MINING CONFLICT, THE VIEW FROM CAJAMARCA

UNCLAS LIMA 003075 SIPDIS SENSITIVE SIPDIS INTERIOR PASS TO USGS FOR D.MENZIE/A.GURMENDI E.O. 12958: N/A TAGS: PGOV PINR PREL ECON EMIN SOCI PE SUBJECT: MINING CONFLICT, THE VIEW FROM CAJAMARCA ¶1. (SBU) Conflicts between large mining companies and surrounding communities have increased in the last five years, with Cajamarca one of the hardest hit regions. Cajamarca's Yanacocha gold mine, the largest open-pit gold mine in the world, has been the most visible and controversial example of the broader challenge to the mining sector. Majority owned and operated by US-based Newmont Mining, Yanacocha has been battered by protests that have forced it to curb investment and production. Although Newmont and other mining companies have attempted to respond to popular demands with social and infrastructure projects, conflicts continue. The ferment, instigated by anti-mining NGOs and clergymen, has attracted the attention of anti-systemic political actors like ethnocacerist leader Antauro Humala, who are taking advantage of the discontent to build their political bases. Scope of the Problem: A Drag on Growth -------------- ¶2. (U) The Presidents Council of Ministers catalogued 71 active mining conflicts between November 2006 and May 2007; of these, the largest concentration--19 conflicts--took place in Cajamarca. Centered on environmental and employment complaints, most conflicts involved protests and roadblocks designed to extract concessions from companies or to block new investments. Some conflicts and their leaders received international attention through the dissemination of anti-globalization propaganda via the internet. One of the most celebrated cases involved clergyman and founder of the NGO Grufides, Father Marco Arana, who in 2004 encouraged protests that forced Newmont Mining to shelve plans to expand the Yanacocha mine. Newmont's inability to replace its reserves has weakened output and in early 2007 led the firm's Vice President for Latin America to predict that production would drop 30 percent this year. This decline has contributed to a steady decrease in national mining output since August 2006; according to the National Statistics and Information Institute, Mines and Quarries GDP decreased 2.7 percent in the first half of 2007 compared to the same period in 2006. Mining Companies Adapt to Conflict -------------- ¶3. (U) Mining companies have worked hard to repair relations with local communities and prevent future conflict. Yanacocha's security chief admitted to POLOFF that the company made mistakes in the past but stressed that it has improved since 2002. The company has spent millions to expand community outreach, to invest in social and road projects, and to build two dams and a reservoir that ensure the delivery of clean water to the community. Other mining companies have followed suit: Yanacocha's security chief said that the firm Anglo-American, for example, has offered local communities $400 million in social investment. Activists have praised Peruvian copper-zinc mining firm Antamina and the formerly US-owned Tantaya copper mine as models for community relations. Firms have also contributed revenue to local and regional governments through a Mining Canon. For Cajamarca, deposits in the Mining Canon increased from $19 million in 2003 to $108 million in 2006. Continued Conflict and Mutual Distrust -------------- ¶4. (SBU) Despite the companies' efforts, social conflicts have continued to erupt, even against the model investors. Father Arana told POLOFF that companies like Newmont have made improvements but argued that past mistakes will not be easily forgotten. He also claimed that social pressure has been the only effective tool in getting industry to respond to the community's needs. Yanacocha's union leader Guillermo Nina complained to POLOFF about salaries and working conditions. Both Arana and Nina criticized Yanacocha's vast profits as unjust in the face of widespread poverty in the region. Yanacocha security analysts, in turn, said that Arana is the source of most protests and that both Arana and Nina are motivated by politics not economics. They said Arana's ultimate goal is not to spread the wealth of mining investment but to lead an international movement to shut down the Andean mining industry. Antauro Humala Seeks to Exploit Conflict -------------- ¶5. (SBU) Antauro Humala, the jailed brother of former presidential candidate Ollanta Humala, and his nationalist movement see the mining conflicts as an opportunity to build political support. His Partido Etnocacerista Revolucionario Unido (PERU) is actively organizing in Cajamarca--albeit from a small base--for local and national elections (2010 and 2011 respectively) with weekly membership drives. Jenny Cabanillas, PERU's director for Cajamarca, said that the renegotiation of mining contracts to guarantee just investment is a key plank in the party's agenda. Another PERU organizer defended the approach saying that politicians in mining areas have to attack mining companies in order to be viable candidates. Isaac Humala, patriarch of the Humala clan, predicted to POLOFF in August that the mining conflicts would expand and eventually contribute to the collapse of the Garcia government. ¶6. (SBU) Comment: Mining conflicts in Cajamarca highlight a broader challenge to spreading the wealth from Peru's economic boom to the hinterland. Where the government fails--even with Mining Canon revenue--to deliver services and jobs, protestors blame the mines, in turn threatening the very investment needed to create wealth and employment. The GOP and mining companies continue to promote the swift resolution of social conflicts to enable expanded investment. But the government is in a difficult race with anti-systemic actors for the "hearts and minds" of the populace. NEALON