MICLA

McGill Research Group Investigating
Canadian Mining in Latin America

Peru

Key Data

Population:29,549,517 people Area:1,285,216 km2 Density:22 people / km2 Demographics:45% indigenous
37% mestizo
15% white
3% other (primarily black and Asian)
Mineral Resources:silver, copper, gold GDP:$229.7 billion GDP per capita:$7,773 GINI:48

History

Overview: Peru has a long and rich history, with people first arriving in the region over 15 000 years ago, with the Andean region of Peru emerging as one of the first primary centres of agricultural production in the world. A number of different indigenous civilisations arose in what is now Peru, such as the Norte Chico, the Nasca, the Chan Chan and finally the Incas, who were to build the largest and most sophisticated empire in Pre-Columbian America. In 1531 the Spanish lead by Francisco Pizarro arrived and proceeded to defeat an Inca Empire, already weakened by the introduction of European diseases years before. War, disease and the harshness of the Spanish encomienda labour system were to devastate Peru’s indigenous population, though Peru was quickly to emerge as one of the richest colonies in the Spanish Empire due to its vast mineral wealth. However, by the Spanish American Wars of Independence in the early 19th century, Peru had declined economically compared to other colonies. White Creole elites were initially reluctant to join the independence movement due to fears of popular indigenous rebellion like the one lead by Tupac Amaru II in 1780 and it was with the outside intervention of independence leaders Símon Bolívar and José de San Martín that indepence was finally won in 1821. Through most of the 19th century Peru remained a country racked with political and economic instability, though growth and modernisation did occur from export orientated development of natural resources. By the twentieth century the ever more vocal demands of a nascent working class and of indigenous peasant groups lead to the growth of new social movements like the populist, anti-imperialist American Popular Revolutionary Alliance (APRA) and the Peruvian Communist Party, seeking to end the political and economic marginalisation of the lower classes. This lead to reaction by elites and the frequent overthrow of civilian governments by the military, culminating in the reformist military regime of General Juan Velasco Alvarado, which sought to address these social demands with a progressive land reform program and a nationalisation of key industries. The 1980’s saw a return to civilian rule but also a period of intense violence and instability as the Maoist terrorist group, the Sendero Luminoso, waged war against the state. The 1990’s saw the election of President Alberto Fujimori who fought back against the insurgents, however, with frequent human rights abuses on both sides. The Fujimori years also saw the introduction of brutal neo-liberal austerity measures and erosion of civil liberties. Eventually a corruption scandal forced Fujimori out of office. Since then Peru has achieved some degree of stability and economic growth has returned. 2011 saw the election of Peru’s first democratically elected, leftist President Ollanta Humala who defeated Alberto Fujimori’s daughter, Keiko, on a platform of greater social spending and inclusion of the country’s poor.

Role of mining within national history: Mining has long history in Peru, dating back to the pre-Inca period. Rich in gold, silver and copper, mining has tied Peru to the world economy ever since Spanish times, when the vast silver deposits of colonial Peru that helped fuel the rapid economic expansion of Western Europe.[1] In time other goods began to challenge silver as Peru’s most important mineral export, with guano deposits (dried bird feces accumulated along parts of Peru’s coast) rising to prominence in the 19th century due their fertilising properties fuelling both growth and conflict, including a war with Chile (1879-1883) that saw the annexation of part of Peru’s southern coast.[2] It was at this time, the late 19th century that foreign mining companies rose to prominence in the Peruvian mining sector, with US mining giants such as Anaconda and the American Smelting and Refining Company emerging as key players, especially in the copper sector.[3] The mineral export sector was to decline in the 1930’s due to the Great Depression, and again in the 1970’s,[4] though it has picked up again in recent years due to rising demand for raw materials from Newly Industrialising Countries, with the mining sector accounting for 67% of export earnings in 2007.[5] Yet while mining has brought wealth for many, Peru remains a very poor country with 34.8% of the population below the poverty line.[6] Since the time of the Spanish, mining has often brought foreigners great wealth, though doing little to spur national development and enforcing the country’s dependency on a resource driven economy.

History of resource exploitation: As has been stated above Peru has a long history of resource exploitation, dating back to pre-Inca times with Peru playing an important role in the world economy as a mineral exporter ever since the Spanish. Asides from mining, fishmeal and agricultural goods are also key primary goods. However, it is mining that remains Peru’s most important primary resource.



[1] Galeano, Eduardo. The Open Veins of Latin America. P 28.

[2] Green, James N, Thomas E. Skidmore and Peter H. Smith. Modern Latin America. P 154.

[3] De Echave, José. Peruvian Peasants Confront the Mining Industry. Socialism and Democracy.

[4] Green, James N, Thomas E. Skidmore and Peter H. Smith. Modern Latin America. P 155.

[5] Peru’s Mineral Wealth and Woes. Council on Foreign Relations.

[6] Peru. CIA World Factbook.

Mining Characteristics

Geological overview: The dominant feature of Peru’s geology are the Andes mountain range formed 50 million years ago by the subduction of the Nazca Plate under the South American.[1] The mountains are the chief areas of mining activity, with porphyry deposits rich in copper, silver, gold and molybdenum, especially in south of the country, near the border with Chile.[2]

Number and type of mines: 470 mining project, both open pit and underground.[3]

Water issues: Understanding water issues is key to understanding the environmental impact of mining in Peru. Peru is the most water stressed country in South America and according to the Tyndall Centre for Climate Change Research the third most vulnerable country to climate change, with many concessions located at in headwater areas in the Andes.[4] The high water use associated with modern mines as well as the risk of contamination puts additional pressure on an already fragile water supply.[5] Local communities, often based around agriculture, rely heavily on water to preserve their livelihood, fuelling conflicts in the region.



[1] Peru: Basic Geology and some Neo-tectonics. IRD Perou.

[2] Weise, Stephanie. The Andahuaylas-Yauri belt of southeastern Peru and its extension to the Chilean porphyry copper province. TU Bergakademie Freiburg.

[3] Peru. Infomine.

[4] Bebbington, Anthony and Mark Williams. Water and Mining Conflicts in Peru. Mountain Research and Development.

[5] Bebbington, Anthony and Mark Williams. Water and Mining Conflicts in Peru. Mountain Research and Development.

Economic Context

Importance of mining to the national economy:In 2010 mining accounted for 5.2% of the GDP[1] and in 2007 accounted for 63% of export revenue.[2] Foreign investment in mining is seen as key to Peru’s high growth in recent years, to such an extent that in 2011 Bank of America predicted that a halt in new mining investment due to protest over Newmont’s Yanacocha mine could shave as much of 2.9 percentage point off Peru’s growth for the coming year.[3]

Unemployment levels: 6.8% (2011 est.)[4]

Raw materials as a percentage of exports: 77% of which copper alone forms 22% of total exports.[5]



[1] Country Profile: Peru. US State Department.

[2] Peru’s Mineral Wealth and Woes. Council on Foreign Relations.

[3] Peru Mining Protests May Curb GDP Growth, Bank of America Says. Bloomberg.

[4] Peru. CIA World Factbook.

[5] Peru at a glance. The World Bank.

Political Context

Brief political overview: 2011 saw Peru’s first democratically elected leftist president, Ollanta Humala, take power, beating his challenger, the daughter of former president Alberto Fujimori, on a platform of anti-poverty measures and increased social spending.[1] Humala ran earlier in 2006 but was defeated in the second round in part due to fears among elites about the candidates close relationship to Venezuelan president Hugo Chavez.[2] In his second run for office Humala presented himself as a moderate leftist, toning down his rhetoric and adopting a more conciliatory position to foreign investors and national elites.[3] [4] Indigenous groups in the poor south of the company were key in bringing about President’s Humala, however, many of these communities find themselves in conflict with the same mining companies the president pledged to support.[5] Increasingly though it would seem as if President Humala has decided to side with the mining companies as evidenced by his decision in December of 2011 to declare a state of emergency in the Cajamarca region to silence protest by local groups opposed to Newmont’s controversial Yanancocha mine.[6]

Corruption (as measured out of 10 by Transparency International’s Corruption Perceptions Index): 3.4[7]

Mining code, legal precedents for mining: Peru’s current mining code has its roots in the Mining Investment Promotion Law of 1991 which was used to amend the General Mining Law of 1981 and later affirmed in the Single Revised Text of the General Mining Law of 1992.[8] The changes took place as part of a series of structural adjustment programs enacted in the 1990’s as part of a neo-liberal reform to revive Peru’s lagging, state-run economy.[9] Prior to the reforms Peru’s mining industry had been government run, with the military government of Juan Velasco nationalising foreign mining projects in 1968.[10] The new laws reduced the role of the state to a purely administrative one, removed the discrimination between foreign and national capital and simplified taxation policy.[11] In 1998 submission of an Environmental Impact Assessment became a perquisite for mineral exploitation and in 2003 the last of Peru’s state owned mining projects was privatised.[12] Peru had shifted from a model in which the state was took an active role in the mining industry to one in which promotion of large scale development by foreign firms took precedent. Despite his populist rhetoric and his initial support by communities and groups opposed to large-scale foreign mining in the country, President Humala has done little to reform the government’s approach to mining projects. Upon taking office President Humala raised the corporate tax rate on mining companies and changed the way royalties were paid to see to it that more money was reinvested into local communities,[13] but has been reluctant to pursue more sweeping reforms, choosing to cultivate closer ties with foreign companies instead.[14]

Government attitude towards foreign mining companies: As has been discussed above the attitude towards foreign mining companies has been positive, ever since the reforms of the early 1990’s. So far it would seem as if President Humala’s government represents a continuity rather than a break with that tradition, with his limited reforms as well as his decision to declare a state of emergency to suppress anti-mining protests in the Cajamarca region suggesting he will continue to side with the companies when conflicts with local communities appear.



[1]Ollanta Humala’s win is a promise to Peru’s poor. The Guardian.

[2] Disgraced leader beats ex-soldier in Peruvian presidential election.The Guardian.

[3] The Brazilin Way: Will it work in Peru? The Economist.

[4] Mining and the man: A calm start for Humala. The Economist.

[5] Business as usual: Peru’s new president leaps to the right. The New Internationalist.

[6] Ibid.

[7] Corruption Perceptions Index 2011. Transparency International.

[8]

[9]

[10] Bastida, Elizabeth, Ricardo Irarrázabal and Ricardo Labó. Mining Investment and Policy Developments: Argentina, Chile and Peru. University of Dundee.

[11] Ibid.

[12] Ibid.

[13] Presidente Humala promulga tres leyes tributarias sobre la actividad minera. La Republica.

[14] Ollanta Humala establece condiciones para la explotación minera en el Perú. La Republica.

Social Context

Important social movements: Alongside, and often tied to the indigenous movement in Peru, the movement to oppose large-scale foreign mining has been one of the most important to emerge in recent years. Incorporating both small scale community groups, indigenous groups, national organisations such as Cooperacción and Alternativas al Extractivismo and international NGO’s like No a la Mina, the movement to impose large-scale mining is well developed and sophisticated. Through the work of these groups the plight of communities affected by large-scale mining projects has reached the national consciousness, with a National March for Water, starting on Feburary 2nd, 2012 in Cajamarca (site of the Yanacocha mining conflict) and crossing the country to raise awareness and pressure the government into acting.[1] For more information on individual community groups see the Conflicts Page: Peru.

Civil society: Peru has a vibrant civil society with a number of different groups mobilising around indigenous, environmental, and human rights issues. Key in part to this growth had been the introduction of the Defensoría del Pueblo (People’s Ombudsman) in 1996.[2] Created to deal with human rights abuses and instances of racial discrimination, the Ombudsman, widely trusted by the public, documents social conflict in the country and advocates for the protection of citizen rights.[3] The Ombudsman has been particularly effective in profiling social conflicts due to mining or water issues, which account for a significant portion of total conflicts.[4] In recent years a number of well organised, national groups like Red Muqui and Cooperaccion have emerged looking at issues related to mining, as well as a number of smaller local movements [See Conflicts Page: Peru]. Indigenous groups such as the Interethnic Association for the Development of the Peruvian Rainforest have also been important in opposing extrcativism and advocating for indigenous rights. [5]

General popularity of/opposition to mining: No reliable data exists on the popularity of mining in the country as a whole, though the national nature of anti-mining protests suggest that there are a large number of people opposed to foreign mining projects in the country. In communities affected by these projects, opposition is often widespread and vocal.



[1] La “marcha nacional del agua” llegó a Lima. No a la Mina.

[2] Peru: The Peruvian human rights ombudsman (Defensoría del Pueblo) and racial discrimination. Centre for Research on Inequality,  Human Security and Ethnicity.

[3] Ibid.

[4] Conflictos por agua y mineros por agua. Red Muqui.

[5] ¿Cómo estamos organizados? AIDESEP.