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Wealth and Sustainability: the Environmental and Social Dimensions of the Mining Sector in Peru

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Wealth and Sustainability: the Environmental and Social Dimensions of the Mining Sector in Peru 33545 v.2 Peru Analytical Advisory Activity The World Bank Public Disclosure Authorized Wealth and Sustainability: The Environmental and Social Dimensions of the Mining Sector in Peru Public Disclosure Authorized Public Disclosure Authorized Peru Country Management Unit Environmentally and Socially Sustainable Development Latin America and the Caribbean Region Public Disclosure Authorized 1 ACRONYMS AAA Analytical Advisory Activity BCR Central Reserve Bank of Peru BGR Federal Institute for Geoscience and Natural Resources BLM Bureau of Land Management IDB Inter-American Development Bank CAF Andean Development Corporation CAREC Central American Credit for Renewable Energy, Efficient Energy and Cleaner Production (Crédito centroamericana para energía renovable, eficiencia energética y producción más limpia) CAS Country Assistance Strategy CAO Dialogue and Consensus Table of Cajamarca (Mesa de Diálogo y Consenso) CIDA Canadian International Development Agency CMLR Centre for Mined Land Rehabilitation CND National Decentralization Council CNDH National Coordinator for Human Rights CONAM National Environment Council (Consejo Nacional del Ambiente) CONAMA National Environmental Commission of Chile (Comisión Nacional del Medio Ambiente de Chile) CONACAMI National Coordinator of Peruvian Communities Affected by Mining (Coordinadora Nacional de Comunidades del Perú Afectada por la Minería) DAC Annual Consolidation Declaration DFID Department for International Development DGAA General Directorate for Environmental Affairs DGM General Directorate of Mining DGPM General Directorate of Multi-annual Public Sector Programming (Dirección General de Programación Multianual del Sector Público) DIGESA General Directorate of Environmental Health, Ministry of Health (Ministerio de Salud, Dirección General de Salud Ambiental) DREM Regional Mining and Energy Directorates D.S. Supreme Decree EA Environmental Assessment EIA Environmental Impact Assessment EIR Extractive Industries Review EMP Environmental Management Plan EMS Environmental Management systems EMTAL Energy and Mining Technical Assistance Project EPA Environmental Protection Agency EPA Environmental Legacy Elimination Project (Proyecto de Eliminación de Pasivos Ambientales) EVAP Preliminary Environmental Evaluation (Evaluación Ambiental Preliminar) EVAT Regional Environmental Evaluation (Evaluación Ambiental Territorial) FAO Food and Agriculture Organization FDDH Defense and Development Front of Huarmey (Frente de Defensa y Desarrollo de Huarmey) 2 FIDE Inter-governmental Decentralization Fund FONAM National Environment Fund (Fondo Nacional del Ambiente ) FONCOMUN Municipality Compensation Fund (Fondo de Compensación Municipal) GEF Global Environmental Facility GOP Government of Peru GDP Gross Domestic Product GNI Gross National Income HC Hydrocarbon IAIA International Association for Impact Assessment IACHR Inter-American Court for Human Rights IBRD International Bank for Reconstruction and Development IDB Inter-American Development Bank IFC International Finance Corporation IGV General sales tax INACC Mining Public Registry (Instituto Nacional de Conseciones y Catastro Minero) INEI National Institute of Statistics INGEMMET Mining and Metallurgy Geological Institute INRENA National Institute for Natural Resources (Instituto Nacional de Recursos Naturales) ISC Selective Excise Tax (Impuesto Selectivo al Consumo) LMP Labor/Management Program MDG Millennium Development Goals MEF Ministry of Economy and Finance MEL mining environmental legacy MEM Ministry of Energy and Mines MEND Mine Environment Neutral Drainage Program MIGA Multilateral Investment Guarantee Agency MMSD Mining, Minerals and Sustainable Development MPL maximum permissible levels MSSD Mining, Minerals and Sustainable Development Report NGO Nongovernmental Organization OIP Office of Investments Programming ONREN National Office of Evaluation of Natural Resources PAMA Environmental Management and Adaptation Plan(s) (Programas de Adecuación y Manejo Ambiental) PCM Presidency of the Council of Ministers Presidencia del Consejo de Ministros PDS Social Development Program PEMA Special Program for Environmental Management PERCAN Peru-Canada Project PRODES Association for the Promotion of Development PROFONAMPE National Fund for Natural Areas Protected by the State (Fondo Nacional para Áreas Naturales Protegidas por el Estado) SEIA National System for Environmental Impact SEMARNAT Secretariat for Environment and Natural Resources 3 SENCICO National Department for Construction Industry Standards, Training and Research (El Servicio Nacional de Normalización, Capacitación e Investigación para la Industria de la Construcción) SIA Social Impact Assessment SIAF Integrated Financial Administration System SME Small and medium-sized enterprise SMI Sustainable Minerals Institute SNGA National Environmental Management System SNIP National System of Public Investment SNMPE National Society of Mining, Petroleum, and Energy (Sociedad Nacional de Minería, Petróleo y Energía) SPCC Southern Peru Copper Corporation SPDA Peruvian Environmental Law Society (Sociedad Peruana de Derecho Ambiental) SUNAT Office of the National Superintendent of Taxes (Tax Authorities) Superintendencia Nacional de Administración Tributaria WBG World Bank Group WHO World Health Organization 4 Table of Contents ACRONYMS ................................................................................................................................. 2 EXECUTIVE SUMMARY......................................................................................................... 10 INTRODUCTION....................................................................................................................... 23 Environmental Issues ................................................................................................................ 25 Social Issues.............................................................................................................................. 26 Origins of This Study and Strategic Framework....................................................................... 29 Chapter 2. Mining Environmental Legacies ............................................................................. 36 Government Programs and Current Knowledge Base .............................................................. 37 Technical Aspects of Addressing Mining Environmental Legacies ......................................... 39 The Legal Framework............................................................................................................... 41 Financing Mechanism for MELs .............................................................................................. 49 Lessons and Best Practices in Addressing Environmental Legacies ........................................ 53 Conclusions and Policy Options for Addressing MELs............................................................ 57 Chapter 3: Environmental and Social Governance of The Mining Sector ........................... 63 Background to Environmental Legislation in Peru................................................................... 63 The Institutional Structure for Environmental Management .................................................... 67 Key Actors ................................................................................................................................ 69 Environmental Management and Licensing Tools.................................................................... 71 Environmental Impact Assessment (EIA)................................................................................. 71 Limitations in The EIA Process ................................................................................................ 74 The World Bank Safeguards Policies and Strategic Environmental Assessment as a Complement to The EIA Process.............................................................................................. 83 Conclusions and Recommendations on the EIA....................................................................... 87 The Environmental Management and Adaptation Plans (PAMA)............................................ 88 Limitations to the PAMA.......................................................................................................... 92 Auditing System........................................................................................................................ 94 Recommendations..................................................................................................................... 98 Chapter 4: Capacity and Framework to Address Social Issues.............................................. 99 Social Conflicts and Key Social Issues................................................................................... 100 Unfulfilled Expectations for Employment and Benefits......................................................... 105 Land Acquisition and Resettlement Impacts........................................................................... 106 Lack of Adequate Communication in The Licensing Process ................................................ 108 Weak Enforcement of Regulations and Absence of The State ............................................... 109 Lack of Local Capacity for Negotiating and Management ..................................................... 109 The Negative Social Perception of Mining as a Polluting Activity ........................................ 110 The World Bank’s Social
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