TINTAYA MINE: FROM CONCILIATION TO CONFLICT

C O N F I D E N T I A L SECTION 01 OF 02 LIMA 002540

SIPDIS

E.O. 12958: DECL: 06/03/2015
TAGS: PGOV PINS EAGR ETRD CASC PE
SUBJECT: TINTAYA MINE: FROM CONCILIATION TO CONFLICT

REF: A. LIMA 2335


B. LIMA 2115

Classified By: ...

id: 34102
date: 6/7/2005 16:28
refid: 05LIMA2540
origin: Embassy Lima
classification: CONFIDENTIAL
destination: 05LIMA2335
header:
This record is a partial extract of the original cable. The full text of the original cable is not available.



-------------- header ends --------------

C O N F I D E N T I A L SECTION 01 OF 02 LIMA 002540

SIPDIS

E.O. 12958: DECL: 06/03/2015
TAGS: PGOV PINS EAGR ETRD CASC PE
SUBJECT: TINTAYA MINE: FROM CONCILIATION TO CONFLICT

REF: A. LIMA 2335


B. LIMA 2115

Classified By: A/DCM Alexander Margulies, Reason 1.4 (d)

--------------
Summary:
--------------


1. (U) Problems remain at BHP Billiton's Tintaya Mine in the
wake of the May 23-25 agricultural strike (Ref A).
Protesters temporarily occupied part of the mine's facilities
on 5/24, demanding that the company revise a September 2003,
Oxfam America-brokered agreement with local communities
whereby the mining company would provide financial support
for development projects (Ref B). Since the takeover, BHP
has closed its mine and refuses to negotiate until the
security of its facility is guaranteed. The company is
compelled to take a hard line, not only to protect its own
interests, but also the integrity of its entire negotiating
process with the local community. End Summary.

--------------
Mine Situation Still Unresolved
--------------


2. (U) Though the May 23 agricultural strike was largely
wrapped up in two days, two areas of contention remain. Rice
farmers in San Martin Province are still not satisfied with
concessions offered by the GOP and accepted by their
counterparts in other provinces (Septel). And the situation
at the Tintaya Mine remains unresolved. Protesters no longer
threaten the facility, but BHP Billiton is refusing to reopen
their copper mine in the area until, the company says, full
security conditions can be re-established.


3. (U) Tintaya Mine in Espinar Province in Puno was the site
of a promising experiment in mining company-NGO-local
community cooperation. In September 2003, BHP agreed to
establish a permanent dialogue roundtable with the
Municipality of nearby Espinar and several local community
groups to resolve conflicts and promote development. Oxfam
America brokered the accord which also created a fund for
investing USD 1.5 million/year of the company's mining
profits into local development projects (Ref B).


4. (U) On 5/24, coincident with an agricultural strike that
hit ten regions, 2000 protesters led by two local groups --
the United Front of the Peasants of Espinar (FUCAE) and the
United Front for the Defense of Espinar Province (FUDIE) --
temporarily occupied part of the mine's facilities (Ref A).
Both FUCAE and FUDIE had originally participated in the
initial talks that led to the September 2003 agreement
between BHP and Espinar representatives, but neither signed
the final accord. Both groups represent peasants from towns
outside the circle of the five communities that are Tintaya
Mine's immediate neighbors. The protesters demanded that BHP
invest in more community projects in their specific areas and
raise its offered support from USD 1.5 million/year to USD 20
million/year. The protesters temporarily called off their
action and met with a high level GOP commission led by Vice
Minister for Energy and Mines Felipe Quea on 6/2. They have
since rejected that Commission as too low ranking and have
demanded that the GOP send either President Toledo or
Ministerial-level interlocutors to resolve the conflict.
(Note: Speaking to local radio on 6/6, Vice Minister of
Energy and Mines Romulo Mucho rejected the idea that the GOP
would send higher level persons in to negotiate under present
conditions. Mucho said that the GOP would not "give in to
blackmail" and that all that remained was for the GOP "to
apply the law" in the Tintaya case. End Note.) If the GOP
does not respond, the protesters have threatened to renew
demonstrations on 6/7. In response to the partial takeover
of the mine, BHP has closed its facility and has not
announced when it will reopen.


5. (C) Oxfam Mining expert Javier Aroca, who helped
negotiate the agreement between BHP Billiton and the local
communities, described the leaders of the protests as
"socialists" and left-wing radicals who were interested in
undermining the APRA Mayor of Espinar, who is a signatory to
the original agreement. Speaking to Poloff on 6/6, Aroca
characterized the protesters' demand for USD 20 million per
year as an outrageously high offer designed to start a
bargaining process. He did not think that BHP should offer
more aid under present conditions. Aroca did hope, however,
that BHP would consider making its grant process more
flexible and establishing an environmental oversight group,
something called for in the original agreement but not yet
implemented.
--------------
BHP Will NOT/NOT Negotiate
--------------

5. (C) A BHP Official told Emboff on 6/2 that the company
had no/no interest in dialogue with the protesters and that
the Tintaya's mine would remain closed for the foreseeable
future. Company officials feel that they have already worked
out a dialogue process with the local community and that
there is no need to open talks with destructive outsiders who
hope to elbow their way to the negotiating table with
outrageous demands.


6. (C) While the mine is shut, the official said, BHP plans
to continue paying its 1,500 workers for the next 2-3 months,
whether the mine reopens or not. The company hopes to
encourage the workers to demonstrate in favor of the mine's
re-opening. In fact, the company, this official said, is in
a good enough financial position that it does not need to
reopen the mine. Surplus stocks are ample and can be sold at
a profit. In addition, with the mine closed insurance costs
drop. The mine's strategy of mobilizing its supporters may
be working. According to press reports, 500 workers and
local students who study mining engineering marched through
Espinar on 6/5 to express publicly their desire to see the
Tintaya Mine put back in operation.

--------------
Comment:
--------------


7. (C) BHP Billiton has little choice but to play hard ball.
The company has proven to be flexible and generous in its
willingness to negotiate with local communities, and as a
result has been seen as the most community-friendly mining
company in Peru. Its agreement with local communities has
been held up as a model for other mining companies to follow.
The company has many local allies, including municipal
authorities, its work force, and local organizations party to
the original agreement, who oppose the protesters and support
the existing accord.
STRUBLE

=======================CABLE ENDS============================