The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Peru’s mining money: Something isn’t working

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Josefa Zambrano (pictured) and her husband Augustin are subsistence farmers in Bajo Porcón, Peru in the Andes Mountains. She is pictured here in her barn. The Yanacocha gold mine is currently operating nearby above the city of Cajamarca, and farmers have taken action to try to protect Cerro Quilish, a small mountain that comprises the top of the watershed that supplies the Zambranos' farm and many others. Photo: Jessica Erickson / Oxfam America (Read more here: http://bit.ly/1kFXpF8.)

Does inequality in mining regions means it’s all about governance?

Peru has done spectacularly well in recent years in promoting economic growth. Over the last ten years, growth has averaged 6% annually, among the highest rates in the region. That growth has helped drive down overall levels of poverty in the country by more than half according to estimates by the Peruvian government.

Yet in the country’s Andean highlands and Amazonian basin, poverty has barely budged, and by some measures is increasing. This is particularly evident in mining-affected areas, which under Peruvian law receive large amounts of revenue directly transferred to local government coffers. One area, San Marcos, last year received $50 million in mining revenues yet has no paved roads, hospital or water treatment facilities. The poorest region in the country, Cajamarca province, is home to Latin America’s largest gold-mine and site of more than 20-years of World Bank-backed mining investment. Peru’s largest mining project, Antamina, is located in Ancash province, where mining money has created a “mafia state” according to The Economist, complete with Colombia-style political assassinations. What’s going on here?

Peru’s problems stem from a complex mix of history, discrimination, corruption, and lack of government capacity. Mining – and the problems it engenders – is therefore woven into the national culture.  Peru’s modern economic elite evolved around mining — originally the mining of guano (petrified bird crap), but later evolving into industrial production of gold and copper. It’s worth remembering that Spanish explorer Francisco Pizarro, who famously brought down the Inca Empire in an epic battle in Cajamarca, went to Peru in search of El Dorado – the lost city of gold.

Why wouldn’t Peruvians develop a deep sense of fatalism about how thing are? A Peruvian anthropologist friend of mine cited the current situation in Madre de Dios as an example, where the pristine Amazon rainforest there has been utterly devastated by informal miners. The government has only belatedly tried to do something about it, because according to my friend, everyone in upper reaches of government is getting money from these illegal mining operations. Even President Humala himself was accused of financing his presidential campaign with funds from illegal mining two weeks ago.  The Humala administration’s proposal of measures to weaken the authority of Peru’s environmental ministry to enforce mining regulations last week has raised further doubts about the Peruvian government’s commitment to making positive changes in the mining sector.

There is thus a sense in mining communities that nothing can be changed and that they simply aren’t going to benefit from Peru’s mineral wealth. Local government and mining company officials sometimes play into this by trying to buy off communities with “chelas,” slang for bottles of beer. Do they hope people will be too inebriated to demand better governance and better delivery of essential services?

Regardless, there is growing consciousness among these communities. Violent protests around extractive operations and the opening up of territories and destruction of natural resources – as in the Bagua massacre in 2009 or the shooting of protestors in Espinar in 2012—suggest that frustrations have been rising to a boiling point over the last few years.

A key challenge though remains how to channel frustration and concern about impacts into constructive demands, not only for immediate compensatory measures, but for better governance. Our Oxfam colleagues in Peru have been thinking about this “chelas” problem—how do we encourage people say “no” to chelas and “” to education, health care, infrastructure, and agriculture?? This is all about creating demand that the government do its job better, and not simply accepting things as they are, an issue we first began looking at several years ago with regard to how sizable natural gas revenues produced by Peru’s Camisea project were being (mis)used at the local level.

Changing these deeply ingrained patterns of political relationships that are so weighted by history and culture is not easy. But new tools and technology may hold some of the keys. Advances in transparency and respect for the right of free, prior and informed consent will also help strengthen the position of communities vis-à-vis governments and corporations.

Citizen engagement, we believe, is another essential element of the equation – part of creating what we call “active citizens.” Informing people about what they can demand and expect from their governments is an essential piece of the puzzle and one on which we expect to focus on in a select group of communities across the country. In July Propuesta Ciudadana, an Oxfam partner, will produce new research describing a more positive example in of better local governance in San Martin province – aided by transparency and participation. Examples like this suggest that by helping create a better understanding of what development is – or can be – we can help contribute to a positive chain reaction that will produce better results on poverty in Peru’s rural areas.

To learn more, please check out Oxfam’s research backgrounder, Summary of Reports on Mining and Development in the Province of Espinar, Peru.

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