UNCLAS SECTION 01 OF 04 LIMA 002115

SIPDIS

SENSITIVE

DRL FOR CNEWLING, DWALTERS, KCUMBERLAND
LABOR FOR PWESNER, LBUFFO

E.O. 12958: N/A
TAGS: EINV EMIN SOCI ETRD ECON EAID ENRG PGOV PHUM PE
SUBJECT: TINTAYA MINE: FROM CONFLICT TO COOPERATION

REF: A. LIMA 1432


B. 04 LIMA 5441

C. 04 LIMA 4471

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Summary:
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1. (SBU) Conflicts between communities and mining companies
are among the most serious problems that confront Peru. One
company, however, stands out as an exception: BHP Billiton,
an Australian firm with a copper mine in Tintaya, has
succeeded in ameliorating once highly conflictive relations
with the local community through a permanent &dialogue
table8 established with the help of Oxfam America. The
&Tintaya Model8 shows that, at least in some cases,
negotiation can lead to accommodation of mining and community
interests. Post notes that Oxfam,s role in Tintaya
contrasts starkly with its involvement in protests that
turned violent in Cajamarca last September. End Summary.

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From Conflict to Cooperation
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2. (SBU) Over the last three years, BHP Billiton, an
Australian company that owns the Tintaya copper mine in the
province of Espinar in southeastern Peru, has succeeded in
transforming once conflictive relations with the local
community into cooperative ones through a &dialogue table8
set up with the help of Oxfam Australia.


3. (SBU) Espinar Province is located 260 km from Cusco in
southeastern Peru. It is one of Peru,s poorest provinces,
with 84 percent of the population living beneath the poverty
line. Almost 80 percent of Espinar,s inhabitants speak
Quechua as their first language. In 1980, the Peruvian
Government expropriated 2368 hectares of land from local
communities to establish the Tintaya copper mine. The mine
began operations as a government-run enterprise in 1985. In
1994, under Fujimori-era privatizations, an American firm,

the Magma Copper Company, purchased Tintaya. Two years
later, an Australian mining firm, BHP Billiton (BHP), bought
the mine from Magma. At the same time, Tintaya also
purchased additional lands from local communities,
approximately doubling the land to be mined. In 1999, the
mine produced 76,795 metric tons of refined copper.


4. (SBU) Starting in 2000, BHP faced a number of challenges
from local communities over latent grievances, some of them
dating from before BHP,s acquisition of Tintaya. These
included:

-Protests that land for the mine had been purchased under
unfair conditions.

-Community women complained of being forcefully evicted from
land they considered theirs.

-Locals alleged contamination of air and water by mine wastes
that had led to ailments among both people and cattle.

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Enter Oxfam
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5. (SBU) In 2001, Oxfam, in collaboration with local NGOs
concerned about mining, analyzed the communities,
complaints. Oxfam found that the GOP had paid USD three per
hectare in compensation for the land for the Tintaya mine.
The GOP had also promised mine employment to those who lost
land. Most of the promised employment disappeared when
copper prices fell in subsequent years. Further, Oxfam also
found that some people had been forcibly ejected from the
land. Oxfam reps attribute this to weak documentation of
land ownership in the countryside, where country dwellers may
have farmed land for generations without title to the same.
Thus, when a sale takes place, they may not be aware of it
until asked to leave. Finally, locals had been injured and
killed falling into holes dug to mine the copper at Tintaya.

6. (SBU) Initially, local BHP reps refused to respond to the
community's complaints. Oxfam America in Peru contacted
Oxfam,s Mining Ombudsman in Australia, who discussed the
case with BHP upper management in 2001. In February 2002,
Oxfam, Tintaya-area NGOs, and local community leaders agreed
to establish a Dialogue Table, a permanent forum, for
negotiating solutions to problems caused by the mine. Four
joint commissions, made up of company and community reps as
well as NGOs were also established to work on issues
involving land, human rights, sustainable development, and
the environment.


7. (SBU) These commissions proposed solutions to various
problems that had plagued BHP,s relations with the local
community. Peasants who had lost their land were relocated
onto new territories purchased by BHP. The Human Rights
Commission worked with the Institute of Legal Defense (ILD),
a Lima-based human rights NGO, and the local Vicaria of
Solidarity of the Catholic Church to investigate alleged
human rights abuses. BHP acknowledged that human rights
abuses had occurred during forcible relocations of
inhabitants. The company paid compensation to victims,
usually several thousand dollars. In one case, that of a boy
whose father had fallen into the mining pit and died, the
company provided him and his mother with a house (worth about
USD 3000) and a commitment to finance his education until age

18.

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Problems with Dam
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8. (SBU) During 2003, a new problem surfaced. BHP had
received permission to build an additional dam to contain
mine wastes. The new dam would extend the life of the mine
by ten years. In planning, BHP complied with all the
regulations required by the Peruvian State. Nonetheless,
when locals found out about the dam,s construction, they
protested that it would have a negative impact on downstream
farmers. BHP used the Dialogue Table to meet with concerned
residents and made significant design modifications to the
dam to ensure that it would have no negative environmental
impact.


9. (SBU) In 2003, BHP negotiated a Framework Agreement with
the local community in which the company guaranteed that it
would provide USD 1.5 million annually for local projects
designed to produce sustainable development. An
administrative committee of company and community reps
manages the projects. Currently there are 22 projects
ongoing.

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Oxfam: Teaching Locals How to Negotiate
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10. (SBU) Oxfam mining expert Javier Aroca and Oxfam rep
Katherine Ross explained that Oxfam faced significant
difficulties in training the affected communities in how to
negotiate with BHP. Aroca said that Peruvian political
culture orients local leaders to take maximalist, high
visibility positions that often fire up their supporters, but
are not helpful in reaching an agreement. Oxfam worked for
several months to teach the concept of bargaining and genuine
negotiations to key members of the communities around Tintaya
so that they could deal effectively with the company.


11. (SBU) Oxfam reps praised BHP for acknowledging that
human rights violations had occurred. Ultimately, the costs
of compensation in cases were not high, but the company's
willingness to acknowledge that wrongs had taken place went a
along way toward building trust.


12. (SBU) BHP rep Paul Warner told Poloff that BHP has
benefited also from its investment of time and money into
good relation at Tintaya. In his words, BHP has established
itself as &the mining company of choice8 for NGOs and
activists interested in mining issues. BHP,s image as the
kinder, gentler mining company could pay dividends in the
future as other mining concessions open up and face NGO and
community scrutiny.

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A Contagious Example?
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13. (SBU) Oxfam and Buenaventura Mining Company jointly
sponsored a workshop on 4/18 to discuss the International
Labor Organization (ILO) Agreement 169, which protects the
rights of indigenous peoples. ILO 169 says that that
governments must consult with indigenous peoples regarding
projects that might impact their communities. Though Peru's
Congress ratified ILO 169 in 1993, the agreement has not been
implemented in Peru. Representatives of various mining
companies attended the joint Oxfam-Buenaventura event, where
they discussed how to interpret and implement ILO 169.

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Marked Contrast to Cajamarca Debacle
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14. (SBU) Oxfam's success in working with BHP is a departure
from its experience in Cajamarca six months ago. Last
September, protests against Newmont Mining/Yanacocha Mine's
exploration of Cerro Quilish turned violent. Protesters
argued that Yanacocha,s exploration would harm the water
supply for the surrounding communities, which are highly
dependent upon agricultural production (Ref B). Some of
Oxfam's Cajamarca partners made inflammatory statements that
may have contributed to an atmosphere of violence We
understand that Oxfam has stopped its financial support to
one more such groups.


15. (SBU) Although part of the blame for the September
protests against Yanacocha, which led to the postponement of
the exploration of Quilish, lies with Newmont, Oxfam, as well
as other participating NGOs, should not have let the protests
get out of hand. Yanacocha is improving its public relations
as well as its cooperation with the local government (ref A).
Oxfam continues to deny its involvement with any of the
violent protestors and has now adopted a specific policy of
non-violence and dialogue in the Cajamarca region. Oxfam is
also participating in the Cajamaraca Mining Dialogue group,
which brings together representatives from the government,
mining companies, NGOs, and the community to attempt to
resolve some of the real concerns about mining in Cajamarca.

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Comment:
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14. (SBU) BHP management in Australia moved intelligently to
incorporate Oxfam and other local NGOs into the negotiations
process to head off brewing problems in Tintaya that local
management had ignored. In this way, BHP emerged with a
much-enhanced reputation and a working mine. Too often,
mining companies in Peru assume that if they get central and
municipal government approval and pay taxes, they should not
experience problems. Weak linkages between governments and
communities and endemic corruption can render agreements with
elected governments useless. Companies need to communicate
their needs to communities and make sure that message reaches
the grassroots.


15. (SBU) Oxfam America proved to be an effective moderating
force in training local community leaders in how to negotiate
realistically with a foreign mining company. This contrasts
with the more confrontational stance the NGO took on the
question of Newmont,s Mine in Quilish (Ref C). For its
part, Oxfam America appears to be trying to market itself as
an intermediary between the community and the mining
companies. Although it did have some success in Tintaya, it
remains to be seen whether Oxfam, in the future, will act as
an honest broker or will position itself firmly on the side
of radical, anti-mining NGOs.
STRUBLE