Historic Decree-Law that nationalizes Cerro mines

DECREE-LAW No. 20492

THE PRESIDENT OF THE REPUBLIC

WHEREAS: The Revolutionary Government has enacted the following Decree-Law:

THE REVOLUTIONARY GOVERNMENT

WHEREAS: Despite requests from the competent bodies of the State, Cerro de Pasco Corporation has systematically failed to comply with obligations of health, housing, and safety entailed by the laws in force, showing a serious growing deficiency in installations and equipment and serious deficiencies in hospitals, schools, basic sanitation, safety and benefits for occupational diseases; As a result of its industrial activities, the Cerro de Pasco Corporation has polluted the waters of the Huascacocha lagoon and of the Rimac, Mantaro, and San Juan rivers, and despite the requests of the State, even while it recognizes that it continues producing that pollution, has not carried out any investment projects intended to prevent that contamination, to correct the serious damage it is causing to the agriculture of the region and the fauna of the rivers and the lagoon; and it has also failed to carry out any specific projects to prevent pollution of the environment that it admits it has been causing for years by the activity of the smelter and other metallurgical plants in ; Since about five years ago, the Cerro de Pasco Corporation has systematically displayed its lack of interest in developing the activities it has in in various publications and in the statements of its executives here in the country and abroad, conduct it has made real by failing to exploit extensive mining concessions that in response to the regulations in force in the country, have reverted to the State in recent years, as well as by the notable reduction of its exploration and development work in the mineral deposits of Morococha, Yauricocha, San Cristóbal, Casapalca, Cobriza, and Cerro de Pasco; At the same time, the company has been following an accelerated policy of reducing its stocks of materials and equipment; Cerro Corporation presented an offer to the Government of Peru January 6, 1972, to sell shares of stock or assets of its subsidiary, Cerro de Pasco Corporation, that had declared losses during fiscal year 1971; As a consequence of making this offer, and in view of the nature of the activities carried out by the company in the country, as well as its socioeconomic incompatibility with the central region of the national territory, a Commission was created by Supreme Resolution No. 024-EM/SD of January 10, 1972, and charged with negotiating, analyzing, and evaluating the content of the proposal and recommending the actions it considered most appropriate in the national interest to the Revolutionary Government; In line with the foregoing, the offering company was officially informed February 16, 1972, of the favorable disposition to enter negotiations with respect to its proposal, proceeding in accordance with the laws of Peru and in the manner most appropriate to the national interest, after the assets to be transferred were determined, the company appraised in its entirety, and reaching agreement on the price and form of payment;

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After presenting its offer of sale to the Peruvian Government, and with the obvious purpose of accelerating the growth of its profits, thus improving its financial position at the time of the negotiations, the company has been, in an exceedingly dangerous way for its present operations and future destiny, in addition to making its withdrawal more noticeable of the investments needed to maintain an adequate stock of materials and equipment and to carry out indispensable exploration and development work, selectively exploiting the mines it holds under concession, irrationally extracting only the highest-grade , which is harmful to the national interest; After the company’s economic future was appraised with seriously negative results unless various necessary expansion projects were carried out to assure its profitability, Cerro Corporation publicly withdrew its offer of sale through notices published in newspapers within the country and abroad in which, flouting the truth, it attempted to mask the serious business reality of its subsidiary and to damage the image of the State, thus thwarting initiation of the negotiations in which the price of the transfer would be agreed upon and the manner of payment; At the same time, with the obvious purpose of damaging the country, it suspended important shipments of materials and equipment indispensable for normal operation of the company’s mining activities, and unduly retaining profits in the United States of America from sales of mined by the Cerro de Pasco Corporation branch in Peru, thus placing the financial liquidity of that branch in such grave jeopardy that in a very short period of time, it will be impossible for it to pay its workers’ wages and its third-party contractual obligations; Decree Law 18880 provides that the entrepreneurial activity of the State is a fundamental factor in the development of the mining industry; As a result of such facts, in protection of legitimate national interests, among them, those of the workers in particular, the State finds itself with an imperative need to proceed with expropriation of the mining business Cerro de Pasco Corporation operates in Peru, taking as basis the results of the evaluation made by the Commission created by Supreme Resolution No. 024-EM/SD of January 10, 1972, and adopting, in addition, the exceptional measures required to ensure continuation of the company’s personnel and the success of its activities, in view of the national necessity and social interest in guaranteeing its efficient operation and profitability within the power of the State; In accordance with the provisions of Article 5 of Decree Law 17063;

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Exercising the powers with which it is vested; and With the vote of approval from the Council of Ministers; The following Decree-Law is enacted: Article 1. Expropriation of the mining business owned by the branch in Peru of the Cerro de Pasco Corporation, incorporated in the State of Delaware, United States of America, consisting of the mining and metallurgical complex with which it operates in the country and all its other assets, is declared to be a matter of national necessity and social interest, and midnight, January 1, 1974, will be considered the date of expropriation and of the State’s taking possession of the business. Article 2. The Ministry of Energy and Mines is authorized to take immediate possession of the business referred to in the preceding Article, assume its direction, arrange for its evaluation, and initiate the corresponding expropriation proceedings, the business to be known as Empresa Minera del Centro del Perú, which may also be referred to as CENTROMIN-PERU. Article 3. For the purposes referred to in the preceding Article and until the transfer to the State is complete, an Official Administrator will be appointed by a Supreme Resolution endorsed by the Minister of Energy and Mines, who will exercise administrative powers over the business, in the name and representation of the State, with broad powers and accounting for his actions to the Minister of the Sector. Article 4. From the date of this Decree-Law, the general and special powers granted by Cerro de Pasco Corporation, a Corporation of the State of Delaware, with respect to the expropriated business will be without legal effect, as will the powers that its branch in Peru has granted for the same purpose. In compliance with the provisions of this paragraph, the Registrars will make corresponding notations of cancellation to powers already recorded in the Registries of Powers of Attorney within 24 hours of the expropriation. The Registries of Powers of Attorney under the responsibility of the Registrars will not record any powers granted for the purposes referred to in the preceding paragraph that are pending registration. Article 5. The Official Administrator will grant new powers by Records extended before a notary public. These powers will be entered in the Public Registries without further requisite than presenting the notary-certified copy of the Record. Article 6. As of the expropriation provided in this Decree-Law, the bank accounts of Cerro de Pasco Corporation will be frozen, and the banks of the Republic, without prior request or any other process, will immediately move to cancel them and open new accounts in the name of CENTROMIN-PERU with the existing balances. The transferred balances will be considered for purposes of the final liquidation of the expropriation, taking pertinent legal provisions into account. Furthermore, checks drawn by Cerro de Pasco Corporation that have not been paid

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as of the date of expropriation will be void and without legal value, and the holders must justify the reasons and amounts for which they were drawn to the Official Administrator so the latter may, in properly verified cases, authorize payment with a new check. Article 7. As of the date of the expropriation provided in this Decree- Law, all existing obligations to pay Cerro de Pasco Corporation, whatever their origin, will be settled in favor of CENTROMIN-PERU. Article 8. All court actions and administrative proceedings that are pending on the date of expropriation and that have been brought against Cerro de Pasco Corporation or by it against third parties will be suspended for 30 days in and 60 days in the other Provinces. Any proceedings undertaken during this period of time will be null and void unless the Official Administrator appears directly or through an authorized representative; or if by express provision, prosecution of certain judicial actions is assigned to the Office of the Attorney General of the Republic. If the periods of time referred to in this Article expire without an appearance by the Official Administrator in the proceedings, he will be called upon ex officio, under the responsibility of the official or judge in charge of the proceedings, to comply by appearing within three days. Article 9. The Ministry of Energy and Mines is authorized to order, by means of a Supreme Resolution, and at the request of the Official Administrator, initiation of the actions resulting from those legal motions filed after the date of the offer of sale presented to the Peruvian Government by Cerro Corporation, whatever their nature, that in the opinion of the Official Administrator, were filed in conditions obviously harmful or contrary to the interest of the expropriated mining business. Similarly, all option contracts for the sale of the expropriated firm’s assets, whatever their date, with respect to which the option has not been exercised, or if the intent to exercise it has been expressed but the price has not been paid, or the respective contract entered into, are null and void and without legal effect.

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Article 10. The Public Registrars, acting on their own responsibility, will suspend registration of legal actions of ownership transfer, lease, assignment, or levying charges or filing liens on property constituting assets of the expropriated business until such time as the new administration confirms such legal actions. Article 11. The value of the expropriated business will be determined by applying regulations governing the appraisal of mining businesses approved by Supreme Decree No. 033-73-EM/DGM, for which purpose the Ministry of Energy and Mines will designate by Supreme Resolution the professional specialists in the field required for the expert operations of appraising the business. In addition, nomination will be by Supreme Resolution of the people who will verify the assets and liabilities of the company, determining whether there is any registered claim, attachment, notation, or any other measure that restricts the company’s ownership or free right to dispose of such assets, which circumstance will be taken into account by the Judge in charge of the expropriation, so that in due time he or she may order the deposit to be maintained until the obligations against the said assets are fully paid. In any event, the Judge will order the encumbrances or charges to be cancelled so the assets become the property of the expropriating party free of any limitation. Article 12. After the official appraisal has been approved by the Ministry of Energy and Mines, this office will initiate the expropriation proceedings that will be carried out in accordance with the provisions of Law 9125, as supplemented and amended, and of this Decree-Law. Article 13. If within 15 days following publication of this Decree-Law, Cerro de Pasco Corporation, incorporated in the State of Delaware, United States of America, does not designate a person with the broadest possible powers and not subject to any kind of limitation who is to represent it in Peru before all authorities until such time as the official transfer document of the business is signed, and for the purposes of receiving the fair market value, the Judge will notify the expropriated party by announcements published in the newspapers of the capital, in accordance with the procedure established in Article 7 of Law 9125. After the representative of Cerro de Pasco Corporation has been appointed, he or she must indicate a legal domicile in Lima and record his or her powers in the appropriate Registry.

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Article 14. In the mining business that is expropriated, all rights and benefits acquired by all the workers will be respected. Article 15. Application of what is provided in the Eleventh Transitory Provision of Decree-Law 19990, as amended by Decree-Law 20015, with respect to workers now employed by the Cerro de Pasco Corporation branch in Peru will be extended for one year. Article 16. While the mining business expropriated by this Decree-Law operates in accordance with what is established in Article 3, it will continue operating under the legal system for private companies, and consequently, the regulations in force for the operation of public enterprises will not apply to it. Pertinent agencies of the State will provide it with the financing it may require. Article 17. CENTROMIN-PERU will carry out all steps, actions, and operations necessary to correct the deficiencies in housing, welfare, and safety now existing in the expropriated mining business, as well as to solve the problems of environmental pollution produced by its operations. The organizations of the State will provide it with all the facilities and assistance it may require. Article 18. The Ministry of Energy and Mines will issue supplementary measures for compliance with what is provided in this Decree-Law. It will also issue the administrative measures and file the court actions necessary to settle liabilities resulting from actions or omissions of Cerro de Pasco Corporation to the damage or detriment of the expropriated business, the country, or the State. In these cases, the judges will hand down the precautionary remedies requested of them. Article 19. All provisions of law contrary to this Decree-Law are hereby repealed, amended, or suspended, as the case may be.

Issued at Government House in Lima on this 24th day of December Nineteen Seventy-Three.

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General of the Peruvian Army Division JUAN VELASCO ALVARADO, President of the Republic. General of the Peruvian Army Division EDGARDO MERCADO JARRÍN, President of the Council of Ministers and Minister of War. Lieutenant General of the Peruvian Air Force ROLANDO GILARDI RODRÍGUEZ, Minister of Aeronautics. Vice Admiral of the Peruvian Navy LUIS VARGAS CABALLERO, Minister of the Navy. Lieutenant General of the Peruvian Air Force PEDRO SALA OROSCO, Minister of Labor. General of the Peruvian Army Division ALFREDO CARPIO BECERRA, Minister of Education. General of the Peruvian Army Division ENRIQUE VALDEZ ANGULO, Minister of Agriculture. General of the Peruvian Army Division FRANCISCO MORALES BERMÚDEZ CERRUTTI, Minister of the Economy and Finance. General of the Peruvian Army Division JORGE FERNÁNDEZ MALDONADO SOLARI, Minister of Energy and Mines. Brigadier General of the Peruvian Army JAVIER TANTALEÁN VANINI, Minister of Fisheries. General of the Peruvian Air Force FERNANDO MIRÓ QUESADA BAHAMONDE, Minister of Health. Rear Admiral of the Peruvian Navy RAMÓN ARROSPIDE MEJÍA, Minister of Housing. Rear Admiral of the Peruvian Navy ALBERTO JIMÉNEZ DE LUCIO, Minister of Industry and Commerce. Brigadier General of the Peruvian Army MIGUEL ÁNGEL DE LA FLOR VALLE, Minister of Foreign Affairs. Brigadier General PEDRO RICHTER PRADA, Minister of the Interior. Brigadier General of the Peruvian Army RAUL MENESES ARATA, Minister of Transportation and Communications.

NOW THEREFORE:

I order that it be published and complied with.

Lima, December 29, 1973

General of the Peruvian Army Division JUAN VELASCO ALVARADO General of the Peruvian Army Division EDGARDO MERCADO JARRÍN Lieutenant General of the Peruvian Air Force ROLANDO GILARDI RODRÍGUEZ Vice Admiral of the Peruvian Navy LUIS VARGAS CABALLERO General of the Peruvian Army Division JORGE FERNÁNDEZ MALDONADO SOLARI

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