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Peru: Challenges of local development in mining regions

Émilie Lemieux

For the past two decades, Peru has been enforcing a rigorous program to liberalize its economy and open its markets to foreign direct investment that has been particularly profitable for the mining sector. The free trade agreement between Canada and Peru, which came into force in August 2009, grants privileged access to Canadian mining exploration and exploitation companies, many of which already invest in the country. Through their social responsibility policies, mining companies are looking to demonstrate that the industry is able to support the development of Peruvian society, where socio-economic inequalities persist, particularly in remote areas. Nevertheless, although these companies are expanding these social initiatives, they are struggling to fuel sustainable development in those regions affected by their activities. The lessons learned from these recent experiences should enable mining companies to rethink their approach in order to prioritize project sustainability and better integration of local actors.  

There are many quite divergent definitions of corporate social responsibility (CSR); one view defines it as a voluntary mechanism that makes it possible to raise the social and environmental standards to which companies must adhere. According to Alejandro Sánchez, director of public relations at the Lagunas Norte mine, owned by the Canadian mining giant Barrick Gold and located in the Peruvian department of La Libertad, mining activity has everything to do with development. “The concept of corporate social responsibility aims to ensure that the profits generated by mines benefit everyone,” says Sánchez.

In Peru, one of the key factors affecting local and regional development is the debate regarding mechanisms for the redistribution of wealth generated by mining activity. Thirty-nine mining companies established in Peru, including Barrick Gold, participate in a general voluntary contributions program known as “aporte voluntario.” The program was established in December 2006 through collaboration between the Peruvian government and the mining sector. By integrating the aporte voluntario into their social responsibility policies, companies decide to contribute —on a voluntary basis— between one and 3.75 per cent of their profits after taxes to development projects in the specific region where they are involved. 

These voluntary contributions are added to the mining royalties transferred to the provinces through the “canon minero,” a central-government mechanism that redistributes 50 per cent of income and other taxes paid by extractive industries to the localities from which the non-renewable resources are extracted. The canon minero is required by law and is an obligatory tax, whereas the aporte voluntario is subject to mineral price trends; the amount contributed through the former depends on the profits that the company incurs during the current year.

With the aporte voluntario, companies have control over their social involvement without having to abide by an external evaluation, a fact that worries civil society organizations that focus on mining issues. “As these resources are not managed by the Peruvian government, mining companies direct their actions based on their own interests,” observes José de Echave, director of the Collective Rights and Extractive Industries Program at CooperAcción, a Peruvian NGO that supports local actors affected by mining. 

In order to carry out their social projects, the companies hire community development experts. Their approach to becoming involved in health, nutrition or education consists in forming strategic alliances with experienced NGOs for project development and implementation. Therefore, companies most often work with non-local NGOs rather than directly with relevant actors and authorities in the community. “There is no co-ordination with regional social actors to initiate local development,” admits Sánchez. Therefore, mines work vertically —collaborating with external organizations rather than with relevant local actors— to design and implement projects in the communities concerned. Most of these initiatives have short-term objectives, a current limitation of CSR efforts in Peru. Moreover, these initiatives are at times carried out in parallel with other development efforts, duplicating instead of reinforcing existing efforts.  

Located in the department of Ancash, the company Antamina, which operates the world’s largest combined brass and zinc mine, of which a share of the international interest is Canadian, contributes 3.75 per cent of its profits to the aporte voluntario mechanism. Gonzalo Quijandrilla, director of communications at Antamina, admits that the project Ally Micuy that is funded by the mine to reduce chronic child malnutrition does not directly involve the participation of either Peru’s Ministry of Health or Ministry of Women and Social Development. Therefore, the personnel from local health institutions does not play a leadership role in these projects, as all work related to awareness-raising and supervision is the responsibility of the mining company’s personnel or that of the NGO carrying out the project. An unintended consequence is often that the country’s institutions, such as the Ministry of Health, are able to avoid social responsibilities that they would normally assume by law. According to Quijandrilla, mining companies aim their development initiatives directly at the target populations because they consider public and governmental institutions to be fragile. The personnel of Antamina receives group consultancy training to help set the direction for their work in CSR. “We are presented with the actors we should work with at the local level, such as the mayor of the town and community groups. But often, these institutions are not representative of the population,” says Quijandrilla.

Yet, the fact that local actors are left out of the leadership process of development initiatives established by the mining companies compromises their perceived legitimacy and impact as well as sustainability. “All actors must contribute to development in mining regions,” says Antonio Jesús Limas López, budget manager of the municipality of Huari, located in Antamina’s zone of involvement. “The challenge we face is that of restructuring the way we work and orienting our actions toward a shared vision of sustainable development, in order to improve the quality of life of the population from a socio-economic point of view.” 

The link between mining activity and development is not easy to determine. There is a need and opportunity to channel the experiences and lessons learned in recent years into prioritizing development that springs from local needs and interests, encouraging the development of a better organized civil society, capable of negotiating mutual benefits with the private sector. blue square 

Émilie Lemieux is recipient of the 2009-2010 Gordon Global Fellowship from the Walter and Duncan Gordon Foundation, an independent Canadian organization dedicated to the development of sound and innovative public policies. She worked for a few years as a volunteer in Peru, with the Canadian NGO SUCO.

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