A long-running blockade at MMG’s Las Bambas mine, which is among Peru’s largest and accounts for roughly 2% of global copper production, points to a difficult stakeholder environment for resource investors in the country.
- Longstanding tensions between MMG and the indigenous community of Fuerabamba came to a head in February 2019, when community members blocked the company from transporting ore from the Las Bambas mine via a national highway that cuts through the Yavi Yavi property (which Fuerabamba acquired as part of a compensation package for a controversial resettlement). Community leaders allege that MMG constructed the road without consulting the community, which the company denies, and that the government unlawfully converted it into a national highway, and have demanded compensation for its use. MMG was unable to ship its copper to market as a result of the blockade and threatened to declare force majeure under sales contracts.
- An initial agreement was reached restoring MMG’s access to the road on 6 April 2019 following discussions between company executives, national and regional government officials, and community leaders. MMG pledged to increase local employment and honour unfilled social and economic commitments, while the government agreed to lift the state emergency imposed on the region, withdraw state security forces and convene several multi-stakeholder working groups to address the community’s grievances, including a working group on justice and human rights.
- Notwithstanding this agreement, community leaders threatened to reinstate the blockade if the government did not drop criminal charges filed against the protesters and reportedly continued to demand payments from MMG, including $50,000 payments to individual community members and right-of-way payments for use of road. National and international media sources reported that a new blockade was imposed in late May after talks between the company and community over compensation broke down. An MMG representative denied this and reported the company continues to engage in constructive dialogue with the community.
- Conflict at Las Bambas underscores the tense stakeholder environment that resource investors face in Peru. Protest has also recently affected operations at Hudbay’s Constancia mine and Tahoe’s La Arena mine. Opposition to mining from indigenous farming communities and environmental groups coupled with a low-price environment stalled the development of major projects in the mid-2010s, notably Newmont’s Conga and Southern Copper’s Tia Maria. Market improvements have sparked increased investment and renewed interest in undeveloped mega-projects, such as Anglo American’s Quellaveco and Southern Copper’s Michiquillay. However, a push to bring large – and controversial – projects online may agitate tensions between companies and communities and draw increased civil society attention.
- The Odebrecht scandal continues to drive political volatility and consume government bandwidth. President Martín Vizcarra’s efforts to deliver on an ambitious anti-corruption programme in response to the scandal – which discredited major political parties and institutions and saw five former presidents investigated or jailed for corruption – have been met with fierce resistance from the opposition-controlled congress. On 30 May, Vizcarra threatened to invoke a constitutional measure authorising him to dissolve congress and call new legislative elections unless his anti-graft proposals are passed.
- President Vizcarra may struggle to unblock stalled projects. He has pledged to address social conflict and boost mining investment to $8 billion by 2021 in order to improve slumping GDP growth and reduce poverty. Vizcarra did successfully build local support for the Quellaveco project during his tenure as governor of the Moquegua department, but previous presidents have failed to deliver on similar promises. Former President Ollanta Humala (elected in 2011) increased community consultation requirements and ordered reviews of some controversial projects to address stakeholder opposition, but failed to negotiate solutions to high-profile conflicts. His successor, Pedro Pablo Kuczynski (elected in 2016) also pledged to revive projects derailed by protests, but made little progress due to a conflictual relationship with the legislature and fallout from Odebrecht, which ultimately forced his resignation in March 2018. Continued tension with the legislature and competing priorities may similarly distract from Vizcarra’s efforts to mediate conflicts.
- The government has been criticised for its slow, ineffective and at times heavy-handed response to social conflict, including authorising the use of force by public security forces and pressing criminal charges against protestors. A congressman from the leftist New Peru coalition has proposed a bill granting amnesty to the 500 Fuerabamba community members facing criminal charges for protest and reforming the penal code to prevent such charges, but the legislation has proved controversial and faces significant opposition in congress.
- Pro-investment governors took office in several key mining jurisdictions following regional elections in October 2018, which may defuse tensions. Departmental governors do not directly approve extractive projects, but their support is key to winning local communities’ approval. In Cajamarca (home to the Michiquillay, Conga and La Granja projects), pro-investment candidate Mesias Guevara was elected governor, ending the eight-year reign of the vehemently anti-mining Social Affirmation Movement (MAS). However, it is unclear if this will result in material changes to stakeholders’ attitudes towards mining projects. Moreover, anti-mining candidates prevailed in several other key mining departments, including Arequipa and Puno.
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