Major new report on combating corruption in mining contracts

10 December 2017

Transparency International (TI) has just launched a major report on corruption risks and how to combat them during the early stages of developing a mine contract. Also published is a global snapshot which is effectively a summary. The work is part of TI’s ‘Mining for Sustainable Development’ project, led by TI Australia with the participation of 18 national chapters including Peru. The Phase One report was funded by the BHP Billiton Foundation and the Australian government.

A key motif is that vulnerability to corruption exists at the very earliest stages of the negotiation over a project, and that it is important to stop it getting a hold “before ground is even broken”.

The conclusions are developed in 100 pages of text.

Four of the top seven corruption risks mention Peru specifically (figure 4, page 16), namely:

  • That community leaders negotiating with a mining company will not represent community members’ interests

  • That there is no verification of the accuracy or truthfulness of environmental impact assessment (EIA) reports

  • That mining laws have been, or will be, if reform is planned, written to favour private interests before the public interest

  • Assuming consultation with communities or landholders is required, that negotiations for landholder or community agreements can be manipulated

Peru is not specifically mentioned (figure 4, page 16) for three others:

  • That criteria for awarding licences etc. will not be publicly knowable

  • That applicants for licences etc. will be controlled by undeclared beneficial owners

  • That in practice there is no due diligence on applicants’ claims regarding their capacity and financial resources

The study identifies six key questions (page 17), and here we note here where Peru features:

1. Who benefits from mining approval decisions?

a. Peru is noted to have taken steps to reveal beneficial ownership (page 25).

b. There is danger from conflicts of interest with ‘revolving doors’ of staff interchange between the public and private sectors and from short-term contracts in the public service (page 26).

2. How ethical and fair is the process for opening land to mining activity?

3. How fair and transparent is the licensing process?
a. Peru is mentioned with regard to stabilisation agreements which can freeze fiscal conditions on projects (page 43).

4. Who gets the rights to mine?

5. How accountable are companies for their environmental and social impacts (ESIA)?
a. Peru is mentioned as being slow to make available documents for the submission, processing and publication of ESIA documents (page 68).

6. How meaningful is community consultation?
a. Peru is noted to lack good information on indigenous and tribal groups and their lands in order for Free Prior and Informed Consent (FPIC) duty to be triggered (page 79).
b. It is also noted that the manipulation of these groups by companies through private agreements is an area of concern (page 79).
c. It is also noted that there is a perceived lack of legitimacy of the ESIA process that has been a major cause of social conflict (page 80).
d. Peru is noted to have positive measures in place to improve the conflicts over the ESIA processes.

In Phase Two the national chapters will work with national actors on preventative action.

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