The Costs of Mining-led Development in Peru
Like other Latin American countries, the 1990s saw Peru implementing policies designed to attract investment into mining. But along with economic development, it caused unacknowledged consequences for the economy and environment. Today, the model of extraction and the foreign capital invested in it reproduce the costs of mining-led development.
On the 10th of March, Peru approved the final changes for the development of Ariana, a copper and zinc mine located in the region of Junín. The project is run by a subsidiary of Barclay’s Southern Peaks Mining (SPM), which expects to start commercial operations in 2021. Comprising a USD 125 million investment for the first phase of its construction, it will boast a processing plant with a capacity of 3,000 tons of minerals per day. The multinational has a record of increasing the lifetime of their mines, thus extending the employment it brings and justifying the fixed environmental cost through larger yield. However, this didn’t stop the project from generating controversy. Ariana lies next to the trans-Andean tunnel which draws water from the lake of Marcapomacocha to transport it to the Rimac river, and finally deliver Lima and Callao their water supply. This raised a red flag given SPM’s past in the region, like when one of its other subsidiaries polluted the Moche river by filtering in acidic waters. In anticipation, two members of congress and NGO CooperAcción raised a warning about the risk that Ariana’s toxic residues could similarly pollute the crucial tunnel.
This conflict is just a fraction of the problems associated with Peru’s growing mining industry. Today, the country is host to 6% of the world’s investment in mining explorations and is one of the biggest producers of silver, copper, and gold, amongst other metals. Yet by 2021 it wants to increase their share to 8%. To reach such numbers, the Andean country could pursue short-sighted policies that typically turn the mining industry into a case of “bread for today, hunger for tomorrow”.
“Fiebre de oro, fiebre de plata”
Today, mining in Peru is thought to generate 174 thousand direct jobs and over 1.1 million indirect jobs. Simultaneously, it fuels exports and internal consumption, which correspond to the recent years’ growing GDP. With mines’ locations close to disadvantaged and low-productivity areas, mineral extraction could further accelerate Peru’s development. However, not everyone feels these improvements equally. Consumption inequality, as measured by the Gini coefficient, is higher in all of Peru’s producing districts than in their non-producing counterparts by, on average, 0.6 percentage points. This could be because many of the new jobs are concentrated in the primary sector and pay poorly. While investments like roads are long-lasting, others like university scholarships and high-maintenance administrative buildings are examples of short-term, localized benefits. In the larger picture, mining investments could lock-in Peru by confining it to export resources. In turn, the extraction of minerals without value-added represents foregone employment for Peru. The commodity export model could be responsible for the vulnerability of Peru’s economic cycle, which fluctuates with the prices of their raw materials. If left unchecked, big mining could pave the path to an unsteady economy reinforced by foreign capital.
Unequal impacts of a global threat
Another side of the issues raised by mining are related to the environment. Mines’ polluting activities sometimes deteriorate surrounding lands, meaning locals lose their previous source of production. In Junín, it is expected that some of Ariana’s new employment is taken by people who migrate at the prospect of SPM’s presence, while locals who previously worked in livestock and agriculture could lose their livelihoods. Like in Old Morococha, the mine in Marcapomacocha could slowly cause the local communities who raise animals like guanacos for their meat and wool to disappear, as younger generations see no future employment prospects and mining becomes the only source of labour. Additionally, air pollution and drinking-water poisoning may leave the environment unsafe, causing lung and nutritional problems. This hits people with low access to healthcare services the hardest, such as the rural community near Ariana. However, it is difficult to trace the causality of health problems in the short term and the recurrence of poorer sections of the communities suffering from it leaves their disproportionately large cost unacknowledged. This situation manifested itself in Cerro Pasco, where the local government turns a blind eye, ignoring safety rules in favour of attracting investment.
“(The authorities) have ridiculed us, mistreated us — they think we don’t have rights.” — Woman whose children suffers from lead poisoning interviewed during a protest in Cerro Pasco in February
This is not the only type of negative externality left behind, evidenced by the water problem. Mines like Ariana destine the scarce resource to their production plants, meaning communities have a lower supply at their disposal. The global threat of climate change impacts people differently: Andean communities like this one not only have to deal with the expectations of more and more future droughts from climate change, but they have to factor in the additional burden of the huge water consumption from their economic activities. Once more, as this water usage is reinforced by foreign capital, the problem becomes harder to escape. This exemplifies how, often, businesses like Barclays offshore the unsustainable production required to extract minerals to communities like Marcapomacocha’s, which suffer the cost.
A collective valuation problem
Mining represents a significant portion of Peru’s tax income, incentivising the government to encourage growth in the extractive sector. This factor, together with the low bargaining power and the low potential as voters of locals like Marcapomacocha’s, keep these threats of mining buried. Though these issues have been around since the European discovery of minerals in the continent, the century-old problem remains relevant, as mining ingrains structural problems that Peru will have to harvest in the future.
The case of Ariana depicts how socio-environmental problems get mentioned only as they endanger the economy. Environmental concerns and the commodity export model seem to take the forefront only when their unsustainability threatens national figures and decision-makers. To activists, Marcapomacocha’s land becomes relevant only as a factor of production. Though natural heritage is doubtlessly crucial as a resource, the need to monetize non-economic goods and make their impacts felt to the big players could translate into more inaction.
