Gold, Copper and Neocolonialism in Peru

As in any number of other countries, mining remains a most controversial industry in Latin America. If you want an industry which has every possible controversy going with it--pollution issues, labour issues, domestic revenue issues and foreign exploitation issues among others--look no further. It is not encouraging that the issues remain the same after all these years: Being unable to create local mining concerns of requisite sophistication, it remains the case that foreign mining concerns still possess the much-needed expertise to bring extractive industries' output to the world market.

This situation is playing out in Peru as we speak. Listening to the industry's critics and following recent events, it's as if the conquistadors and their rapacious habits never left the Cajamarca region:

North of this sprawling capital city [of Lima] and high in the Andes Mountains lies Cajamarca, a region well-known in Peru for two main reasons: the conquest of the Inca Empire by Spain’s Francisco Pizarro and the area’s extraordinary wealth of natural resources. Here, Colorado-based Newmont Mining Corp. has been operating Latin America’s largest gold mine, Yanacocha, since 1993.

The mine is nearing the end of its life and Newmont wants to develop the nearby $4.8 billion Minas Conga copper and gold project, which will be the biggest foreign investment in Peru’s history. But the project has run into intense local opposition and five people were killed during recent protests, causing the government to impose a state of emergency.

Opponents, led by Cajamarca’s president, contend that the project will harm scarce water resources in the area. Their position has clashed with that of Peruvian President Ollanta Humala, who officially announced his support for Minas Conga in late June. This conflict has become a high-stakes test of how Peru treats foreign investment. The country has more than $50 billion in mining investments in the pipeline and taxes from mining are a key source of government revenue.

The odd thing as followers of Latin American politics are concerned will point out is that Humala originally styled himself as a leftist in the Hugo Chavez mould. Yet, upon ascending to the presidency, he has been quite the opposite in liberalizing opportunities for foreign investment. Is he the Peruvian Fernando Henrique Cardoso? His opponents wish otherwise and desire a Hugo-alike according to some--especially in light of the coloured history of foreign miners operating in the region:

[Miguel] Santillana, an analyst at the Peru Institute who has also worked as a consultant for foreign mining companies said there was bad blood from the beginning between the local community and the Yanacocha mine operators, as people in Cajamarca tend to associate mining with abuse of resources. The current conflict over Minas Conga has much more to do with politics than environmental concerns and it’s an effort to redefine the country’s economic model, according to Santillana, who believes that political leaders in Cajamarca want to weaken Humala and redirect Peru toward left-wing policies like those pursued by Ecuador, Venezuela and Bolivia.

In late June, Newmont said in a statement that before it begins the construction of Minas Conga mining facilities, it will build water reservoirs that will benefit the local community. But this commitment failed to appease the project’s opponents and the conflict has escalated.

More recently, outright hostility has broken out as the regional president has told the foreign miners to pack up and leave--clearly in contrast to the desires of the central government:

The president of the Peruvian region of Cajamarca, Gregorio Santos, said there is no use continuing talks with two Roman Catholic priests trying to reach a peaceful solution to the dispute over the Minas Conga copper and gold project[...]between those who oppose the Minas Conga project and the company, which has been supported by the government of President Ollanta Humala.

"The facilitators have already completed their tasks," Mr. Santos said. "The facilitators aren't going to make any decisions. The executive branch already knows the position of the people of Cajamarca." Mr. Santos has been one of the main leaders of the opposition and the protests against the mining project in the northern region of Cajamarca. 

Call it a rebellion over mining, but for now, the state of emergency declared by the central government in this region continues.