Spectre of rising violence haunts Peruvian mining

Spectre of rising violence haunts Peruvian mining

By Hal Weitzman,

August 12 2005

President Alejandro Toledo and his Peruvian cabinet gathered for a gala lunch last month for a bout of back-slapping. The administration was celebrating an achievement: annual exports had doubled to more than $14bn (€11bn, £8bn) since it took office in July 2001.

The economy has been carefully managed by a team of technocrats, but the export boom may have less to do with policy than with the high price of minerals, driven by China's hunger. As aproducer of copper, gold, silver, zinc and molybdenum, Peru has benefited: the mining sector accounts for half of exports.

But the figures hide a trend for the industry in Peru: rising violence directed at mining and exploration companies that threatens to alienate the foreign investors whose input is needed to fuel growth.

The latest target is Monterrico Metals, a British resource development company that is developing Rio Blanco, 880km north-west of Lima in a farming region on the Ecuadorean border. The project is expected to become Peru's second biggest copper mine when it opens in 2008.

In recent weeks the site has come under attack from protesters who say mining will contaminate water supplies to farms. One demonstrator died in clashes with police last week. Farmers kidnapped three of Monterrico's Peruvian employees in the area last weekend, one of whom has still not been released.

The conflict at Rio Blanco follows several similar confrontations. In May, BHP Billiton, the world's biggest diversified miner, suspended operations for a month at its Tintaya mine in southern Peru when protesters raided the site, demanding the company spend more on improving local roads.

Last September Newmont, the US miner, scrapped a planned expansion of Yanacocha, the world's most productive gold mine, in the northern highlands, after demonstrators alleging water contamination besieged the site for two weeks, forcing Newmont to helicopter in shift workers.

There have been lower-profile stand-offs: the government reported 12 serious conflicts between mining companies and communities last month alone.

The government says activists in the communist Patria Roja party, radical local clerics and leftwing campaigning groups have whipped up sentiment against Rio Blanco. The police say opium producers in the region encourage violence to prevent the state taking a more active role there. The area is thought to be a centre of poppy cultivation.

Many in the industry blame the government for failing to provide security at mines or the infrastructure necessary for development. Andrew Bristow, Monterrico's operations manager, says that the authorities have been helpful since the conflict began, but that the government has a "very poor presence" in the region. "It's almost a forgotten corner of Peru," he says.

José de Echave, of CooperAcción, a Peruvian sustainable development organisation supported by Christian Aid, points to communities' lack of confidence both in mining companies and in the government's ability to oversee their activity.

"The ministry of mining is responsible for regulating the environmental impact of the industry but it also has to attract foreign investment," he says. "We need a more independent body, like the Environmental Protection Agency in the US."

Part of the problem is big mining's record. "There is a history of poorly run operations in Peru," says Mr Bristow. Monterrico may be suffering from being near Tambogrande, a project aborted by Manhattan Minerals, a Canadian company that suffered from poor community relations.