With investment rates in extractive industries falling, what is the best way to reverse this trend? Surely rescinding existing environmental legislation is not the way to do it. But this is the path on which the Humala administration – under constant lobbying pressure from the investor community – appears resolved to pursue. It is a path that will further worsen already frayed relations between companies and local communities and could render Peru even more at the mercy of climate change.
The pace of economic expansion has been slowing since the beginning of this year. Month-on-month in May, growth was down to 1.8%. As a result, the central bank has been obliged to reduce substantially its previously over-optimistic growth forecasts for this year. Rather than the 5.5% it was confidently predicting only a few months back, it now sees the economy expanding by just over 4%, the lowest since 2009. Finance Minister Luis Castilla recently said that he expected GDP to grow this year between 3.5% and 4.5%.
In order to reverse this downward trend, the government has come up with a series of proposals it believes will boost investment, especially in the all-important extractive sector (mining and hydrocarbons). These involve steps that will significantly lower environmental controls, supposedly making it easier and quicker for investment decisions to be made. Among them are steps to reduce the time taken for receiving comments on Environmental Impact Assessment (EIAs), lower the fines currently payable by those firms that infringe environmental controls, and place decisions about setting up environmental protection zones in the hands of the full cabinet (and not just the environment ministry).
Environmental legislation in Peru has long been weak and deficient. The very fact that there is an environment ministry at all was largely the consequence of external pressures from the United States. Set up only in 2008, the ministry has lacked teeth. Those in charge, Antonio Brack under Alan García and Manuel Pulgar Vidal under Humala, have sought to defend their corner, but hopes of it producing a national blueprint for environmental protection have fallen foul of pressures from the politically-influential investor community and their main spokesmen at the cabinet level (the minister of economy and finance and the minister of energy mines).
The environmental cause has lacked such organised backing in society. Those that have fought for improving environmental observance have been limited largely to a handful of ‘green’ NGOs. Their influence in Congress, however, has been limited mainly to a few leftward-leaning legislators. Those who have argued in favour of better environmental protection have been accused of harbouring extremist ideologies designed to sabotage Peru’s growth record over the last 15 years. Environmentalism has been depicted by some as unpatriotic: García famously derided environmentalists as behaving like a dog in the manger who ‘neither eat or allow others to do so’. Though Humala was elected on promises to protect the environment, his government’s policies have followed faithfully in García’s footprints.
With Peru hosting the United Nations’ COP 20 summit meeting this year, its poor environmental record will come under further international scrutiny. In particular, given the arid climate that prevails along the coast and in the Andean region, use of scant water resources by mining operations (often at the cost of neighbouring agricultural communities) highlights the need for agreed policies and enforcement mechanisms over the use of water. Constant protests by such communities underline the fact that mining companies that fail to respect basic environmental rules have repeatedly caused conflicts that imperil their own businesses. In the Amazon jungle, persistent denunciations by indigenous communities about oil spills and other disruptive effects of hydrocarbons exploration and extraction show that a lack of concern for the environment threatens further to poison relations with oil and gas companies.
What Peru needs is agreement on basic procedures that protect people as well as facilitating investment. This is not an ‘either-or’ choice. Without such an accord, the opposition of local people to all sorts of extractive development can only grow more bitter and violent. Perhaps the COP 20 meeting may provide a timely moment to engage in the quest for such an agenda. But government will need to listen to others than just the representatives of the mining and oil industries. In its last two years in office, the Humala government may yet redeem its initial promises on enhancing environmental protection; but judging by the president’s speech on July 28, the omens are not good.