Xstrata in Peru: will CSR ‘best practice’ keep communities on side?
This is the third article in our ‘License to Operate Flashpoint’ series analysing socio-political risks around resource projects in the news.
What’s interesting about Xstrata’s Las Bambas project?
- Resource projects across Peru have been experiencing increasingly frequent and sometimes violent protests by local communities and NGOs who object to what they see as negative environmental impacts, lack of tangible benefits for communities, and lack of consultation. Poverty levels in mining regions in Peru certainly remain very high in spite of billions of dollars of investment in mining in the country since the 1990s.
- Into this difficult social context comes Xstrata’s Las Bambas project, a copper deposit it won the rights to explore in 2004. If the feasibility stage of the project is successful, Xstrata may shortly begin invest in it some $4 billion.
How Secure is Xstrata’s socio-political ‘License to Operate’ for Las Bambas?
- So far, Xstrata appears to have maintained relatively positive community relations at Las Bambas (or at least avoided the major backlash witnessed at some other mines).
- This seems partly down to the company’s best-practice efforts in this area. For example, it included support for a social fund for community development in its original bid for the project, and has contributed some $48.5m to the fund since 2004. It has also worked with the other trustees of the social fund to revise its governance and management. In addition Xstrata has directly invested over $20 million in social projects in local communities. It has consulted early and intensively with communities, committing to achieve their consent for project activities. It has created an ‘Independent Advisory Group’ to offer advice on sustainable development issues relating to the project. It is seeking to involve communities in monitoring the project’s environmental impacts.
- Even so challenges have already arisen. There has been some distrust on the part of communities and criticism from some Peruvian NGOs. Concerns over management of the social fund and also the resettlement of one of the local communities have led to some protests. As the project progresses, such challenges may increase. Issues around environmental impacts, for example, are unlikely to disappear. Above all, Las Bambas will likely face high local and regional expectations for delivery of social services and other socio-economic benefits, particularly given the weakness of state provision in this area (this has been a key challenge for other mines). Las Bambas is located in Apurimac, one of the poorest regions in Peru.
What more can Xstrata do?
- Clearly Xstrata should continue to adhere to best practice approaches, for example on water management, resettlement, and also open consultation with communities. Most important may be finding ways to enhance local government capacity to address the social needs of the communities and the broader region. This might be done through more partnerships with international donors, NGOs and the government itself.
- Some future tensions may be inevitable. But by continuing to think and plan ahead, and with some luck, Xstrata may be able to forge a sound working relationship, even if not perfect harmony, with its local communities.
¹ This simplified version of a ‘heat map’ is one element of LicenseSecure™, a model developed by Critical Resource to help companies responsibly strengthen the ‘license to operate’ (i.e. local, national and international stakeholder support) for resource projects. This particular ‘heat map’ is based on outside-in analysis; a full LicenseSecure™ study involves in depth, on-the-ground research, and analyses company policies and activities as well as external factors.