Background on Mining in EspinarOne of the major mining projects in the Espinar region over the past three decades has been the copper mine at Tintaya. Over the years, the project has been the subject of much controversy. One major campaign began in 2000 when nearby communities sought reassurances from BHP Billiton (then operator of Tintaya) that it would maintain high environmental standards and make significant contributions to local development. In the following months, communities repeatedly called for an agreement which would detail the firm’s specific commitments in these areas. The campaign was largely ignored by the company until May 2003 when frustrated locals launched demonstrations against the mine, bringing the region to a standstill. This appeared to pressure the firm into action and, three months later, an agreement was signed. Amongst other pledges in the document, known as Convenio Marco, was a commitment by BHP Billiton to contribute “up to 3%” of profits to local development projects. On purchasing the concession in 2006, Xstrata took over this agreement in a bid to retain the project’s ‘social license’. Since this date Xstrata has, under the terms of the convenio, made voluntary contributions of US$ 55m (£35m) to local development initiatives. The firm also appears to have made a number of other positive contributions. For example, it has made concerted efforts to employ Peruvian nationals in its project and pays, according to its 2011 social and environmental management report, around US$ 85m (£55m) a year in taxes to the central government.
An Outdated Agreement?At the heart of the dispute today is a disagreement over whether Convenio Marco continues to be valid. Broadly speaking, Xstrata believes it is, while the communities feel it is out-of-date and should be replaced. There are a number of reasons why locals feel the convenio needs to be renegotiated. Firstly, the original agreement was based on a negotiation process in which Xstrata was not even involved. The document has not been updated since 2003, not even to replace BHP Billiton’s name with that of its successor. Secondly, when the agreement was first signed the political context in the country was rather different and a number of relevant instruments did not then exist. For example, in 2003 no Environmental Ministry existed and the Prior Consultation Law had not been passed. Had these been in place at the original stage of negotiations, the communities say, they would have certainly had an impact on the content and monitoring of the agreement. Thirdly, locals argue that plans to close Tintaya this year and open a new mine at Antapaccay, a few kilometres south of Tintaya, fundamentally alter the nature of Xstrata’s operations in a way never envisaged by the convenio. To reflect the larger size of the new project, the community want the firm to increase its development contributions.
Financial AccountabilityGiven the agreement needs to be altered anyway to reflect the changes above, there is ample scope, the communities feel, for the new convenio to address other problematic areas of Xstrata’s community relations. In particular, locals hope a new agreement would make it easier for them to monitor the level of Xstrata contributions to the development fund and to assess the effectiveness of this expenditure. At the moment, it is somewhat complicated for Espinar residents to find out whether Xstrata has paid less than it should, not least because the wording in the agreement (“up to 3%” of profit) is highly ambiguous. Locals complain of difficulties in accessing data on Xstrata’s profits from Tintaya, without which they cannot know what percentage the firm does in fact contribute. More complex still are efforts to monitor disbursements from the fund. More than half of the development funds are administered directly either by Xstrata Tintaya or the Tintaya Foundation. Accordingly, local authorities have little oversight over the expenditure. Further, a recent internal review found that nearly 90% of all projects between 2004 and 2011 (i.e. under both BHP Billiton and Xstrata’s tenure) were missing at least one element of required financial documentation. Residents say this lack of transparency and external oversight may have contributed to the inefficiency of some of the development projects. Some of the more egregious examples of waste cited by local organisations include: a loss-making dairy plant whose products are not sold by any major Peruvian outlet, and a hospital in which little equipment functions and which is unable to treat seriously ill patients.
Environmental AspectsAnother issue of concern for some residents is the environmental question. Since 2010 community members near the mine site have complained of the increasing prevalence of premature deaths and birth defects among their livestock, as well as the depletion of fish stock from the rivers. A 2010 the National Centre for Occupational Health and the Protection of the Environment for Health reported that levels of arsenic and mercury in drinking water in Espinar exceeded the level permitted by Peruvian law and by the World Health Organisation. This was corroborated the following year by an independent study by a KielUniversity environmental engineer, who found elevated levels of metals in water and soil samples taken from seven nearby communities. The cause of the contamination has not yet been confirmed. Xstrata emphatically denies its activities are to blame, but many locals are loath to believe them. They have continued to call for the firm to facilitate further independent study into the source of the environmental problems.
Frustrated DialogueAll of the above issues (with the possible exception of the environmental concerns) appear to show the communities’ commitment to work with, rather than to reject, the mining project. This is an advantage not always enjoyed by mining firms in conflict with locals in Peru. Over the past few years, social movements in the region have on numerous occasions sought to reach a negotiated solution with Xstrata. However, the prevailing perception among Espinar’s residents is that representatives from the firm’s Peru branch have made little sincere effort to positively engage with them. More so than any other factor, it was this belief which most contributed to the decision to protest in late May. For a number of months prior to the demonstrations, the provincial government and social organisations had been complaining of the difficulties of dialogue with Xstrata staff in the region. They alleged the company had failed to respond to invitations for meetings called by the local government and communities. There was also an unfortunate incident, caught on camera, in which an Xstrata official referred to local social movement leader Moisés Ccamerccoa as “not very intelligent” and made insinuations about Mollohuanca’s “past political life”. Though Xstrata’s corporate team in Lima subsequently took corrective action, removing the official from their community relations team, this incident did not help engender positive dialogue between the groups. After making no advances with negotiations in Peru, a delegation of social movement leaders travelled, with the assistance of European NGOs, to Switzerland and the UK to meet with senior Xstrata officials. Despite some hopes that these meetings would bring fresh breakthroughs, this did not ultimately prove to be the case. This was one of the last major interactions between the community and the firm before the protests in late May.
After the StormAfter the initial crisis subsided (and Mayor Mollohuanca was released) the communities returned to talk of dialogue with the firm. In a positive advance on 21st June a new round of negotiations was initiated, featuring representatives from government ministries (environment, agriculture, energy and mines, health), provincial authorities, regional government and social movements. The move has injected a degree of optimism into a situation which was looking increasingly dim. If the talks do bring about a negotiated solution, the case may well provide lessons of how to bring some of the country’s other conflicts back from the brink. Nevertheless, one may still wonder why it took a crisis before locals were able to persuade both the firm and Lima-based authorities to take their concerns seriously. It appears the importance of early intervention in such cases is a lesson yet to be learned.
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