Extractives: a watch-list of concerns as prices pick up
3 February 2018
As mineral prices strengthen once again, international business analysts are ranking Peru high for the good economic returns they portend. One analyst describes Peru and Brazil as positioned to lead the pack in copper, with Peru the winner "owing to its number of high-value projects and a faster-growing mining industry value".
Anglo American sees Quellaveco (in Moquegua region) as its priority copper project, due to start production in March. The list of the six cheapest places in the world to mine gold includes Peru.
Though arguably good news, the price rise provides a propitious moment to underline, once again, the extreme vulnerabilities that many Peruvians face, above all among the country’s indigenous population, from extractive development in terms of livelihoods and human rights. It is good to see that in the Peruvian press and in NGO activity healthy attention is being paid right now to the challenges posed by renewed interest in extractives.
High on the list is water. Mining, as is well known, uses large quantities of water, and large companies have licences to use water in perpetuity in several of the drought-affected regions. La República last week gave prominence to the documentation by Ojo Público of the number of such licences (31) in the high-risk drought zones of Tacna, Moquegua, Lima, La Libertad and Lambayeque. Southern Copper used 50.5 billion litres of water in 2015 at its Cuajone and Toquepala installations. Although every new project still has to have its EIA approved (even where it has a licence), mining development can easily lead to conflict over water usage.
Then there is contamination, both of water and land, and the damage arising to health and the environment. Last week there was a meeting of a group formed in November of representatives from regions affected by toxic metal contamination. These include peoples at risk from oil production in Loreto (Cuninico and Cuatro Cuencas) and Amazonas (Chiriaco), and from metal mining in Cuzco (Espinar), Cajamarca (Hualgayoc), Junín (La Oroya), Lima (San Mateo), Pasco (Cerro de Pasco) and Puno. The group is now planning regional encounters, to which they will seek to convene both victims of contamination and local authorities. They are demanding to know what the public health response is in prevention and treatment, and are calling for a multi-sectoral commission to be presided over by the Council of Ministers.
Another important issue is the use of social funds, known as Obras por Impuestos, that companies control and which replace tax obligations. Since 2006, about US$522 million dollars have been invested in this way. As well as fostering corporate clientelism, the scheme runs the risk of causing a serious erosion of the state's role as revenues pick up again.
Finally, there is the eternal issue of illegal mining, above all of gold. As we reported last week, this has been given welcome prominence by the Pope's visit (his description of gold as 'a false god' has entered the discourse) and many articles record the dangers arising from mercury poisoning and other environmental and health damage, not to mention the damage from effective slavery and abuse as well as by the undermining of the rule of law. See the Miami Herald for its latest denunciation (28 January) of the impact of US demand
All these issues need to be kept firmly on the public agenda if the next boom in extractives is to avoid doing the damage of the last.