima.

“Transformative dialogues” is a concept proposed by José Luis López Follegatti in his book

Diálogos que transforman (2015) and put into practice by the Grupo de Diálogo, Minería y

Desarrollo Sostenible (Group of Dialogue, Mining and Sustainable Development, GDMDS).

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The underlying principles of transformative dialogues are very different than the standard

negotiation process of strikes, forced dialogue, signing agreements, doubtful implementation

and lack of transparency in the process. Instead, the transformative dialogue focuses on

understanding the other’s perspective, mutual respect and commitment for a common cause.

GDMDS is based on the premise of non binding dialogue process, and it does not seek to reach

an agreement in the end. These dialogues are not supposed to “end”, they are supposed to

extinguish, only when all the differences and problems from all the parts were solved or

discussed and all the parts understand they have nothing else to get from each other. This type of

dialogue is fundamentally different from the government’s implementation of dialogue. Many

people that were interviewed for this research interviewed indicated that dialogue with an end

goal was more useful.

Transformative dialogue has a set of underlying rules of conduct to facilitate an open dialogue

process. First step would be the main stakeholders be invited to participate in the dialogue space.

It is expected for these people to form the base for discussion in the dialogue and represent the

full amount of stakeholders involved in the process relating the meeting in question. The second

step is to call more people to participate on the dialogue with the goal of representing all interests

in the dialogue space. This is important given the participation of external actor from out the

conflict can help the parts see their real problems and concerns.

The third step related in the book “Dialogos que Constroem” is to set the space and format of the

meetings. In most cases the space should take the form of a circle, but in the case of an

exposition or presentation, dialogue can take place in a semicircle. It is important that the format

reflects equality among all the participants, without excluding anyone. Step four is define the

moderator, who is responsible to set and implements the pre-determined agenda for the meeting.

Participants must respect time limits so all can speak and make their contributions to the

dialogue. Respect others and opinions on the table is one of the main reasonings of opening this

space. At least, five, participants plan to follow-up what was discussed in the dialogue. For that,

the moderator creates working groups and plans for monitoring those working groups and the

dialogue group itself. The working groups are composed, mainly, by the most interest people in

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the situation in discussion, however, anyone in the meetings can participate, with the consent of

the group, usually represented by the decision of the moderator.

The Dialogue Group was used as a model for other initiatives in different regions of Peru.

GDMDS maintains connections with smaller dialogue groups in Arequipa, Ancash, Apurimac

and formerly Cajamarca. These smaller dialogue groups have a partnership with GDMDS, but

are not administered by it. GDMDS interacts with these local groups in two ways: first, by

inviting people from the region to the dialogues in the Lima; and second, by offering a leadership

training program. The goal of the training program is to create a network of leaders in the

regions, who can promote dialogue spaces even without the presence of the GDMDS. The

expectation is that they are trained to promote better and healthier dialogue and have the tools to

try to hinder or solve conflicts.

II. Research Methodology

Data collection for this report was conducted in Peru from June 8 - July 31, 2015 by four

students representing the Center for International Conflict Resolution (CICR) at Columbia

University’s School of International and Public Affairs. This is a qualitative research drawing

from both primary and secondary sources. We conducted perception survey and observation

during our field trip.

The team travelled to five regions to understand the impact of dialogue process. The regions

selected, after consultation with various stakeholders from GDMDS, UNDP Lima, and NGOs

working on the issues of mining conflict, were Ancash (June 18 - June 30), Cusco (July 2 - July

16), Apurimac (July 10 - July 13), Arequipa (July 19 - July 25) and Lima (June 8 - June 17).

Each region has unique conflicts with different drivers of conflict and different experiences of

the dialogue processes, which provided a comprehensive overview of the social and

environmental conflict related to natural resource extraction in Peru.

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The interviews followed a semi-structured format that allows for a natural flow of conversation.

Within this format we posed several basic questions for each informant followed by more in-

depth discussion. We developed a survey aimed at:

1. Identifying the source(s) of conflict related to mining projects in Peru

2. Characterizing the dialogue process

3. Assessing the efficacy of the dialogue process

4. Assessing how stakeholders perceive the dialogue process

5. Exploring possible suggestions for improvement for the GDMDS

To get respondents we used “snowball”51 technique where we asked our respondents to refer us

to additional respondents. It was considered necessary to use this technique given the topic we

are researching, it was more likely for us to get more respondents using this techniques than

getting respondents targeted through “cold calls”.

We interviewed 56 respondents. 21 respondents from national and regional government, 31

respondents from civil society organizations including 6 community leaders, and 10 respondents

from private companies. We also observed three dialogue table meetings (two in Lima and one in

Ancash). Interviewees were chosen based on their involvement in the dialogue processes in Peru.

Our initial list of respondents consisted of people actively involved with GDMDS, and some

respondents who are not involved with GDMDS. We also interviewed respondents that were

involved in other dialogue tables in Peru including ONDS dialogue tables to obtain the context

of dialogue in Peru.

Our initial interviews in Lima provided broad overview of conflict and mining in Peru and the

role of GDMDS. Our team travelled to Ancash where our visit focused on Grupo de Diálogo

Ancash (GDA). We attended a GDA meeting and interviewed people who are involved with

GDA. We also travelled to Parón, San Marcos and Santa Cruz de Picchu, all of which are areas

affected by mining projects. In Cusco we spent time in the capital of the region to understand the 51 Snowballing or chain referral sampling refers to method that yields study sample through referrals among people who share characteristics/ knowledge that are relevant to research interest. It is particularly applicable when the focus of the study is a sensitive issue that requires insiders knowledge to locate people for the study. This definition is stated in Patrick Biernacki and Dan Waldorf. Snowball Sampling : Problems and Techniques of Chain Referral Sampling. November 1981. Sage Publication.

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various mining conflicts in the south and we travelled to Espinar, the city next to the Antapaccay

mine. In Apurímac we visited the region’s capital, Abancay, as well as the area of influence of

the Las Bambas mine. In Arequipa we focused more on the mining projects in the region,

including the mine Cerro Verde, which is next to the region’s capital, and Tía María further to

the south.

Most of our interviews are recorded (audio recording) with consent from our respondents. For

data analysis, we code responses from our interviews and group the responses based on the

general themes emerging from our interviews. From the initial consideration of the data we

observe distinction in terms of perception between groups of respondents. Therefore we decided

to group our respondents into four categories: civil society, private company, community

members/leaders and government. This allow us to compare perception among different

stakeholder groups. Since we are working with perception data, when necessary we triangulate

our findings with other qualitative and quantitative data from literatures.

UNDP officials were not present during our visits and interviews. The findings and conclusion of

this report are independent from the view of UNDP Peru.

Limitations

This research faced several limitations. First, we interviewed a limited number of respondents

from the private sector. After sending numerous emails and requests to several private

companies, we received little or no response. This discrepancy could possibly affect the analyses

especially when comparing perspectives amongst the actors involved in the dialogue process

seeing that the companies themselves are not equally represented in the research. Second, our

snowballing technique may have introduced bias as we were referred to contacts that may share

similar views as the person who referred us. We mitigated this limitation by selecting initial

interviewees with diverse backgrounds52 .

52 Bleich and Pekkanen. How to Report Interview Data. p.87

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III. Strategic Considerations for Dialogue

Addressing the underlying causes of conflict related to natural resources extraction requires a

concerted and multifaceted approach that encompasses governance, economic stability, capacity

building, and creative approaches to increase opportunities to dialogue53. GDMDS provides

valuable lesson learned. It is especially important considering one of UNDP’s regional goals in

Latin America, to systematize and assess dialogue experiences at different levels, and identify

and disseminate lessons learned from the dialogue processes54.

The UN Toolkit and Guidance for Preventing and Managing Natural Resources Conflict has

identified six keys opportunities for preventing conflicts related to extractive industries,

including55:

1. Effective engagement of communities and stakeholders

2. Ensuring equitable benefit sharing

3. Mitigating the negative economic, social, environmental and gender impacts

4. Transparent and effective management of revenues

5. Strengthening the institution and legal framework

GDMDS provides a great venue to pursue these opportunities, but with limited life span.

GDMDS meetings provide constant communication channels between stakeholders. If organized

strategically, GDMDS meetings can ensure stakeholder access to information required to ensure

meaningful engagement. These communication channels are also important to ensure inclusive

conversation. This is important to ensure equitable and legitimate benefit sharing agreement.

Communication and information sharing are also crucial to ensure transparency. Increasing

transparency is important to ensure effective management of revenues. GDMDS indirectly

strengthens the capacity of civil society.

As discussed in the previous section, many negative impacts related to mining projects often

stem from negative perception. Therefore it is important to have a venue where stakeholders can

voice their concerns and discuss risk and perceived risks openly. Establishing a robust legal and

institutional framework is crucial to ensure that the rights of relevant stakeholders are respected.

53 The UN Interagency Framework Team for Prevention Action. 2012. Toolkit and Guidance for Preventing and Managing Land and Natural Resources Conflict. 54 UNDP. Democratic Institutionality for Dialogue and Conflict Prevention: The Case of Peru. 2014. 55 This document was produced by the UN framework Team in cooperation with the EU as part of a strategic multi-agency project focused on building capacity of national stakeholders, the UN System and the EU to prevent land and natural resources from contributing to violent conflict.

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Several respondents have stated that GDMDS contributed in the early discussions of canon

minero and FPIC.

However, it should be noted that although dialogue is a method for confidence and relationship

building, it is not effective for addressing development deficiencies to include promises that are

made without the firm commitment of the government to enforce regulations and company

community agreements. During conflict, particularly during times of violence and loss of life, the

breakdown of communication between parties is never positive due to the increased polarity that

follows this is supported by our findings from the field. Following the loss of life, dialogue tends

to be a less effective method in the short run, but does contribute to bringing both parties

together in the long-run. The timing of dialogue matters to ensure its efficacy. Additionally,

dialogue is completely depended on the willingness of the participants. If those participating

truly do not want to create consensus, it will not happen.

IV.Research Findings

IV. 1 The Contemporary Roots of Conflict Are Consistent With Previous Studies

Conflict is created as a result of interactions between multiple political, economic, social,

historical and cultural factors56. Social and environmental conflict in Peru mostly centers on the

mismanagement of funds that stagnate development, environmental damage and general

suspicion of the local population towards mining. This suspicion stems from the long history of

degrading mining practices. However, there are variations of perceptions on the driver of conflict

across stakeholders depending on region and the type of stakeholders.

Common themes of conflict are: environmental issues (including pollution, water contamination,

water scarcity and sometimes climate change), unequal benefit sharing, lack of development and

the general lack of trust in companies and the state. However, the perceived root causes that have

the greatest impact on conflict varies by region. Respondents in Lima generally stated lack of

information or misinformation as the main source. In Ancash environmental issues are perceived

as the root cause. This focus on the environment is also analogous to the dominant source of

conflict identified in Arequipa. In Apurimac, unmet expectations and the company's’ negative

56 USAID. June 2012. Follow the Water : Emerging Issues of Climate Change and Conflict in Peru.CMM discussion Paper No. 5

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reputation are the two drivers of conflict. Despite the differences in the source of conflict, there

is a general agreement across regions that the main driver is also accompanied by a combination

of the common themes mentioned above. This section sets out some key findings and strategic

considerations that our research wishes to highlight for UNDP Lima based on our field research

in Ancash, Cusco, Apurimac, and Arequipa.

IV. 1.a Environmental Problems Related to Mining Operation: Perception and Reality

Technically all stages of mining operations carry the risk of negatively impacting the

environment. Detrimental environmental impacts can be generated through improper disposal of

waste rock, inadequate containment and treatment of tailings, toxic waste leakage into water

sources, and the degradation that comes from regular construction of infrastructure and

supporting infrastructure for mining projects. All of these risks can be minimized and even

eliminated with proper planning. EIAs specifically are one of the mechanisms to minimize these

risks. It is the history of these intrinsic side-effects that has generated communal feelings of

mistrust towards all mining operations.

The relationship between natural resources, the environment and conflict is multidimensional

and complex. This is especially true in Peru. The poor environmental performances of some

companies combined with existing mistrust has made mining and environmental concerns an

extremely volatile. Natural resource exploitation and environmental stress alone has incited

social conflicts57.

Hydrocarbons do impact communities, but not on the same scale as mining. Conflict is also

driven by uncertainty about the livelihood and control of key assets such as water and land; this

feeling is generated not only by the actual extraction itself, but the attempt to exploit mineral

deposits58. Communities react strongly when there is a perceived risk to their livelihood, as many

communities around the world do. Additionally, mining concessions often overlap with

community claims and water resources. There is less conflict related to hydrocarbon projects

than mining because the environmental impact of hydrocarbon projects is smaller and more

concentrated, thus affecting less people.59

57 Matthew, Brown & Jensen. 2009. p.8 58 Bebbington.2012. p. 90 59 Interview

26

The runoff from mining operations is damaging water sources. It is estimated that mining only

uses 5 percent of Peru’s water; however, a good portion of mining activities happen in headwater

areas like the Andean mountains. This poses both serious environmental and health risks due to

water pollution. It is estimated that every year mining and metallurgy releases over 13 Billion m2

of chemicals into freshwater ways60. Members from ANA mentioned that the water authority

sees the importance of the Department of Water Conflict, given more than 70 percent of conflicts

are related to mining in some capacity.

Majority of Defensoria del Pueblo’s representatives agree that mining companies often fail to

prevent the negative impacts of their operations, subsequently affecting community health and

environment, especially in the nascent stage of mining operations. Many of our respondents,

especially community members, stated that water scarcity and pollution are among the main

sources of grievance in their communities, and although companies contributed to development

projects, they often ignore their responsibility to the environment. Mining projects operating in

close proximity to populated center also affect the water supply for the community and their

ability to provide water for livestock. In Parón, specifically, the community organized and went

on strike to secure access to their local lake that is their primary water source. The concession to

this lake was given to a private company from the government without community consent.

Currently, Paron has access to the lake at least during periods of rainfall, but Duke Energy still

owns the lake 61.

Perception is very powerful. The distinction between risk and perceived risks of environmental

pollution and its intrinsic effects are often blurred. Majority of members throughout the Ancash

region mentioned that a main sources of conflict is not the actually pollution itself, but the

perception that Antamina is polluting the environment. Members of ANA, NGOs, and

government officials all agreed on the importance of managing perception to avoid conflict.

Regarding water pollution, specifically, degradation comes from mining operations. Respondents

mentioned that the state would monitor the quality of water but the community disregarded the

results even though the test showed no evidence of pollution in the water. The community was 60 Bebbington. 2012. p. 192 61 The community in Santa Cruz de Picchu mainly works in agricultural sector.

27

convinced that their water sources were polluted despite the negative results of the test because

their livestock had been dying. The community began to notice an increase in the mortality rate

of their livestock since the company began their operations. The death of livestock was the

communities justification that pollution was present, despite the collected data against it.

There is extensive evidence showing that highland areas of Peru are experiencing serious

negative impacts from climate change. These impacts include glacier retreat, warmer

temperatures, more erratic and intense weather events, water scarcity, and contamination62 (acid

rock drainage) by glacier retreat63. Both glacier retreat and mining activities produce toxic heavy

metals that emerge in waterways. This creates uncertainty about the source of contamination that

subsequently leads to accusations against the nearest mining company without the ability to trace

the pollution. Traditionally, community ideology is anti-mining and the perceived catalyst is the

company and not climate change.

The ideology that mining and environmental degradation are intrinsically linked has resulted in

outright rejection of mining projects. The fear of pollution and environmental degradation is

commonly used for political advancement of local and regional government leaders from their

strong opposition to mining projects to generate political support.64 These perceived risks are

further exacerbated by the lack of community trust in both the company and the state. All mining

companies unanimously agreed that perception is the main source of conflict, which is to be

expected given the companies’ position. These perceived risks are instilled in communities from

the long history of poor environmental performances of the company and the state's lack of

enforcing environmental safeguards. This finding is consistent with theories of risk perception.

The asymmetry of information is creating intransigence. The general public has the tendency to

view risks differently than experts. This difference of understanding is often the result of the

large amount of technical information that only experts can digest, which leads to

62 As the glaciers recede, water and oxygen combine with sulfur in the newly exposed surfaces to make sulfuric acid. The sulfuric acid releases the toxic heavy metal found in the exposed rocks. These toxic materials are then carried by glacier melt into the surface and groundwater. 63 USAID. Follow the water : emerging issues of climate change and conflict in Peru. p. 6 64 Majority of respondents agreed on this.

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misunderstanding or lack of information regarding the EIA, specifically.65 The EIA is usually the

main source of information to which the community has access, and they are highly technical

documents that requires certain levels of expertise to comprehend. To overcome this asymmetry,

communities are dependent upon secondary parties to assess and communicate the information.

Civil society are calling on the limited number of NGOs that can provide legal advice to explain

complex issues about the environment and economics66. Second, party assistance helps reduce

informational asymmetry between companies and communities. The problem with this assistance

is that it comes from either the government, scientists, other community members who share or

contest community interest and values67. The lack of firsthand comprehension of these materials

leads communities to further suspicion. To further exacerbate the information gap, majority of

communities have to independently pay for consultants.68

Many companies created participatory environmental monitoring as a key strategy to gain the

trust of communities and alter the perception of risk related to environmental pollution69.

Building trust is important to minimize perceived environmental risks, of which the state is

poorly equipped to address.

One of the key elements in managing natural resources is the ability and willingness to monitor

environmental impacts. However, most of the time there are tensions between the efforts to

attract investment in extractives and ensuring sustainable development70. The State’s ability to

monitor environmental impacts of mining projects is constrained by the lack of resources and

deep mistrust from the population. Our respondents noted that people in the highlands,

especially, feel abandoned and excluded due to the lack of state presence and the lack of

engagement these communities receive from their national representatives. Community members

tend to believe that the state will always take the side of the company above their grievances and

concerns. Perceived vested interests have quickly eroded public trust.

65 According Zacarias Madariaga Coaquira, Gerente of ARMA# (The Regional Environmental Authority of Arequipa), 66 This information was obtained from one of our interviews with a national NGO working on the issues related to mining and development (Cooperacion). 67 Eiset.2012.p.7 68Majority of NGO, civil society, and community member respondents from all regions mentioned this 69 The information is obtained from interview with Cerro Verde’s representative. 70 Bebbington. 2012.p.28

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The media is perceived as misleading. Media can influence the public’s risk perception71. Edgar

Palma, an independent journalist in Ancash stated that media in Peru is led to this false

dichotomy of being pro or anti-mining. Majority of government, company, and community

members agree that the press can be easily bought and media companies lack transparency. In

general, media reporting on mining and mining conflicts is shallow and lacks real investigation.

Without clear and accurate information about the problems and situation, readers are at a

disadvantage and lose confidence in the government and corporations.

IV.1.b Managing Expectations and Underdevelopment in The Andes

In many parts of the world, indigenous communities are excluded from resource control. This

leads to unsatisfactory benefit sharing arrangement or a burden that is not proportionate for the

local community. Experiencing negative externalities of mining projects without receiving fair

benefits exacerbates grievances felt by the community. Even though Peru’s economy is one of

the largest in Latin America, 25% of the population in Peru still lives below the national poverty

line72. The national rural poverty rate remains very high at 50%, with nearly 20% of those

residing in the mineral rich Andean region considered being extremely poor73.

Underdevelopment in the Andean region is a result of government neglect. This perception is

shared by most community members that we interviewed in Ancash, and Apurimac. This

sentiment is also echoed by our respondents from private companies. Communities and

companies alike believe the government of Peru has neglected the Andean community for

decades. Therefore, the presence of mining companies in these regions is perceived by local

communities as the only facilitator of development. Representatives from mining companies

believe that companies are replacing the role of the state by providing basic services and

facilitating regional and local development, even though these company believes it is not their

responsibility. The majority of the companies agree that private companies are not supposed to

replace the role of state because it undermines its authority and legitimacy. Ideally, companies

paying their taxes should be enough. But, the management of Canon and corruption has created

inefficiency in the distribution of government transfers and development. Seeing that companies

71 EU.p.7 72 Council on Hemispheric Affairs, 2013, pg. 3 73 Council on Hemispheric Affairs, 2013, pg. 4

30

are contributing to development regardless of their opposition to it, companies need to start to

focus more on regional development, not just local, to overcome its stagnation.

Communities believe the state will react to protests and violence. For years, communities have

used traditional channels of communication to generate state support and representation with

little success. This lack of success brought the use of protests and violence as a strategy to gain

the attention of the state. NGOs, companies, and community leaders believe that if communities

don’t use violence, the state will not pay attention. This is the result of the government’s

reactive strategy in handling conflict. The state only intervenes when the conflict materializes.

IV.1. c Weak Governance and Decentralization

Well-implemented decentralization may generate welfare gains, but a poorly managed one has

the opposite effect74. Respondents in all regions expressed disappointment over the lack of

development despite increasing Canon revenues. The regional governments in mining areas

received between US$0.68 bn (in 2006) and US$1.15 bn (in 2009). One of the main arguments

for further expansion of mining industry is the possibility of new development and poverty

reduction programs funded by such revenue75. However often times this benefit does not trickle

down or materialize into development. All stakeholders interviewed acknowledge that local

governments are lacking the capacity to manage funds from Canon. This inequality is

exacerbated by limited transparency at all levels of government and its inability to reduce

corruption and foster trust76.

IV. 2 Evaluation of Dialogue Processes in Peru

Dialogue is an inclusive process. Participants of dialogue must be willing to address the root

causes of the problem not just the immediate symptoms to alter long-term perspective77. Ideally

dialogue is meant to complement or lay the groundwork for other political processes and should

not be treated as an end solution by itself. Based on our findings of the roots of conflict, a

74 Stephen Calabrese, Dennis N. Epple, Richard Romano. Inefficiencies from Metropolitan Political and Fiscal Decentralization: Failures of Tiebout Competition. 2011. p.2-3 75 Leonith Hinojosa. Mining and Water Governance in Peru. This information was obtained from Peru Support Group Website. Peru Support Group is an NGO working on human right issues, social inclusion and democracy in Peru. 76 “Wealth and Sustainability: The Environmental and Social Conditions in Peru.” The World Bank, 2005. 77 UNDP. “ Why Dialogue Matters for Conflict Prevention and Peacebuilding”. February 2009

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process of dialogue is necessary to bring stakeholders together and challenge assumptions and

beliefs. Dialogue can establish basic conditions such as trust and political will, by facilitating

space where stakeholders can express their concern and be exposed to other stakeholders’

perspectives.

Establishing dialogue tables is the government’s strategy to mitigate conflict, and it is always

reactionary. The timing of a dialogue process is important in ensuring success. The majority of

our respondents agree that dialogue has to happen before conflict materialize to provide a true

preventive measure. Some even suggests that dialogue should be a continuing process that occurs

before, during, and after conflict. The majority of our respondents from mining companies and

civil society agree that dialogue needs to happen before a conflict foments, even as early as the

initial project exploration process. However, all conflicts came to the attention of authorities only

after escalation. Most stakeholders believe that dialogue should be established before the conflict

starts. It is increasingly difficult to mollify a conflict once the loss of life occurs, and with the

government's reliance on reactionary dialogue as the primary method to quell these conflicts, the

chances rise that conflicts will become intransient do to the use of force. After the use of

violence, the situation is no longer conducive for parties cooperate or to dialogue, further

prolonging the conflict.78. Conflict monitoring capacities were nonexistent in the early 2000s,

neither were practical tools to prevent socio-environmental unrest.

Forms of the dialogue process impact the success of the dialogue more so than the substance or

issues under discussion79. Respondents mentioned that dialogue tables are often treated as

“negotiation tables”, which is fundamentally different from a dialogue table. In a negotiation

stakeholders are seeking consensus, whereas the aim of dialogue is to bridge communities, share

perspective and discover new ideas80. In a dialogue table, it is common for stakeholders to

promise communities that they will commit to a project or initiative and then fail to follow their

commitments. These unfulfilled commitments only creates more grievances and exemplifies how

fundamental it is to ensure stakeholders understand what dialogue is and is not. However, now

that the practice of dialogue has evolved in Peru, people’s expectation to dialogue process is also

78 UNDP. “Democratic Institutionality for Dialogue and Conflict Prevention ; The Case of Peru”.2014 79UNDP. “Democratic Institutionality for Dialogue and Conflict Prevention ; The Case of Peru”.2014 80 UNDP. “Democratic Institutionality for Dialogue and Conflict Prevention ; The Case of Peru”

32

changing. Some of the respondents that we spoke to said that dialogue tables have to reach an

agreement in the end, otherwise it’s just a waste of time. Respondents then pointed out that when

the parties are trying to reach an agreement, they tend to be less honest compared to when no

agreement is reached. It appears that many participants of dialogue do not fundamentally

understand its structure.

There are variation of opinion when it comes to government involvement in the dialogue

process. Some community members believe that state led dialogue tables or multilateral dialogue

tables 81 is preferable since it provides a guarantee and ensures accountability from the company.

It is widely agreed by respondents from both the community and the company that the state’s

role in promoting development is irreplaceable. However, two respondents from mining

companies pointed out that having the state partake in dialogue often slows the process. This can

be attributed to the characteristics of bureaucratic institutions. It is also likely that the companies

would take this position, because without the state the company has more influence over

communities. Additionally, stakeholders stated that government officials often do not know how

to dialogue 82.

Government-led dialogue tables often lack legitimacy. Based on our interviews, people in the

regions strongly believe that the national government is always slanted in favor of the mining

company. This belief affects their perception on dialogue tables initiated or mediated by the

government. This table is considered bias and only a stop-gap solution to make sure investment

in mining will continue to flow into the country. The fact that many communities, especially

those that are adjacent to the projects, don’t receive the benefit makes it harder to convince them

that government has the interest of the people as its priority. The dialogue table not only lacks

legitimacy, but also is problematic since it is reactive in nature.

Another problem with dialogue is asymmetric information and asymmetric power relations.

Dialogue and deliberation processes are still considered inadequate to deal with power relations

and eradicate structural, social, and economic inequality because it often takes place within

81 During our interviews respondents often differentiate dialogue tables as bilateral referring to dialogue table in which only company and community are the parties, and multi-actor dialogue table in which state is also involved. 82 Our respondent was stating her perception based on the dialogue process she was involved in.

33

existing institutional, political, and legal framework that remains top-down. Even when it is

inclusive, the process fosters structural bias in which the strongest actors are able to dominate the

process83, which places communities at a disadvantage in dialogue tables. Dialogue tables are

often organized in Spanish, disregarding the fact that many community members in the Andean

region only speak Quechua. This is problematic because it excludes the community from the

dialogue and creates resentment from communities making it more challenging for stakeholders

to build consensus.

Community members often lack the required level of expertise to interpret technical documents

nor are they able to access assistance. Building capacity for community leaders is an important

aspect to ensure they are even capable of partaking in the dialogue process. GDA Ancash and

RNL have provided training for community leaders and this has been considered a success.

Community leaders that have attended the training stated how the training helped them build

their understanding and ability to partake in dialogue, while also understanding their rights and

obligations in front of the state and companies.

Majority of respondents agree that GDMDS-led dialogue tables are exhaustive because they lack

tangible results. GDMDS is an informal space that facilitates the free flow of ideas because in

theory people are not restricted to representing their organization’s official position. GDMDS is

a facilitator by providing networking opportunities for stakeholders. On the other hand, GDMDS

is often viewed as ineffective because its meetings lack a concrete outcome or tangible benefits,

even though tangible outcomes is not what a dialogue is intended to provide. We also found that

many become exhausted with talking and sharing feelings. A dialogue that is implemented for

years and produces no outcome exhausts its participants and loses its impact.

V. Conclusion

Dialogue has taken many forms and has many different interpretations in Peru. Government’s

approach to dialogue is considered less strategic. The timing and stakeholders involved in the

dialogue undermine the efficacy of the dialogue process. In addition to that, the government of

Peru still has not address the root causes of conflict related to mining such as structural 83 Isabelle Anguelovski. “Understanding the Dynamics of Community Engagement of Corporations in Communities: the Iterative Processes and Local Protest at the Tintaya Copper Mine in Peru”. Society and Natural Resources Vol 23 Issue 4. 2010

34

inequality, and underdevelopment. Government also still needs to regain trust from the

community especially in the Andean region. In this context GDMDS can help create basic

conditions for effective dialogue. Many attributes of GDMDS set them apart from government

led dialogue table.

In the context of social conflict related to mining in Peru, GDMDS can help create basic

conditions for effective dialogue such as political willingness and trust. Dialogue is not only

necessary to mitigate conflict but also to manage perception of stakeholders involved. The

absence of transparency and accessible information not only creates risk, but also benefits

mining activities due to poor corporate practices and weak government control. This has

contributed to conflict escalation in Peru for the past decades. A venue to share information may

help mitigate the risk of conflict. However, GDSMS should improve several aspects to be more

effective.

VI. Recommendations

Based on our main findings in this research, there are several areas where GDMDS can improve

and take actions that will maximize its contribution and relevance in reducing the risks of

conflict related to mining projects in Peru.

1. GDMDS should be more institutionalized and create clear protocols:

GDMDS dialogue process has no specific goal. It only seeks to create a space for people to

strengthen relationships between stakeholders. This can be seen as a disadvantage in the short-

run. Many community leaders do not see the effectiveness in this dialogue concept. They

mentioned the necessity for a signed agreement or document to create an official record of

responsibilities from the part of the company and the government. The signature in the document

is a means for building trust between the communities and the companies and the government.

By developing a more structured protocol and a set of clear goals for its processes, GDMDS can

overcome this stigma of not being ineffective, and create a binding relation between the

35

stakeholders. The objective is to show a clear path of development, creating a transparency and

building on trust of the stakeholders.

2. GDMDS should have smaller and more decentralized meetings

Many interviewees, specially from the private sector, mentioned the increasing number of people

attending the group meetings. This can be good for the group because new people create a larger

and network and brings more stakeholders into the discussion. However, when the amount of

people in the space becomes unwieldy and the quality of the discussion is impacted, the dialogue

weakens and people will have an incentive to abandon the space.

By decentralizing the meetings, there would be fewer people who attend each of the meetings,

and the participants would be able to discuss topics that really interest them. Also, by being

selective with who is invited to join the dialogue space does not mean that the space will lose

stakeholder representation. Rather, it is a matter of careful selection.

3. Explore possible partnerships with Universities

The ability of GDMDS to solve conflicts relies on its capacity to create connections between

people in mining areas and to build their capacity through dialogue training. One of the findings

of our research was that universities in the country weren’t able to fulfill their role, even though

five percent of the Canon is designated for universities to conduct research relating to mining.

Given that, it is be important for GDMDS to use the universities as a channel to improve its

capacity and presence in the regions and develop more ways to impact mining conflicts. Even in

universities without government assistance, the partnership would help the group to disseminate

its ideas and provide more connections.

4. GDMDS should expand beyond mining issues

Although mining is the main source of conflict in Peru today, it is not the only one. Other

extractive industries, such as oil and gas in the Amazon, have analogous problems and have

grown in recent years. GDMDS can use its network of influence to act in those new conflicts.

The idea of using dialogue in the beginning of the conflict situation is also applicable. By

expanding the mission of the group, GDMDS not only will increase its net of connections, but

36

also will have the opportunity to become a major conflict resolution tool throughout the country.

Additionally, this is a good way to get more financing and expand dialogue training programs in

the regions.

5. GDMDS should intensify its engagement with all stakeholders including national and

local government officials and ensure broad representations

Today GDMDS is very concentrated in Lima. Regional dialogue groups and stakeholders based

outside of Lima are invited to meetings, and many times travel expenses are covered.

If GDMDS remains concentrated in one geographical site, the group will lose its influence have

a more difficult time to create the network of contacts it needs to improve the conflict resolution

process in Peru. If GDMDS could create regional offices in mining areas with potential for

conflict, the outcomes from the network it creates would be greater. Also, not only would the

training program be more effective, but also the stakeholders from the regions would be more

connected to each other.

37

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