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Peru - Beggar on a Throne of Gold |
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By Milagros Salazar*
Just
two of the 27 major mining companies operating in Peru under special
contracts are paying royalties. An announcement is expected soon
about "voluntary contributions" for social programs.
LIMA - Mining companies operating in Peru are
seeing increasing millions in profits as a result of the surge in
international prices for metals, but few are contributing what is
needed to alleviate the poverty of the people living in mining areas.
President Alan García, who took office Jul. 28, promised during
his electoral campaign to renegotiate the contracts in the mining
industry. But now he appears willing to accept "voluntary contributions"
to social investment, with sums as yet undefined.
In the northwestern Peruvian region of Cajamarca is Latin America's
leading gold mine, run by the Yanacocha company in partnership with
the U.S.-based Newmont and Peru's Buenaventura. But the paradox
is that this booming mine is located in an area where 74.2 percent
of the population lives in poverty.
The world's fifth producer of gold, second in silver, third in copper
and zinc, and fourth in lead, "Peru is a beggar seated on a throne
of gold," according to a popular local saying. Peru is among the
countries with greatest poverty in the region.
Nationwide, 51 percent of Peru's 27 million people are poor, and
24 percent live in extreme poverty, according to the national institute
of statistics, INEI.
In the last two years, prices have shot up: copper 111 percent,
gold 42.5 percent, and silver 65.5 percent. But the increased revenues
for the companies did not do much for the communities around the
mines. Local residents complain that mining operations are contaminating
their rivers and lakes, and they demand that the government step
in to force the companies to answer for the harm caused to the environment.
In the southern city of Cusco, where the British-Australian company
BHP Billiton Tintaya operates (the third leading copper producer
in Peru, after Antamina and the U.S.-based Southern Peru), 59.2
percent of the 1.17 million residents are poor, according to INEI.
In the western region of Ancash, despite the gold produced by the
Canadian firm Barrick Gold, 55.3 percent of the population is poor,
and 23.4 percent is extremely poor.
In addition to the price hikes for gold, silver and copper, in the
last two years, according to the economic news agency Bloomberg,
the prices have increased for zinc by 150 percent, lead by 36.5
percent and tin by 15 percent.
To begin to resolve these inequalities, President García had promised
to renegotiate the mining contracts and to implement a tax on the
companies' profits.
But the issue suffered a lukewarm response in the recently begun
negotiations. The head of the Council of Ministers, Jorge del Castillo,
confirmed for Tierramérica that only a "voluntary contribution"
from the mines was deemed acceptable, because there are contracts
of "juridical stability" signed during the Alberto Fujimori government
(1990-2000), some of which are still valid.
Those contracts froze the payment of taxes. And, according to the
mining executives, the obligation to pay royalties -- recently established
in 2004 -- should be exonerated because they should be considered
a form of taxation.
Nevertheless, that year the Constitutional Tribunal ruled that the
royalties are compensation for exploiting the country's non-renewable
resources, and, as such, should be paid.
In 2005 alone, it is estimated that the government failed to receive
royalties totaling nearly 158 million dollars because the mining
companies claimed legal refuge in the stability contracts, according
to Tierramérica's conversations with former presidential candidate
for the Socialist Party, Javier Diez Canseco, and experts from the
consortium of non-governmental organizations, Propuesta Ciudadana.
The Ministry of Energy and Mining says that 25 of the 27 major mining
companies with juridical stability contracts do not pay royalties.
Among them are Yanacocha, BHP Billiton Tintaya (which is already
paying a voluntary contribution based on its profits), Barrick Gold,
Cerro Verde and Antamina.
There are another 40 companies, most of them smaller, that do pay
royalties. The big mining firms Buenaventura, Shougang and Southern
Peru are paying -- their stability contracts expired in 2005.
According to officials, from 1996 to 2002 the mining companies paid
about 682 million dollars in income taxes.
Between 2002 and 2006, Yanacocha saw its net profits increase 225
percent, according to the National Oversight Commission of Stock
Companies. In the first half of this year, profits shot up from
210 million dollars to 681.5 million.
Unofficial data indicate that the company may have offered the government
a voluntary contribution of a relatively small sum of 20 million
dollars a year.
Adding together the net profits of the five major foreign mining
companies so far in 2006, the total reaches 2.76 billion dollars.
But ministerial chief Jorge del Castillo said that the "juridical
stability cannot be threatened and a middle ground must be reached
in the negotiations with the companies."
The president of the National Society of Mining, Petroleum and Energy,
Carlos del Solar, told Tierramérica that in the next few days the
executives will present a proposal for the voluntary contribution,
to be announced publicly Aug. 24 by Del Castillo in his first address
to Congress.
"We are aware of the great social pressure existing today, but the
business sector has also carried out many public works, and cannot
solve everything," said Del Solar.
For the representative of the Mining Society and the general manager
of the U.S.-based Hunt Oil of Peru, one of the operators of the
multi-million-dollar Camisea natural gas project, the government
should better manage the resources it obtains in order to mitigate
social discontent.
He was alluding to the approximately 300 million dollars that were
frozen in 2005 in bank accounts in the name of regional and local
governments, according to the Ministry of Economy.
The mining companies and the national government charge that this
money was not invested because the local and regional authorities
could not support projects for carrying out public works. But those
governments, in turn, say that the National System for Public Investment
does not attend to their proposals with due speed.
Between 2001 and 2005, the contributions through fees and royalties
increased five-fold due to the hike in international prices for
metals. The Ministry of Economy estimates that in 2006 the regions
will see about one billion dollars through this channel.
Amidst the bonanza numbers and the negotiations, conflicts between
the mining sector and the local communities are heating up. Earlier
this month a peasant farmer died in the town of Combayo in a clash
with the police and the Yanacocha security guards. His death is
being investigated. The rural workers of the area have declared
themselves on war footing.
* Milagros Salazar is a Tierramérica contributor.
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