Document(s) 5 of 18

Introduction

The main objective of this study is to analyze the relationship between large-scale mining projects and affected local communities in Chile. There are three fundamental dimensions that we will consider: the economy, the environment, and social development.

Our analysis is based on detailed case studies of three mining projects. While the cases selected do not pretend to offer a statistical representation, they present a range of characteristics (in size, geographic location, type of operation, and methods of relating to local communities) that allow us to draw conclusions and lessons applicable to other mining projects. The usefulness of the case studies is not limited to the knowledge of concrete experiences between large mining projects and the community, nonetheless they permit us to propose some “best practices” for future mining projects. These best practices derive from observed “actions” in the cases or “omissions” detected over the course of the study.

The three mining projects analyzed are La Escondida (Region II), La Candelaria (Region III) and Fachinal (Region XI). The first two projects are located in areas with long mining traditions, while the third is where mining has never had much economic importance. In terms of size, Escondida is a mega-project, according to international standards, while Candelaria is a medium-sized operation. Fachinal is a much smaller operation, but one that can nevertheless be considered large-scale mining and which has a significant impact on the area where it is located.

This study presents the conceptual framework, followed by an exploration of three case studies. We then present a series of conclusions and propose a series of best practices to follow.

Conceptual framework

The objective of this section is to present the conceptual framework and the variables analyzed in the three cases. These variables are grouped together in the areas of the economy; the environment; as well as social and human development capital, and community-company relationships. We use each variable group to analyze the relationships between mining mega-projects and local communities. In addition, we present the methodology used to collect, organize, and interpret information for each case study.

Methodological model

The methodological model used to analyze the dimensions and variables is common to the three case studies. It distinguishes between the corporate context that gives rise to the projects (the internal realm of the companies themselves) and the greater community (the external realm). This schema is presented in Graph 1, which is used to systematize mining companies’ “best practices” with regards to both the internal and external realms.

We gathered primary information through qualitative techniques and used secondary information taken from studies conducted by public entities, universities, business organizations, and the mining companies themselves. The qualitative primary information was obtained through in-depth interviews with key informants, such as managers from the three companies, regional mining, labour, and health authorities, Regional Environmental Commission officials, union leaders, NGO and regional association representatives, in addition to university professors and researchers specializing in mining.[2]

We will focus on the companies’ policies and their impacts on the community. Nevertheless, the information generated by various company officials is contrasted with the visions of other relevant actors from the external realm mentioned earlier.

Internal context

The companies’ internal realm is composed of a series of institutional relations that comprise a corporate model. It determines the way in which the company defines its corporate policy, organization, and the processes between the different actors within the company.

The first component of a company’s internal realm is its corporate policy, which is a mental model shared by company representatives and understood as a series of corporate decisions that characterize the institution’s culture. This model defines the corporate guidelines for “how things are done.” Two important elements of a corporate policy are the mission statement and standards that the company establishes or assumes.

The mission statement outlines the company’s corporate model and defines its reason for being. It provides the guidelines that are translated into policies and strategies with regards to the company’s internal and external realms.

Safety standards help define the quality of the workplace by establishing the correct operating procedures for activities within the company. These standards can be based on international norms, such as ISO 9000 and 14000, which companies can assume in order to create safe working conditions.

A company’s “organization” refers to the definition of functions and the rights and obligations associated with each function. Organization allows companies to establish each person’s responsibilities in order to avoid overlap or omissions in certain areas. For example, it is important that the company define which organizational division is in charge of information generation and distribution, both internal and external.

A company’s “processes” refer to conditions under which work is carried out, production takes place, materials are moved and shipped, etc. The company defines guidelines for how both direct employees and subcontractors should perform these processes. In some cases, companies put more emphasis on guidelines for direct employees, while subcontractors and suppliers (in the areas of exploration or food service) are not subject to the company’s internal guidelines. This can generate inconveniences, especially in terms of community relations. Thus, it is important that everyone associated with the company be held to and understand its guidelines.

External realm

The external realm in which a company operates is often heterogeneous in terms of its organizational characteristics, complexity and level of participation. In such cases, companies must adapt to the structured discourses expressed in national, regional and local policies, but should also incorporate the opinions and impressions held by other, less organized members of the community. Likewise, in terms of organization, companies relate with highly organized social actors such as national, regional, and local political authorities, universities, business associations, workers associations, NGOs, producer confederations, and social organizations — as well as with the community in general.

Given the complexity of the external realm, companies should design strategies for optimal relations with each of the distinct social actors. An important element is the information policy toward the community, which determines the level of consultation with and participation of each community actor with respect to the mining project. Another important element is the distribution of benefits within the community, which range from taxes and royalties to sporadic petitions from less organized groups. It is necessary to distinguish between short- and long-term actions that a company can undertake regarding community benefits.

Issues such as training, education, health, local development, and environmental impacts are important in the external realm. Companies should define their role in each of these areas, as well as their corresponding rights and obligations. They should define their level of involvement in each of the aforementioned themes, which can range from a commitment to comply with the applicable laws to full participation in local or regional bodies. The type of commitment made has strong implications for the definition of short- and long-term policies.

Variables analyzed

In this section, we present the variables analyzed in each case study, which are classified as economic variables; environmental variables; social and human capital variables; and variables in community-company relations.

Economic variables

Economic variables quantify the economic impact of the mining project in terms of its contribution to the economic development of the host region, as well as the direct economic benefits that can accrue to the country, such as foreign exchange earnings, employment, investment, trade balance, and technological support.

Environmental variables

The environmental policies of the companies in our three case studies allow us to identify the practices they develop as part of the relations they establish with the surrounding area.

The safety and quality standards variable refers to the designs, controls, evaluations and actions that companies establish in order to mitigate the impacts of productive processes such as mineral extraction and processing. For our objectives, it is important to define these standards and identify the potential best practices that the companies employ in this area.

Social and human capital

Socio-cultural dimension of the project

The socio-cultural dimension of a mining project refers to the impact the project has on variables such as health, education and training, work shifts, community relations, communication strategy, and citizen participation.

The socio-cultural impact of a mining mega-project on the community has been one of the most relevant issues for environmental authorities, community organizations, and the mining industry. From the exploration stage to the mine’s closure and abandonment, there are diverse points of contact and potential conflict between communities and mining interests with regards to social, socioeconomic, and environmental issues.

In northern Chile, mining is without a doubt the most important economic activity. The history of mining goes back to the first settlements recorded in the area. This tradition has been a central component of regional identity. The presence of international companies in the first decades of the century had a considerable impact on the region’s history. Workers’ movements and political parties appeared as early strategies of establishing community counterweights to the presence of mining mega-projects. Thus, there are historical references to the relations between mega-projects and local communities that are present in the collective memory. This long history has produced resistance to the presence of foreign mining companies.[3]

Health

There are various dimensions to relation between health and mining, which are important to distinguish.

An analysis of the issue of health within a mining company requires the identification of company strategies for addressing problems related to worker health, stress management, obesity, alcohol and drug use, sexually transmitted diseases, and accidents. The common denominator among these strategies is that the company has control over detecting and neutralizing the effects of mining work on the health of its workers via the design of preventative plans and programs.

The health and community theme refers to the impact that large mining projects can have on the health of the general population of a specific community. At this level, issues such as prostitution, sexually transmitted diseases, alcoholism and drug use are significant. Another important aspect of the relationships between large mining projects and health is the benefits that mining companies can provide to local communities.

Education and training

Education and training have become recurring themes within discussions of the modern mining industry. The industry’s general shift to clean production technology has produced a strong demand for a skilled, multifunctional work force for its diverse operations. The country’s educational centers have not necessarily produced workers who can meet this demand. Faced with this reality, the companies in this study have developed diverse strategies for the formation of the work force their operations require.

Companies can organize work shifts in different ways, from a normal work shift in which the worker returns home each day (in cases where the mine is located close to town) to 20 or 10-day stints that oblige the worker to remain in camps adjacent to the mine. There are pros and cons to each of these schemes for the company, workers and their families. In many cases, the mine’s remote geographic location requires prolonged stays at the project site in order to maintain continuous exploitation. However, long stays at camp generate a series of problems for workers and their families that are difficult to evaluate.

Community-company relations

The community’s perception

Traditionally, good relations with the local community have not been an important part of the mining culture. For its part, the local community tends to view mining activities as isolated and oriented toward a purely economic end. The community is apprehensive about being excluded from the benefits produced by the mining project and requires information about the status of the project.

In turn, the mining industry is conscious that its activities are costly, risky and require huge investments in exploration in order to determine if a deposit is worth exploiting. Given the uncertainty of success, the mining company has little interest in establishing relations with the community until the project is well underway. In this scenario, community relations have traditionally not been a company’s first priority.

Thus, a situation of fear and mistrust arises from the lack of communication and comprehension between the mining industry and the community.

A community’s response to mining company interests is shaped by mining’s historic legacy. Thus, in areas with a long mining tradition, such as northern Chile, communities’ expectations are different from those in areas where this tradition does not exist, such as the extreme southern region of the country.

Strategic communication with the community

A company’s communication strategy is key to understanding certain aspects of its relations with the community. In this study, we examine the ways the three mining companies approached such communications from the beginning of operations.

Citizen participation

Citizen participation refers to the degree of involvement by the general public or community organizations in the mining project’s development. Participation can vary depending on the different stages of the mining operation. It is important to understand each company’s strategies with respect to citizen participation in order to determine whether it really exists.

Integration of company employees in the community

Another important variable in community-company relations is the integration of employees and workers in the cities and towns near the mine. The way the company approaches this integration can be a determining factor in how the community perceives the project.

Community benefits

The variable of community benefits refers to the positive impacts from the mining companies or alliances established with other firms that directly benefit the community.

The Case of La Escondida Mining Company

Description of the project

On March 15, 1989, construction began on the La Escondida mining project. The first shipments of copper concentrate began on December 3, 1990. Exploration activities began in 1978 and lasted four years, after which ensued a period of technical studies and the search for financing.

La Escondida is located in the Atacama desert 3 000 meters above sea level, to the southeast of Antofagasta and 240 kilometers south of Chuquicamata. It is the third-largest copper deposit in the world after Chuquicamata (Chile) and Bingham Canyon (USA). The mine is owned by BHP-UTAH (57.5 percent), Río Tinto of London (30 percent), Jeco of Japan lead by Mitsubishi (10 percent) and the International Finance Corporation (2.5 percent).

The mineral deposit has reserves of 1.8 billion tonnes with an average grade of 1.59 percent copper. Planning for the mine considered the utilization of 662 million tonnes with an average copper grade of 2.12 percent. Initially, the mine’s lifespan was estimated at 52 years from the start of production. Nevertheless, new investments have increased production capacity significantly and the lifespan is now estimated at 34 years.

Project infrastructure includes a well field 25 kilometers east of Escondida in the Punta Negra salt flats, with a water supply system capable of providing 65 000 GPM at an average of 12 000 GPM at maximum capacity. This salt water is treated by reverse osmosis for consumption. Additional infrastructure includes a high-voltage energy line connected to SING, a 165-kilometer mineral pipeline for transporting concentrate from the plant to the port of Coloso and a filtration plant to eliminate water from the concentrate. The port facility at Coloso, located 15 kilometers south of Antofagasta, can house ships of up to 45 000 DWT.

Economic variables

In recent years Region II has experienced a series of social and economic changes, to which La Escondida mine has contributed significantly. Nevertheless, it is difficult to isolate those impacts directly attributable to the mine. This is because various mining companies have been operating in the region simultaneously with La Escondida.

In 1999, Region II had an estimated population of 461 300 inhabitants and a population density of 3.7 inhabitants per square kilometer. The region’s economy is based on mining, which generates close to 59 percent of the gross regional product. Copper is the region’s principal product, representing between 52 percent and 55 percent of national copper production.

Production

Within the region, GDP per capita rose from US $2 923 in 1985 to US $11 420 in 1996, a 290 percent increase. Meanwhile, GDP per capita for the entire country rose from US $1 360 to US $4 994 in the same period, an increase of approximately 260 percent.

Region II has been one of the country’s fastest growing regions during the last decade. Between 1988 and 1997, while the country grew at an average rate of 8 percent per year, Region II grew at a rate of 9.6 percent. The mining sector grew 71.6 percent in the region for the same period, while the national average for mining sector growth was 43.2 percent. While these figures are not solely attributable to Escondida, the company has had a significant influence.

The company’s production levels, for both concentrate and cathodes, are represented in Table 1.

The production of copper concentrate (41.4 percent fine copper content) in 1997 was 2 098 256 tonnes. National copper production in 1998 was approximately 3.7 million metric tonnes. Escondida contributed 23 percent of national copper production for that year. Its average share from 1994 to 1998 was also 23 percent. Thus we can determine that Escondida’s contribution to the national GDP was on average approximately 2 percent between 1991 and 1996 (Escondida Mining Company 1997a).

In 1997 copper production in Region II was approximately 2 million metric tonnes and Escondida’s contribution to regional copper production was 55 percent for this year. This means that Escondida contributed to 34 percent of the regional GDP between 1991 and 1996 (Escondida Mining Company 1997a). Meanwhile, 54 percent of Region II’s GDP came from the mining sector in general (Aroca 1999).

Investment

Foreign investment in the region during the period 1990–1998 was US $5.33 billion, or approximately 20 percent of the national total, almost US $27 billion. Approximately US $11 billion correspond specifically to mining investments during this period, in which Escondida invested nearly US $2.3 billion. Thus Escondida’s impact on foreign investment was 8.9 percent at the national level, 21 percent at the regional level and 44.4 percent within the mining sector.

Exports

Escondida’s exports quadrupled between 1991 and 1998, from US $466 million to US $1.96 billion. In 1997, exports from Region II represented 30.2 percent of the total national exports. For that same year, Escondida represented 30.3 percent of exports from Region II, 18.3 percent of national mineral exports and 9.1 percent of the country’s total exports.

Taxes paid

It is possible to determine Escondida’s direct contribution to the Chilean government by looking at the destinations of national and regional budget allocations. Contributions to the national budget are related to income tax payments. Tax contributions to the region are related to payments for land rights and permits related to the Escondida operation.

Between 1990 and 1998, the company paid US $1.19 billion in income taxes, of which US $253 million were paid in 1996, US $331 million in 1997, and US $111 million in 1998. The decrease in taxes paid for 1998 reflects lower incomes due to the drop in world copper prices. The 1996 value represents 25.6 percent of total income taxes paid by the mining sector[4] and 10.5 percent of total income taxes collected by the state.

In addition, Escondida made periodic payments of surface fees and permits, which are necessary for the normal functioning of operations. These include mining patents, real estate contributions, purchases, obligations, leases, patents, rights, and municipal circulation permits.

These payments go to the statebudget according to the distribution represented in Table 2, which shows Escondida’s contribution to the estimated budget for the year 1997. According to the table, 87 percent of payments for land rights and permits go the regional budget, whether through the National Fund for Regional Development (FNDR) or the municipalities.[5]

Escondida’s contribution to the regional budget is significant, considering that for 1997, Escondida made payments of US $1.26 million that went to the FNDR for Region II, which represented 20 percent of the total contribution of mining patent payments and more than 6 percent of the fund’s total.

Employment

Escondida directly employs approximately 2 000 permanent workers, of whom 80 percent are from Region II, 11 percent from Regions I and III, with only 9 percent being from Santiago and other regions in Chile.

Using an input-product matrix for Region II, Aroca (1999) estimated the employment multiplier for Escondida. Considering subcontractors as service providers and not as direct Escondida workers, and without considering the effect of salaries and wages paid to workers in the region, this author arrives at a multiplier of 3.1. In other words, for each worker hired by Escondida in the region, 3.1 additional workers are hired. The employment multiplier for the rest of the regional mining sector is only 1.04.

By assuming that all wages and salaries are spent in the region and adding a line for these remunerations and a column for regional consumption to the input-product matrix, the author obtains a multiplier of 5.7. In other words, for every worker hired by Escondida, 5.7 additional workers are hired in the region once it is taken into account that the workers — whether working in the mine itself, subcontracted firms, or suppliers to the mine — will spend some of the money they earn and generate more jobs. This tends to overestimate the effects on employment, since not all salaries and wages are spent in the region.

This same calculation for the rest of the regional mining sector produces a multiplier of 1.76 workers for every worker hired in the sector. The difference between figures obtained for Escondida is due to the different management systems used by various companies in the sector. While Escondida subcontracts many activities associated with the project operations, other companies in the region subcontract few activities. As a result, they have more personnel directly working at the operation. In sum, total employment (direct and indirect) in the mining sector represents around 9 percent of the region’s total employment, without considering those jobs at projects related to investment and construction.

By using the multiplier of 5.7 indirect jobs for each job in the mine, it is possible to estimate the indirect effect that the salaries received by the workers and management in the mine. In Table 3, the direct, indirect, and total expenditure in the region resulting from the mine is calculated. As noted earlier, it is assumed that all expenditures are made in the region, so these estimates can be considered upper-bound impacts.

In Table 3, the direct impact is the expenditure of the mine workers, while the indirect impact is the expenditure of those receiving employment indirectly due to the mine. The income multiplier is total income generated in the region divided by the income earned by the mine workers and management. Note that it is different from the employment multiplier as: it is lower because some money is saved and, hence, not recycled; it is higher as it includes the first round of expenditures (by the mine workers), while the employment multiplier is only the additional jobs and thus does not include the mine workers jobs; and it can move in either direction if non-mine workers earn on average different salaries than mine workers. In this case, (the usual one), it is lower because mine workers earn more, (i.e., the same expenditure will create more jobs resulting in a relatively greater effect on the employment multiplier).

Environmental variables

Company policy

Environmental concerns are prominent in the company’s mission statement, which also includes aspects of the internal realm, such as safety, the workplace environment, human relations needs and worker well-being. Attention to these areas is considered as a fundamental part of its mission and corporate principals.

In the external realm, the company’s mission statement establishes the responsibility to constantly inform local authorities, especially with regard to the environment. From our conversations with company representatives, we could detect a corporate attitude recognizing the need to anticipate possible environmental events, which are approached through the environmental impact studies conducted at each phase or step the company takes.

Another principal that characterizes Escondida’s mission with regard to the external realm is the rapid response to any occurrence that could affect the company. For example, it hired an expert in a marine species that was supposedly at risk from activities performed in the port of Coloso, who conducted a thorough investigative study. Something similar happened in the case of Andean flamingos, which are found in the Punta Negra salt flats, which are the object of constant study. An element of this best practice with the external realm is the policy of company relations with the university and academic worlds, which admit the company into a scientific society dedicated to investigation.

Since the start of operations, Escondida has complied with all health and safety regulations in the country and with the corporate polices of the companies operating the mine. Escondida conducted an environmental impact study before this was required or regulated under Chilean law, and has introduced clean technologies to its productive processes.

To comply with its environmental programs, the company has signed cooperation agreements with different national public agencies, including SAG (Agriculture and Livestock Service) and CONAF (National Forestry Corporation). In addition, Escondida is a member of the National Oceanographic Committee, the Chilean Society of Sea Sciences, and other organizations having to do with environmental protection (Escondida Mining Company 1998).

Nevertheless, the local population frequently expressed concerns about possible problems stemming from company activities. For example, coastal residents as well as professors at the University of Antofagasta mentioned in interviews that the company is causing pollution problems in Coloso Bay. When we asked the company’s environmental manager about this concern, he said the company was informed about the matter and had conducted the relevant studies in order to control possible contamination problems in the bay. Study results did not find contamination problems.

Water use is another issue that sparks a certain level of controversy. Since the mine is located in a desert region, water must be obtained from groundwater tables below the salt flats by way of 120-foot wells, on average. Again, academics from the University of Antofagasta expressed concern during the course of our interviews about groundwater extraction. They worry that since water table recharge takes years, over the long term, water levels in the salt flats could drop drastically, adversely affecting the area’s flora and fauna.

Nevertheless, the results of studies conducted by the company do not anticipate the existence of adverse effects on local flora and fauna. In addition, the company is very conscious of the region’s water scarcity and has taken all the necessary measures to maximize water recycling, such as reusing tailings water in the process. The tailings pond has a system to reduce surface area and therefore the loss of water through evaporation, which maximizes the amount of water recycled.[6] As part of its environmental program, Escondida controls groundwater levels to ensure there are no negative effects on the ecosystems surrounding the Punta Negra salt flats, where the company has its well field.

Given the project’s long lifespan, closure studies have not yet been conducted, although in the future this will be an important issue in terms of restoring the environment to its normal conditions.

It is important to note that Escondida recently certified its Coloso port facilities under the ISO 14 000 system, which certifies the existence of an environmental management system.

Safety and quality standards

Escondida’s environmental management system allows company personnel to conduct inspections and evaluations, as well as implement mitigation measures. The system provides for both internal and external audits. Some of the company’s main environmental considerations include tailings management, dust control at the mine, hazardous waste management, and the continuous and permanent monitoring of the marine environment at the port facilities in Coloso.

Social and human capital

Health

Internal company health

Escondida has implemented an integral health plan, which includes a pre-employment exam and an annual preventative medical exam. The annual exams are voluntary and provide company employees with the means to discover potential pathologies. In addition, the company has a fully equipped first-aid center with qualified medical personnel to manage emergencies and health problems that can occur in camp. This allows for the timely diagnosis and effective treatment of common illnesses.

With regard to work-related stress, Escondida’s work shifts are organized according to the “4x4 system,” explained more fully later. The system avoids the adverse health effects of remaining at high altitude for prolonged periods of time.

Obesity problems stem from two main causes: the lack of healthy eating habits among rural workers or “old timers,” and the over-consumption of products from the cafeteria, especially during the first days when new workers are getting used to their surroundings. Faced with this, the company has obesity prevention and control programs, which are complemented with sports and recreational facilities inside the camp comparable to the best and most complete in the region.

The company treats other, more sensitive health issues with special care. The introduction of drugs and alcohol to camp is controlled by an electronic detection system. If such substances are detected, the worker is punished and could be subject to dismissal. The existence of sexually transmitted diseases, including AIDS, is verified by annual preventative medical exams, although the company does not yet have any specific policy in place to address the issue.

Work shift

As we mentioned earlier, Escondida has a “4x4” work shift system. In other words, workers spend four days at the mine and four days at home. During the mine stay, workers have 12-hour shifts, from 8 a.m. to 8 p.m., or from 8 p.m. to 8 a.m. The company maintains that its analysis shows this system is better for workers in terms of personal health and family relations. In the event that problems arise from the work scheme, the company consults and converses directly with the affected worker. According to the Labour Secretariat for Region II, the 4x4 work scheme does not constitute a problem.

Community health benefits

One of the areas in which Escondida has been very deeply involved is precisely in the area of health benefits for the community. However, all the actions related to this area have not been done directly by the company but through the Escondida Foundation which is described below. In fact, community health programs form the largest share of its budget. Among the programs financed by the foundation are: implementation of an emergency primary health service, contest for research projects on cancer in Region II, development of a children’s oncology unit at the regional hospital of Antofagasta, hospitality housing for oncology patients, and an early cancer detection program.

Education and training

Training

Due to the lack of training centers and qualified technicians in Region II, Escondida created a professional institute in Antofagasta to provide training and develop required skills. In January 1997, the company contracted the services of the British Columbia Institute of Technology (BCIT) to oversee technician training. The company built a 2 200 square meter facility to house the institute, which together with other necessary components required a total investment of US $8 million.

Since training began in January 1997, 307 technicians have completed the first of four stages in the heavy machinery mechanic, plant mechanic, and electrician training programs. It is estimated that all 560 participants will complete their training and aptitude evaluations in order to reach the level of master of trades (maestro de oficios) at the end of 2002.

In addition, Escondida implemented an extensive career development program for company personnel in April 1998. The company hired specialized personnel to conduct trainings and develop a resources system to support the respective activities. Moreover, utilizing the SENCE (National Training and Employment Service) Antofagasta facilities, Escondida places first (SENCE 1996) in terms of courses offered, personnel trained and amount invested. In addition to the courses authorized by SENCE, this effort involves training programs specific to each employee. In total, Escondida invested US $2.105 million in diverse training programs through 1998, the equivalent of approximately US $1 000 per person.

Education

Escondida created the Escondida Educational Foundation, which runs a four-year apprenticeship program in which 70 percent of the skills are learned within the company, according to standards set by Canadian specialists. Currently, the company is creating an educational establishment in the area north of Antofagasta.

Through the Escondida Foundation, the company has addressed the issue of high-school graduates’ technical skills and work attitudes. The foundation uses tests and rigorous work orientation programs, which, in addition to providing training, strengthen personal attitudes regarding work. Certain basic values are addressed, such as punctuality, responsibility, and the ability to work as a team. The Escondida Foundation also seeks to address the gap between high-school level technical formation, which is characterized by a lack of direct experience in the company, few practical skills, and many lecture classes, and university or professional institute training, which bestows a professional title but also low skill levels in a given specialization.

The Escondida mine has also clearly contributed to an improvement in the capacities of local suppliers. These small- and medium-sized firms have benefited from training programs oriented at improving their service quality as suppliers to the mine.

With respect to the themes of education and its relation to the community, the opinions that we collected generally agree that there is a generalized demand for educational services starting from the arrival of the mining mega-projects such as Escondida. In particular, there is a demand for private schools (colegios particulares pagados), due to the arrival of workers from outside the region who look for quality services. There is also a demand for these schools on the part of local mine workers whose high salaries allow them to access these services. In addition, these workers value higher education, which they desire for their children in order to consolidate their social status.

The Antofagasta International School is an Escondida school that initially offered correspondence courses through the home countries of the mine owners. The school had 20 students from Escondida and 20 from Zaldívar. Like the mine, the school is run by subcontractors and is currently administrated by ISS, a US company. The school offers levels 1 through 8 with curriculum similar to that in the United States. Mid-level students still study by correspondence. Almost all of the professors are from the United States and Canada, while there are only two Chilean instructors. The school offers an international bachelor’s degree. Though the Ministry of Education (MINEDUC) does not recognize it, the school is trying to obtain certification in order to incorporate Chilean students. One of the biggest problems faced by Chilean executives moving to Antofagasta is the lack of quality schools.

Community-company relations

Community perceptions

The community’s perception is heavily influenced by Antofagasta’s current economic situation. The city’s economy has grown explosively in recent years, primarily due to large mining-related investments. The population views Escondida as the milestone that marked the beginning of the growth period. Economic growth is evident in the increasing number of companies offering subsidiary mining-related services, the arrival of national and international hotel chains, commercial store chains and travel agents with high national and international demand, as well as population growth, the construction boom and an increase in consumption and debt.

There are two points of view regarding Escondida’s impact. Local authorities and company directors consider the city’s economic growth a result of the mining operation. But small- and mid-sized business owners feel excluded from the benefits of economic growth as a result of Escondida’s high technological and environmental standards. The latter sector tends to feels that resources are not retained or obtained in the optimal manner, which obliges them to engage in productive re-engineering in order to satisfy the potential demand for services associated with mining and thus access the highest subcontractor links.

The region’s over-dependence on mining, together with the temporary nature of a mining economy, result in moderate forecasts for the future. Residents have a strongly ingrained vision of the cyclical nature of the regional economy, while the past experience of the rise and fall of nitrate mining is ever-present to successfully contain excess enthusiasm.

Strategic communication with the community

Escondida’s organizational structure consists of a Corporate Affairs division and, within this, a Communications and External Affairs department, which is in charge of community relations. This department develops the communications policy oriented toward processing information related to the mine’s impact on national and regional development. The company has contracted local universities to measure the project’s impact on the local community, especially in socioeconomic terms.

Initially, development of the cathodes plant in Coloso sparked fierce opposition by organized community groups, especially local environmental groups backed by national organizations. Faced with this pressure, Escondida adopted a strategy of informing the community through local media and organizing informational meetings with various groups. The meetings were used to inform participants about the company’s safety measures and environmental risk and impact analyses. According to company officials, this strategy managed to reverse the situation and win over groups that originally opposed the project.

The company’s communication strategy also includes project site visits open to the community.

Citizen participation

Company officials say that even before the Environmental Law regulations were published, they provided information concerning every new project in an official manner, first to the authorities and later to interest groups such as the Lion’s Club, the Rotary Club, the Red Cross, local universities, small business groups, and the Businessperson’s Association.

Insertion of workers and employees in the community

Escondida has a housing plan that builds new houses for workers and employees, available through a finance plan with low-interest loans. As part of the company’s policy, the houses or apartments are built in different parts of Antofagasta in order to avoid the creation of a “miners’ ghetto” and to promote the natural insertion of company employees in the community.

In the southern part of Antofagasta is an area known as the Southern Gardens, a modern gated community on the south side of the University of Antofagasta planned as a barrio alto with lawns, small plazas and gardens. Residents are business people, wealthy professionals and Escondida employees.

According to articles in the Antofagasta newspaper El Mercurio, in the last five years Antofagasta has become a real-estate paradise due to the region’s economic boom. The arrival of mining companies and their subcontractors has generated a floating population that demands a large quantity of real estate.

Community benefits

Escondida Foundation

One of the company’s primary strategies for establishing links with the local community was the creation of the Escondida Foundation. The idea was approved in 1994 and began operations in 1996. It represents the way the company chose to pursue the increased effectiveness of its community relations program as well as more effective social actions both for the poor and extremely poor sectors.

The foundation’s principal objectives are centered on the areas of education, health, and technology. Projects presented to the foundation must comply with a series of requirements regarding formulation, programming, costs, and management before they are submitted to the board of directors for consideration. The board of directors consists of 11 people, five of whom are distinguished members of the community at the national and regional levels.

The foundation’s programs focus on five principal areas, each of which has its own specific projects: micro-enterprise, labour insertion, educational support, health support, and development funds programs.

The foundation avoids assistentialism, aiming instead to train people to resolve their own problems, a clear indication of their long-term objective. The foundation’s main strategy is to form teams or strategic alliances with other organizations in its program areas. From its founding as a non-profit institution, the majority of the foundation’s resources have been oriented toward the poor and extremely poor sectors, as is evident in the list of current or completed projects that received support. The foundation’s development programs are geared to job creation and access, as well as quality of life issues, which constitute the backbone of its objectives.

The fishermen of Coloso Bay (the copper concentrate port) constitute another community group that has benefited directly from the Escondida mining company. The company financed the construction of market stalls, public bathrooms, road improvement, drinking water tanks and the group’s office headquarters. The company also finances school transportation for children and drinking water.

Escondida has collaborated with local universities and the Antofagasta Industrial School on cultural, educational, sports, and recreational activities. It has organized art and literary activities with secondary schools, and sponsors Antofagasta Day, the municipal orchestra’s concert series, and the professional football (soccer) team, Deportes Antofagasta.

Productive Development Corporation

An interesting way in which the company builds relations with the local community is through the Productive Development Corporation, which began as a regional government initiative in accordance with its development strategy. One of the corporation’s central objectives is to link the regional development strategy to large companies and universities, to foster joint public-private efforts.

The informed community (technicians, academics and local authorities) views this corporation as an important initiative for long-term regional development. The corporation seeks to strengthen the capacities of small- and medium-sized companies associated with the mining industry. Once installed, these capacities become part of the region’s human capital. Incorporating the concept of a “productive association” and encourages measures to promote it are seen as important for strengthening the abilities of small businesses to compete and capture resources.

The regional government, the mining companies of Escondida and Codelco and other mid-sized firms participate in the Productive Development Corporation. Important electric and sanitary companies from the region are also involved, as well as the University of Antofagasta and Northern Catholic University. The corporation’s composition is similar to that known as the “strategic peak,” which brings together the principal regional actors involved in development. The corporation’s associates consider Escondida’s participation as very important, both in terms of start-up and subsequent maintenance. Escondida’s support of the Productive Development Corporation is part of its policy for linking the company with the community.

The Case of the Candelaria Mining Company

Description of the project

The Candelaria mining project was inaugurated in March 1995. The Phelps Dodge Corporation, the main owner of the Candelaria mine, began explorations in 1983 and finished in 1987. The mine is located 9 kilometers south of Tierra Amarilla and 20 kilometers south of Copiapó in Region III, at approximately 650 meters above sea level. The operation extends over approximately 4 000 hectares that include the mine, the concentrator, the tailings dam and other facilities. The Candelaria Mining Company is owned by Phelps Dodge (80 percent) and a consortium made up of the Japanese companies Sumitomo Metal Mining and Sumitomo Corporation (20 percent). Estimated mineral reserves are 366 million tonnes with a grade of 1.29 percent, which at an extraction rate of 50 million tonnes per year should last 34 years.

The water needs of the mine are met by five wells in the town of Alcaparrosa. Each is between 60 and 100 meters deep, more than sufficient to reach the groundwater table that lies 30 meters below the surface, on average. The concentrator consumes approximately 95 percent of the water used in the mining operation, or some 2 800 cubic meters per hour. Eighty-five percent of the water is recuperated, meaning that fresh water consumption is about 130 liters per second.

The concentrate (with an approximately 9 percent humidity level) is transported by truck to the port of Padrones, located opposite Caldera Bay on Padrones Point about four kilometers south of the city center. This is where the company built the Clean Mechanized Port, where the concentrate is prepared for shipment. Construction began in August 1993 and the facility was inaugurated on 3 February 1995. Preparation capacity is 1 200 tonnes per hour, which means that it takes two or three days output to fill a 35 000-tonne capacity ship.

Economic variables

Mining is the principal economic activity in Region III, which has an estimated population of 269 100 inhabitants and a population density of 3.6 inhabitants per square kilometer. Production of copper, gold, silver and iron represent 41 percent of the gross regional product. Agriculture accounts for 17 percent, especially the production of table grapes for export in the Copiapó and Huasco valleys. Fishing and construction have emerged as important activities in the last several years. During recent years the growth of Region III (Atacama) has been strongly influenced by the arrival of large-scale mining projects, principally the Candelaria project.

Production

During 1993–1995, Atacama’s gross regional product grew at an annual average rate of 11.5 percent, which was significantly higher than the average national growth rate of 6.3 percent. Indeed, in 1995, when Candelaria began Phase 1 of production, Atacama’s gross regional production grew at a rate of almost 24 percent. In the same year, mining accounted for 11.3 percent of the gross regional product.

Candelaria’s production is presented in Table 4.

In 1997, national copper production was nearly 3.7 million metric tonnes. Candelaria’s share of national copper production was 5.8 percent for that year. Between 1994 and 1998, Candelaria accounted for an average of 4.4 percent of national copper production.

Region III produced approximately 380 000 metric tonnes of copper in 1997, 41 percent of which was attributable to Candelaria. Its average contribution to regional production for the years 1994 to 1997 was 36 percent. Finally, copper mining in Region III accounted for 10.8 percent of national copper production.

Investment

With an investment of more than US $565 million during Phase I, the Candelaria mining project is the largest investment in Atacama in the last several decades. The project represents 48 percent of the total foreign investment in the region’s mining industry realized via DL 600 between 1974 and 1997 and 5 percent of the country’s total foreign investment under the same system for the same period. In 1997, the company’s accumulated investment reached approximately US $902 million through the end of Phase II of the project, which increased annual average production to 175 000 tonnes of high-grade copper. At these production rates, the project lifespan dropped to 17 years.

Total foreign investment in the region for the period 1990–1998 was approximately US $1.3 billion, of which 68 percent came from the Candelaria project. At the national level, total foreign investment for the same period was nearly US $27 billion, of which 3.4 percent was attributable to Candelaria. Finally, Candelaria’s contribution to total foreign mining investments is 8 percent. Based on these indicators, we can conclude that Candelaria has a significant regional impact.

Exports

In 1998, Candelaria exported 206 000 metric tonnes of high grade copper, which represents approximately 39 percent of total regional exports and 6 percent of national mineral exports.

Employment

Originally, Candelaria employed 650 workers, which increased to about 900 workers as the project expanded. In 1997, in addition to the 791 workers employed by Candelaria, an additional 435 workers had permanent jobs at the company’s subcontractors. Currently, there are 869 direct employees, of which approximately 82 percent hail from Region III. Meanwhile, there are 450 indirect workers, of which 95 percent come from Region III. These numbers represent approximately 4 percent of the work force in Region III.

In order to analyze the indirect effects on the local economy of the salaries received by the workers and management at Candelaria, we used the multiplier for the mining sector estimated by the Faculty of Economics and Administration of the Catholic University of the North. (See Table 5.) According to this study, for each worker employed by a mining firm in Chile, approximately 1.76 indirect jobs are generated on the assumption that all of the income is spent in the region. We will use this indicator to get an order of magnitude of the indirect employment and income effects of the mine, keeping in mind that it is a general multiplier and not specific to Candelaria.

As in the case of Escondida — see Table 3 — the direct impact is the expenditure of the mine workers, while the indirect impact is the expenditure of those receiving employment indirectly due to the mine. The income multiplier is total income generated in the region divided by the income earned by the mine workers and management.

Others

Including investments in the port facilities at Padrones Point, total infrastructure investment was approximately US $62.5 million. In addition, the company has constructed 21.5 kilometers of new roads, 17 of which are in or around the town of Tierra Amarilla and 4.5 of which are in Caldera.

Between 1993 and 1996, Phelps Dodge paid approximately US $30 million in taxes, including taxes on income, patents, concessions and others.

Candelaria has developed a housing assistance plan that aims to help workers find housing solutions in the communities of Copiapó, Tierra Amarilla or Caldera, depending on their work location. This has meant accumulated costs, through May 1997, of US $3.3 million. In addition, Candelaria is constructing a modern sports facility in the town of Copiapó.

Environmental variables

Company policy

The issue of the environment has been fundamental in the development of the Candelaria mine. Environmental protection is a constant concern and priority in each of the company’s institutions, a concern born in the directives and objectives of the Phelps Dodge Corporation. The company’s mission statement declares that its central objective is to create value for its associates and workers within a context of responsibility, ethics, and safety.

The company aspires to be a good neighbor who protects the environment. In addition, the company expressly declares its commitment to and involvement with the local community where the company is located. The company pledges to use the cleanest and most advanced technology throughout the exploitation process. The company’s primary objectives are to protect the natural environment, serve as an example of the best environmental practices in the industry and to be recognized as a responsible entity by the community, other companies and government authorities.

Candelaria was the first company in Region III to voluntarily conduct environmental impact studies before beginning operations. These studies allowed the company to obtain environmental authorizations starting in 1992. The company conducted a detailed study of solid waste management, which lead to the control and minimization of the operation’s adverse environmental impacts. In addition, the company continuously monitors air, soil, and water quality. It also has signed agreements with schools and universities to realize investigations and joint seminars.

Safety and quality standards

Environmental protection measures at the mine and processing plant in Tierra Amarilla and the port facility in Caldera Bay include: an emissions control program in the area of the mine, environmental training programs, a fully enclosed concentrate transport system, and a system of water recovery and reuse that has made the company the lowest water consumer per tonne of processed mineral in the region. Between 82 percent and 85 percent of the water used at the mine is recycled, according to information provided by the company.

Nevertheless, some agricultural producers express doubts with respect to the water recycling figures reported by the company and feel the mine is taking water away from producers in the area. However, the company periodically sends regional and local environmental authorities all monitoring data and maintains it has not received a single complaint from any neighbor with respect to water use.

It would appear the company is doing everything in its power to comply with Chilean and international norms. Nevertheless, the population does not feel entirely sure about the solutions or studies presented by it. This could be due to a lack information or to the industry’s historical legacy that has lead community residents to believe that mining is a polluting activity with little concern for the environment.

Starting in 1997, Candelaria began to design an environmental management system (EMS) based on strict international guidelines under the voluntary ISO 14001 standard. In December 1999, the company’s EMS was certified under this system for all mine and port facilities, making it one of the first copper mining operations in the world to achieve full certification under the ISO standards.

Social and human capital

Health

Company’s internal health

Candelaria’s total health program provides for drug and alcohol testing. The Risk Prevention Department is in charge of testing under the Phelps Dodge philosophy known as “zero and lower,” which refers to the company’s goal of a workplace, home, school and community that is free of material damage, injuries and accidents.

The work shift is not a health problem for the workers at Candelaria. Since workers return home daily, there are no problems associated with prolonged stays at worker camps.

Benefits to community health

Candelaria has contributed significantly to the remodeling of emergency services at the Regional Pediatric Hospital in Copiapó and to the construction of the general clinic in Rosario.

Education and training

As the owner of Candelaria, Phelps Dodge’s education strategy is oriented to strengthening relationship between the formation of new mining technicians and the company’s needs in the context of a cleaner, more technologically advanced mining industry. Toward this end, the company collaborates with the Benjamín Teplinzky Center, which provides technical training for the mining industry.

A second area of focus is the implementation of student and teacher training programs at the region’s technical and professional schools. The programs consist of internships at the mine, which provide participants with a realistic vision of the mining industry. In this way, the company seeks to overcome the problem of a lack of articulation between technical training and company needs.

A third area of focus is an orientation program for the company’s own workers and suppliers. The program’s main objective is to introduce every worker, employee or supplier to Candelaria’s corporate model, which has clear procedural guidelines regarding such considerations as technological management, worker safety, and environmental protection.

Between 1993 and 1996, the company invested US $630 000 in employee training, the equivalent of 143 person-hours of training. According to the National Employment and Training Services (SENCE), the total of US $1.9 million was invested in training programs for Region II in 1995. Phelps Dodge’s training investment that year was US $288 000, or 15 percent of the regional total. In addition, Phelps Dodge created the San Lorenzo School in conjunction with the Placer Dome Company. The two companies have set up a scholarship program for workers and their families. Candelaria’s contribution to this program was US $194 000 in the first semester of 1997.

Community-company relations

Community’s perception

The region has numerous recognized comparative advantages for its development, including significant natural resources available for exploitation. This does not mean that region’s advantages and possibilities are free of risks or threats. The community has a clear sense of the risks inherent in large mining projects. Residents make constant references to large projects of the past that extracted minerals and left behind nothing more than a hole in the ground. In this sense, Atacama is a region with mining experience. The community also has a clear vision of what contributions a mining project should make to regional development. In this case, references point to important projects that in the past left their mark on the region by constructing lasting public works.

The presence of companies such as Candelaria attracts banking institutions and large stores to the region. This is seen both as an opportunity for general employment and as a threat, since local businesses are displaced. Thus the arrival of a new mining project is viewed with a mixture of mistrust and enthusiasm. The negative experiences of the past are not enough to contain the enthusiasm generated by arrival of new projects, and people create expectations that they pass on to family members in other parts of the country, causing migration to the region in search of jobs. Expectations center on jobs and increased business for local commerce and service providers, since mine employees receive higher salaries than the local average and thus have greater purchasing power.

Nevertheless, our interviews with members of the commercial sector revealed a different perception of mining in general. The perception is that mine employees tend to spend their wages on recreation and diversion in other parts of the region, since many of them live in other cities. Miners do not spend their income at local businesses, but rather spend it in other cities. This is attributed to the fact that there are important mining companies in the area that import workers from other regions who generally do not reside in Copiapó, or if they do, it is only temporary.

Local suppliers

With regard to input purchases, large companies generally purchase items needed immediately in Copiapó or locally, while big ticket items or larger orders are purchased in Santiago. Candelaria has made efforts to give priority to regional companies during bidding for goods and service provision. Nevertheless, there are various areas in which local businesses are not qualified to provide to the company. Some 56 percent of Candelaria’s costs from the acquisition of goods and services are spent on companies outside of Region III.

The company’s policy states that, all things being equal, it prefers to use local suppliers for the provision of goods and services. Above all, the company gives priority to local residents in the area of employment, in an attempt to capture all qualified human resources from people in the area. For example, the transport of mineral concentrate from the mine to the port is done by a local company, with which Candelaria has very close relations.

Since operations began, many companies from Santiago have opened branch offices in the area. There has also been significant growth in purchases from local businesses and the appearance of several small local subcontractors in areas such as shipping, welding, vehicle repair and facilities engineering. Instead of maintaining a long list of potential suppliers, which was the company’s initial policy, Candelaria has chosen to concentrate on a few key suppliers. Suppliers can thus maintain their competitiveness and count on a certain volume of business, allowing them to maintain a stable work force and keep experienced workers. In addition, this allows the company to inculcate suppliers with its corporate values, such as safety and environmental protection. The company has been extremely rigorous on this point and subcontractors have assimilated key corporate values.

Commerce

In the local commerce sector, there is the perception that benefits have not been as significant as those in nearby towns such as Antofagasta or Iquique, where large-scale mining has produced visible and explosive development. According to our interviews, public authorities have an important role to play in pressuring large companies to make significant and lasting investments, such as housing complexes, that ensure workers will live in the area and, in consequence, require local services. Our interviewees indicated that local commerce tends to benefit more from small- and medium-sized mining companies.

Infrastructure

In the community’s view, the most important contribution that a mega-project can make is the construction of large public works. Candelaria has not built any large public works for the community, such as a highway or housing complex. While it is true that Candelaria built houses for its executives, the community does not view this as a contribution to the city. The area where Candelaria managers and upper executives live is perceived as an exclusive enclave that has not been incorporated into the city and does not contribute to the company’s integration into the community.

The lack of a large housing complex for Candelaria employees and workers has been strongly criticized.[7] The company adopted a policy of letting all supervisors and worker choose their own housing in the region by way of its housing plan. Under this plan, 60 percent of workers have their own homes. This was an attempt to integrate workers into the community.

Employment

Our interviewees agree that Candelaria’s impact on job creation has been significant. While the community’s expectation is that it will be able to meet all of the company’s labour needs, there is the perception that even though this is not the case, the project nevertheless represents an important boost to the regional economy. Interviewees refer to prior project phases, such as construction, during which there were 2 000 new jobs in the region. However, not all jobs went to regional workers. According to the labour secretariat, the local work force covered approximately 20 percent of the demand, which from the local perspective is positive, since it meant 400 direct new jobs for the region. The remaining 80 percent went to outside workers who arrive in search of work. According to one informant, they are viewed as a contribution to the region, since they constitute a qualified work force that will be integrated into the community as a factor for change. As a result of this migratory flow, Copiapó’s population has grown nearly 7 percent since 1990.

A negative aspect of this new source of employment stems from the distortions in the local job market caused by the relatively high salaries. Services tend to become more expensive, especially for the sector of the population that is not linked to the mining project.

Work shift

Candelaria does not use worker camps at the mine; instead, workers return home at the end of every shift. This situation directly benefits the community since it is able to capture a larger share of the work force’s expenditures. The situation is very different for the employees of subcontractors. According to the region’s labour authority, this is one of the greatest concerns generated by Candelaria. There are significant differences between Candelaria employees and subcontractor employees, in areas such as salary levels, the length of contracts, work conditions and internal relations. The Candelaria worker, for example, has access to a sports facility and many other advantages for building a family life that the subcontractor employee does not have.

Union

The appearance of a union at Candelaria has not been exempt from the general problems of unionism at the international level. Our interviewees indicate that the appearance of Candelaria’s union was hidden and gradual. Issues such as medical leave and housing programs sparked workers’ interest.

The union’s objective is to be fully organized in time for the next collective bargaining round in 2001. Its strategy has been to establish alliances with similar entities and to participate in worker confederations, especially the metal mining confederation. Union leaders have initiated conversations with unions at the parent company’s projects in the USA and Canada who are interested in supporting their Chilean counterparts. It is worth noting that the union does not participate in the CUT (Unified Workers Central), which is seen as politicized entity that does not represent workers’ interests.

Union leaders are concerned with the unequal working conditions between Candelaria and subcontractor employees. They are not indifferent to the situation and they consider it unjust. While the issue is not part of their demands, it is something that concerns them and is cause for solidarity.

Contributions to the community

The union is critical of the company’s contributions to the community, which it considers insufficient and opportunistic. Union leaders note that many company donations appear to be part of a communications strategy to attract press coverage rather than a real contribution to the community. According to union leaders, the company should have a budget item specifically for contributions to the community. This situation prompted the union to generate its own funds to help the community, since they feel they are in a privileged situation.

From the company’s perspective, Phelps Dodge’s policy seeks to establish a strong commitment to the communities where its operations are located. The company has contributed US $1.6 million to the regional community since it arrived in the area. Starting in 1994, when Candelaria began production, the company has concentrated on maximizing its contributions to the regional community, principally the towns of Tierra Amarilla, Copiapó and Caldera. Between 1995 and 1997, the company contributed US $830 000 for various health, education and sports initiatives.

Community communication strategy

Candelaria’s Public Affairs division is in charge of developing and maintaining community relations. At each of its operations throughout the world, Phelps Dodge has an “open door” policy, which translates into a strategy of integrating the company into the local community by openly explaining who the company is and what it does. The company’s strategy includes consultation with local organizations such as neighborhood associations, environmental groups, and schools. The company also uses studies to gauge public opinion, such as studies on Candelaria’s socioeconomic impact on the region or surveys of different social groups in the community.

Citizen participation

For the Candelaria Mining Company, the theme of citizen participation has followed all of the work rules established in its environmental impact studies. Nevertheless, Candelaria’s environmental manager, Cristián Strickler, indicated that citizen participation during the exploration phase, “presents certain sensibilities in terms of strategic information. Once the project was consolidated, we made the information public through the presence of authorities, journalists and other organizations, in accordance with the obligations established under current legislation.” He added, “Whenever we have prepared environmental impact studies for new projects or modifications to existing projects, we have presented them to the directly affected communities, with support from local authorities for their organization and development.”

Community benefits

Candelaria’s Donations Committee takes on the task of building community relations by creating a space for the discussion of urgent issues in areas such as health, culture and recreation. In addition, the company sponsors “ecological brigades” in Tierra Amarilla schools. Starting in 1994, when the mine began production, the two Phelps Dodge subsidiaries[8] have concentrated on maximizing contributions to the regional community, principally the towns of Tierra Amarilla, Copiapó and Caldera. As detailed in Table 6, between 1994 and 1997, the company contributed US $830 000 to finance various community support programs.

The company has also actively collaborated on community education programs and regional events. For example, the company supports area high schools and the University of Atacama. It has participated in the Environmental Expo and the Mining Day exposition in Copiapó and Expomar in Caldera. In addition, Phelps Dodge financed a professorship of Mineral Processing in the Engineering School at the University of Chile.

The Case of the Fachinal Mining Company

Description of the project

The Fachinal Mining Company is a gold and silver mining project located in Region XI, about 25 kilometers from Chile Chico on the southern shore of General Carrera Lake. The project required an investment of US $85 million, representing the biggest mining investment in this region, which is the largest and most sparsely populated in the country. According to INE, the region has a total of 93 600 inhabitants, of which 77.5 percent are concentrated in the towns of Coyhaique and Aysén. The region has a population density of 0.9 inhabitants per square kilometer.

Freeport Minerals first began exploration in December 1981. After two years of exploration and before minerals were discovered in the area, Freeport Mineral was acquired by Coeur D’Alene Mines Corp, which created CDE Chilean Mining Corporation. Construction began in late 1994 and the project was inaugurated in March 1996. The project is owned by the US company Coeur D’Alene Mines Corp.

The Fachinal operation consists of five underground mines and four open pit mines. Underground reserves are 894 000 tonnes of mineral with an average grade of 3.97 grams of gold and 193 gramsof silver per tonne. The open pit mines will tap approximately 3.2 million tonnes with an average grade of 1.96 grams of gold and 87.4 grams of silver per tonne. With a production schedule of 1 500 tonnes of mineral per day, the project’s lifespan is estimated at 8 years, by the end of which some 4.8 million tonnes of mineral will have been mined. Annual production is 1 400 kilos of gold and 78 000 kilos of silver, with an estimated value of US $31.5 million. Mineral concentrate is transported by truck to Puerto Chacabuco for shipment to its final destination.

The operation requires 50 liters of water per second, provided by the La Tina estuary and General Carrera Lake. The rest of the requirements are provided by the recirculation of water from the tailings pond to the milling and floatation process.

Economic variables

There is significantly less information available for an evaluation of Fachinal’s impacts on Chile Chico compared to the other companies in this study. This is because Fachinal has been operating for a shorter period of time and because the project is smaller in scope with a shorter lifespan. In this case, however, any significant impact can be directly associated with Fachinal, since it is the only large company operating in the area.

Production

There is little detailed information regarding production levels and Fachinal’s impact on the region, although we can establish that the company accounts for almost all mineral production in the region. Table 7 shows regional gold and silver production, nearly 100 percent of which is attributable to Fachinal.

Employment

With respect to the mining sector, those who were trained by Fachinal were hired by the company. However, the principal productive activity in the region is agriculture and many believe that once the mine closes, agriculture regain its former predominance. The mine directly employs 265 people, while a similar number are employed in services and indirect jobs; 168 direct mine employees are members of two different unions.

According to the CAS 2 classification system[9] 61 percent of Chile Chico’s population is considered “poor.” Poverty is worsening since the region’s low population density has not attracted quality educational centers, especially institutions of higher education. However, Chile Chico has a kindergarten and a municipal high school. This situation led the company to develop a training program aimed at employing youth from Region XI. Under it, the company trained and hired 50 young people[10] in 1995 and 25 in 1996.

As in the case of Candelaria, in order to analyze the indirect effects of the salaries received by the workers and management at Fachinal on the local economy, we used the multiplier for the mining sector estimated by the Faculty of Economics and Administration of the Catholic University of the North. According to this study, for each worker employed by a mining firm in Chile, approximately 1.76 indirect jobs are generated, on the assumption that all income is spent in the region. We will use this indicator to get an order of magnitude of the indirect employment and income effects of the mine, keeping in mind that it is a general multiplier and not specific to Fachinal. Table 8 illustrates our findings.

As in the case of Escondida — see Table 3 — the direct impact is the expenditure of the mine workers, while the indirect impact is the expenditure of those receiving employment indirectly due to the mine. The income multiplier is total income generated in the region divided by the income earned by the mine workers and management.

Construction

One of the largest impacts in the region was in the area of housing and urbanization. Residential construction by the firm was limited to a hotel and several houses. It preferred to give credit to the workers so that they could rent existing houses in the area. This resulted in more than a doubling of rents in the nearby communities, causing severe difficulties for the former tenants. According to the INE Census, the town of Chile Chico had only 1 325 houses in 1992. Consequently, the ability to house the new workers, most of who came from other areas, was very limited.

Commerce

Local commerce expanded significantly due to the expectations of the Chile Chico area residents, who anticipated a significant increase in demand as a result of the mining project. For example, supermarkets and other food provisioning sources doubled. Nevertheless, many owners are now deeply in debt. The anticipated demand did not materialize because mine workers usually obtain goods in other parts of the region, such as Coyhaique. In addition, the mine’s food service concession was granted to a company that obtains provisions from other areas. A similar situation occurred in the housing sector, where more capacity was built than what was needed.

Meanwhile, the new affluence of residents has caused the number of passengers, and hence transportation services to proliferate, with the connection from Balmaceda to Chile Chico being served by small planes.

Environmental variables

Fachinal has a strong respect for environmental protection and safety measures and directs its activities in such a way as to protect the natural environment, company employees, and the public in general. This stems from the corporate vision of the project’s owner, Coeur D’Alene Mine Corporation, and is reflected in Fachinal’s mission statement. Fachinal’s mission is to obtain value for the shareholder under safe working conditions for company personnel and with respect for the environment.

Another key aspect of the mission statement is the idea of mutual respect as an important component of company relations. Fachinal’s mission highlights measures geared toward the internal realm, or in other words, responsibilities within the company. In contrast to the mission statements of Escondida and Candelaria, Fachinal makes no express reference to its relations with the community. While this does not mean that the company has no policy in place to address community relations, it has not undertaken efforts such as creating a company foundation, donations committee, or other initiatives specifically aimed at building relations with the host community, as the other two companies have done. Fachinal differs in terms of geographic location, but nevertheless, the standards and norms it employs are similar to the two previous companies. In Fachinal’s case, obtaining water required for mine operations is not a problem, although the company must address other environmental aspects, such as flora and fauna, that were not major considerations for the other companies due to the geographic conditions of the host regions.

Fachinal voluntarily submitted its environmental impact study to regional authorities for approval in 1994, before Chile’s Environment Law was passed. The study considered the project’s surrounding environment in detail and included sections on the climate, air quality, geomorphology, soils, hydrology, hydrogeology, and volcanism. A biological study included local vegetation, and terrestrial and aquatic fauna. In addition, the EIS considered the stages of exploration, construction, production, and closure[11] for the areas of Laguna Verde, Guanaco, Chile Chico, and Puerto Chacabuco.

The company has committed to complying with all laws applicable to the environment, safety, and regulations. It applies reasonable operating procedures, which ensure effectiveness when confronting environmental problems.

Quality and safety standards at the Fachinal mining project.

In order to comply with the objectives outlined its environmental policy, as well as with current laws and its commitments to local authorities and the community of Region XI, Fachinal uses what it calls management tools. These are a series of programs, procedures and actions that conform to its environmental management system. To evaluate this, the company conducts internal and external environmental audits.

Among the primary management tools are the environmental policy regulations, which establish all of the internal norms that each employee and subcontractor must assume. Another important tool is the environmental management plan, which is revised annually and which contains scientific aspects, such as a contingency plan that outlines the formula for the rapid resolution of emergency situations that can affect the environment. It also incorporates the monitoring plan, which is designed to immediately detect any alteration in various environmental variables. The most important areas monitored are ground and surface water quality, air quality, dust, soil and vegetation quality, and noise levels. In addition, the company conducts fauna censuses in important habitat areas and uses a waste management plan that establishes those measures necessary to minimize risks and ensure safe disposal.

Social and human capital

Health

Internal company health

The company addresses the issue of worker health by way of private institutions (ISAPRE) and FONASA, and its health insurance picks up any costs not covered by these programs.

Fachinal considers drug and alcohol use a public health issue and so it does not gather information regarding consumption among workers. Nevertheless, when the company detects workers under the influence of alcohol, they are not admitted onto the project site. Fachinal’s drug policy states that if workers are discovered to possess or sell drugs, they are subject to immediate dismissal.

The influx of new workers is examined by the Chilean Safety Association, which administers a pre-employment exam to determine if an applicant is fit for employment. According to José San Francisco, human resources manager at CDE:

At first we had problems in Chile Chico, since many workers were declared unfit by the Association due to dental problems, which is a big problem in Chile Chico. We had to make an exception in the case of the subcontractor employees. There is only one dentist in Chile Chico. There are two in Coyhaique but their schedules are booked. With the salaries they receive now, the workers have gone in for treatment.

Mining culture and sexuality

Due to the absence of a traditional mining culture in Chile Chico, where the Fachinal project is located, the increase in sexual commerce in the town is especially visible. There has been explosive growth in nightclubs, due to demand generated by the floating population, primarily young males.

According to the general practitioner in the area, Chile Chico has seen a slight but significant increase in sexually transmitted diseases. The hospital conducts prevention and control activities specifically focused to sex workers. At one point, local radio stations spread a rumour about the presence of a female HIV carrier in town, unleashing a social psychosis that reached the mining company workers. According to an operations manager interviewed, there was a significant increase in work leaves to attend medical exams. According to the general practitioner in the area, this anecdote had significant effects on awareness levels and sexually risky behaviour became a topic of everyday conversation.

Education and training

When operations began in 1995, the company’s administration confronted a serious shortage of skilled labour in the region for mine and plant workers and equipment maintenance technicians. Faced with this situation, company executives and regional authorities began a training program, with participation from SENSA, aimed at the integral formation of mine workers. The eight-month program was taught by instructors from the University of La Serena. Program participants were 75 young Ayesino residents who had graduated from the Industrial School. At the end of the course, they were hired as mine operators. The Fachinal experience can be characterized as an alternating apprenticeship model, meaning it combines theoretical classroom training with on-site workplace training. Region XI’s mining authorities have applauded the high school-graduate training program as a way to ensure a skilled work force in the area.

A second area addressed by the Environmental Affairs Division is related to the insertion of new mining engineers contracted by the company. Without being an orientation program per se, this division invested time in defining what it means to work in a company that obeys clear guidelines, especially with regards to the environment, designed by the company’s head office in the United States.

Work shift

Region XI’s labour authority indicates that Fachinal’s work shifts are structured in three 8-hour shifts, which means that most workers live in Chile Chico and arrive at the mine by vehicle. Some workers from more distant locales (La Junta, Cochrane) have special shifts.

Community-company relations

The community’s perception

The senator from the region, Mr. Horvath, has a negative opinion of the mine’s impact on Chile Chico and the surrounding region.

A portion of mining patent fees go to the municipality and that is the only part that stays in local or regional funds. But mining activity itself doesn’t leave anything. This goes as taxes to the national treasury and doesn’t return through federal programs or budget allocations. There is a structural flaw to the system because it tends to concentrate funds and all offices are in Santiago. There is a remote administration of the activity from Santiago.

For one supermarket owner, the arrival of the Fachinal mining project to Chile Chico had a significant impact on the community.

The publicity mounted by the company toward the community was really impressive. Everything became exaggerated. You began to see a lot of traffic, especially from the mine. People who got jobs at the mine began to compete to see who had the best car. People who before had no job or maybe only a temporary job earning 80 000 pesos, suddenly they’re looking at a salary of 300, 400, 500 thousand pesos. The first thing they do is buy a car on a finance plan. Every finance company in Coyhaiquewas chasing the payroll lists, offering credit to anyone who had a salary above a certain level. It’s created a new type of worker: a worker deeply in debt but with a new car, television set and whatever else. Right now these workers owe more than they earn.

The mine’s importance for Chile Chico is such that the community is affected by ups and down in the international metals market. A typical conversation in the community has to do with constant rumours that the mine is on the verge of closing because a drop in the price of gold, creating a situation of constant tension.

A key factor in our interviewees’ evaluations of company-community relations had to do with the expectations generated by Fachinal. People recall its efforts during the early stages to highlight the benefits the project would bring the community, which they consider was a public relations strategy aimed at winning community support.

The community, for its part, reacted with out-of-proportion enthusiasm to the possibilities the project would offer. Residents launched risky economic ventures and ran up significant debts. The first to react were the commercial and housing sectors. Although there was a period of economic growth, especially during the construction phase when important contingents of outside workers arrived to justify new investments, the shift to Fachinal’s production phase saw a considerable drop in local incomes. The failed investments provided further support for the interpretation that the company’s initial communication campaign facilitated the community’s overreaction.

The community developed a profound sense of frustration once it became evident that many promises were being forgotten as the project’s production phase began. For example, people expected Fachinal to make good on its promise to purchase inputs locally. Instead, local goods and service providers in a number of areas were ignored.

In the commercial sector, for example, there are strong criticisms of Fachinal’s contracts with Emasa. It is the state provisioning company for isolated regions that allows functionaries to obtain a payroll discount and subsidized prices. It is estimated that Emasa captures a large percentage of the miners’ incomes. Meanwhile, local commerce distrusts the presence of finance companies. Both Emasa and the finance companies absorb resources that are not reinvested in the area; as such they are considered to conspire against local development.

A similar situation arose in the education sector, where unmet promises and expectations ended up deteriorating company-community relations. In this case, the opinions collected indicate that the company gave signals it was seeking a relation of mutual collaboration, which began with an important donation of computers. The school reoriented itself to technical professional education and students began entering the company as interns with the idea the company would offer them a profession with concrete opportunities for development. Nevertheless, the results did not fulfill community expectations, due to a drop in gold prices that caused the company to put an end to these types of collaborations.

Senator Horvath comments on this situation:

The school deserves some criticism on this point. We have talked with the teachers and the director. At about the same time the mining project was getting underway, the school began its transformation into a polytechnic school. Many students had expectations of jobs at the company, which have not come true. The situation began several years ago when the company donated computer equipment, things of that nature. However, at the moment the school does not feel a greater link with the company, nor has there been a linkage in the sense that the company proposes, which wouldn’t cost them anything. The company has not taken advantage of tax breaks from donations to educational facilities. This is the criticism we’ve noticed in the educational sector.

The company’s integration in the local community has been especially problematic, probably as a result of the community’s lack of experience with large-scale projects, as well as the social dynamics specific to the small, isolated towns that present additional challenges to the integration process. The opinions consulted note the significant impact on local dynamics caused by the fact that certain people from the locality receive economic benefits. The resulting gap between those who benefit and those who do not creates a situation that does not go unnoticed.

The gradual deterioration of community-company relations ended up with parties’ viewing each other as competitors. The company created a closed circuit of suppliers, such as the hotel the company created with its own cafeteria, administrated by the Central de Restaurantes (a food service company that operates on the national and international levels). Community members complain that food supply is a service that local companies could have provided due to the locale’sexcellent microclimate for the production of vegetables, livestock, and other necessities. Another criticism has to do with the fact that subcontracted services receive an indirect subsidy, since the Central de Restaurantes’ cafeteria occupies company-owned space and thus does not pay for rent or basic services such as electricity, water and gas. Several local businesses went bankrupt and had no way to pay their debts. The initial enthusiasm became a catastrophe and contributed to a further deterioration in community-company relations, reaching extremes such as the case of one local business owner who prohibited miners from entering his locale and who made repeated complaints to local authorities and Fachinal.

Citizen participation

In terms of citizen participation, the case of Fachinal is different from the previous two cases. According to the company’s environmental manager,

The project was not associated with citizen participation because the regulations for the environment law had not been passed yet. Nevertheless, we held meetings with the community and even environmental groups to explain the project.

Senator Horvath says of community participation:

Perhaps the activities leading up to the project’s installation were carried out in conjunction with the community, but later after production began, this link began to weaken. There has been a general tendency of citizen pressure against mega-projects. The company does not create foundations or local development corporations, conduct impact studies, out of the goodness of its heart. This has been more a result of local pressure.

Employees’ integration in the community

Fachinal’s owner CDE failed to implement an adequate housing plan. The company instead opted to repair houses in Chile Chico. The housing demand generated by the company produced a rent increase, which meant that certain sectors of the local community, such as the police and public officials, were forced to give up the houses they rented since owners preferred to rent to the mining company. This situation had positive elements in the sense that it served to develop the property rental sector, as well as negative elements such as the rent increase. Nevertheless the company feels its workers have successfully integrated in the community. Company credit is available to workers to buy houses.

But Fachinal’s policy does not appear to have adequately addressed the issue of employee integration in the community. Indeed, local residents do not perceive a clear policy. According to local writer and Rotary Club member Danka Ivanov, mine workers and their families

should integrate themselves into the daily lives of small town residents, since a mining or fishing project can have a strong cultural impact on a small town. One has to have a lot of strength and understand one’s own cultural values in order not to be lead astray by another culture. Because these companies leave and there is the constant threat that they are going to lay people off at the mine. Last month 40 people were let go — it’s a constant threat. I wouldn’t want to depend on a salary from the mine because it’s too nerve-wracking. They can’t guarantee your job, since neither the manager nor anyone else has a guaranteed job. If the whims of the metals market are like they are now, which is atrocious, people don’t save and don’t look toward the future.

With regards to the issue of employee integration in the community, Senator Horvath says,

The other point that one observes with some degree of concern is that in general, the people who work at the company come from outside the region. Administrators, accountants, and professionals: they have almost no link to the region. From somewhere else in Chile they fly to Balmaceda, then sometimes from Balmaceda they fly directly to Chile Chico and never even get to know Coyhaique or Puerto Aysén. They don’t have any idea what the region is really like, which reveals the enclave mentality that mega-projects generally have, to differing degrees.

Community benefits

The arrival of the Fachinal mining project has brought certain benefits to the community, such as:

• the arrival of television broadcasts to Chile Chico;
• the donation of a computer to the police force;
• improvement in the road between Chile Chico and the mine site (25 kilometers), to which the company contributed 60 percent of the costs; and
• improvement to the lawn at the Plaza de Armas in Chile Chico.

Nevertheless, Mrs. Ivanov has a different perception from that of the company:

They talked about so many things, they even mentioned the possibility of private schools…They talked about how they were going to make a significant contribution to the hospital in order to improve the healthcare quality, which is quite poor, and I don’t know how that ever turned out. We still just have the local general practitioner, who come “right out of the oven” with no experience.

Mrs. Ivanov ends by referring to another impact of the mining company’s arrival:

There was excessive growth in commerce and prostitution as well. Many people have businesses disguised as nightclubs, but everyone knows there’s more going on there than dancing.

Conclusions and recommendations for best practice

The objective of this chapter is to present the principal conclusions and lessons obtained from the case studies. This will enable us to identify and propose a series of best practices in each of the areas analyzed, which will serve to design and recommend policies and strategies that can be applied in other contexts.

Context

There are a series of lessons and best practices that refer to the general context in which a project is developed. In the case of mining projects, one essential aspect has to do with the initial insertion of the project into the local context. A few best practices that arise are:

1. A company should know the country in which it is going to begin operations

This implies knowledge of applicablelaws and regulations. Specifically, it requires knowledge of norms regarding declarations of intent and environmental impact studies.

2. A company should know the local community in which it is going to begin operations

It is considered a best practice to send an advance mission of experts in community relations or socio-cultural affairs, especially in cases of communities with no mining experience. This allows the company to be sensitive to local customs, cultures, and needs.

3. A company should establish positive relations with the community

Knowledge of a local community should be used to establish positive community relations as soon as exploration begins. This requires the ability to communicate in a context of uncertainty, which must be based on an open dialogue that establishes the basis of mutual trust.

Strategies in the internal realm

There are also a series of lessons and best practices that either stem from, or are applicable to, internal company relations, and which affect the benefits and costs of a project for the workers. Application of these lessons helps determine how the project is perceived by the local community, and helps the community understand the company’s culture of “how things are done.”

1. Declaration of a mission statement

One of the conclusions drawn from the case studies is that each project is carried out under a corporate model that corresponds to a shared mental model, understood as a series of corporate decisions that characterize the culture of a specific company. The corporate model implies the design of strategies, policies and the concept of best practices with regards to the company’s activities as a way of responding to social, political and legal pressures from the local community and society in general.

The existence of a corporate model implies that the company defines guidelines regarding “how things are done.” These generally originate in the corporate headquarters located in the company’s home country. These guidelines can be based on the philosophic principals defined by the company’s founders or be based on standards fixed by international organizations. They orient the company’s activities at each of its projects throughout the world, and in many cases there are external reviews that verify their application. The guidelines that constitute the corporate model shape the way project activities are carried out (i.e., the internal realm), as well as relations with the community, local and national authorities, organizations, universities, and others (i.e., the external realm).

In general, the corporate model is presented in each company’s mission statement, which is a declaration of the company’s reason for being and as such, provides guidelines that are translated into policies and strategies toward the internal and external realms. In each of the three cases, we see the best practice of declaring a corporate mission that is known and assumed by all those who form part of the company. This requires an orientation process with each group inside the company, including management, professionals, technicians, workers, and suppliers, such that there is an appropriation of the declaration that establishes the fundamental components of the company’s reason for being. For example, in one of the companies studied, the mission statement was printed out and each worker had to sign it. This was handed out by all company offices.

2. Declaration and application of safety and quality standards

The existence of safety standards allows for a safe and efficient work environment. Two of the companies studied assumed safety standards supervised by international institutions, based on incentive systems or prizes for meeting certain goals. According to our observations, the application of such incentive systems generates a positive environment for the compliance of safety regulations and provides a permanent source of information to all workers about the goals that are met. This establishes a clear incentive to meet these goals. The third company adheres to its own standards developed by corporate headquarters that have beenproven over time. In terms of quality standards, two of the companies have certified under ISO 14 000 and the third has its own corporate standards.

3. Design of an environmental management system

As we have shown in our analysis, the existence of an environmental management system (EMS) entails more than simply complying with all applicable laws, regulations, norms and standards. An EMS allows the company to ensure that all design, construction and operating procedures use the best available technology, keeping in mind economic and environmental factors. In addition, it opens the possibility of cooperating with the larger community in the identification of environmental goals and the development of effective control programs.

4. Efficient organizational design

Efficient organizational design requires clearly defined responsibilities. The creation of management divisions outlining their attributes and procedures is key for efficient management. Lack of clarity regarding responsibilities and procedures in one of the companies studied resulted in a duplication of functions that produced a minor conflict with the environmental authority.

5. Definition of a human resources policy

The cultivation of a company’s human resources is crucial for the smooth functioning of internal processes. The clear definition of a human resources policy is a best practice that allows the company to establish a profile of new employees, as well as the promotion and demotion policy internal to the organization. It also provides for orientation, training, and improvement programs, allowing the company to cultivate a professionally and technically competitive work force. However, cultivating human resources is not sufficiently assumed by all mining companies. This is especially evident in times of financial crisis, during which companies are distinguished according to those who use personnel layoffs as a first or last resort.

6. Health systems

As indicatedin the case studies, companies have greater control over worker health while they are at the project site or living at the mine camp. A company has far less control when workers makes use of their time off in the community, or during stays at towns and cities nearby. As such, a company’s health strategy is geared toward having greater control over worker health inside the mining operation.

The issue of health is important for the three mining companies in the study. All designed clear strategies and invested important resources with respect to the health of workers and their families. Clearly, companies are concerned with the relationship between health and productivity. A worker with health problems is a risk — often a costly one — for meeting production goals.

For two of the three cases, it was impossible to accurately determine how the mine affected workers in a study of the community’s health, because there were so many mining companies, both large and small, in the area. Nevertheless, certain strategies or characteristics allow a company to minimize possible effects of its workers on the general population’s health. For example, a company should opt for a work shift system that allows workers to spend as much time as possible with their families. Daily shifts or brief stays at the project site should help minimize the negative effects on community health generally associated with life organized around mining camps.

Another strategy is the implementation of a health plan that permits monitoring of potential diseases. The existence of a total health system can be considered a best practice, since it allows the company to define preventative and curative health policies that can detect possible diseases and address the possible effects derived from the mining operation. Our analysis illustrates the benefits of a health system concerned with issues such as eating habits, sexually transmitted diseases, high altitude, and drug and alcohol use.

7. Information and communication system

The timely management of information is important for all organizations. The existence of an information system that was elevated to a management division in one of the cases studied is a best practice that encourages the processing of internal and external information by way of consultation with community groups.

Internal and external diffusion is fundamental to any information system. The ability to react promptly to conflicts by providing solid, objective, and transparent information constitutes a best practice, as does the capacity to anticipate and proactively inform about future events in an opportune manner.

Strategies in the external realm

In each of the cases studied, the issue of external community relations is relevant. This is evident because all three companies have developed some type of strategy to address this issue. Such strategies contrast with the historic model of an isolated mining project that provides little or no information to the community, which both prevents the community from expressing legitimate concerns and leads to false expectations.

1. Community information

Two of the companies studied have strong concern for informing the community about its activities. The third company is more concerned with informing the authorities (whether environmental, health, or labour) than the community.

To a greater or lesser degree, the strategies of the companies in the study indicate the need to establish fluid and permanent lines of communication with the community — however diverse — regarding company activities. These strategies create credibility within the community regarding mining activities and its benefits for local and national development, and help avoid the existence of unfounded rumours about the effects of the project.

2. Strategy for distributing community benefits

It is necessary to distinguish between long- and short-term strategies designed to channel the benefits to the community. Short-term responses are donations or benefits made directly to community groups and that last as long as the mineral deposits last. Long-term responses, on the other hand, are designed to contribute to the socioeconomic sustainability of the mining operation. In consequence, these imply strategies with a time frame beyond the lifespan of the mining operation. In the three cases studies presented, the community received direct benefits from the companies ranging from simple donations to the repair or construction of roads.

A comparative analysis of the three cases in the study reveals differences in the area of community benefits. Escondida Mining Company has both short- and long-term strategies for providing community benefits. The short-term strategies include the company’s relations to the community directly through the Corporate Affairs Division, and the Communications and Corporate Affairs Department. The latter is concerned with the most direct aspects and emerging problems in terms of community relations. Escondida coalesced its long term strategy by creating its Foundation, a non-profit organization, as a response to long-term social problems. Its goal is to contribute to the long-term sustainability of the mining project by creating social capital. The foundation was conceived of as a strategy that would last beyond the life cycle of the mine, which provides it with a degree of independence from the company. This implies that the foundation’s role is to link the company to the community, and its emphasis is on involving other public and private institutions in the conception and development of programs and projects.

Candelaria Mining Company’s Public Affairs Division is in charge of short-term community relations. In this sense, the company has not defined a policy that goes beyond the life cycle of the mine. Through this division, the company established mechanisms to receive the community’s opinion, such as a process of consultation with social organizations, including environmental groups. In addition, the company makes donations to schools, finances mining professorships at the university, and supports the Teplinzky Institute that trains mining technicians.

Finally, Fachinal Mining Company has the least evident strategy for establishing relations with the community. Its Human Resources Division has taken on an important role in this area, although the Environmental Division also acts as a mediator between the community and authorities. But there is no clearly defined strategy, whether short- or long-term, for building community relations and for providing benefits to the community.

In the first case, the model of the company pursuing a short-term strategy combined with a foundation oriented to long-term solutions can be considered a best practice, especially after having observed how it functions. Nevertheless, there are two important considerations: few mining projects are big enough, or have sufficient resources, to create a foundation that can effectively contribute to human capital, or that can capitalize on the resources contributed by the company in order to achieve long-term, institutional sustainability. One way of overcoming this obstacle is for a number of medium and large companies to jointly create the foundation. Our impression is that more could be accomplished in the region if there were more foundations that acted in coordination with the public sector on regional development initiatives.

The second consideration concerns the risks of completely externalizing community benefits through a foundation. The main risk is that the company is not responsible for its actions and community relations are solely the result of the foundation. For this reason, a best practice is the combination of short- and long-term strategies.

Meanwhile, a strategy of purely assistential, short-term contributions to the community will not contribute to its long-term sustainability or allow the community to feel that the company has made a positive and lasting contribution to the area.

3. Working with the local community

In the analysis of each case, we provided examples of community projects that offered direct benefits to diverse social groups, such as the fishermen in shipment ports or the community in general, in terms of investments in roads, public square improvements and other projects. This best practice allows companies to make investments to maintain strong community relations, which in the long term could be considered added value. A failure to adopt this practice would mean facing problematic relations or conflicts with the community, which can endanger the viability of the project, or require considerable investment so as to mitigate or reverse a negative situation.

4. Establishment of fluid and permanent relations with authorities

Developing positive, permanent relations with local and national authorities is recognized as a best practice by the companies in the study. Regional authorities tend to value a company’s participation in discussions on issues that are relevant to the mining sector as well as in cooperative programs with the public sector. In such cases, the company contributes its knowledge and the authority contributes its organization and vision of regional development. One example of this is training programs offered by the mining companies.

5. Human resources in environmental impact studies

The case studies reveal the importance of human resources for mining companies. Nevertheless, because mining projects have an immense impact on people’s quality of life and ensuing psychosocial and family relations, in our opinion human resources does not receive the necessary attention in environmental impact studies (EIS). One suggestion is that the EIS should contain a special chapter in which mining companies define their corporate strategy for human resources management and address issues such as work conditions, workplace stress management, workplace health, quality of family life and productivity, worker well-being, and education.

6. Closure plan and work force conversion policy

The image of a mine project that simply closes, “covers up the hole in the ground and leaves,” leaving behind it a host of unemployed workers, still persists in the communities that have experienced the phenomenon. This is true in the case of the carbon industry in Chile and a few medium-sized mines that are shutting down production due to low copper and gold prices. To avoid this stressful situation for companies and workers alike, the closure plan should consider mechanisms for the conversion of the work force that provide more flexibility and transferable multiple skills to workers. This will ensure that they can be absorbed into other productive areas. Conversion mechanisms include training workers as micro-entrepreneurs in services or products required by the mining interest, as the Canadians do. In the case of Chile, this is relevant because it will permit, in a not so distant future, the exportation of mining know-how to countries such as Argentina when they begin to exploit the large mineral deposits that exist there.

7. Participation in training

Chile has seen evident development and growth of its mining sector. Nevertheless, for modern mining to be efficient, productive, and successful within a framework of respect for the environment, the sector requires a multi-skilled and experienced work force that currently does not exist, especially with regards to machine operators. This is because technical professional education, at least in the area of mining, is still not geared toward the new occupations and specialties required by new mining. Given this reality, mining companies have studied development strategies for investing in education and training to form a work force that can meet their demands.

In such programs, companies contribute their technical knowledge, or their area of competitive advantage, and put it at the service of the regional work force, particularly young people. It is easy for the mining company to train an electrical technician or a machine operator, but is more difficult for it to offer other types of education, which it must subcontract.

The three mining companies comprising this study developed programs that prepare students from technical professional schools. This is accomplished through orientation programs that prepare students for the type of jobs available, or through apprenticeship programs for students and professors at the project site.

Such education and training strategies can generate clear benefits for the local communities. The relations established between mining companies and technical and professional educational establishments favour the formation of a “semi-technician.” This position was created in response to the ever more demanding technical and organizational needs of the mining companies. In addition, the broader the technical formation (i.e., less specific to the mining sector), the greater the possible benefits to other sectors besides mining from a skilled work force prepared to make a positive contribution to society and less dependent on one specific economic sector.

The three companies studied consider participation in the educational area as a best practice that provides mutual benefits for the educational sector, the community, and the company. Examples of the social role that mining companies can assume include the Escondida Education Foundation, which establishes a clear investment in social aspects and promotes the human resources formation for the mining sector; the Candelaria Mining Company’s collaboration with the technical training center Benjamin Teplinzky; and Fachinal’s award-winning and recognized training program. These examples constitute a valuable investment in human capital that benefits the mining industry in general.

Finally, training for suppliers generates an improved local service capacity that is positive for the modern mining activity.

8. Association with universities and institutes

As the analysis of the case studies reveals, the valuable relationship between the companies and universities or research institutes can be considered a best practice. For the most part, the image of traditional mining as an environmentally destructive, contaminating industry is due to a failure to protect species affected by mining. The three companies studied are committed to clean mining and devote significant resources to investigate the effects of mining on the local flora and fauna. For the universities, this best practice constitutes a good source of funding for research, not only in the hard sciences, but also in the areas of archaeology or ethno-history, such as the case of the research financed by Escondida. This relationship allows the mining companies to design closure plans with clear concern for restoring the original landscape, as is the case with Fachinal, which has plans for reforestation with original species.

9. Productive development corporation

A best practice in terms of establishing positive community-company relations is the creation of a productive development corporation, which provides for public-private partnerships to address regional development. One initiative of this type that is important for long-term regional development reinforces the capabilities of small- and mid-sized businesses associated with the mining industry that remain in the area, and which go on to become part of the human capital of the region.

10. Supplier purchasing policy

One of the common complaints about mining mega-projects is that supplies and inputs come from outside the region or abroad, thus depriving local businesses of the benefits from subcontracts at the mine. In general, local community members want to be the principal suppliers. All things being equal, the companies studied here tend to favour local suppliers for the provision of goods and services. Nevertheless, the host communities have the general impression that local participation could be greater, although they recognize problems such as low quality and mining companies’ lack of trust in local businesses as habitual suppliers.

In this sense, companies can make an important contribution by helping local businesses to meet their high standards. One proposal is that the mining company enters into a joint venture with local suppliers in order to teach them the way things are done and help them improve product quality.

These associations should begin with simple, low technology activities. Later the technology level can be increased as the necessary trust is built. The more general the locally produced good or service, the greater the contribution of such an initiative, since the good or service can be offered to economic sectors other than mining. In this way, the diffusion of benefits is maximized in local communities that cannot depend exclusively on mining. Such an initiative can generate a higher-quality local business capacity that supports the modern mining industry and other productive sectors.

References

Aroca, Patricio. 1999. An Input-Product Matrix for Region II: Methodology and Results. Universidad Católica del Norte, Antofagasta, Chile.

COCHILCO. 1999. Statistics for Copper and other Minerals: 1989–1998. Santiago, Chile.

Escondida Mining Company. 1997. Social and Economic Impact of Escondida in Region II. Antofagasta, Chile.

Escondida Mining Company. 1997. Annual Report and Financial Statement. Antofagasta, Chile.

———. 1998. Annual Report and Financial Statement. Antofagasta, Chile.

Phelps Dodge. 1997. Social and Economic Antecedents from the 3rd Region. Atacama, Chile.

———. 1997. Annual Report. Santiago, Chile.

SENCE. 1996. Annual Statistical Report of the Regional Office. Government of Chile. Santiago, Chile.

[1] Jose Miguel Sánchez, economist, is currently a professor at the Economic Institute of the Catholic University of Chile and the director of this project. Send all comments to jsanchez@volcan.facea.puc.cl. Julio Castillo, anthropologist, is an associate researcher in the Economics Department of the University of Chile. Verónica Kunze, economist, is an instructor and associate researcher in the Economics Department of the University of Chile. Rodrigo Araya is an anthropologist.

[2] The methodology of the In-depth Interview (II) supposes a situation of direct conversation on specific themes proposed in a broad manner by the interviewer.The interviewee is asked for his/her perspectives that emerge during the interview. The interviewer turns over the direction of the conversation to the interviewee, although the interviewer controls the conversation by way of content guidelines. This method enables the argument sequences and emotional positions that structure the conversations to be studied. In particular, the way in which distinct collectives participate in the conversations are studied, with a view to analyzing their experience and social practice. Interviews lasted aproximately 20 to 40 minutes.

[3] There are several phases to the presence of foreign companies: first the Spanish, then the British (both for nitrates), later the North Americans (copper mining) and currently multinational companies (mostly copper).

[4] Estimate by Gémines Consulting using a representative sample of mining sector companies.

[5] In this case, corresponding are payments made to the Illustrious Municipality of Antofagasta.

[6] The company’s water recuperation system has allowed for a reduction in the operation’s water needs such that 75% of the water needed for the milling process is recycled.

[7] There are mechanisms for workers to buy housing through Serviu, where workers are obligated to stay at the company for 12 years.

[8] The other company is Ojos del Salado.

[9] The index system for the socioeconomic situation is used by the government to grant various subsidies.

[10] From the province of Aysén.

[11] The study included the closure plan since the project’s lifespan is only eight years.

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