Document(s) 4 of 18

Introduction[1]

Mining in Bolivia

In spite of developments in agriculture and agro-industry and the corresponding economic diversification in eastern Bolivia, mining continues to play a significant role in the country’s economy. Table 1 illustrates the importance of mineral exports with respect to total exports and foreign exchange earnings. Although the dominant role of mining has decreased, it continues to be the primary export sector in the national economy. Mining also plays a secondary role as a generator of funds for the national treasury, although in this area, too, the sector’s contribution has decreased significantly.

Mining’s contribution to the GDP and employment levels has decreased and is not highly significant at the national level. Within traditional mining regions such as Potosí and Oruro, however, this industry’s contribution remains significant, as shown in Table 2. Between 1993 and 1998, these sectors received between 73 percent and 92 percent of mining royalties,a principal source of financing.

Potosí and Oruro’s mining has decreased in importance since the 1950s. This decline was exacerbated by the crisis in tin mining of the mid-1980s. Currently, both sectors register the lowest income and human development levels in the country, and consequently the region experiences high levels of emigration. This situation appears to offer proof to those people who believe that mining does not contribute to sustainable development at the local or regional level.

Mining and local development

Various studies on the mining industry and its local context have identified a typical model in which a specific type of local community and its relationship to a given mining operation can be predicted. In this model, the community is usually located in a remote region. Although the literature recognizes that such communities are not totally isolated from the market economy, in general the community’s link to the market is secondary and complementary. The community’s economy is essentially self-sufficient and sustains a culture and particular form of organization that is different from the market economy. (MEM 1996, 1997; Labat-Anderson Inc. 1997; May 1998; Kumalo 1999) Meanwhile, the type of mining operation prevalent in the literature is one characterized by its large size, with an annual turnover of US $100 million or more. Such operations are usually run by a transnational mining company that maintains the corporate culture of competition in international markets, such as Rio Tinto, P.T. Freeport Indonesia, and Comalco.

The relationship between these specific types of local communities and mining operations produces several predictable results. Workers and others are attracted to the area by road construction and the promise of job opportunities because of the mine’s opening. This migration entails high risks for the local communities, since the new arrivals bring diseases or alcoholism to the area. In addition, the migrants compete with local residents for the use of natural resources (May 1998). Increased demand for land causes a rapid increase in property and land prices. Worsening inequalities in income distribution favours young adults, modifying their position and prestige vis-à-vis their elders and affecting traditional social structures in the process (Labat-Anderson Inc. 1997). The growing population places excess demands on services and infrastructure such as roads, schools and hospitals.

According to Bisset (1996), such impacts are common during the mine’s construction and exploitation phases and typically are followed by more severeimpactsafter the operation closes. Unemployment would increase significantly and property and land prices plummet. The demoralizing nature of a recession and unemployment causes an increase in alcohol and drug use among residents. The author even predicts that “many people would lose their cultural ability to survive without a paying job. Faced with the lack of alternative economic activities, severe social impacts can be foreseen — a potentially spectacular contraction.” (Bisset 1996, pp. 9-10) In response to this situation, “local communities are demanding compensation far above what they have received in the past. They want infrastructure, training for mining or other jobs, and social services, including education and health.” (McMahon and Strongman 1999, p. 8).

Evidence from case studies of large mining and petroleum projects show that a purely compensatory attitude on the part of the company toward the community is incapable of achieving sustainable development at the local level. Thus, a new trend proposes to replace compensation with the formation of social capital. (Labat-Anderson Inc. 1997; May 1998) Social capital formation focuses on the importance of strong social ties that make human groups more cooperative, productive and innovative. According to this focus, progress and development require groups or communities capable of identifying their limitations and the strategies necessary to overcome them. This in turn requires trust and experience among group members (May 1998, p. 22). The social capital focus favours community empowerment over mere compensation in goods and resources. A community’s ability to identify its problems and their possible solutions is the best mechanism for promoting sustainable development.

From compensation to social transformation

This study evaluates the relationship between mining operations and local communities, identifying the impacts and transmission mechanisms for a type of local community that is substantially different from the predominant model in the research literature. Although the local community in this study is still a rural community whose economy is based on subsistence agriculture, its distinctive characteristic as an indigenous social unit is its state of “de-structurization.” This means that the local community is in an advanced state of assimilation regarding the values of urban culture and the market economy. In contrast to the remote community so predominate in literature, these communities are connected to the urban realm by way of markets, roads, and highways. More importantly, the community’s adolescents and young adults struggle to integrate into the urban world and end their marginalization. In this struggle, however, they do not abandon their ties to the community or the land, since these are the last refuges to which they can turn if insertion in the urban world becomes too difficult. Such communities represent some of the principal sources of marked migration from the country to the city that are so prevalent in Latin America.

As this study will argue, the opening of a large mining project next to local communities of the type described above produces impacts that are distinct (and usually opposite) to those expected under the prevalent model. For example, migratory flows involve displacement to urban centers because periodic commuting to the mine becomes an option. Moreover, employment at the mine or with associated subcontractors may provide sufficient income to enable a relatively smooth transition to the urban world and, in many cases, a higher rank on the socioeconomic scale.

In other words, the opening of a large mining operation can serve as the catalyst for a socioeconomic transformation at the local level, reducing the importance of compensation. In addition, the concept of sustainable development of a community takes on a different meaning, since it does not take place within the community itself but rather in the negation of the community within a westernized, urban social context. This implies that, in such cases, a socially responsible company should contribute to enabling the community to transform itself. It is not a matter of compensating for changes to a social system. What is critical is to convert these changes into a new or different equilibrium within a social entity which is in the process of change.

The significance of this study is to show that the relationships between large-scale mining and local communities do not follow a singular pattern, as literature suggests. It is necessary to establish a taxonomy of possible and relevant cases that contribute to the formation of recommendations. When this is achieved, then the state, mining companies and local communities can take actions oriented toward achieving the highest levels of well-being for members of the communities involved.

Methodological focus

This investigation analyzes two case studies: the operation of Minera del Sur at Puquio Norte, and the operation of Inti Raymi at Kori Kollo.

The Puquio Norte mining operation represents an excellent pilot case because the socioeconomic, cultural and environmental baseline of its area of social influence was easily determined. It began operation in March 1997, less than two years before the fieldwork for this study commenced. Therefore, reconstructing the baseline was less difficult and more reliable than an operation such as Inti Raymi, which began operations during the second half of the 1980s. Although the region where Puquio Norte is located has been home to mining operations since colonial times, these were largely artisanal operations. Until the discovery of the Puquio Norte deposit, there had been no industrial-scale mining operation in the region. Because of this historical presence, the Puquio Norte case presented little “noise” or interference in the perceptions of local residents. A similar situation in western Bolivia is unlikely.

The main disadvantage of Puquio Norte was its size. Although this investigation is geared to an analysis of the impacts of large-scale mining operations, Puquio Norte is a relatively small operation by international mining standards. For example, Yanacocha in Peru produces 1 050 000 ounces and Inti Raymi in Bolivia produces 350 000 ounces of gold per year, while Puquio Norte produces just 27 500 ounces per year. Not counting silver production, Puquio Norte represents only 3 percent of Yanacocha’s production, and 9 percent of Inti Raymi’s production. This is a structural limitation of the Bolivian mining industry, which apart from Inti Raymi and the San Cristobal project[2] (currently in the engineering design phase and thus not eligible for this study), consists solely of small mining operations.

Inti Raymi was chosen because it is the most important mining operation currently underway in Bolivia and because it contrasts with the Puquio Norte case. While Puquio Norte’s area of social influence enjoyed economic growth during the period of study, Inti Raymi’s area of social influence, at the rural level, experienced economic decline. In contrast to Puquio Norte, Inti Raymi had to compete with local community members for access to mining resources. Inti Raymi’s policy toward the local community has consistently supported social and economic development requirements without demanding, in exchange, a counter-contribution on the part of the community, as has been the case with Puquio Norte.

In our investigations of the case studies, we adopted an empirical research focus. The study’s design and execution, therefore, did not assume a specific theoretical focus. We have favoured a multidisciplinary analysis with the goal of establishing, through detailed and integral fieldwork, how and why a mining operation impacts on its area of social influence.

Puquio Norte

Antecedents

At the end of the 1980s, the Minera del Sur Company, (COMSUR 1992)[3] began exploration activities in the new Bolivian mining frontier of the Precambrian region.This is part of the Brazilian Shield located in the eastern part of the country where geological formations of economic interest exist, including precious metals and stones, as well as manganese. The company’s exploration activities resulted in the discovery of the Puquio Norte gold deposit located 11 km from the town of San Ramón by highway. Puquio Norte is an open-pit operation that treats 1 500 tonnes per day by way of the carbon-in-leach process; the mine’s lifespan is estimated at seven years.

COMSUR’s exploration activities in this region were made possible after Rio Tinto, a British-based transnational mining company, acquired one-third of its shares. This enabled the incorporation of strict environmental and occupational safety standards at COMSUR’s operations. Rio Tinto’s association with COMSUR was geared toward the discovery of a large-scale mineral deposit, which has still not occurred. When small deposits like Puquio Norte are discovered, COMSUR develops and administers them, defining all necessary policies for their exploitation, including environmental, personnel and community relations. Rio Tinto makes suggestions in any area it considers pertinent, but does not define business policies or administer the mining operations.

Environment

COMSUR was the first company to discover, develop and exploit a mineral deposit in the Precambrian region on an industrial scale. Thus, the company became a source of information on modern mining’s impacts on ecologically sensitive regions such as the Bolivian Amazon. According to company executives, the mining operation complied with the most stringent international standards as well as with Bolivian regulations. In addition, officials decided not to construct a mining camp in order to minimize the risks and social costs involved in relocating the miners after the mine’s inevitable closure. Instead, Puquio Norte’s miners and employees integrated with the civil population of San Ramón.

Following practices that are in place at the international level, environmental management at Puquio Norte is based on principles of zero discharge and systematic monitoring. The zero discharge principle means that effluents are not discharged from the production process. Ore is crushed, milled and put in solution, then circulated from water tanks to the processing plant and back. Sterile solids from the plant are pumped to the tailings damwhere they are separated from liquids by gravity. The water from the dam is recycled back to the plant. In this way, water loss occurs only through evaporation.

The effectiveness of this process depends on the stability and impermeability of the tailings dam. The material used in the dam’s construction are the solids that remain after the mining process, and because of this region’s climatic and ecological characteristics, these have a high natural capacity for revegetation and regrowth. To guarantee its impermeability, the dam is lined with compacted clay covered with a layer of geo-membrane, a flexible plastic.

According to company personnel, monitoring activities are fundamental to Puquio Norte’s environmental management. Monitoring is performed on: surface water (10 points) and ground water (3 points); the volume and level of the San Julián River[4]; the pH and cyanide content of the tailings dam; soil at four points located north, south, east and west of the mine; sterile material from the mine; and dust and noise. Since the mine is currently extracting oxidized material from the deposit, there is no acid rock drainage.

In terms of closure and rehabilitation, Puquio Norte plans to cover the dam with oxidized material and revegetate the area. Despite its projected seven-year lifespan, our fieldwork research was unable to identify a closure and restoration plan in place for the operation.

Local community perceptions

Although the town of San Ramón is aware of COMSUR’s presence in the area because of the Puquio Norte operation, this knowledge is fragmentary, partial, and often incorrect. Such a situation becomes fertile ground for false perceptions and misunderstandings regarding the impact of the mining operation.

Several interviewees expressed concern about the environmental risks associated with Puquio Norte and supposed benefits that the mining operation would leave in the region. For example, due to the intense rains the region usually receives, some residents worry about the stability of the tailings dam, which is located upstream from the capture point for the town. This concern is expressed because, according to reports, the tailings dam at COMSUR’s Porco operation in Potosí ruptured in August 1996 from severe climatic conditions.

The sensitivity of some San Ramón residents to potential environmental impacts of the Puquio Norte operation was evident when the morning paper El Deber reported that the tailings dam had burst, contaminating the San Julián River. The report was a false alarm. The company reacted with an open door policy, welcoming inspection visits and the collection of samples by authorities from the government, San Ramón, and the university. Such a response allowed national, regional and local authorities to verify, in situ, the high environmental standards by which the operation is managed. Nevertheless, not all San Ramón residents share this opinion, and some still express concern about the environmental risks of the mining operation.

This type of perception regarding mining is not exclusive to the area around Puquio Norte. Although the issue has not been studied systematically, the Bolivian population generally distrusts the mining industry. According to business people and field experts, this perception is due to the mining sector’s history since the colonial era, which has been fraught with frustrations as well as negative environmental and social impacts. As such, modern mining operations such as Puquio Norte or Inti Raymi must bear the brunt of this legacy in spite of the fact that they comply with stringent environmental standards. Moreover, as we will see in the section on Inti Raymi, this legacy can give rise to a situation in which the environment becomes a mechanism for political pressure by local organizations toward the company or government in order to obtain greater returns at the local level from mining. In this context, an objective analysis of the company’s environmental management is influenced by political positions that seek greater benefits from mining activities.

The local context: the town of San Ramon[5]

During the period of discovery, construction and opening of the mine, Puquio Norte’s area of social influence — the town of San Ramón[6] — experienced rapid economic growth. According to our estimates, between 1992 and 1998, the average monthly income in San Ramón grew at an average annual rate of 17.4 percent. This growth prompted the construction of the interdepartmental Santa Cruz-Trinidad highway, which passes through San Ramón where the road forks toward Trinidad one way, and the towns of San Javier, Concepción, San Ignacio de Velasco and San Matías in the other direction. The highway provides a link to the department’s capital, serves as a connecting axis between the departments of Santa Cruz and Beni, as well as a link between the towns located in the western part of Santa Cruz, near the Brazilian border.

Prior to the discovery of Puquio Norte, San Ramón experienced an intense immigration process because an alluvial gold deposit was discovered in the surrounding area and the construction of a highway. People from the interior of Bolivia were attracted by the prospect of amassing a fortune or simply earning a bit of money during the fierce economic crisis of the 1980s. As a result, towns such as San Ramón, where gold deposits accessible to artisanal mining were discovered, became migration magnets for hundreds of people. Almost all San Ramón residents were caught up in the gold rush. In addition, hostels, hotels, bars, cantinas and street stalls sprang up, offering various goods and services.

Although artisanal mining activities declined in the early 1990s, the interdepartmental highway’s termination at the nodal location of San Ramón meant the town remained a destination point for migrants. According to our estimates, between 1992 and 1998 the town grew at an annual rate of 17.8 percent. This population growth invigorated economic activity (especially commerce), accelerated the process of urbanization, and prompted the regional electrification project. The fact that significant population growth was accompanied by exceptional economic growth is indicative of the notable dynamism experienced by San Ramón during the 1990s.

Mestizaje and westernization

It is evident that by the mid-1990s, when construction of the Puquio Norte mine began, the population of San Ramón was extremely diverse, both socially and culturally. First, there were the long-standing San Ramón residents who, even before 1980, did not recognize an ethnic identity, spoke only Spanish, did not use traditional dress, and did not make traditional crafts, despite the fact that the area was once inhabited by Chiquitano Indians (D’Orbigny 1994). Second, there were the immigrants to the region’s communities and villages who arrived between 1982 and 1987 during the gold rush, and who consider themselves peasants or cambas due to their mestizaje — or advanced state of acculturation. Third, there was a wave of immigrants from the Andean region and the valleys. According to the majority of interviewees, less than 50 percent of the current population of San Ramón is made up of collas (western Bolivia natives).

Land tenure

Until 1995, San Ramón had 3 200 hectares of communal land. Due to population growth from constant immigration, these lands were divided for the benefit of the most senior residents. Lands adjacent to the urban center were ceded to the municipality so that they could be divided into urban lots. This enabled a process of relatively ordered urban growth for San Ramón, but in exchange, the town lost its communal lands, which were the principal reference and space for collective unity.

In terms of lands affected by the mining operation, there was no transaction with San Ramón residents or authorities, since COMSUR had acquired lands from a citizen of foreign origin by the name of Gehard. Now COMSUR owns 250 hectares of land, of which approximately 30 hectares are affected by the mining operation. Subsoil rights were acquired from the state by way of 7 200-hectare mining concession. COMSUR acquired plots within San Ramón from the municipal agency in order to build housing for the company’s technical personnel. Other employees and workers have acquired their own plots of land or rented housing, according to their convenience and needs.

Impacts of the mine on San Ramón

Employment

Although COMSUR tried to hire the greatest number of local residents possible, Ramoneños are nevertheless a minority of the 118 member work force, equivalent to 30 percent. There are two reasons for this. First, Puquio Norte’s salaries provide income levels similar to those San Ramón residents can earn in alternative activities. In addition, 13.5 percent of a worker’s salary is withheld for social security and contributions to the National Housing Fund. For families used to working as independent producers, as the majority of San Ramón residents are, such withholdings are considered simple taxes, since many view their condition as salaried workers as a temporary situation. Second, local residents prefer activities that do not imply a relation of dependence and it is difficult for them to become accustomed to the discipline of working at a mining company that entails complying with a work schedule and safety measures. This attitude was confirmed by 100 percent of the interviewees.

Table 3 presents the statistics for absenteeism and acts of disobedience by workers at Puquio Norte between February 1998 and January 1999. Workers from eastern Bolivia (San Ramón and Santa Cruz) had an average absenteeism rate that was 45 percent higher than the rate for workers from other regions of the country. In addition, workers from other parts of Bolivia committed 38 percent fewer acts of disobedience than workers from eastern Bolivia.[7]

Approximately 50 percent of workers are western migrants who arrived on their own accord before the mine opened. Only 20 percent of workers, mostly experienced miners, were contracted directly by the company in the western part of Bolivia. Thus the majority of mine workers are from San Ramón, (30 percent locals and 50 percent immigrant residents from the western Bolivia), representing 25 percent of the total salaried workers in San Ramón.

Income

The opening of Puquio Norte has had direct and indirect impacts on income levels in San Ramón. Direct impacts include workers’ salaries and subcontractors’ fees. As we mentioned earlier, the monthly salaries at the mining operation are similar to the average monthly income in San Ramón, or approximately US $290 in 1998 according to our estimates.[8]

Three types of subcontractors in the region provide goods and services to Puquio Norte. During construction, local sawmills sold important quantities of wood to COMSUR. Since production began, COMSUR has employed transport services available in the area. Four of the 42 transport firms in San Ramón were contracted by Puquio Norte, two for the daily transport of company personnel to the mine site and the other two for transportation of material from the mine to the mineral processing plant. Approximately 30 dump-truck subcontractors are from the interior of Bolivia. During the construction and exploitation phases, hotel owners have also benefited from the periodic arrival of delegations of technical personnel and executives from COMSUR’s central and regional offices. In addition, San Ramón’s location along the highway means there is a constant flow of travellers to local hotels and hostels.

In addition to the economic agents mentioned above, our fieldwork found that other classes of San Ramón society increased their income levels from spending by Puquio Norte technicians, workers and employees. For example, merchants and farmers benefited from the sale of staple goods. However, this effect was lessened by the fact that most clothing purchases were conducted at large markets in San Julián or Santa Cruz de los Andes, which offer greater variety and are easily accessible by highway. Nevertheless, several technicians, workers and employees invested in houses or land in San Ramón. Due to San Ramón’s condition as an immigration center, many Puquio Norte personnel invested in the region. In addition, a portion of workers’ income was spent in town, implying that part of the payment to workers and, to a lesser degree, subcontractors was converted into income for other town residents. In other words, the mine-generated income has a multiplier effect in the area of social influence, which shows the importance of systematically evaluating not only the direct income paid by the mine to local residents, but also the destination of spending by the mine’s personnel and subcontractors. Such an analysis was conducted for the Inti Raymi operation that is discussed in the second part of this chapter.

Prices

Approximately 22 percent of San Ramón’s population are vendors, primarily of clothes and food, though a small minority sells agricultural inputs and tools. Most vendors have agreements with suppliers from the city of Santa Cruz de la Sierra regarding the provision of mass goods to San Ramón at wholesale prices. As such, retail prices of mass goods in San Ramón are equal to those in Santa Cruz de la Sierra. Thus the market in San Ramón is highly competitive and any price increase resulting from product scarcity is immediately eliminated from the market. In this context, increased spending directly and indirectly attributable to the mine is unlikely to have affected the consumer price index in San Ramón.

The cost of housing and rent in San Ramón has increased dramatically in recent years due to the wave of immigrant arrivals. In consequence, the opening of Puquio Norte may have had positive impacts on inflation in the housing market, although it has not been possible to obtain sufficient information to conduct an analysis of this.

Company policy toward the community

COMSUR’s policy strove to avoid a paternalistic or benefactor relationship with the community of San Ramón. The objective is to avoid a situation in which the community becomes accustomed to subsidies, leading to possible conflicts with the company. According to COMSUR executives, the policy is also the result the operation’s moderate profit margin, which has lead the company to focus on cost reduction. Nevertheless, this does not mean that COMSUR does not cooperate with San Ramón; rather, the company provides assistance on the condition the community provides a counter-contribution in exchange. The community of San Ramón is aware that it can enter into agreements with COMSUR on the condition that it complies with the principle of mutually beneficial counter-contributions.

For example, high rates of population growth during the 1990s lead to chronic overcrowding at the San Ramón primary and secondary schools. School directors were forced to reject new students or move students to other classesin the interim. Contributing to this difficult situation was the influx of the children of those immigrant families that provided services to COMSUR, leading the company and school directors to sign an agreement of mutual cooperation. In the agreement COMSUR committed to monthly contributions of approximately US $500 during the 10-month school year; the school in turn agreed to enroll the children of COMSUR personnel.

Infrastructure and mining royalties

COMSUR and the Rural Electrification Cooperative (CRE) co-financed the construction of a 220-km gas pipeline between Mineros and the San Julián River. It provides energy to the mine and gas to the recently constructed thermoelectric plant in San Ramón that provides electric energy to the region north of Chiquitanía.

Initially, COMSUR planned to build a gas pipeline between 1.5 and 2.0 inches in diameter at a total cost of US $1.6 million for the section between Mineros and the San Julián River. Nevertheless, the company had no problem agreeing to the joint construction with CRE of a 3-inch diameter pipeline, at a cost of US $2.4 million. COMSUR contributed US $1.6 million to the project’s financing, while CRE contributed the additional US $800 000 required to widen the pipeline’s diameter to 3 inches. Thus COMSUR is the owner of two-thirds while CRE owns the remaining third.

This project was possible thanks to the opening of Puquio Norte and has had significant positive impacts in San Ramón and the surrounding area since it enabled rural electrification in the region of Chiquitanía. However, the project required the installation of a thermoelectric plant and subsequent infrastructure for the distribution of electric energy, works that could have been financed by mining royalties paid by the Puquio Norte mine.[9] However, mining royalties constitute a departmental income and are distributed according to the department’s budget. Rural municipalities such as San Javier (to which San Ramón belongs) have no control over budget allocations, and have not received any development projects or similar works that could be directly attributed to COMSUR’s mining royalties for the Puquio Norte mining operation.

This lack of coordination between public investment policy and mining royalties as a potential financing mechanism generated undeniable social losses in the case of the rural electrification of San Ramón and the Chiquitanía region. The CRE had been negotiating with international cooperation agencies regarding financing for the construction of the thermoelectric plant, a process that delayed the project for three years. This illustrates the need to improve public investment policy instruments in order to avoid situations where the needs of small local communities surrounding a mining operation, such as San Ramón, are marginalized in favour of centrally determined needs at the departmental or national level.

Overall, the Puquio Norte operation has had a positive impact on jobs, income levels, and infrastructure development within its area of social influence. It is important to emphasize that the intensity of these impacts is at least partially related to population flows in the area. For example, in the case of San Ramón, the mine’s positive impact has been heightened by the town’s role as migration center. Several minor negative impacts were identified, such as an increase in housing prices and the saturation of public services, including schools. Among the corrective measures taken, the company is making extra tax contributions to improve the local school system.

In terms of the distribution of benefits generated by the mining operation, the local population has suffered the consequences of the lack of coordination between fiscal mining policy and public investment policy. This is an area that could be improved considerably for the benefit of the local communities. There are important benefits from investing in infrastructure or complementary public services resulting from works linked to the opening of a mine, such as the generation of electric energy from the construction of the pipeline.

Finally, there is concern among some San Ramón residents regarding the environmental risks entailed by a relatively large mining operation and its impact on the regional ecology. The company’s policy of openness regarding the environment has been useful but apparently insufficient given the negative precedents established by the national mining industry’s traditional lack of attention to environmental impacts.

Inti Raymi and its local context

Antecedents

The Inti Raymi mining company was founded in 1982 by the Bolivian group Zeland Mines S.A. and the Texan group Westworld Inc. Its goal was intensive exploration of the Kori Kollo deposit located in the province of Saucarí, 42 km northeast of the city of Oruro. Since then, Inti Raymi’s shareholder structure has evolved, reflecting changes in the mining operation. In 1999, 88 percent of the shares belonged to Battle Mountain Gold Company of the United States and 12 percent to Zeland Mines. In the same year, Inti Raymi had no other exploration activity underway except for Kori Kollo, although it had several exploration prospects. In 1999, preliminary results indicated important gold reserves in La Joya that could possibly double the operation’s lifespan if the bio-oxidationmetallurgical tests were positive.

Inti Raymi is a pioneering and innovative company whose Kori Kollo operation has been the reference point in Bolivian mining since its discovery and development. Inti Raymi brought new technology and production methods to Bolivian mining, including open pit mining and the concentration of minerals through leaching. The operation has been active in the introduction of technological changes, such as induced polarization and magnetic prospecting in exploration, cycle optimization and the use of pregnant solution. Such changes have enabled important increases in the recovery of gold and the reduction of costs (Loayza 1999). Moreover, Inti Raymi is the first industrial company in the country to establish a foundation to promote the social and economic development of local communities within its area of influence.

The mining operation

The Kori Kollo deposit is located within sub-volcanic or intrusive rocks, possibly originating in the tertiary period. The operation had two phases for oxide and sulfide production that provided much of the income necessary for the company’s social policy, which will be addressed in following sections.

The oxide and sulfide projects have been mined in an open pit. This has required the excavation of the Kori Kollo mountain, which over time will become a lake. In Andean culture, some mountains are considered gods and thus the object of adoration and worship; however, this is not the case with the Kori Kollo mountain. Nevertheless, some community members feel that the disappearance of Kori Kollo has influenced the climate, since the mountain served as a windbreak for the strong air currents that affect the area.

Oxides were treated by heap leaching followed by the precipitation of gold and silver using the Merril-Crowe method. In total, approximately 9.4 million tonnes of oxide were treated, the wastes from which were re-treated once the sulfide project had finished and then deposited in the tailings dam constructed for the sulfide operation.

Once the existence of approximately 64 million tonnes of mineral sulfide was proven, the company decided that the best method of treating this reserve were the carbon-in-leach process and the ZADRA process for putting the gold and silver in solution. The project was designed to treat 14 500 tonnes per day and in 1999 the company reached a capacity of approximately 20 000 tonnes per day. The product is gold ore, whose approximate content is 80 percent gold and 20 percent silver. Refining is done outside Bolivia.

Local context and population flow

Inti Raymi’s mining operations, deposit, and camp are located within the territory of two communities, Chuquiña and La Joya, located in the cold and dry central highlands. In addition, the operation has relations with communities adjacent to Chuquiña and La Joya, as the action radius of the company’s social arm, the Inti Raymi Foundation, encompasses 25 communities. Finally, Inti Raymi has important direct and indirect relations with the city of Oruro, the department’s capital and administrative base.

Chuquiña

When Inti Raymi began operations in the area during the mid-1980s, Chuquiña’s structure constituted a social and territorial unit, whose central axis was the village of Chuquiña. The community of Chuquiña is of Aymara origin and is part of the province of Saucarí. In addition, it forms part of the ayllu[10] Chariri, which together with 11 other ayllus, makes up the larger social and territorial unit known as the Marka,[11] with its ceremonial center in the village of Toledo (Ayllu Sartañani 1994). Nevertheless, by the mid-1980s, this traditional system of organization had lost practically all relevance in the area dominated by the republican state organizational system.

During this time Chuquiña’s lands were divided. One secondary road connected the community to the principal highway to La Paz and another connected it to the city of Oruro. Transportation service was restricted to trucks or a few buses once or twice a week. It was necessary to cross the Desaguadero River at different points by boat. During the rainy season, the road became impassable since there were no embankment or drainage ditches.

Chuquiña’s economy depended on sheep farming. Average family income, although the highest among the adjacent communities due to larger sheep flocks, was not sufficient to prevent the gradual migration toward urban centers, especially to the city of Oruro. In 1969, out of a total of 220 families, 91 emigrated to other parts of the department of Oruro and the country’s interior. In 1987, out of a total of 97 families, 62 emigrated outside of the area (Rojas 1995).

Nevertheless, this migratory process has not been definitive since many families continued administrating their land and livestock from the city of Oruro. Normally, they returned to their lands on the weekends and during planting and harvest times. This behaviour stemmed from a development strategy consistent with the maintenance of two complementary sources of income: a job in the city as a worker (either public employee or merchant) and agricultural producer in their own community of origin. This strategy was possible due to the short distance between Chuquiña and the city of Oruro (42 km) and the availability of cheap labour from the region’s impoverished campesinos. These people were contracted on a part-time basis by the migrants for agricultural and livestock tasks necessary to maintain production.

La Joya

The village of La Joya is approximately 5 km from Chuquiña. During the mid-1990s, this community also adapted its organization to the political administrative system in effect throughout Bolivia. In contrast to Chuquiña, however, La Joya was not part of an Andean social and territorial organizational system. Until 1953, the area now occupied by La Joya was the hacienda[12] of La Barca, which was later expropriated during the agrarian reform process in favour of the families living on the estate.

By the mid-1980s, the most important activities in the community of La Joya were agricultural and livestock production and cooperative mining. Because they were not located along the Desaguadero River, the population’s land parcels were smaller and less appropriate for grazing than those in Chuquiña. After the severe drought of 1982-1983, many residents migrated to the city of Oruro and other towns throughout the country. Other residents were obliged to take up artisanal mining in the La Joya mountain in the hopes of obtaining a complementary source of income. By the beginning of the 1980s, artisanal miners had formed the mining cooperatives of La Joya Ltd. and Concepción de Mayo Ltd., which exploited the mining concessions belonging to Inti Raymi.

Adjacent communities

In the mid-1980s, the adjacent communities that benefit from the Inti Raymi Foundation had an organizational structure similar to those for Chuquiña or La Joya. Their economy was and still is based primarily on subsistence agriculture and livestock production — a reality that is similar to Chuquiña and La Joya, except that these communities lack the presence of artisanal mining. Infrastructure consisted of an embanked road connecting several communities with the city of Oruro, while passing through Chuquiña toward Carangas. The most distant communities were linked by way of less-passable back roads. As with Chuquiña and La Joya, migration was the common denominator in the area.

The city of Oruro[13]

By the mid-1980s, the department and city of Oruro suffered a severe economic recession due to the drastic contraction in the mining industry, whose decline affected all other sectors. The city was favourably located for national and international commerce. It is linked to the Chilean port of Iquique by way of the Oruro-Pisiga-Iquique highway and to the port of Antofagasta by way of the Oruro-Uyuni-Antofagasta railroad. In addition, a paved road links Oruro to the largest cities in the country. Because of its strategic location, the city of Oruro has become the commercial emporium in Bolivia, especially for imported goods.

Acquisition of lands

As owner of the concessions in the La Joya-Chuquiña mining district, the Inti Raymi Mining Company S.A. (IRSA) acquired the lands necessary to exploit the deposit and to install the mining and administrative infrastructure. Inti Raymi believed that the richest part of the deposit was in La Joya, and so paid community residents nearly US $1 000 per hectare, in spite of the fact that local market prices were on the order of US $20-30 per hectare. Once the exploration study was concluded, however, it revealed that the Kori Kollo mountain, located in the jurisdiction of the Chuquiña canton, had a much more attractive deposit than that located in La Joya. But to acquire land in Chuquiña, the company adopted the following policy: acquire lands by phases according to the needs of the operation[14]; negotiate separately with each landowner; offer a price per hectare significantly higher than the average price in the area[15]; and once the mine closed, make every effort to restore the lands to their natural condition and return them to their prior owners.

In spite of the agreements signed by the parties, community residents continued with complaints, disagreements and pressures toward the company. During the course of our fieldwork, it was evident that community members used the issues of land and the environment (which will be addressed in a following section) as mechanisms of pressure with which to obtain additional benefits from the company. While pressures based on supposed environmental contamination by the mining operation have not been effective, pressures for additional compensatory benefits in exchange for the land are growing. In July 1999, community members staged a one-day work stoppage and occupied the area near the crusher, demanding additional compensation for the relocation of the community of Chuquiña.

The relocation of Chuquiña

In the early 1990s, the sulfide exploitation required the installation of a new processing plant near the town of Chuquiña. The company bought 9 hectares of land in Chuquiña at a cost of US $200 000 in the eastern section of the town. The technological change from heap leaching to leaching in agitation tanks was going to require a finer grain in the mill as well as a 350 percent increase in production, entailing a significant increase in noise and dust levels that would have disturbed community residents. Thus, the company began negotiations with community residents, proposing to move the town to a new location far enough away from the mining operation to avoid disturbance. In contrast to what occurs in most towns in the Bolivian highlands, the company offered to build new housing for all current Chuquiña homeowners and to provide all basic services, including a new modern hospital.

After lengthy negotiations, community members finally accepted the company’s offer to move the town to a new location called Villa Nueva Chuquiña. The houses would consist of two bedrooms, a kitchen, dining room, bathroom, and patio. The company would provide construction material that did not exist in the area, such as cement and iron bars, as well as labour. For their part, community members provided locally available construction material, such as rocks, sand and an assistant bricklayer. The relocation process attracted several community residents who had years before moved to the city of Oruro or other departments. These return residents were included in the Villa Nueva Chuquiña project. By 1999, 135 houses, market facilities, hospitals and educational centers had been built at a cost of US $1.8 million for the company.

In spite of the agreements mentioned above, Chuquiña’s relocation was not free of discrepancies and criticisms. Some residents resisted the move to the new town out of fear of being tricked by the company and losing their houses in the old town. Those who rented houses feared losing their tenants. Some residents argued that since the town of Chuquiña, especially its church, dated to the colonial era, it had great historic value in terms of preserving the memory of their ancestors and would be at risk from the company’s mining activities.

Toward the middle of 1992, a conflict developed between the company and the Oruro Human Rights Assembly over complaints lodged by Chuquiña residents.[16] For its part, the company demanded compliance with the negotiated agreements, renewing its commitment to conduct operations in a way compatible with the environment and citizens’ rights. Finally, the community agreed to the relocation and several members ended up renting their houses to workers from the interior of the country because many of them had already established residence in the city of Oruro.

Company-community relations

As analyzed above, one of the company’s most serious challenges from the beginning was achieving local community acceptance within an unfavourable context created by the company’s competition with locals for access to mineral resources and land. In addition to land acquisition and the town’s relocation, Inti Raymi was able, after several conflicts, to buy and freely transfer the gold concessions of “Independencia,” “Vera,” and “Iroco” in favour of the cooperatives holding the La Joya concession, even assuming subsistence costs for the first month. From then on, the company gradually dedicated itself to activities of cooperation and assistance to local communities in order to facilitate its insertion in the local context.

During the oxide phase, Inti Raymi became subject to multiple demands on the part of neighboring communities and civic institutions in Oruro that included the donation of sporting equipment and the construction of social infrastructure works such as secondary roads. When construction on the sulfide project began in the early 1990s, Inti Raymi was a pioneer in social assistance. Nevertheless, Inti Raymi’s experience shows how easily a company’s efforts at social action can be diluted in the medium term if they are not accompanied by an adequate sustainable development strategy for the region. In order to systematically attend to these needs, in 1991 the company decided to create the Inti Raymi Foundation.

The Inti Raymi Foundation

The foundation was established as a means of leveraging financial resources (in addition to those provided by the company) for investment in the region. Initially, the foundation was successful at mobilizing state resources from the Social Investment Fund in the area. Since 1997, the foundation has received funds from Spanish and Dutch international cooperation agencies as well as the Inter-American Foundation.

The Inti Raymi Foundation adopted a participatory policy designed to include community priorities in its plans and projects, as well as involve community residents in its activities. The foundation has presented itself as a willing partner eager to cooperate in the design and execution of projects sponsored by the communities. From the administrative and financial points of view, this policy entailed the foundation’s role as a counterpart agency and pre-investment funder for community projects. The foundation’s important role in developing effective community management capacity, however, has not been understood by some residents. During our fieldwork, it was evident that several beneficiaries view the foundation as illegitimate since it does not exclusively invest its own resources but rather, in many cases uses public funds.

In order to define the activities to be discussed with the communities within its scope of action, the foundation carried out a two-stage process involving:

1. a diagnosis and characterization of its area of action; and
2. creating a series of community workshops designed to identify and prioritize infrastructure needs.

Using these demands as a starting point, the foundation designed projects that emphasized agricultural and livestock activities, as well as those geared toward improving health, basic education, hygiene and water supply.

Mining’s dual role

Despite the creation of the Inti Raymi Foundation as a mechanism for social development projects that address the communities’ most pressing needs, the company continued to directly attend to the demands and requirements of the communities of La Joya and Chuquiña. There were two reasons for this. First, the company considers these communities part of its area of strategic action. Interaction with such communities was much less structured than with the other communities targeted by the foundation. Avoiding conflicts was a priority for the company and relations with La Joya and Chuquiña were the responsibility of the highest executive levels within the company. For its part, residents of the two communities did not directly relate to the mining company; instead their interaction was always mediated by community authorities. For example, during the land acquisition phases, the company always initiated contacts with community leaders, while residents waited for the go-ahead from their leaders prior to any direct negotiation with Inti Raymi.

Second, the mining company has been much more accessible to La Joya and Chuquiña’s demands than the Foundation because the latter uses a clearly defined methodology for approving projects. Its priority is to support activities that promote regional development, including after mine closure, rather than merely avoiding conflicts that could delay the normal timeframe for a mining operation.

It is important to note that this duality in relations between Inti Raymi and its area of social influence has been successful in avoiding conflict or confrontations. In some cases, it led the company to adopt assistential and even paternalistic positions with respect to La Joya and Chuquiña. This occurred due to the joint circumstances of a favourable market and the high quality of the Kori Kollo deposit. Now that gold prices have dropped to their lowest point in 30 years, the sustainability of this policy is precarious, to say the least. The company has been systematically reducing costs but pressure from La Joya and particularly Chuquiña have not let up. Since there has been little change in the area’s difficult social and economic conditions, the communities could react confrontationally to the company and its mining activities. The company is faced with the serious challenge of how to maintain trouble-free community relations during a market slump, after having established relations during an economic boom.

Environment[17]

Just like a coin, the issue of the environment at the Kori Kollo operation presents two opposing sides that form a whole. On the one hand, there are the technical aspects of the company’s environmental management policies; on the other, there is the natural environmental degradation prevalent in the area and the resulting political pressure on the company and the government. Both aspects are fundamental to understanding the relationship between the company and its surrounding social context.

The analysis that follows addresses each side of the coin. We have attempted to emphasize that in a context like that faced by Inti Raymi, the relation between a large mining project and its environmental impact is not limited to technical management of the operation itself, as many companies wrongly assume. On the contrary, interest groups use the environmental issue as an opportunity to question the legitimacy of mining activities, particularly at the local community level. If this reality is not incorporated in a timely and appropriate manner within the company’s environmental management and communication policies, the best technical efforts can do little, later on, to reverse the mutual distrust between the mining operation and the local community. This not only constitutes a source of conflicts and tensions during the operation of the mine, but also will likely continue beyond the closure of the mine.

Environmental management at the mining operation

As we saw in the first part of this section, the Kori Kollo operation advanced rapidly. In less than a decade it went from a project worth a few million dollars (the oxide mining operation) to the most important industrial project in the country. By the early 1990s, it had an estimated investment of US $150 million. Financing this was beyond the Bolivian financial and banking system’s capacity. Thus, the project turned to international financial institutions such as the World Bank, the Overseas Private Investment Corporation, and the Andean Development Corporation. Even though Bolivia had not passed an environmental law at that time, Inti Raymi’s operation had to comply with strict monitoring and environmental impact mitigation norms. [18]

The Inti Raymi mining operation, like Puquio Norte, is based on the principles of zero discharge and systematic, continuous monitoring. The water used in the processing plant is recycled. The resulting tailings from the concentration process are sent in pulp form to the tailings dam, where the solids are separated from the liquid, which is recycled back to the treatment plant. Following international standards, the leftover cyanide solution in the dam is kept under 50 parts per million by way of the application of hydrogen peroxide, which facilitates radiation’s ability to break down cyanide. Due to their high salinity, waters flowing from aquifers into the mining pit are not discharged into any water body. They are discharged into the evaporation ponds, specifically constructed to liberate water through evaporation. The salt that remains at the end of the project is deposited in the base of the mine pit and, over time, covered with water.

In order to avoid the formation of acid rock drainage, both the tailings dam, which will accumulate approximately 65 million tonnes of tailings, and the sterile solids generated by the mine, which will be in the magnitude of 70 million tonnes, will be encapsulated with oxidized material. The base of the sterile deposit is a four-foot thick liner made from oxidized material extracted during the operation’s first stage. The liner of the tailings dam has been made impermeable with a layer of compacted clay in order to avoid the tailings coming into contact with ground and surface water.

Because the Desaguadero River flows close to the mine, a 5-km dam has been constructed around the mine site. The dam will prevent floodwaters from entering the mine as well as discharge from the mine entering the river. The site also has a ring of monitoring ponds throughout the operation, which are used to take monthly samples of physical parameters and tri-monthly tests of chemical parameters. In addition to water quality, soil and air quality are also monitored. The goal of the restoration program is to restore lands affected by the mining operation to their original condition.

While conducting the fieldwork, we observed that the mine’s restoration programs have already begun, affecting 70 hectares in 1999. In addition, also underway within the area of the mining operation are the rehabilitation of green spaces and artificial lakes which are home to regional bird species such as ducks and flamingos. Finally, according to company officials, the company has established a fund to cover the costs of adequate closure measures.[19]

Currently, there have been no confirmed incidents of contamination or environmental damage due to the mining operation. Nevertheless, visits to the area and conversations with local residents and Oruro inhabitants demonstrate that the dominant perception is that the operation has significantly and negatively affected the region’s ecology.

The environment as an instrument of political pressure

As we explained earlier, the discovery and exploitation of the massive Kori Kollo deposit coincided with the crisis in the state-directed economic model, revealing this model’s defects. First, centralism resulting from the state’s role as economic planner had practically asphyxiated regional aspirations. Thus, the crisis provoked regional movements. Second, with the drop in metals prices, the mining departments of Potosí and Oruro suffered severe unemployment and recession. Inevitably, the population of these mining regions has questioned the mining industry’s long-term contributions to the areas. Among other aspects, criticism has been leveled against the amount and distribution of mining royalties paid to the central government and the regions.

Within this context of decline, Inti Raymi’s arrival as a dynamic operation (and the most important gold mine in South America) served as a starting point from which to attack the centralist model and promote its reform. Newspapers from the period 1993-1998 reflect the uncertainty regarding gold and mining royalties on the part of Oruro institutions. Oruro institutions lobbied the central government to impose higher royalties on Inti Raymi’s gold operation, suggesting that a greater percentage of these royalties go to the department. One of the main arguments employed in this fight was the environmental degradation that the mine left in its wake. In other words, Oruro institutions were demanding higher royalties not only because the resources were located in the department, but also as a form of compensation for the environmental harm or risks associated with mining. Western Bolivia’s experience with mining contamination since colonial times was cited. Because this perception was based on experience, Inti Raymi faced the difficult challenge of persuading the population of its responsibility and commitment to environmental management. The situation became even more complicated because Inti Raymi’s sulfide project commenced simultaneously with the natural degradation of the Uru-Uru and Poopó lakes. Mining’s negative environmental reputation led to the belief that such degradation was largely due to the Inti Raymi operation.

The department of Oruro is part of the closed basin or high Andean plateau that serves as a drainage system from Lake Titicaca to Lake Poopó by way of the Desaguadero River. The volume and depth of Lake Poopó depends primarily on the level of Lake Titicaca, which in turn is subject to cyclical fluctuations due to natural events such as the El Niño phenomenon.

“The close relationship between water levels in Lake Titicaca and the size and depth (or even the existence) of water in Lake Poopó, is due, of course, to the fact that the volume of the Desaguadero River (which contributes approximately 80 percent of the water that feeds Lake Poopó) varies depending on the level of water in the lake that it drains. Between 1984 and 1987, Lake Titicaca reached its maximum level… The result was a tremendous expansion of Lake Poopó, which reached a surface area of 3 500 square kilometers in 1986 and a maximum depth of 9 meters… In subsequent years, Lake Titicaca’s water level dropped once again…It is not surprising that during recent years, Lake Poopó has almost ceased to exist as a lake with a visible surface of water” (SGAB 1997, pp. 38-39).

The gradual disappearance of the principal lake in the department of Oruro, which coincided with Inti Raymi’s sulfide mining operation, had serious effects on the region’s flora and fauna. For example, as the lake disappeared, fish species such as orestia and pejerrey could no longer feed many of the communities scattered around the lake. In addition, the lake’s disappearance negatively affected local flora, because soil salinity increased. This situation negatively affected local campesinos. Inti Raymi was accused of being responsible for these processes, in part so as to pressure the company for compensation.[20]

Initially, the company did not realize that mining’s environmental impacts and risks could be cause for such concern and fear among local communities. The company was slow to develop a communications or community relations policy to focus on dispelling fears and creating trust, even at the cost of suffering a few delays or adjustments in the project’s schedule. Local residents say they were not consulted about the use of cyanide in the oxide mining operation, which could have served to dispel fears in a timely manner. Moreover, after a few isolated incidents involving animals that evaded company security and drank from the cyanide ponds, the company compensated the owners far above the market value of their livestock in order to avoid conflict. Such action gave the community the false impression that the operation’s negative environmental impacts explained the high compensation.

Thus, the mining industry’s negative environmental legacy, the local population’s distrust of the company and its activities, combined with the company’s insufficient and tardy attempts at communication with local residents all opened the door to fear and uncertainty. If we add in the political manipulation of the environmental issue, together with the phenomenon of the natural degradation of the area, the discrepancy (which in the authors’ opinion exists) between the operation’s level of environmental management and the communities’ negative perception of the operation is not surprising.

In conclusion, this section has shown that the most basic feature of the relationship between Inti Raymi and local communities is the distribution of benefits generated by mining activities. For local residents, the arrival of the mining operation is both an opportunity and a threat. It is a threat because the mine competes with residents for land and mineral resources, but it is also an opportunity because it can provide them with resources or, as we will see in the following section, well-paid jobs. Due to the deposit’s richness and the cooperation of company executives, Inti Raymi adapted to the situation by developing an assistance policy vis-à-vis local communities with the goal of avoiding conflicts that could affect the normal functioning of mining activities. Over time, it became apparent that the region’s pressing needs required a more structured and effective response, and so the company created the Inti Raymi Foundation. Thus, the company’s initial assistential role matured into the role of an agent committed to local development. But because the company’s assistentialist policy was not eliminated, it effectively developed a dualistic response to local residents’ demands. In other words, the company seeks to promote local development but also seeks to avoid conflicts.

Impacts of Inti Raymi

In this section we analyze the principal economic and social impacts in the mining operation’s area of influence.

Employment and human resources management

Inti Raymi’s policy is to give hiring preference to workers from the communities of Chuquiña and La Joya. Table 4 shows the evolution of the local communities’ share of mine employment.

From 1990 to 1997, between 54 percent and 68 percent of Inti Raymi workers were from the communities of Chuquiña and La Joya. The number of contract workers, as a response to pressures from local communities for jobs, is notable. Thus, between 1997 and 1998, when international gold prices fell approximately 30 percent and Inti Raymi was forced to reduce costs, contract workers were the most severely affected, practically disappearing from the work force. Clearly, this type of employment was largely surplus or unnecessary to the operationand had to be abandoned when the company’s economic situation went through difficulties. This explains the smaller percentage of workers from Chuquiña and La Joya for the year 1999.

Training

Initially, Inti Raymi’s mining operation was heavily weighted toward unskilled labour. Nevertheless, the technological changes implied by the shift to sulfide mining required the company to train workers by way of three programs focusing on equalization, professionalization and specialization. All operators and employees at the oxide operation were trained in order to proceed to the sulfide operation.

The equalization program involved the development of cognitive tools such as language, technical knowledge and quantitative training, as well as general technical skills in areas such as mechanics or electricity. The professionalization program was oriented to training operators in relation to their job positions. Courses consisted of 20 percent theoretical training and 80 percent practical training. Finally, the specialization program formed specialized resources within the area of professionalization. For example, within the area of auto mechanics, a specialty could be electronic injection. Whereas 51 percent of workers were trained under the first program, 25 percent were in the second and 3.3 percent in the third.

Importance of employment originating in the mining operation

The impact of the mining operation on employment in Chuquiña and La Joya can be evaluated in relation to the communities’ economically active population (EAP). The analysis includes employment by subcontractors engaged in various services such as transport, food service, operative contracts, cleaning and civil works. In 1997 an estimated 143 additional jobs for local residents were created with subcontractors.

Table 5 presents the total impact of the mining operation on employment in Chuquiña and La Joya. Note that the direct employment at the mine plus indirect employment with subcontractors equals 56.2 percent of the EAP of Chuquiña and La Joya for the year 1997. Due to the human capital development experienced by much of Inti Raymi’s labour force, which we will discuss later, the possibility of unemployment problems once the mine inevitably closes is low.

Income

Direct impact on income of local communities

Table 5 showed that most employment generated by the company in Chuquiña and La Joya was through the direct hiring of workers at the operation, who have always received salaries higher than the regional average, as we can appreciate in Table 6.

The wage differential between Inti Raymi workers and the department’s average is increasing over time. A similar situation occurs with the variations in the opportunity costs for the average worker from Chuquiña or La Joya, which is the sum of the average income of a worker in the city of Oruro and that of an agricultural producer in the department of Oruro. As a result, residents from La Joya, Chuquiña and adjacent communities have a strong incentive to enroll as workers at the mining operation. During our fieldwork, various interviewees from the rural area adjacent to the mine expressed their indifference and — in some cases — opposition to the Inti Raymi Foundation’s activities. Nevertheless, they all expressed the desire to one day get a job at the mine. When asked about their expectations regarding Inti Raymi, they have very clear ideas: they value the foundation’s support, but do not expect it to significantly change their lives; in contrast, a job at the mine represents a significant change.

Indirect impact on income of local communities

Indirect impacts on communities’ income result when wages earned at the mining operation are spent on goods or services produced in Chuquiña and La Joya. Among the goods consumed by mining personnel are meat, different varieties of potatoes and potato products, and Andean grains such as quinoa, wheat and barley. In turn, this indirect income is not usually spent on goods produced in these communities. However, because recipients view it as an extraordinary income, they usually spend it on the acquisition of durable goods or clothing. Thus the wages spent by workers in the area around the mine do not have an expanded multiplier effect in the area.

Migration to the city of Oruro

Until 1995, 83.7 percent of mine personnel resided in Villa Chuquiña and La Joya, while 10.6 percent lived in the city of Oruro and the rest in other cities. However, this high level of local residence was not desired as local residents aspired to live in a city like Oruro, and their income levels made this possible. Due to a growing state of frustration, in spite of repeated refusals by mine administrators to provide transportation from the mine site to Oruro, in 1996 the union decided to contract a transportation fleet using its own resources. Later, union negotiations with the company resulted in an agreement that Inti Raymi would cover 50 percent of transportation costs and later assume all such costs.

Figure 1 illustrates two unmistakable tendencies. Between 1990 and 1995, the number of mine workers, employees and technicians residing in Chuquiña and La Joya reached its peak, due fundamentally to the company’s policy. In contrast, between 1995 and 1997, the local population decreased drastically while the number of workers living in the city of Oruro increased.

The year 1995 represented a historic turning point for Chuquiña and La Joya residents. Consolidating their residence in the city of Oruro implied a better standard of living and multiple new opportunities for them and their families. Moreover, this change did not imply a jump into the unknown or the transition to an unfamiliar and risky world. In addition to having stable incomes, the company facilitated access to housing and vehicles and, in some cases, assisted with real estate investments in other cities in the country.[21]

Impact on income in the city of Oruro

Table 6 showed the mine workers’ salaries were significantly higher than the average income in the city of Oruro. This was also true of technicians and professionals employed at the mine. In the following section we analyze the impact of these salaries on the city of Oruro.

Workers invest approximately 40 percent and technicians 25 percent of their income in real estate. Nearly 45 percent of the income is spent in the city of Oruro. According to data collected during our field work, the average worker is relatively frugal and has the following investment priorities: the purchase of a plot of land in Oruro; the construction of a house on this plot; their children’s education (with aspirations of becoming a professional with a university education); the purchase of a plot of land in another city; the purchase of a store or commercial venue; the purchase of a minibus to provide urban transport services; and the purchase of an automobile.

Although mine workers earn considerably less than technicians, they devote a greater proportion of their income to savings and investments. For their part, technicians and employees have the following investment priorities: acquisition of real estate (or if they are already owners, additions to and improvement of their property); changing their existing automobile for a more recent model, which involves a mixture of investment and consumption; and financial assets, which are generally obtained in the banking system, such as savings accounts or fixed-rate deposits.

Discounting wages spent on investments and in the communities of Chuquiña and La Joya, nearly 100 percent of the remaining wages are spent in the city of Oruro. This is because Oruro is probably the cheapest city in the country. As a result, investment spending and consumption in the city of Oruro together represent 78 percent of workers’ income and 86.25 percent of technicians’ and employees’ incomes. A portion of this spending, however, leaves the city of Oruro in the form of payment on imports and goods and services produced elsewhere in the country. Discounting these losses, the resulting net spending in turn becomes income for other families in Oruro, and so on, successively.

The sum of this successive spending represents the income multiplication of wages and salaries paid by Inti Raymi. The estimate of this multiplier effect is presented in the first column of Table 7.

Table 7 shows that in 1997, every dollar paid by Inti Raymi as wages and salaries became US $2.6 in income in the city of Oruro’s economy. For example, the approximately US $7.1 million paid in salaries became US $18.3 million for the economy of Oruro. This impact can be more concretely appreciated comparing it to the number of families that the income could maintain. The average family in Oruro had an annual income of US $2 691 in 1997; thus the indirect income generated by the mining operation would have maintained approximately 6 800 families that year, or 18 percent of families living in the city.

Using this methodology, we can estimate a multiplier of 3.25 for the income earned by the operation’s subcontractors[22] residing in Chuquiña, La Joya and the city of Oruro, as shown in the second column of the same table. Considering both the direct and indirect effects, in 1997 approximately 6 percent of Oruro families could have been maintained with this income. The multiplier effect of both types of income — workers plus subcontractors — is shown in the third column, which could have maintained approximately one-fourth of the families residing in Oruro.

Infrastructure

Inti Raymi’s infrastructure development program constructed road and communications works. These works were incremental improvements in the area’s roadway system.

The company built a bridge across the Desaguadero River and a highway connecting the city of Oruro at a cost of US $320 000. The project benefited various communities in addition to Chuquiña and La Joya by significantly improving the links among the communities and to the national highway system and the city of Oruro. Instead of travelling along poorly maintained roads and crossing the river by boat, community members could now travel quickly and comfortably along well-maintained highways, completing the journey in much less time than before. The project also helped facilitate the migration of families living in these communities to the city of Oruro. With the new highway and the bridge it is now possible to live in Oruro and work at the mining operation. In addition, the project facilitated the integration of the rural population into the city of Oruro.

Departmental income

Gold production in Bolivia was subject to minimal royalties on the order of 1 percent and 1.5 percent of the gross sales value. This was because most of the country’s gold came from alluvial river deposits north of La Paz, produced by mining cooperatives and individual gold panners. Gold nuggets were easily smuggled out of the country, which invariably happened when the government raised gold royalties beyond minimum levels. Thus, during its first few years, Inti Raymi’s oxide operation benefited from this exceptionally favourable tax treatment.

Once the oxide operation became well-known and was treating several thousand tonnes a day, the government decided to differentiate the gold produced in Kori Kollo from alluvial gold and subjected the former to royalties of 3 percent. Estimates realized by the National Mining Secretary show that for the period 1993-1996, during which gold prices fluctuated between US $350 and US $400 per troy ounce, Inti Raymi paid mining royalties equivalent to between 9 and 12 percent of profits. During this same period, taxes on profits in Chile fluctuated between 15 and 35 percent, in Argentina and Venezuela reached 30 percent, Peru 38 percent and Mexico between 35 and 40 percent.

In 1997, the government reformed the mining tax regime and established a single system that combined mining royalties with income tax. Since then, Inti Raymi’s gold production has been subject to the Impuesto sobre las Utilidades de las Empresas (IUE, Corporate Income Tax) and royalties between 4 percent and 7 percent of the gold value according to international market prices. Under the new regime, the IUE is applicable as a fiscal credit upon paying mining royalties. All royalties paid are destined to the department in which an operation is located — in Inti Raymi’s case, the department of Oruro.

As shown in Table 8, Inti Raymi contributed 14 percent and 10 percent of the total departmental income during the years 1997 and 1998, respectively. These figures reveal the absence of other large mining operations in the department of Oruro and the country in general, a phenomenon that has existed since the 1980s. This is even clearer when we consider Inti Raymi’s contribution to the department’s total royalty-related income. Between 1993 (when the sulfide operation commenced) and 1998, Inti Raymi was responsible for between 74 percent and 99 percent of Oruro’s income from mining royalties. Thus, the Inti Raymi deposit is the principal natural resource currently exploited in the department of Oruro. Without the Inti Raymi operation, the department would be virtually without income from natural resources.

In terms of the department’s budget appropriations, there is no correlation between the source of income and how it is spent. Instead, income is expended according to political considerations and usually goes to areas with greater influence within the department, such as the city of Oruro. As a result, it is possible that the mining royalties could, for example, be spent on agricultural development projects, on projects in the city of Oruro, or the community of Chuquiña. During the interviews with regional government officials, we did not detect that the actions of Inti Raymi or its foundation had had the effect of displacing public investment in the area. On the contrary, it is more probable that public investment in the region increased due to the Inti Raymi Foundation’s active role as a mobilizer of public resources.

Human development and social capital

Personnel at the mine

Although subject to debate, perhaps the greatest impact on human development in the area resulted from employment of a significant number of Chuquiña and La Joya residents at the mine. The company’s work conditions favoured the social and economic development of workers’ families by offering higher incomes as well as access to quality health and education services.

For Chuquiña and La Joya residents, employment at the mining operation brought a 400 percent increase in income levels. Residents went from being agricultural producers and poorly paid workers or functionaries in the city Oruro to stable and well-paid jobs comparable to middle-class levels in the city. Moreover, since their frugal habits enabled them to save approximately 40 percent of their income, and because the company did not tolerate alcoholism, workers spent their income acquiring land, real estate, and small businesses such as stores. Thus workers and their families went from being socially and ethnically marginalized to being upwardly mobile residents in Oruro.

In terms of health care, the change was also positive and significant. In many cases, families had neither individual or family health coverage, and employment at the mining company entailed full coverage of medical insurance. In terms of education, the mine brought favourable conditions both for workers and their children. As mentioned earlier, workers were exposed to an educative process framed around developing and applying the skills required by a company such as Inti Raymi. It is not difficult to imagine that these workers and technicians are well paid both within and outside the mining industry. For example, the workers, technicians and employees interviewed during our fieldwork did not express concern for their future after the mine closes. They assume they will be able to find work at other mining companies or in other industries if need be, thanks to their professional training and specialization in such jobs as a mechanic or electrician.

In addition, migration to Oruro increased the educational opportunities available to Inti Raymi workers’ children, both in terms of formal education and the advantages offered by the environment of an of urban society. The children of these new members of the middle class were able to advance beyond a primary school education, which is the level attained by 59 percent of the department. (National Institute of Statistics, National Housing and Population Census 1992; Muller and Associates 1997).

Human development in communities adjacent to the operation

The presence of the company and the Inti Raymi Foundation in these communities enabled the development of alternative economic activities and the improvement in health and education services.

The company and the foundation constructed primary and secondary schools capable of housing 1 000 students in the communities of Chuquiña and La Joya.[23] The schools are similar in quality to the average private school in the city of Oruro, and include mechanics and welding workshops, computer laboratories, library, and sports facilities. In addition, the company provided children from La Joya and Nueva Chuquiña with breakfast, uniforms, and school supplies.

In addition, the Inti Raymi Foundation supported the construction of an educational infrastructure through the formulation of pre-feasibility and feasibility projects presented to the Social Investment Fund. The result has been an improvement in learning conditions and compliance with the population’s demand for quality educational infrastructure. In addition, Caritas and the Anti-Hunger Foundation, with participation from parents, have been providing school breakfasts in order to combat the low nutritional levels that negatively effect learning. Likewise, the foundation has provided teaching material each year. Schools have received book donations that complement other learning materials and help improve learning conditions. Finally, the foundation granted bonuses to local teachers who agreed not to interrupt their teaching responsibilities. However, such improvements have not improved dropout rates caused by migration.

Simultaneous to building the new community of Chuquiña, Inti Raymi constructed a hospital similar to a top-level private medical center in the city of La Paz. According to the hospital’s director, “there is no health center of this kind in the city of Oruro.” Among other services, the hospital offers medical and dental attention, childbirth facilities, an isolation ward, and a laboratory for the detection of tuberculosis. The hospital attends to 24 area communities with a total of approximately 5 200 inhabitants.

The foundation has established a health care system composed of a reference center (the Health Center of Villa Chuquiña); monthly visits to the communities by an itinerant doctor-and-nurse team; health promoters[24] in each city; and transportation service to the city of Oruro for those requiring specialized medical attention. This system has allowed important gains, as shown in Table 9.

The principal efforts of the Inti Raymi Foundation at the rural level were focused on improving the region’s agricultural productivity in order to boost incomes and living standards for the region’s inhabitants. To that effect, the foundation conceived and developed the Livestock Promotion Center (CEPROGAN), which provides technical assistance and training to agricultural and livestock producers within the foundation’s scope of action in the areas of livestock production, soils, grazing lands, and forestry. Although this program has benefited local campesinos, it has not managed to raise income levels sufficiently to avoid the systematic abandonment of the region.

Formation of social capital

The Inti Raymi Foundation’s policy is to seek community participation so that its projects reflect local priorities and get community members to participate in the solution of their problems. The Local Development Fund (FONDEL) illustrates such efforts and their results.

FONDEL is an investment fund created by the Inti Raymi Foundation and Inter-American Foundation (IAF) with initial capital of US $300 000, to which each institution contributed 50 percent. FONDEL was created to counteract widespread poverty in the area by solving some basic problems, such as the lack of negotiating and management capacity on the part of local communities. These problems are relatively simple for most organizations in the modern world, but have long been unsurpassable for communities within the foundation’s area of influence.

The strategy adopted by FONDEL was that each participant — FONDEL, the beneficiary community, and the state — has clearly defined roles and responsibilities with which they must comply. FONDEL establishes the procedures, fixes relations among diverse actors, and co-finances projects. The community identifies, develops and executes the projects, in addition to providing local materials and labour. Other private organizations and the state provide co-financing and technical assistance.

FONDEL works according to projects. Each must comply with the following stages: identification of the project; formulation of the project profile; successful search for financing; project execution; supervision of the project execution; and project maintenance for the benefit of current and future generations. In each of these stages, the communities are trained by the foundation.

FONDEL’s initial results are encouraging, including the construction of productive and basic hygiene infrastructure and the strengthening of communities’ management capacity. It is important to note that initial FONDEL contributions were multiplied by 2.85. In addition, communities have been the principal contributors to FONDEL projects, providing 37 percent of total resources.

Human development in the city of Oruro

Although subject to debate, the foundation’s principal contribution to human development in the city of Oruro (which as we have seen is a center of attraction for human resources) has been the establishment of the Multi-Service Educational and Intercultural Center (CEMEI). The foundation became involved in education because it is an issue common to all foundation projects; one which represents its central thrust of development. The city of Oruro suffered poor-quality public education services, characterized by lack of infrastructure and equipment such as libraries, furniture, and teaching materials, as well as low professional levels among teachers.

In the area north of Oruro, the foundation initiated an innovative project inspired by the Jesuit-sponsored Multiservice Educational Center (CEMSE) in La Paz. The foundation’s project, known by its initials CEMEI[25], provides teaching materials to the city’s public schools and implements innovative teaching methodologies at a well-equipped center periodically attended by all students from area schools. CEMEI encourages free expression and creativity, and provides access to technology, new teaching methods and resources that complement the educational process.

According to parents and teachers, the center’s support is very important because it provides children with a space offering novel elements — workshops, a gymnasium, sports field, video library, and computer lab — that keeps them off the street. Students receive support to enjoy those school activities that teachers cannot always provide given the lack of equipment in their schools. CEMEI figures confirm these goals. Between 1996 and 1998, coverage increased from 12 000 to 16 000 participants, reaching the limit of 1 000 participants per day, above which the quality of attention and services would suffer. CEMEI’s attends to approximately 30 percent of Oruro’s students.

Impacts, best practices and sustainability

Using the Bolivian experience, this study has evaluated the positive and negative impacts that the opening of an industrial mining operation can have on the its socioeconomic area of influence. In this section we discuss the study’s implications for public policy and business strategies, with the goal of contributing to a maximization of benefits and minimization of identified costs.

One of the study’s most important results has been to show that a mining operation’s costs and benefits (and their intensity or magnitude) depend on the characteristics of the socioeconomic and cultural context into which the operation inserts itself. As a result, in a socioeconomic context, the potential costs and benefits identified, as well as the best practices recommended, are applicable in Inti Raymi and Puquio Norte’s areas of influence. The fundamental characteristics of these areas are: origin linked to native cultures (the predominance of western culture notwithstanding); rural communities connected by good highways to urban centers or important cities; marked migration of local populations; and an agrarian-based economy which possesses an important and growing flow of commercial goods.

Potential benefits

Employment and income

Employment is one of the most efficient mechanisms for distributing benefits among rural communities. Employment permits the productive use of the labour force with high levels of productivity and, as a result, income. In addition, the growing importance of informationand advanced technology used in the mining industry provides local workers with opportunities for training and skills acquisition, as well as work discipline. For example, the Inti Raymi sulfide operation provided local workers with education and training to which they would never have had access, otherwise. Finally, high and stable income levels provide workers and their families the means to acquire assets as well as access to new opportunities. This is essential if rural peasant families are to escape the social and economic marginalization to which they are commonly subjected.

In addition to these multiple benefits, other forms of compensatory (or surplus) employment also usually arise, as in the case of Inti Raymi. In such a situation, that policy should be considered part of an efficient benefit-distribution policy rather than a strictly personnel policy.

This study has shown that while employment at the mine has significant impacts on rural communities, affecting a significant portion of the EAP, the multiplier effect of mine salaries primarily occurs at the urban level, especially in cities where the provision of goods and services and a considerable population is concentrated. In the case of Inti Raymi, for example, the multiplier effect in rural communities was practically zero, while in the city of Oruro, each dollar paid by the company became approximately 2.8 dollars in income, benefiting approximately one-fourth of the families residing there.

Infrastructure, mining income and public investment

Since mining operations are located in rural areas with infrastructure deficiencies, the construction of these facilities is another important mechanism for promoting regional development in a mining project’s area of social influence. Puquio Norte, for example, required the construction of a 220-kilometer pipeline, which provided an opportunity for the Rural Electrification Cooperative to assume the additional cost of widening the pipeline in order to electrify not only the town of San Ramón but also all of Chiquitanía Norte.

The maximization of benefits derived from the infrastructure works depends on the level of state involvement in their construction and financing. Infrastructure works are commonly public goods that can produce high social benefits that do not correspond to the private sector. For this reason, works initiated exclusively by private sector entities, such as a mining company, do not maximize the collective well being. For example, if the gas pipeline to Puquio Norte had been extended to Trinidad in the department of Beni, the benefits for the eastern region of the country would have been considerably greater. A work of such magnitude, however, would not only have required widening the pipeline but also nearly doubling its length. Investment in infrastructure works represents an additional cost that can make a mining project less feasible and thus endanger all the other positive effects for the region’s development. This situation can be minimized if the state assumes partial or total financing.

In current circumstances in Bolivia, portions of mining royalties or taxes are seldom invested in rural areas contiguous to the mining operation. We suggest incorporating infrastructure works with clear local benefits within the department’s budget in relation to royalties or taxes paid.

Local development promotion

Increasingly, mining companies are taking part in the local development process by establishing foundations. Inti Raymi is a pioneering company in this respect. In general, this study found that the Inti Raymi Foundation had positive effects. The most effective programs were those oriented to basic infrastructure development, the provision of basic health and education services, and the formation of social capital. In other words, the most effective programs were those oriented to the provision of goods and public services. Projects geared toward productive ends, which are part of private investment, have had positive impacts but their efficiency and sustainability is debatable.

The study also showed that, notwithstanding the creation of the Inti Raymi Foundation, the company continued to directly address community needs within its area of social influence. Over the long term, this dualistic approach to company-community relations hurt the company’s image. A best practice for a socially responsible strategy would be to avoid dualistic actions in the social context. It is evident that entities specializing in social work, such as a foundation, provide the greatest benefits.

Magnitude and sustainability of benefits

This study has shown that population flows will determine the magnitude and sustainability of the benefits from a mining project to its area of social influence. Benefits are diluted or even disappear when they are focused on an area with high emigration levels. In contrast, benefits are heightened in an area receiving migration flows. Thus, mine-sponsored productive diversification will be more effective and sustainable in a migrant-receiving area, where the multiplier effect of mining-related income is most evident. As such, a diagnosis of general population flows within the area of social influence is important when designing a company’s social programs. This analysis should be conducted during the project’s environmental and social baseline studies.

Potential costs

Natural resource competition

Mining companies often compete with local communities for natural resources, particularly land and water. For example, Inti Raymi had to compete with its neighbors for natural resources, land, and minerals. One practice that allowed the company to avoid or overcome conflicts with the local community has been compensation, in the form of assets similar to those displaced or, when that was impossible, compensation by an asset whose market value exceeded the value of the displaced asset.

Nevertheless, problems have arisen due to the fact that Inti Raymi established a mechanism for individual negotiation with each one of the community members that sold land. Due to differences in prices among land of similar quality, a few community members have complained to the company, arguing for higher compensation and, in some cases, have initiated legal action. While it would be naïve to deny the existence of opportunistic attitudes aimed at obtaining advantages from the company, it is also evident that the company’s approach to negotiation generated mistrust within the community. As a result, land negotiations should be collective or the conditions offered by the company be made public. Transparency is essential to building the trust necessary for conflict-free, company-community relations which can so easily compensate for additional costs.

Environment

This study has shown that in countries like Bolivia, the environmental management of an industrial mining project has two intimately related facets: The technical facet linked to environmental standards and practices applied, and the public facet related to the company’s and the industry’s image within society. As a result, it is not enough to comply with strict environmental standards or practices; it is also necessary to respond to the public’s perception of mining. Both facets merit careful attention from the outset, which will give results in form of community relations based on mutual trust. In addition to impeccable technical standards, sound environmental management means creating trust and credibility among local communities. We suggest the adoption of ongoing information and consultation policies with local communities, particularly those that feel exposed to risks from mining activities, and certification of a company’s environmental programs by a credible third party that inspires confidence in the local communities.

References

Ayllu, Sartañani. 1994. Perspectivas de descentralización en Karankas: La visión comunitaria. PROADE/ILDIS. La Paz.

Bisset, Ron. 1996. Social impact assessment and its future. Mining Environmental Management. The Mining Journal Limited, March, London.

Columba, Marwin. 1999. Environmental Management at the Inti Raymi Mining Company. Inti Raymi. La Paz, Bolivia.

COMSUR/EMICRUZ Ltda. 1992. Impacto Socioeconómico, Proyecto Minero “Puquio Norte.” Consultora CONIN Ltda. Mimeo. September.

D’Orbigny, Alcides. 1994. Viajes por Bolivia. Edit. Juventud, La Paz, Bolivia.

Kumalo, Jane. 1999. Living next to a coal mine. Mining Environmental Management. The Mining Journal Limited, March, London.

Labat-Anderson Inc. 1997. Final Social Audit Report. P.T. Freeport, Jakarta, Indonesia.

Loayza, Fernando. 1999. Competitiveness, Environmental Performance and Technical Change: A Case Study of the Bolivian Mining Industry. In Environmental Management and Sustainable Development: Case Studies from the Americas. International Development Research Center, Ottawa, ON, Canada.

May, Peter; Dobbs, Alan; Fernández-Dávida, Patricia; Gonçalves daVinha, Valéria; Zaidenweber, Nathan. 1998. Corporate Roles and Rewards in Promoting Sustainable Development: Lessons Learned from Camisea. Energy and Resources Group. University of California, Berkeley, CA.

May, P. 1998. Mining Environmental Management, March, 1997.

McMahon, Gary; Strongman, John. 1999. The Rise of the Community. Mining Environmental Management. The Mining Journal, January, London.

MEM (Mining Environmental Management). 1996. Social Issues, Lihir: Socio­economic Impact. The Mining Journal, March, London.

---. 1997. Socioeconomic impacts at Sadiola. The Mining Journal Limited, March, London.

Muller and Associates. 1997. Socioeconomic Statistics 1997. La Paz, Bolivia.

National Institute of Statistics, 1992. National Housing and Population Census. La Paz, Bolivia.

Rojas, R. Javier. 1995. Diagnóstico socio-económico de la Comunidad de Chuquiña, Provincia Saucarí del Departamento de Oruro. Thesis, Universidad Técnica de Oruro. Oruro, Bolivia.

SGAB (Swedish Geological AB). 1997. Proyecto Piloto Oruro, Documento Final, Plan de Gestión Ambiental, Ministerio de Desarrollo Sostenible y Medio Ambiente y Secretaría Nacional de Minería. La Paz, Bolivia.

[1] The authors would like to thank the Mining Policy Research Initiative of the International Development Research Centre of Canada and the Mining and Industry Division of the World Bank for providing funding that made this study possible.

[2] A silver mining project in the Los Lipez area that would require an investment of approximately US $450 million.

[3] COMSUR is a Bolivian company composed of several mining operations. Its most significant undertakings are: Porco (zinc-silver-lead), Don Diego (zinc-lead-silver), Bolívar (zinc-lead-silver), COMCO (silver) and Puquio Norte (gold).

[4] The San Julián River provides water to the town of San Ramón and the Puquio Norte mining operation.

[5] Based on secondary information and an orientation field visit, the towns of San Ramón, Santa Rosa de la Mina and San Javier were selected as Puquio Norte’s area of social influence. During the course of our field work it became evident, however, that San Javier was linked to Puquio Norte solely by way of municipalresponsibilities. In addition, the mine has no presence in Santa Rosa de la Mina and none of its residents work at the mining company. In contrast, a highway links San Ramón to Puquio Norte. A few San Ramón residents work at the mining company and the company’s technicians, administrators and workers live in San Ramón. For the most part, Puquio Norte workers and their families shop at the local market, and access local health and education services.

[6] San Ramón is located 180 kilometers east of the city of Santa Cruz de la Sierra. It belongs to the Santa Rosa de la Mina canton, Ñuflo de Chávez province, Second Municipal Section (San Javier) of the Department of Santa Cruz.

[7] To address the problems of absenteeism and worker indiscipline, guidelines have been issued and the area superintendants and section bosses conduct motivational workshops.

[8] The estimate for income levels for 1998 was obtained through a random stratifed sample that involved in-depth interviews with 47 people.

[9] Puquio Norte pays royalites equivalent to 9.5% of San Ramón’s income. This is a significant figure, since it is equivalent to approximately 85% of the total taxes paid by San Ramón residents.

[10] The ayllu is the territorial, social, kinship and identity unit in the socio-ethnic organization of Andean culture.

[11] The Marka is the territorial unit that corresponds to the grouping of ayllus that constitute a larger unit in the Andean organizational system.

[12] Rural estates, or haciendas, were large extensions of land belonging to a single landowner and dedicated to agricultural production. Their domain included the residents who lived on the land.

[13] The city of Oruro is the capital of the department of the same name, located 230 kilometers south of the city of La Paz.

[14] Inti Raymi bought 500 hectares from the Chuquiña community for the construction of its productive facilities, paying US $500 per hectare. Later, for sulphide mining operation, the company acquired approximately 1 000 hectares at a cost of US $300 per hectare for the construction of the tailings dam. Finally, the company bought nearly 4 100 hectares at US $350 per hectare for the construction of the evaporation ponds for the sulphide operation.

[15] According to company officials, the value of these lands was estimated at between US $15 and US $30 per hectare.

[16] Complaints included: supposed threats by company officials to demolish the church and the town; company pressures regarding relocation to Villa Chuquiña; invasion of the town’s urban radius; that the new mining methods would contaminate the town, which would end up inhabitable due to its proximity to the smelter; impediments to the residents’ free movement because of the construction of aTRANCA; and the suspension of transportion of children to the school in Villa Chuquiña. See Córdova, 1993.

[17] This section is based on information from different sources. Its goal is to obtain an objective analysis of Inti Raymi’s environmental management. The sources were: (i) Oruro’s regional environmental evaluation as undertaken by the Swedish Geological AB in the Oruro pilot project (1993 and 1996); (ii) Internal company documents such as “Environmental Management at the Inti Raymi Mining Company” written by Marwin Columba, Superintendant of Environmental Control; (iii) Interviews with key company and community informants; (iv) Press articles and other information found in bulletins such as “Informa y Opina” by the Pastoral Society; and (v) the technical evaluation conducted by one of the present authors during the early 1990s with the support of environmental specialists (Loayza 1999).

[18] As an example, in 1997, Inti Raymi was granted first prize by the Latin American Mining Organism (OLAMI) in the category of large-scale mining in the ecology and environment competition.

[19] Bolivian environmental legislation does not require the establishment of a fund or monetary reserves for restoration or rehabilitation activities associated with the closure of a mine.

[20] For example, the following press clippings from the time are highly revealing: “The use of toxics and poisonous chemical products represents a grave danger, not only to residents’ health, but also to soil fertility, water quality and environmental equilibrium, the contamination of which is caused by Inti Raymi’s use of cyanide in its gold mining operations, poisoning not only the site but taking its deadly effects to the Poopó and Uru-Uru lakes, endangering and destroying the fish populations, the only source of sustenance for the residents and town of Oruro.” OPINION, 3 September 1991, “Mining companies contaminate the soil, water and environment.”

“Jaimes (from the department of Oruro) was emphatic in attributing the disappearance of all vestiges of life in the area around lakes Poopó and Uru-Uru to the effects of lethal cyanide used by the Inti Raymi company in Saucarí… Lake Poopó is dead, there is no longer any life because all the species of flora and fauna have disappeared, afirmed the interviewee…” La Patria, 27 October 1993, “Inti Raymi responsible for ecological disaster in the department.”

[21] The facilities granted by the company to workers were interest-free cash loans in order to obtain bank credits.

[22] The interviews conducted established that Inti Raymi’s subcontractors consume or invest 100% of their income in the city of Oruro. This could be due to the fact that in most cases, the companies are already in the process of consolidation in the Oruro market.

[23] These works had 90 percent co-financing from FIS.

[24] Community members trained as health workers promoted health-care programs offered at the local health center. They also assist in childbirth and first aid.

[25] CEMEI was constructed by the Inti Raymi Foundation with co-financing from FIS. In addition, FIS gave support to cover the 25% of the administrative costs for 18 months.

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