Mining and Development in Peru With Special Reference to The Rio Blanco Project, Piura www.perusupportgroup.org.uk A Delegation Report Professor Anthony Bebbington, Ph.D. Michael Connarty, M.P. Wendy Coxshall, Ph.D. Hugh O’Shaughnessy Professor Mark Williams, Ph.D. Published by the Peru Support Group, March 2007 Mining and Development in Peru Contents List of Boxes, Figures and Tables Abbreviations Executive Summary Monterrico Metals: Responding to this report PART I: RIO BLANCO IN CONTEXT Chapter 1 Introduction Chapter 2 Mining, development, democracy and the environment in Peru Chapter 3 Mining and development in Piura Chapter 4 Majaz: background information on the case and this Delegation Chapter 5 Method and process of the Delegation Chapter 6 Events and changes since April 2006 PART II: ASSESSING THE RIO BLANCO CONFLICT Chapter 7 Assessing the debate on March 21st, 2006 Chapter 8 The Rio Blanco Project and development in Piura Chapter 9 The Rio Blanco Project and the environment Chapter 10 Wider issues embodied in the Rio Blanco case: governing mining for development, democracy and environmental security Chapter 11 Conclusions and ways forward PART III: ANNEXES Annex 1 Bibliography Annex 2 Detailed suggestions on environmental monitoring options Annex 3 On the importance of continued multi-stakeholder dialogue over the life of a natural resource extraction project Annex 4 Team Member Bio sketches Annex 5 Persons and organisations consulted ii Mining & Development in Peru List of boxes, figures and tables Box 1: Mining, acid mine drainage and pasivos ambientales Box 2: Land use planning and extractive industries in the UK Box 3: Rondas Campesinas Box 4: Minera Majaz's Public Apology Box 5: Minera Majaz's statement on the legality of its presence in the Rio Blanco area Box 6: Independent monitoring and strategic use of natural resource revenues in Chad Figure 1: Irrigation and hydroelectric projects in Piura: actual and planned Figure 2: Map of Mineral Concessions in the Department of Piura Figure 3: Map of Piura showing Huancabamba and Ayabaca Figure 4: Mineral Concessions in Ayabaca and Huancabamba Figure 5: Rules governing distribution of tax and royalty income Table 1: Socio-economic indicators: Piura, Ayabaca, Huancabamba and Carmen de la Frontera Table 2: Anticipated income from the canon minero and royalties Abbreviations AMD Acid Mine Drainage ARD Acid Rock Drainage ASL Above sea level CEO Chief Executive Officer CEPAL United Nations Economic Commission on Latin America and the Caribbean CONACAMI National Confederation of Communities Affected by Mining CONFIEP National Confederation of Private Business Institutions CVR Truth and Reconciliation Commission DFID UK Department for International Development DFS Detailed Feasibility Study DINOES Executive Divisions for Special Operations (of the Peruvian National Police) ECLAC United Nations Economic Commission on Latin America and the Caribbean EIA Environmental Impact Assessment FDI Foreign Direct Investment GDP Gross Domestic Product IFC International Finance Corporation INAAC National Institute for Mining Concessions and Cadastre INRENA National Institute for Natural Resources, MEM Ministry of Energy and Mines NGO Nongovernmental Organisation ONPE National Office for Electoral Processes OSINERG Supervisory Body for Investment in the Energy Sector PSG Peru Support Group SER Rural Educative Services SNMPE National Society for Mining, Petroleum and Energy STD Sexually Transmitted Disease WWF WorldWide Fund for Nature iii Mining & Development in Peru Mining & Development in Peru Executive Summary This report addresses the relationships between has contributed to sustainable local development in mining and development in Peru, focusing on a par- Peru, this territorial expansion has generated ticular experience in the Northern highlands of increasing social conflict. Among those protesting Piura - the Rio Blanco Project, executed by Minera current mineral development there exists a range of Majaz, a wholly owned subsidiary of the British views: from those who are against mining at all company Monterrico Metals. The report is the work costs, to those in favour of mining but demanding of an independent delegation organized and coordi- what they deem to be a fairer distribution of the ben- nated by the Peru Support Group (PSG), a UK efits, to those who insist that mineral expansion be based membership organisation. The PSG’s interest managed in such a way that prioritizes the defence in mining led it to sponsor a meeting in the Houses of human, economic, social and cultural rights and of of Parliament in March 2006, which showed signifi- the environment. These conflicts have been visible in cant disagreements between Minera Majaz and the national press and in the electoral campaigns of local citizens’ organisations regarding the dynamics presidential candidates. of environment and development around the compa- ny’s exploration activities. With the agreement of These mobilisations have thrust into public debate a Monterrico Metals, the delegation was organized to basic principle of economics - that development and form a third party view on these differences of opin- social life involve trade-offs. Many argue that the ion, and on the broader development effects of the potential trade-offs at stake require far more careful investments and activities of this UK based compa- thought and analysis than is currently the case in ny - both the effects to date, and those in the future. Peru. This is particularly so for Piura, as the mine The case is also emblematic of broader issues in proposed by Minera Majaz would constitute the the relationships between mining, society and devel- region’s first large metal mine. Given that the compa- opment that are relevant to the operations of other ny estimates it will be among Peru’s top two copper British mining companies in Peru. mines, and possibly one of the very largest in South America, the social and economic transformations While Peru has a long history of mineral extraction, that it would induce are likely to be great. investment in the mining sector has increased rap- Furthermore, the company suggests that the current- idly since the early 1990s, a direct effect of policy ly proposed mine would likely be the beginning of a reforms of the Alberto Fujimori government. much larger ‘mining district’. This means that the Between 1990 and 1997 investment in exploration potential environment and development effects of Rio increased 90 per cent worldwide, four fold in Latin Blanco cannot be discussed independently of the America, and 20 fold in Peru. By 2003 mining impacts of this wider district. These issues are partic- accounted for 57% of all exports in Peru, and 37% ularly important for Piura for three main reasons. of foreign direct investment between 2001 and First, public investment needs far surpass regional 2003. The 1990s saw the area affected by mining government revenue, a spending gap that could concessions increase from 4 million to 16 million potentially be reduced by tax and royalty income hectares, such that by decade’s end around 55% of from mining. Second, much of Piura is desert or Peru’s six thousand or so campesino (peasant) semi-desert and its agriculture is acutely dependent communities were in zones influenced by mining. on the quantity and quality of water draining from the region’s eastern highlands, where the Rio Blanco Given the large profits being made from mining at a Project is located. This sector has begun to grow rap- time of significant mineral price increases, and in idly, with both large enterprises and small and iv the light of the very limited evidence that mining medium farmer organisations supplying internal and Mining & Development in Peru external markets. This growth would likely be affect- ments on this issue in the UK and Peru have signifi- ed by diminutions in the quantity and quality of water. cantly understated the level of conflict between them Even among interviewees not opposed to mineral and communities. There is evidence that the compa- development the delegation encountered the view ny did not enjoy legally adequate permission from the that mining needs to be planned jointly with water communities of Yanta and Segunda y Cajas to be resource management and development, and that operating on their land. There is also evidence of this requires strategic thinking and planning of a sort communities retracting in writing permission that may that the current process for approving mining projects have been inappropriately given by their leaders. The does not allow. Third, Piura has already been the site Ombudsperson’s office concluded that the presence of a high profile conflict that ultimately led to the of Minera Majaz on these community lands is not departure of the Canadian junior company, grounded in law. Manhattan, from its exploration site in Tambogrande. In the second domain, the presence of the company The copper deposit at the Rio Blanco site was identi- has had marginal effects on economic opportunity, fied in the early 1990s, and rights to its exploration and has been accompanied by increased real and have passed among diverse companies until being perceived human vulnerability and declines in overall fully acquired by Monterrico Metals in 2003. In sub- levels of social empowerment. The capacity of sequent years, Monterrico has established that this is regional society as a whole to act collectively has a very large deposit centred on a site named Henry’s weakened, and the scope for reasoned public debate Hill. The same period has also been one of consider- has been significantly curtailed. More significant, per- able unrest in the region which to date has led to the haps, are the changes that would ensue should a loss of two campesinos’ lives, as well as several mine exist in the zone. Three main causal chains are maimings, injuries, arrests and lawsuits. Up until late invoked to argue that mining is the means to local 2006 the company explained this violence as a con- economic development.