Preventing and managing social conflict in Peru (Beyond Borders – July 2, 2013)

Beyond Borders is published by Barrick Gold Corporation:

Peru has one of the world’s fastest-growing economies, driven largely by its mineral wealth and the expansion of the mining industry. Today, most major global mining companies have operations in the country, including Barrick, BHP-Billiton, Newmont, Freeport McMoran, Glencore Xstrata and others.

Increased mining sector investment and revenues have provided significant benefits to Peru’s national economy. The sector’s contribution to total government revenue averaged 14 percent between 2000 and 2010. In 2010 alone, Peru mined $18 billion worth of minerals, accounting for 12 percent of the country’s gross domestic product. The mining boom has contributed to a marked reduction in Peru’s poverty rate to about 28 percent in 2011 from 42 percent five years earlier, according to The World Bank.

Barrick has been operating in Peru for the past 15 years and has two mines in northern Peru — Pierina and Lagunas Norte. The contribution of these operations to economic prosperity is significant. In 2012, Barrick paid nearly $400 million in taxes and royalties in Peru, and purchased approximately $340 million in goods and services in the country. Ninety-nine percent of the 1,200 Barrick employees who work at Pierina and Lagunas Norte are Peruvian nationals.

“Peru is an attractive and highly rewarding place to do business,” says Igor Gonzales, Barrick’s newly retired Chief Operating Officer and a Peruvian. “There are also challenges. Barrick and many of our industry peers recognize it is in our long-term interest to promote further economic growth and stability in Peru.”

Social conflicts

Despite economic gains in Peru, ongoing social conflicts are occurring across the country. The root causes of these conflicts involve a complex mix of social, economic, political and environmental factors.

In rural Peru, where the poverty rate remains more than 50 percent in many communities, local residents expect nearby mining operations to generate significant improvements in their standard of living. Tensions can arise in communities when residents believe they are not receiving their fair share of resource wealth. Concern about potential mining-related impacts on the environment, particularly on water, can also be a source of tension. These tensions can sometimes escalate into full-blown social conflicts that result in work stoppages, project delays and, in some cases, violent confrontations.

As of February, there were 120 active conflicts across Peru, of which 70 percent were related to mining, according to the Peru Ombudsman’s Office. State institutions have documented an increase in these conflicts over the past four years.

Last year, Peruvian President Ollanta Humala called for mediation to avert social conflicts between communities and companies nationwide over royalties, water and other issues. The President also pledged to increase social spending for the poor to share the benefits of greater economic prosperity and reduce social conflicts.

In its recent article, “Peru’s Social Conflict Is About More Than Mining,” the Fraser Institute, a Canadian-based think tank, noted that mining opponents often frame the choice for communities as a choice between water and gold. “While communities may have legitimate concerns over water quality and usage, allegations of pollution have also become politicized,” the article said, citing research conducted by the World Economic Forum.

Gonzales says that some opposition to mining is rooted in an ideological aversion to all mining activity. However, he adds that the relationship between most mining companies and communities in Peru is not a zero-sum game, as is often portrayed by mining opponents. “We know that our operations contribute significantly to local economic development. Our approach is based on creating mutually beneficial relationships and working collaboratively with all stakeholders.”

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