Document(s) 6 of 18

Introduction

This section presents the principal conclusions of the project “Large-scale Mining and Local Communities” for Peru. The project’s main objective was to analyze the socioeconomic, cultural and environmental relations between large-scale mining companies and local communities, in order to identify practices that lead to sustainable local development. Our analysis, which began in June 1998, focuses on two large mining companies — Yanacocha Mining Company (Minera Yanacocha) and Antamina Mining Company (Minera Antamina) — chosen because of the size of their investments and scope of regional impacts.

The project applied specific research strategies for each area. In the case of Yanacocha, we collected secondary material and conducted interviews and focus groups in the city of Cajamarca. In the case of Antamina, we collected baseline date from directly affected communities and visited surrounding areas.

The section is divided into four subsections. The first outlines the principal ideas and concepts that have guided the investigation. The two following subsections present case studies of the Yanacocha and Antamina mining companies. The fourth subsection presents a summary of the best practices observed in the case studies.

Definitions and variables

In this section we present definitions, variables, and questions to be answered. First we discuss the possible dimensions of the mining company, the community and the state, as well as relations among the three actors. Then we address the following themes: land acquisition; community demands, expectations, and perceptions regarding the mining company; development options as well as company communication and information strategies; and possible community benefits from the mining companies’ presence.

Mining company

We can characterize a mining company according to three indicators: the size of the operation (large, medium or small); daily production volume in metric tonnes (MT) (less than 350, between 350 and 5 000, and more than 5 000); and the estimated lifespan of the operation. A priori, there appears to be no correlation between a company’s size, the estimated lifecycle of its operation, and its interest regarding local communities.

Local communities

“Local community” is defined in the broad sense of the term as the entire local population directly or indirectly linked to the mining operation. Within the term, we distinguish three levels:

1. population directly linked to the operation (those who reside on lands acquired by the mining company);
2. population residing on lands adjacent to or near the mining operation (any area that will be affected by changes to the environment, infrastructure, population movements or commercial traffic); and
3. population residing in nearby towns (towns of more than 1 000 residents that will be affected by the construction of camps or access roads, or by becoming a provisioning, lodging, or recreation center for the mining company and its personnel).

Relations between the actors

In this scenario, we assume that interactions between the community, the mining company and the state take place on three different levels. At each level, actors have their own specific interests and expectations with regard to each other and within each sector:

1. in the area of the mine operation;
2. at the level of local and regional administrations; and
3. beyond the area of the mine operation (the country’s capital city).

Land acquisition

The amount of land a mining company must buy depends on the scale and nature of its operations. The two mines in our study are open-pit mines, which require large quantities of land.

The purchase of lands directly or indirectly affects the families and localities originally situated in the area of the operation or on adjacent lands. Impacts vary from a slight alteration to a radical transformation of the means of social and economic reproduction. The arrival of a mining operation obligates the local population to redefine its options and methods of production.

The first problem that arises during land acquisitions is to choose the way and conditions under which land is transferred. This depends on variables such as the nature of the lands themselves, the way the lands are utilized, ownership, type of transaction, type of contract, and mediation of the transfer process.

Lands acquired may be grazing lands, irrigated lands, or non-irrigated lands. They may be utilized on a permanent basis or according to season and climate. In addition, lands may contain water sources or other resources, serve as a right-of-way, or possess other characteristics that modify their value, such as trees, crops, houses, or fences. Land ownership may be communal or familial. In general, lands required by the mining company are high-altitude grasslands, used primarily for grazing and with low productivity. These are of seasonal use and ownership may be communal or familial.

Land transfers are sometimes coerced under threat of resorting to the Land Law, which provides for a process of land expropriation. Although this has rarely occurred and large mining operations normally do not resort to this strategy, smaller operations apply different pressures in order to obtain the land they need. At the other extreme, the sale of land can be negotiated. Finally, the purchase and sale of land may be accompanied by an offer to relocate affected occupants.

In general, miners and campesinos have different understandings of land transfer negotiations. The company may view a document signed and approved by the community assembly as legally binding, while campesinos do not consider it an impediment to revising the negotiations. For campesinos, negotiations are a continuing process that exists latently as long as there is a relationship between the parties.

Community demands, expectations and perceptions

The affected population’s fundamental demands center on jobs, support for certain activities or public works (primarily infrastructure), and a market for their traditional products. The population reacts according to its interests, its perception of the mining operation and the expectations that the operation generates.

Unfortunately, local workers and products generally do not meet mining company requirements, and this causes conflicts. For this reason, companies must provide opportunities for worker training, as well as technical assistance that will allow producers to diversify and improve product quality in accordance with company requirements. Nevertheless, for efforts to be sustainable over time, the company must avoid giving in to protectionism toward local producers. Although in the short term it is necessary to provide support to start-up local providers, local industry must be capable of competing over the long term with other producers throughout the country and of diversifying its client base.

Development options and communication strategies

A company may opt to play a limited or non-existent role in local development, or it can choose to be proactive. The main development models available to a company are the following: assistential (when the company is concerned with minimal tasks, principally the provision of minor social services), productive (when the company engages in capacity building or the promotion of the manufacture or cultivation of a new product) or sustainable (when the company chooses to establish the conditions necessary for benefits to continue beyond the mine’s lifecycle).

The local population and its leaders have their own visions and may propose development alternatives, which may or may not coincide with experts’ technical criteria. For example, a local mayor may request a sports arena, while company officials prefer to provide drinking water systems or rotating credit for agricultural producers.

Community benefits

Assuming that basic environmental standards are met, a large mining operation can generate important benefits for local communities, especially when it comes to isolated communities with limited access and infrastructure.

There does not appear to be a consensus regarding the benefits produced by the presence of a mining operation and the limited literature on the topic classifies such benefits differently. We will focus on six main areas of impact: increased local and regional economic flow; infrastructure development; employment (direct and indirect) and related social impacts; basic service development; development of productive capabilities; and the formation of social capital.

The Case of Yanacocha Mining Company

Yanacocha Mining Company

The Yanacocha Mining Company (Minera Yanacocha) operates in the department of Cajamarca in northeastern Peru. Its operations involve daily interaction with the districts of Cajamarca and La Encañada and the Cajamarquino and Llaucano river basins (as well as the sub-basins of the Mashcon and Porcon rivers).

The mineral deposit is located 4 000 meters above sea level, some 20 kilometers north of the city of Cajamarca. The mine is connected to the city by way of a 45-kilometer highway. It is a sparsely inhabited region of high-altitude plains, situated at the source of several ravines that irrigate Cajamarca, Porcon and La Encañada. Currently, four deposits are being exploited: Carachugo (1993), Maqui Maqui (1994), San José (1996) and Yanacocha (1997). Exploitation of the La Quinua deposit is currently under evaluation. The company operates open-pit mines, treating extracted ore in leach pits that do not require crushers or mills. The process produces ingots of 70 percent gold and 30 percent silver.

The project’s two processing plants process approximately eight million tonnes per year. Production increased from 2 535 kilograms of high-grade gold in 1993 to 41 300 kilograms in 1998, representing 44 percent of national production. During 1999, Yanacocha increased production to 47 061 kilograms (a 14 percent increase). Reserves are estimated at 20 million ounces (equivalent to 15 years of production).

The company has management and representation offices in Lima, a management office in Cajamarca, and another in the area of the operation. The company also has Public Relations and Rural Development offices in Cajamarca. The company is owned by Newmont (51.35 percent), Minas Buenaventure (43.65 percent) and the World Bank’s International Finance Corporation (5 percent).

Area of influence: Cajamarca, Baños del Inca and La Encañada

The Cajamarca region’s economy revolves around small-scale agriculture, livestock production, the dairy industry and tourism. According to the 1993 census, 48.5 percent of the economically active population (EAP) works in the primary sector, 35.3 percent in the service industry, and 16.2 percent in manufacturing. Most of the region’s agriculture is carried out on parcels of land smaller than 3 hectares. Livestock production consists primarily of dairy cows.

The region’s center is the city of Cajamarca. According to the 1993 census, Cajamarca had 117 509 inhabitants (or 324.97 inhabitants per square kilometer); Baños del Inca had 24 864 inhabitants (or 95.21 inhabitants per square kilometer); and La Encañada had 22 117 inhabitants (or 36.86 inhabitants per square kilometer). The majority of Baños del Inca and La Encañada residents live in rural areas and work in agriculture and subsistence fishing (some 90 percent of the EAP for La Encañada). Indeed, Cajamarca is one of the country’s most rural departments: only 10 percent of the population lives in urban areas. Nevertheless, recent years have seen accelerated internal migration and urban growth in the districts of Cajamarca, Baños del Inca and La Encañada. Table 1 shows the relationship between population and EAP in Cajamarca.

Campesinos living near the mine are primarily small landholders. The only exceptions are the campesino communities of Tual, La Encañada (which was recently created and lacks strong organization), and the Atahualpa Jerusalen de Porcon Cooperative. In addition to the political authorities specific to rural areas — lieutenant governors in the case of small villages and mayors, governors, and justices of the peace in the district capitals — there are also various women’s associations and, most importantly, peasant patrols (rondas campesinas). These are self-defense organizations. They appeared during the mid-1970s to combat cattle-rustling, though later expanded as an organizational form from northern Cajamarca to other parts of the country, simultaneously taking on added political functions and eventually promoting development.

Relations between the actors

In the case of Yanacocha, we see a clear separation between the spaces of interaction and the actors that dialogue in each space. At the macroeconomic level beyond the space of the operation, there is a fluid relationship between Yanacocha and the Peruvian government authorities such as the Ministry of Energy and Mines, the Labour Ministry, and the tax-collection agency SUNAT. The company is an important economic actor that deserves governmental attention in the areas of the environment, taxes, and foreign trade.

The area adjacent to the mine comprises 35 caseríos (tiny villages), most of which are located south of the operation. During the land acquisition phase, company-community relations were fraught with conflict and in several communities the company’s negotiators were expelled by stone-throwing local residents. Relations have improved significantly, due in large part to the fact that village residents are now the beneficiaries of a range of development programs sponsored by the company’s Rural Development office or its counterparts. There is direct interaction between company officials and local political authorities and community leaders, as well as the only two organized campesino communities in the area. Relations are even better with consolidated organizations, which has allowed the company to design a clear work plan. The state has not intervened in relations between the company and the communities adjacent to the mine.

The city of Cajamarca and the village of Baños del Inca constitute the space of local public interaction between the mining company, government officials and regional civil society. Local authorities are a strong presence, especially the mayor of Cajamarca, who continually requests support for infrastructure and other public works for the city. The company’s Public Relations office interacts with diverse institutions and local organizations (such as the provincial municipality, various schools, unions, and government entities). In addition, Yanacocha interacts on a corporate level with local businesses by way of the company’s participation in the Cajamarca Chamber of Commerce. Nevertheless, at the level of local public opinion, relations remain troubled.

In general, we see a compartmentalization of dialogue. There are bilateral relations between Yanacocha and local and national governments, between Yanacocha and local rural communities, and between the government and local communities. The actors do not venture outside the boundaries of their established relationships, and there is no three-way dialogue between government, company, and community. There are only bilateral relations in which one of the actors is always absent.

Land acquisition

Most of the lands acquired by Yanacocha were grazing lands. What little agriculture was practiced was non-irrigated and of a marginal nature compared to production standards in the area. Many campesinos had sizeable extensions of land, some more than 100 hectares. Yanacocha dealt with large and mid-sized owners and with small landholders that ended up selling less than one hectare.

The lands were used for grazing based on seasonal movement of livestock. In the area of the mine, there were between 2 000 and 2 500 head of livestock, mostly sheep and, to a lesser degree, cattle, as well as horses and camelids. The livestock was largely of mixed strainsand low productivity. The area has the lowest levels of milk production in the province.

Landowners’ education levels are very low. Among the 41 Combayo area heads of household who sold land (31 men and 10 women), 21 are illiterate, 19 have a primary-school education and only one has incomplete secondary school education. All ten of the female landowners are illiterate and only two of the partners of male household heads have incomplete primary school education. This situation limits the possibilities for equal negotiation between campesinos and the mining company and must be taken into account during land negotiations or any other subsequent transaction.

Land acquisition began in August 1992 by way of direct negotiation. Separate transactions took place between specialized buyers from the mining company and each campesino landowner. Between 1992 and 1999, Yanacocha purchased a total of 10 200 hectares of land. (Table 2.)

Initially, the company paid between US $80 and US $100 per hectare (between 100 and 200 soles at the time). These prices were greater than those paid by campesinos in their own internal transactions. In 1995 and 1996, prices increased significantly, in part because of a reappraisal of lands, but probably also because of protests and the actions of third-party agents. According to information from Yanacocha officials, an estimated 80 percent of the cases required the formalization of ownership documents prior to the sale, since many lands were not registered. This situation is common in many parts of the Peruvian Andes.

The bulk of Yanacocha’s land acquisition took place during the years 1993 (20 percent) and 1996 (31.8 percent). In a total of eight years, the company realized 157 transactions with 126 families. Several families sold lands to the company on more than one occasion.

In Peruvian soles, the price paid by Yanacocha in Combayo increased annually, while the amount of land decreased. In 1996, the company paid six times as much money for less than two and a half times land than in 1992. (Table 3.) The presence of terrorism in the area in 1992 partially explains this trend. The increase in prices paid in dollars is less significant but nevertheless notable: the company paid six times more for the last plot purchased than for the first plots. Currently, there are few land purchases and prices are much higher than during the first years of the company’s presence. Depending on land quality and location, the company now pays between US $900 and US $1 000 per hectare.

The prices paid by Yanacocha were higher than those paid in the precarious internal land market. In 1992, campesinos paid between US $36 and US $48 per hectare of pasture (between 45 and 60 soles) in transactions between parties of similar socioeconomic level. In traditional societies, prices are fixed more according to the nature of the relationship between the two parties than according to the object being sold.

More than half of the sellers spent their money on non-productive consumption (primarily food and clothing), such that the money did not serve to replace the economic activity they had lost as a result of selling their lands. Nearly a fifth of the sellers used the money to buy other plots, usually smaller than the plots sold but nevertheless with water resources necessary to continue agricultural activities. The remaining families appear to have converted their money toward urban activities.

Therefore, we can distinguish between three groups of sellers: those who lacked sufficient lands for either agriculture or livestock production had to turn to other activities; those who, having lost their pasture lands, turned to agriculture or the production of improved livestock strains fed on irrigated grasslands; and those who still possess plots in the highlands or who graze their livestock in areas adjacent to the mining company. Each of these groups corresponds to a different model of productive transformation.

The first land acquisitions sparked a series of problems and complaints regarding land prices and the company’s supposed failure to comply with promises made at the moment of sale. The first conflicts arose in 1993. With support from the provincial mayor and church parish, sellers in the area of Porcon demanded a “fair price” for their lands, jobs at the mine, the declaration of intangible zones, and mining royalties. Yanacocha and the plaintiffs reached an agreement and signeda declaration of reconciliation that stipulated payment for activities or constructions not authorized by the owners or landholders.

In 1994, a similar conflict arose between Yanacocha and sellers in the Combayo area. After the company prevailed in court, the Bishopric of Cajamarca and the National Human Rights Coordinating Committee stepped in to mediate. The parties reached an agreement under which the company provided US $150 000 (plus 10 percent for administrative costs) for an NGO to establish a rotating credit fund for livestock and equipment purchases, livestock improvement and various commercial activities.

In general, the greatest problems regarding land transfer arose during the initial purchases. Yanacocha corrected these problems in subsequent years by changing purchasing agents, formalizing and increasing transparency in the transactions, following up with families, and raising the price paid per hectare. Yanacocha has sought to maintain good relations with former landholding families, giving them priority attention in company-sponsored development projects, as well as the assignment of temporary jobs within the company and its subcontractors. Yanacocha has close to 550 members of the 126 former landholding families registered, who are then contracted on a rotating basis for the 250 unskilled jobs required by the mine and its subcontractors. In addition, the company has hired a small group of the sellers’ relatives on a permanent basis.

Cajamarca residents’ demands, expectations and perceptions

Regardless of the actual effect Yanacocha may have on the city of Cajamarca, it is worth noting the population’s demands and perceptions, since these will guide their opinions, attitudes and behaviour toward the mining company.

Development demands

In general, the population views Yanacocha as an opportunity, but one it is unsure of how to best exploit. Cajamarca residents believe the company must approach the city in a more integral manner. The population demands more job opportunities for Cajamarca locals and expects the company to provide infrastructure and a market for products both at the city and regional levels. Cajamarca residents want to see their city become a development pole, though it is worth noting their lack of awareness regarding Yanacocha’s rural development activities.

The population assumes that Yanacocha has a commitment to Cajamarca, both because the company extracts resources from the area and because the company uses the city as a “base camp.” Starting from these premises, the population demands that Yanacocha “leave something behind,” such as public works, and that the company contribute to the city’s urban development.

The population demands that Yanacocha improve the services it uses, such as the airport, highways, hospital and sports, recreation, and educational centers (by assisting schools and libraries or building sporting arenas, for example). The population also looks to the company to contribute to regional development by supporting the university and encouraging it to create professionals that can later work in the mining sector.

Nevertheless, public opinion is ambiguous regarding the company’s use of the city to house its employees, or its use of facilities such as the Inca Club or local schools. Most Yanacocha and subcontractor employees live in the city of Cajamarca or in the village of Baños del Inca. In addition, there are two small camps (for subcontractors) near the mine that provide temporary residence for workers. Under this system, there a continual movement of workers from the city and base camps to the mine, which is viable given the reduced number of workers and Cajamarca’s proximity.

Although the population views the mine as a potential market for its products, there is a gap between the nature and quality of locally offered products and the mining company’s consumption needs. The population’s expectations that the mine become a huge market for local production did not coincide with reality.

Since Cajamarca was ill prepared for the arrival of the mining boom, outsiders tended to benefit from the demand for goods and services generated by Yanacocha and other companies based in the region. Many suppliers are based in Lima or Trujillo, and have not even established offices in Cajamarca. Fuel, for example, is provided by Mobil. Most supplies come from Lima, which limits the possibility of generating added value that remains in the region.

Nevertheless, the few local purchases that Yanacocha made, together with those of other, smaller mining companies, have been sufficient to influence the development of commercial sectors and some services in Cajamarca. Several local businesses approached Yanacocha and now supply various products. The company has a list of local suppliers and has started a policy of rotation among them, in an attempt to give equal treatment.

In general, Cajamarca has benefited from increased availability of high-quality “imported” products and from an increase in the number of small stores open to the general public. According to city residents, these trends have been accompanied by an increase in the cost of living.

Meanwhile, the service sector has also grown: vehicle maintenance has improved and dropped in price and there is an increase in the number of transport companies operating, as well as an increase in the number of passengers. Public service infrastructure has increased, such as electricity — Yanacocha uses close to one-third of the energy consumed in Cajamarca — as a result of government-sponsored service and infrastructure development policies. With regards to the provision of goods and services, it is worth mentioning that Yanacocha experimented with the creation of a local service provider. The attempt failed, basically because of internal management problems. Contracted companies provide Yanacocha with the goods and services required for operations, personnel maintenance and related activities.

In summary, as much as possible Yanacocha tries to incorporate local suppliers into its product-acquisition network. Nevertheless, this intention is limited by the local production capacity’s inability to meet company needs. This can be because local producers cannot meet necessary quality standards, or because required products are not produced locally and there is no capacity to do so.

Effects on the city of Cajamarca

According to the interviews and focus groups conducted for this study, the population sees a direct relationship between the progress experienced in recent years and the mine’s presence. The population appears not to take into account the fact that Yanacocha’s arrival coincided with the decrease of terrorism and the country’s general economic upswing. The public believes that Yanacocha has brought economic growth to Cajamarca, as noted by the appearance of small commercial centers, improved services, an increase in the automotive fleet, and urban growth.

This development is viewed ambivalently, due to the rising cost of living and dollarization of prices, the arrival of outsiders, the deterioration of “decent customs” and an increase in crime.

The city’s development has attracted people from the coast, whose customs clash with those of Cajamarquinos. Mine workers are viewed as nouveau riche who are disorderly, rough, and who are accused of reducing the social space of local residents.

Locals perceive the creation of a new elite, reflected, for example, in the creation of the Davy School (1995). The school is said to promote an unpatriotic, “foreign” style of teaching that does not respect national realities and culture. Locals accuse the school of charging high tuition rates and of favouring the children of mining company employees.

For Cajamarca residents, the most salient negative effect of the mine is the deterioration of decent customs, due to the appearance of nightclubs, and a supposed increase in prostitution. According to official figures, there are 14 nightclubs in Cajamarca (although the figure could be as high as 20 according to unofficial figures). Most of these are located on the outskirts of town; nearby residents blame them with upsetting the general order and creating instability.

The population also complains of a significant increase in crime. Residents feel that Cajamarca has gone from a safe, peaceful city to one where no one leaves the door to their house unlocked or their car unattended, even during the day. This situation is attributed to “unsavory characters” that have come to Cajamarca because of the illusion of prosperity created by the mining company.

Perception of the mine’s environmental impacts[1]

Although Yanacocha prides itself on not contaminating the environment, Cajamarca residents harbour doubts regarding the company’s claims. Many believe that the mine does indeed contaminate the area. The population’s view is based on general impressions and rumours regarding the mine’s activities, as well as past experiences with other mining companies.

Residents accuse the company of general (unspecified) environmental contamination, water contamination (considered serious, since the mine operation is located at the headwaters of three ravines) and harm to animals and humans. There are rumours regarding workers afflicted with respiratory and gastrointestinal problems as a result of working at the mine.

Public officials, authorities, and NGO representatives recognize that there is currently no evidence of contamination, but add that it would probably only be measurable within ten or fifteen years.

Since people act according to the perception and not necessarily according to facts, it is worth noting the positions that currently exist in Cajamarca with regard to the issue of contamination. Radicals call for Yanacocha’s expulsion, while moderates want to declare certain areas off-limits to mining activity. Others adopt a more conciliatory position, calling for increased access to information and improved communication on the part of the company, as well as the creation of an independent body that would conduct an independent environmental impact study (something that has not yet been done).A third group is not concerned with the problems of contamination so much as with the demand for employment.

Campesino “common sense” holds that a mine always contaminates (whether as a result of wastes, carbon monoxide, toxic fumes, or dust). Nevertheless, campesinos tend to feel that the mine’s potential benefits outweigh its potential harm.

Although Yanacocha’s daily operations do not seriously contaminate the environment, the population believes, for different reasons, that the company is responsible for a series of phenomena, imaginary or real. Three arguments explain this situation:

1. people lack information about mining industry advances in the area of environmental protection and so continue to believe that mines are always a source of contamination;
2. some local authorities “need to believe” that the mining industry contaminates in order to utilize the environmental issue as an excuse with which to obtain resources from the company; and
3. environmental issue can be used as a political banner with which to mobilize the population, not necessarily against the mining company, but against the government and its economic reforms. Obviously, these explanations are not mutually exclusive and it is likely that all three contribute to the population’s position.

Development options for Cajamarca and surrounding areas and Yanacocha’s communication strategies

Yanacocha responds to the population’s demands in accordance with its own criteria, possibilities, and priorities. The company actively participates in local development using a range of intervention strategies: an immediate-term strategy for rural communities adjacent to the mine, an urban strategy for the city of Cajamarca, and finally, a strategy of regional development. (See Table 4.)

Rural development strategy

For several years, Yanacocha has experimented with a range of social promotion activities in the areas adjacent to the mine. The first consisted primarily of direct assistance. Later, the company experimented with social promotion and productive activities via third-party mediators. Most recently the company has attempted to articulate third-party efforts around a single local development strategy. Each stage has been associated with a change in the way the company conceived its role in local development promotion. It is interesting to note how company efforts have evolved from immediate-term assistentialism to a project of long-term regional sustainable development.

During the first stage (1993–1995), company activities were monitored by the Yanacocha Association, the company’s foundation, in conjunction with the Yanacocha Women’s Association (ADAMINYA), an organization created by company management that groups the wives of company executives and professional personnel. The small work team concentrated on direct assistance in the areas of health and nutrition (a nursing program, first-aid courses, communal first-aid kits, the distribution of medicines, and the construction of various health posts) and education (construction or rehabilitation of educational centers, distribution of educational materials, teacher training courses, subsidized transport for teachers and school breakfast programs). Little by little, these activities expanded to include some issues of productive development, with a total of 35 small villages participating.

During the second stage (1996–1998), three programs were given priority: community assistance, rural development, and support for the development of social and productive infrastructure. For project implementation, Yanacocha established agreements with diverse institutions specialized in various areas of rural development, as well as with government and international cooperation agencies. An alliance with CARE gave rise to the Yanacocha Food Security Project (Prosay), which focused on such areas as health and education, productive development, school nutrition, highway construction and rehabilitation, environmental clean-up, and rotating funds.

Thus the company’s development promotion activities were taken on by specialized third parties. In addition to CARE, Yanacocha signed agreements with Adefor (for forestry programs and campesino training), Cipder and Edac (for agricultural promotion and credit programs), the Ministry of Health (for programs targeting severe diarrheic diseaseandacute respiratory infections, as well as health promoter training), and others. In addition, the company has signed or hopes to sign agreements with the Inter-American Foundation, PMA (small projects with women), the Embassy of Holland and other institutions for a range of programs.

During the third (current) stage, the company is attempting to coordinate and better articulate efforts undertaken by diverse institutions. Toward this end, the company created a Rural Development Office as the coordinating entity for the institutions working in the area of the mine that receive total or partial funding from Yanacocha.

Thus we see that Yanacocha moved from a strategy of sporadic attention to specific beneficiaries to a strategy aimed at forming a development “belt” around the mine, and is now oriented to the design of a more integrated strategy. Although it is difficult to verify without rigorous evaluation, Yanacocha’s actions to date appear to have been successful, both in terms of the expansion of basic services (hygiene, education and health) and the rural highway program.

Funding for Yanacocha’s development activities comes from different sources, including from the company itself, the Yanacocha Women’s Association (ADAMINYA), and the various organizations engaged in program implementation (primarily CARE). The Yanacocha Association was created to administer and raise funds related to the company’s development programs.

The Yanacocha Food Security Project (Prosay), a joint project with CARE, was implemented between 1996 and 1998, after a six-month pilot project in 1995. In three years, the project managed a budget of US $1 055 841, of which CARE provided US $562 237 (or 53 percent) and Yanacocha provided US $373 180 (35 percent). The remainder came from ADAMINYA (6 percent) and self-generated funds (6 percent). Although the project’s central objective was to gradually eliminate food insecurity in the 28 small villages adjacent to the mine, the project also encompassed productive activities, basic infrastructure development, and training courses. The project’s five components are agricultural development, income generation, health and nutrition, hygiene and potable water, and school breakfast programs. Table 5 shows Prosay beneficiaries.

Since it is not yet possible to thoroughly evaluate the diverse components of Yanacocha’s rural development activities, we will concentrate on an evaluation of the Prosay project.

The project has benefited 650 families (36 percent of the 1 818 families estimated to live in the area around the mine), while several families have benefited from more than one project. In three villages, all five project components were implemented; in four villages, four project components were implemented; in five villages, three components were implemented; in six villages, two components were implemented; and in 12 villages, only one component was implemented (generally the school breakfast program).

Urban and regional development

One of Yanacocha’s weakest points is its relations with the city of Cajamarca. In part, this is due to the fact that operations began at a time when terrorism was still present in the region, since the company had to worry about protecting personnel and keeping a low profile. But the failure is also due to a lack of understanding regarding the local context and an inadequate communication policy.

Yanacocha’s urban strategy is implemented via the Chamber of Commerce, in which company managers and officials from its Public Relations office in Cajamarca participate. Yanacocha is re-evaluating its strategy for Cajamarca, which has not been as successful as its rural development programs. In addition, the company’s urban strategy includes regional components that move beyond the city itself.

The strategy’s main objective is to promote competitiveness in a series of areas considered central to the region’s economic development. Toward this end, Yanacocha and the German Technical Cooperation Agency have created Pro-competir, a competitiveness center.

The three target areas (forestry, the dairy industry and tourism) were identified in a study conducted by the Advanced School for Business Administration (ESAN) students and professionals (Indacochea 1998). The idea is to consider capacity building an investment, and to train new entrepreneurs who can later collaborate on joint proposals and strategies.

In certain respects, Yanacocha’s urban strategy competes with the “consensus roundtable” (mesa de concertación) initiative first proposed in 1993 by Asodel and the provincial municipality of Cajamarca. The roundtable initiative attempts to bring together NGOs and local, regional, and central government institutions to draw up a common development agenda for the province of Cajamarca.

Communication strategy

Information regarding Yanacocha and its activities is not distributed equally among Cajamarca residents. According to information gathered in interviews and focus groups[2], residents of outlying urban areas are generally better informed than those living closer to the city center. Municipal officials and NGO representatives are the best informed.

Yanacocha only began its public relations policy after operations had begun, and tended to direct the policy toward elites and regional authorities. In 1993, the company conducted an accelerated and selective campaign designed to familiarize national, regional and local authorities with the company’s activities.

Community relations were still rather discreet and directed toward the most important regional institutions. In general, Yanacocha implemented a community relations policy that company officials characterize as “low profile.” In addition to the official public relations policy, one must consider the effect of “unintentional relations”;[3] that is, the population’s perception of the company formed over the course of daily interaction with company officials and employees. The effects of these intentional and unintentional relations taken together have not been positive: in general, the population perceives company employees as arrogant, authoritarian, contemptuous and not respectful of local customs and usage.

In the last few years, Yanacocha has experimented with a more open policy, but this change is not completely apparent to regional elites, while the majority of city residents maintain an image of the company formed during earlier years. In any event, there is no noticeable change in the company’s “unintentional relations,” which makes it difficult to improve the company’s image with regards to regional society.

Yanacocha is viewed as a company that does not approach regional institutions and that behaves as if it were an enclave. This general impression does not necessarily correspond to reality, since Yanacocha has established relations — although in a limited manner at first — with regional society. This once again reveals that public opinion is not based solely on information, but rather on images built upon common sense and fragments of observations and overhead conversations among people or institutions linked to the company. For example, it is rumoured that Yanacocha lent support to one of the mayoral candidates during recent elections. Regardless of whether the rumour is true, people react and form opinions as if it were. As a result, the population has adopted a wary attitude toward Yanacocha, which contrasts with the attitude of most of the smaller institutions that are primarily concerned with obtaining whatever they can from the mine.

Benefits in the province of Cajamarca and the region

Yanacocha benefits the region in terms of activities linked directly to the operation itself (goods and services required by the company and its subcontractors), development and social promotion activities conducted by the company’s Rural Promotion office, and the company’s participation in Cajamarca business associations. Indirectly, Yanacocha contributes to regional, provincial and district level mining royalties. In addition, the company’s presence has invigorated various other activities.

Direct and indirect employment

Yanacocha directly contracts few local personnel. According to company figures, in 1994 the company had 155 workers, 220 in 1995, 269 in 1997, 337 in 1998, and 466 workers through mid-1999. Nevertheless, these figures underestimate direct employment generated by the mine, since they do not incorporate workers at subcontracted companies that perform tasks central to the mining operation, such as demolition and mineral transportation.

According to figures from 1997 (see Table 6), direct employment generated by Yanacocha and its four primary subcontractors rose to 1 145 workers (both permanent and temporary), 63 percent of whom were labourers (blue collar employees) and 36 percent were white collar employees (36 percent).

60 percent of Yanacocha workers have been hired from within the region (45 percent of whom were born in Cajamarca), 35 percent hail from other parts of the country and 5 percent are foreigners. While the majority of unskilled workers have been contracted in Cajamarca, this does not necessarily mean they are Cajamarquinos.

Yanacocha gives priority in unskilled temporary jobs to former landowners and imposes this condition on its subcontractors as well. The company also aims to contract personnel from the area, and ads in this vein appear in local newspapers and on its office doors. Nevertheless, there are few local specialists capable of filling the positions available. Although unskilled workers receive minimal training, the company does not have an official policy of training the local population in order to incorporate them into the company’s work force.

Nevertheless, Yanacocha indirectly generates important amounts of employment in the Cajamarca region. While precise figures do not exist, it is important to estimate this trend in order to evaluate the mine’s impact. The 46 mid-sized Cajamarca companies that supply Yanacocha employ 1 119 people, while the 378 small suppliers employ 1 890 people, for a total of 3 009 people. Table 7 illustrates this relationship.

The wages and salaries paid by Yanacocha and its subcontractors are above average for the Cajamarca region, especially in the case of employees, who receive more than 200 percent more than they would working elsewhere in Cajamarca (Table 8). For these employees, pay rates are similar to those in Lima. In the case of labourers, the difference is not as great (between 111 and 158 percent).

According to 1997 figures, Yanacocha created some 3 696 jobs at the provincial level, equivalent to 5.5 percent of the EAP. This figure could increase over time, as various suppliers registered in Lima, such as Ferreyros, are opening offices in Cajamarca in order to serve Yanacocha better. This would imply increased local employment.[4] The impact of the mine’s employment on EAP is illustrated in Table 9.

Development of basic services

Yanacocha’s presence contributes directly and indirectly to the provision of basic services in both the city of Cajamarca and rural areas. In Cajamarca, Yanacocha created and maintains the Davy School, which offers quality education for mine workers and the general population. Yanacocha also collaborates in the operations of various other schools. In addition, the company has helped reopen the Incas Club, a regional recreation center.

In rural areas, agreements with the health and education ministries as well the Prosay program (Yanacocha Food Security Program)have provided for the implementation of medical posts, schools, and drinking water systems.

The school breakfast program began in coordination with local teachers and parents’ associations. In three years, the program provided 5 963 meals to 2 031 school children. The program reached 19 villages during its first year and 21 villages during its second and third years. Eleven community kitchens participated in meal preparation. Meals were distributed in exchange for parents’ participation in the construction and repair of highways and roads, (although there are no figures regarding the current condition of such roads, nor number of kilometers affected).

According to a company evaluation, malnutrition among 5 year-olds decreased from 35.5 percent to 12.4 percent in ten villages during the program’s first year (1996–1997), and from 21 percent to 15.7 percent in eleven villages during the second year (1997–1998).

The health project aims to improve women’s awareness, attitudes and abilities regarding hygiene, nutrition, and illness detection. At the same time, Yanacocha sponsored a program to construct medical posts. Yanacocha organized health and nutrition training courses in 21 villages. These courses presented topics such as breast feeding, as well as how to recognize the symptoms of diarrhea and pneumonia — that is, the etiology of severe diarrheic diseases (SDD) and severe respiratory infections (SRI). There has been a significant decrease in SDD (from 13 percent in 1996 to 3 percent in 1998), and SRI (from 46 percent in 1996 to 14 percent in 1998). While SDD rates are much lower than those in non-participating villages, SRI rates are much the same for participating and non-participating villages (16 percent).

Infrastructure and access

Yanacocha has benefited the region in terms of the extension, maintenance and improvements to the area’s principal highways and smaller rural roads. Although Yanacocha has not undertaken large-scale highway construction projects, it repaired highways to the coast affected by heavy rains during the 1998 El Niño phenomenon. In addition, Yanacocha widened and improved the road leading from Cajamarca to the highland areas where the mining camp is located. In general, campesinos indicate that road construction saves them significant travelling time. In quantitative terms, between 1994 and 1997, the company built 79 kilometers of new roads, improved 53 kilometers and paved 15 kilometers. In addition, Yanacocha has conducted studies regarding the possible construction of 25 kilometers of additional roads.

The remainder of infrastructure activities focused primarily on hygienic works and the installation of drinking water systems.

Improvement in local and regional productive possibilities

In this section we analyze Yanacocha’s goods and service providers, drawing upon the work of Kuramoto (1999). Although we distinguish between suppliers from Lima and those from Cajamarca, this is an artificial division that has disappeared over time as Lima based companies open offices or branches in Cajamarca, leading to increased local impact in terms of employment and purchases. This is a natural process that is expected to increase in the future: at first, all supplies come from Lima (or abroad), but gradually local capacity develops. Another effect we see over time is that certain products brought in from abroad begin to be produced locally or nationally. This result depends on developments in the mining sector at the national level, as well as adequate training and research policies.

Product suppliers

The number of product suppliers increased from 332 in 1993 to 566 in 1998. Most of these companies are based in Lima, although the number of Cajamarca-based suppliers has almost doubled since the mine began operations.

It is important to distinguish between product suppliers that manufacture mining equipment and inputs, and those that merely sell imported products. With regards to the first category, Yanacocha’s relations have been sporadic and fairly weak. In the case of mining equipment, Yanacocha has used few national suppliers, largely because the company utilizes relatively new technology as a result of the scale of its operations. Like most large-scale mining projects, Yanacocha’s design and construction were assigned to a foreign engineering firm. These companies not only design the processing plants, but also identify equipment suppliers and effect purchases, at the same time as managing the entire project during the construction phase. In addition, national companies — with a few exceptions — are unable to compete with foreign suppliers, whose costs are lower and whose commercial distribution systems are more efficient.

Companies that import products have a greater capture of Yanacocha’s purchases. This is true of companies that supply standard mining equipment such as trucks, front-end loaders, compressors and drill rigs (Ferreyros), as well as subsidiaries of foreign companies (Ingersoll Rand, Atlas Copco, Baker Hughes, etc.).

These companies’ capture of mine purchases has increased, principally because new companies have opened and/or because the range of products imported by existing companies has increased. Ferreyros is opening a warehouse near Cajamarca in order to provide better service, which will undoubtedly have an impact on employment and the local economy. It is worth noting that one Cajamarca-based supplier is among Yanacocha’s 20 principal suppliers.

Although non-manufacturing suppliers predominate, it is important to note that several national companies, such as FIMA (mechanical equipment), FAMESA and EXSA (explosives) were among Yanacocha’s top ten suppliers during several years.

Finally, Yanacocha’s purchases have increased substantially since operations first began. This is principally due to an increase in the mine’s production volume, which requires an increase in inputs and materials. Table 10 illustrates this.

Cajamarca product suppliers

For an idea of the scale of these companies’ Yanacocha-related sales, we can divide them according to the schema shown in Table 11.

As mentioned earlier, the number of local companies that supply Yanacocha has almost doubled since operations began, a trend that has lead to a 300 percent increase in sales. Nevertheless, if we break down the companies according to sales, we see that most companies registered sales of less than US $1 000 per year, and that only 5 percent registered sales of more than US $50 000. This trend continued in 1998. Most of the Cajamarca supply companies are dedicated to vehicle sales and maintenance (25 percent), architecture and engineering activities (15 percent) or parts supply (15 percent).

Service providers

Local service providers outnumber product suppliers, largely because of Yanacocha’s policy of subcontracting out activities that can be performed by third parties. Yanacocha is directly responsible only for exploration, drilling, leaching and processing, while subcontractors take on demolition, haulage and the transport of material to the leach pads. However, the company is reevaluating this system and will likely begin to assume activities previously assumed by subcontracters.

Yanacocha’s total number of service providers has increased from 566 companies in 1993 to 980 companies in 1998. In this case, there is a greater participation of Cajamarca-based companies (whose numbers nearly doubled, from 174 to 336 companies), and several are among Yanacocha’s principal service providers.

Between 1993 and 1998, Cajamarca firms’ share of the service provision market increased from 2 percent to 15.5 percent, while Lima companies’ share decreased from 89 percent to 72.6 percent. These changes are due principally to the fact that the nature of most of the services requires that providers be located close to the client.

Finally, as Table 12 demonstrates, Yanacocha’s service-related expenses have increased in the last five years, from US $36 million in 1993 to US $175 million in 1998.

Cajamarca service providers

As we see in Table 13, the number of Cajamarca firms that provide services to Yanacocha has increased considerably. Many of the firms register sales of more than US $50 000, and total sales for these companies are approximately 50 times higher than when mine operations began.

Local development projects: agriculture and promotional credit

Yanacocha’s rural development activities include productive programs and projects, rotating funds for agricultural inputs (seeds, fertilizers and pesticides), and the provision of productive credit. In addition, the company conducts forestry projects, experiments with agricultural and livestock possibilities, and constructs small infrastructure projects (warehouses and irrigation canals).

The company’s productive and business-oriented programs are focused on two main areas: agricultural promotion aimed at small producer groups and income-generation loans aimed primarily at women. Work with the small producers includes the introduction of quality inputs (seeds, fertilizers and pesticides) and a technical assistance and training program. A total of 13 groups have participated in the programs, benefiting 146 families.

Inputs are introduced using rotating funds disbursed to producer groups. During the first year, seeds for four different species were distributed (potato, wheat, barley andchocho, a type of bean). Later, the fund concentrated on potato seeds, with a 100 percent recuperation rate during the first two years. The fertilizer and pesticide fund’s recuperation rate is lower, though it is increasing — only two-thirds of the fund have been recovered to date.

In addition to the credit funds, Yanacocha conducted training sessions on pest control, marketing, and rotating fund basics. The company built seven warehouses in order to lower potato seed loss and renovated the La Shacsha irrigation canal (at a cost of US $66 828 provided by Yanacocha, CARE and the beneficiaries themselves).

As a result, pest-control awareness increased, as did agricultural production. During the first year, participating plots registered outputs of 12 171 kilos/hectare, which dropped to 6 700 kilos/hectare during the second year and 6 858 kilos/hectare during the third year. The drop in production was due to adverse weather conditions that affected the entire region. Before project intervention, average output was 3 633 kilos/hectare. Between 1996 and 1998, total income from potato sales doubled.

Meanwhile, 216 families from 13 villages benefited from income-generation loans. The initial capital was US $50 197, with US $18 145 provided by Yanacocha and US $32 053 by CARE. Loans were disbursed for commercial operations or livestock purchases. A total of US $105 050 in loans was disbursed. Of that, US $35 516 was for productive activities and US $75 532 for commercial activities. The loan recuperation rate was 98 percent. Loans were complemented with a business administration course for women. The sum of both activities together with increases in productivity, sales and loan-generated income have allowed 88 percent of participating families to develop their economic activities and increase their average monthly income from US $61 to US $155.

Capital injection and local/regional monetary circulation

The Cajamarca region benefits from the presence of Yanacocha in two ways: through an increase in local monetary circulation (as a result of local employee salaries and local sales of goods and services) and through potential mining royalty income. In the latter case, as the central government has not distributed mining royalties for several years, its potential impact can only be hypothesized.

It is difficult to calculate the impacts of the arrival of employees to Cajamarca, because there are no statistics regarding income increases from direct or indirect employment. There are no figures regarding the income of goods and service providers or how much of that income is spent in Cajamarca. Given these limitations, any calculation is a rough estimate.

As Table 14 shows, in 1997, the total amount of salaries paid by Yanacocha and its four main subcontractors was US $8 989 683. Salaries paid by goods and service providers for the same year is estimated at US $12 748 921 (Table 15). If we assume that 100 percent of the income from salaries is spent in Cajamarca and the region, then the mine would have injected a total of US $21 738 604 into the economy Cajamarca during 1997. A similar calculation for salaries paid by supply companies from Lima would produce a total figure for wages and salaries of US $15 701 988.

In order to estimate Yanacocha’s impact on the region, it is necessary to compare this figure with the region’s total income. The department of Cajamarca’s GDP for 1997 was US $1.4 billion, with a per capita GDP on the order of US $1 100. According to these figures, it is estimated that Yanacocha provided an added value on the order of US $250 million, or 18 percent of the department’s GDP. Yanacocha’s impact on the city of Cajamarca is difficult to quantify because there are no statistics regarding production or income at the level of provinces or districts. Obviously, there is a big difference between the city of Cajamarca’s income and that of the rest of the department, and it is likely that a large part of the department’s total income is concentrated in the city. If we assume that 50 percent of the department’s GDP comes from Cajamarca, but does not include the value added from Yanacocha, the city’s annual income for 1997 would be on the order of US $500 million, which indicates that income from the mine is on the order of 5 percent of the city’s total income.

Nevertheless, income directly related to the mine is an approximation of the dynamic effects the company has on the local economy. Employees of the mine and its subcontractors spend their wages on local purchases, providing income to other people, who in turn spend it in the area, thus creating a multiplier effect. In order to estimate this effect, it is necessary to determine how much of the total income is put into savings and how much is spent locally. In addition, it is necessary to determine what percentage of local purchases stays in the local economy and how much goes to production outside the region.

For our analysis of the impact of worker spending, we have assumed certain consumption and investment levels on the part of workers. The consumption level is based on National Standard of Living Surveys for 1996 conducted for the urban Andes and for the corresponding occupational category (mining). The investment level was based on national accounts for 1997.

In order to determine the multiplier effect of direct worker spending (i.e., income created in subsequent cycles), we must determine what percentage of Cajamarca families’ income is spent on purchases of locally produced goods and services. It is necessary to separate purchases of imported goods or goods and services produced elsewhere in the country, such that the net figure represents the amount converted into income for other Cajamarca families, and so on. This multiplier is estimated at 1.65. Table 16 compares indirect and direct incomes.

During 1997, total spending in Cajamarca due to Yanacocha workers’ wages and salaries was approximately US $20.8 million, which in turn generated US $34.2 million in income for other Cajamarca families. The multiplier effect presented in the last line of the previous table is the result of dividing the total impact on Cajamarca (direct plus indirect) by total worker income (income for employees of Yanacocha, its subcontractors and providers).

For a better idea of the total impact generated in the department of Cajamarca, we must determine the number of families this income will maintain. The average family income for the department is US $5 390.[5] Thus, the total mine-related income for 1997 would have maintained 10 200 families,[6] or 4 percent of the department’s total population.

But Yanacocha’s impact at the regional level is greater, since Peruvian law requires the distribution of 8 percent of company profits among workers equivalent to a maximum of 18 monthly salaries. During the last two years, Yanacocha has met this limit. Although these incomes are extraordinary and it is difficult to determine the amount spent locally, this would suggest that the total mine-related impact is actually greater than the estimate above.

Finally, Peruvian law provides that host regions receive a portion of mining royalties worth up to 20 percent of the value of taxes paid to the central government.[7] However, regional income from mining royalties can only be estimated, since there are no statistics for taxes paid by Yanacocha or actual royalty distribution. If taxes paid on Yanacocha’s earnings for the period 1993–1997 were US $164.4 million, the total regional royalties would be US $33.9 million. Regional distribution, according to law, would be as shown in Table 17.

According to a report by Apoyo Consultoría (1997), the municipality of Cajamarca has received just a fraction of the total royalties it is owed. Royalty distribution for the 1993–1996 period is still pending, which includes almost all royalties paid by Yanacocha. By the end of 1996, the municipality had received nearly US $5.8 thousand, while by the end of 1997, it rose to US $35.7 thousand, less than 1 percent of the municipality’s total income.

La Encañada — in theory, the principal beneficiary of mining royalties — has not received much of the money it is due, either. Starting in September 1996, the municipality of La Encañada began to receive royalty payments of approximately US $3 thousand per month. These funds have been partially earmarked for school construction.

In addition to the figures mentioned above, we must add the Yanacocha Association’s contributions to development activities. Contributions for the association’s initial projects were US $747 thousand annually between 1995 and 1997 (a total of US $2.241 million), in addition to the US $5 million earmarked for highways and US $750 thousand invested in the construction of Davy School.

Development of social capital

Civil society has organized and reacted to Yanacocha’s presence, and while this reaction has often been confrontational and not very fruitful, a space for discussion has been created that capitalizes on the Cajamarca tradition known as “consensus roundtables” established by the previous mayor.

In urban areas, Yanacocha’s greatest potential impact comes from its participation in the Chamber of Commerce and its Pro-Competir project, which could improve conditions for business planning and administration, as well as the production of goods and services at the local level. The courses and workshops on business excellence and competitiveness oriented to small business owners, producers and especially youth could make a significant contribution whose effects last beyond the lifecycle of the mine. Unfortunately, the initiative has not managed to convoke Cajamarca’s main actors and there is competition from other similar local initiatives.

In rural areas, Yanacocha’s projects have had greater success in creating and strengthening local leadership and in generating a positive social dynamic with regard to mine-community relations. Company projects contributed to supporting mothers clubs and other local organizations participating in the Prosay project. Loans for livestock production and non-earmarked loans for women, in addition to generating small immediate benefits, contribute to the population’s knowledge of credit systems, rotating fund management, and the development of management capabilities among beneficiaries. At the same time, areas that received drinking water infrastructure projects have created Water Administration Boards, augmenting the local institutional network.

 The Case of Antamina Mining Company

Antamina Mining Company

The Antamina mining operation is located in the district of San Marcos, province of Huari, department of Ancash. The mine is situated in the Callejon de Conchucos, between the Cordillera Blanca and the Cordillera Huayhuash. The operation is 35 kilometers from the village of San Marcos (2 970 meters above sea level), 165 kilometers from Huaraz, 230 kilometers from the coast (Pativilca) and 430 kilometers from Lima.

The principal deposit is 4 300 meters above sea level. The construction phase began during the second half of 1998 and operations are expected to begin in 2001. Through August 1998, the deposit was estimated at 500 million tonnes of proven reserves, with grades of 1.2 percent copper, 1.1 percent zinc, 15 grams of silver per tonne and 0.03 percent molybdenum. The mine’s lifespan is guaranteed for nearly 40 years. The operation will consist of an open pit mine and a 70 000 metric tonne concentrating plant that will produce 1.3 million tonnes of concentrate. Annual production is predicted to be 250 000 tonnes of metallic copper and 150 000 metric tonnes of zinc. Antamina is expected to become one of the largest exporters in the country, with exports worth approximately US $950 million per year. The operation belongs to a consortium formed by Rio Algom Ltd (33.75 percent of shares), Noranda Inc. (33.75 percent), Teck Corporation (22.5 percent) and Mitsubishi (10 percent).

Antamina has administrative offices in Lima and Huaraz, as well as a Community Affairs office in San Marcos and one in Huallanca. These offices receive community complaints and suggestions, as well as channeling job opportunities. The San Marcos office is in charge of coordinating local development strategies.

In January 2000, Antamina and its subcontractors employed 8 000 workers, the highest figure since construction began. At least one-fourth are local workers and 96 percent are Peruvian. During the exploitation phase, Antamina will employ approximately 1 900 workers, of whom 500 will be unskilled.

The district of San Marcos and other affected localities

San Marcos and the Callejón de Conchucos

According to the 1993 census, the district of San Marcos had 11 660 residents, of whom only 2 784 (24 percent) reside in the district’s capital. San Marcos has a population density of 22 residents per square kilometer. In contrast, 64 percent of the population of Huallanca lives in urban areas. (Table 18.) San Marcos has high poverty, illiteracy, and malnutrition levels. Much of the population lacks running water and electricity.

Two-thirds of the population work in agriculture and subsistence fishing. Further up the valley, the principal productive activity is sheep and cattle production. These animals are grazed on natural grasslands with a low protein content, producing low quality livestock. In the middle and lower valley, residents grow potatoes, cereals for small-scale commercialization, and fruits and vegetables for personal consumption.

Most of the district’s inhabitants are peasants who live far apart or grouped in tiny villages in the middle and upper valley. San Marcos, Huari, and Chavin, located in the lower valley, are the most important urban centers in the area.

The most important rural organizations in this context are the campesino communities, which group together a large part of the population and possess large quantities of land. There are also small landholders grouped together in caseríos beyond communal jurisdiction or living in urban centers. Caseríos are individual landholders who are not organized, and their only means of inscription for collective actions is their place of residence.

For the purposes of this study, we distinguish three geographic areas affected by the Antamina operation.

Areas of direct influence

Yanacancha, Juproq, Ayash Huaripampa, Centro Pichu and Cambio 90are the villages and caserios located adjacent to the mine. They are located more than 3 900 meters above sea level, with populations between 15 and 60 families, dispersed over a wide area. Most have sold lands to Antamina. All economic activity is basically subsistence level. Residents from the first two villages raise livestock and let their lands for grazing to the communities of Carhuayoc and Yanacancha, as well as small landholders from Juproq and other caserios in the valley. The other three villages are located in the Ayash Ravine, where in addition to livestock production, residents grow root vegetables and cereals on non-irrigated farmlands. The economies of the highland and valley areas are linked through family subsistence strategies that require the ability to manage more than one ecological zone.

Affected communities

There are three communities affected by the mine: Santa Cruz de Pichu, Angoraju Carhuayoc and Huaripampa.

Carhuayoc was founded in 1972, after agrarian reform laws granted ex-colonists title to former estate lands. The community is in a privileged position with respect to it neighbors, as its urban center is the second most important in the area after San Marcos. The community is politically unstable due to economic differences between residents from the original estate — who possess productive agricultural plots and seek the definitive division of communal lands — and those residents who arrived after selling their plots in the higher areas — and therefore look for greater communal support.

Huaripampa is the oldest and most traditional community in the area. It was founded in 1914 and legally recognized in 1963. The community is comprised of hundreds of members, all involved in livestock production and cereal farming. Although most of the communal lands have been divided, the community retains two collective estates in the higher areas (Pajuscocha and Yanacancha) that are used to graze livestock and 120 alpacas managed by the communal company. Huaripampa’s communal structure is solid and stable.

Indirectly affected urban centers

The area of indirect influence comprises several villages and urban centers. Closest to the mine are San Marcos and Huallanca. San Marcos is the capital of the district of the same name. Huallanca is located on the new access road connecting the mine with Lima highway.

San Marcos is the goods and service provision center for nearly all of the communities and villages in the district. Its economy is based on commerce and the exchange of agricultural products for items not produced in the area. Its streets are filled with stores, chicha stands, pharmacies, et cetera, where campesinos arrive to sell their products and buy items such as pots, shoes, alcohol, medicine, and batteries.

Huallanca is located on the eastern slopes of the Cordillera de Huayhuash, in the province of Chiquián. It is situated along one of the commercial routes used to transport products such as fruit and coca from the jungle to the coast. Since 1968, the Santa Luisa mining company has operated within the district. Santa Luisa is a medium-sized company dedicated to traditional-style mining whose largest operation is known as Huanzalá[8]. Huallanca has electricity and a sewage system thanks to an agreement signed with Santa Luisa. The mining company’s presence contributed to the town’s development by providing various services and offering jobs to a large segment of the population. The mine also contaminated the river, which adversely affected livestock production, traditionally the main economic activity in the area.

Relations between the actors

Like the Yanacocha case, the Antamina case is marked by the lack of fluid dialogue between the government, the company and the community. Beyond the space of the operation, Antamina maintains fluid relations with the central government. Its principal relation with the central government centers on establishing macro-level conditions favourable to the mining operation, such as the tax stability contract granted to every large-scale investment. Antamina also coordinates with the Transportation Ministry regarding necessary infrastructure projects.

Antamina has begun a dialogue with community mayors from the project’s vast area of influence. The company is working with a range of NGOs on the development planning process in many of these communities. Relations between Antamina and local actors are marked by the process of establishing the technical, social and infrastructure-related bases necessary to begin operations by 2001.

In the area of the mine itself, Antamina maintains relations with ex-landholders and with the communities and estates adjacent to the mine, with which future development projects must be coordinated. The central government does not participate in this dialogue.

In terms of local administration, Antamina negotiates with the municipality and other actors regarding the terms and areas of future development projects. Antamina has set up a community relations office to receive complaints and suggestions. Relations with authorities from Huaraz — the intermediate urban space similar to the city of Cajamarca for Yanacocha — are troubled.

The central government does not intervene to facilitate relations between Antamina and the city of Huaraz, nor has Antamina joined with local authorities to demand an infusion of potential mineral revenues generated by the operation from the central government.

Land acquisition

The local land market in the area near the mine is practically nonexistent. Property is distributed by heredity claims or appropriations dating from the Agrarian Reform era of the 1970s. Nevertheless, there are small transactions involving the sale or leasing of plots between small landholders and community members. This situation led Antamina to decide that it would be better to buy required lands in a single negotiation, using uniform prices determined according to plot characteristics. Table 19 illustrates this process.

The company’s offer was set using an estimated value based on the price of the plot and its potential uses, as well as on the land acquisition experiences of other large mining companies in Peru. Later, negotiations were conducted at a meeting attended by landowners from the areas closest to the mine site. The price per hectare was established at this meeting. Since the plots in question wereof poor agricultural quality or natural grasslands, the price was set at US $400 per hectare, the base price for all transactions. Two exceptions were the estates of Antamina (where the mining concession is located) and La Tranca (as it consisted of agricultural lands): the company paid US $1 000 per hectare in both cases. Table 20 shows a comparison of these comparable costs.

Since many landowners did not have titles to their plots, Antamina facilitated the titling process through the government’s Special Program for Land Titling (PETT) in charge of ordering individual and communal lands.

Once the lands required for the mine operation were surveyed and boundaries drawn up, Antamina conducted a study of the resident population in order to plan their later relocation. A census was taken and residents were classified in different categories: members of the community possessing the lands, individual landowners, shepherds, or squatters. The relocation and compensation plan included not only displaced landowners, but also shepherds or tenants, who were equally affected by the mining operation. The plan called for the relocation of families to other plots near those they had sold.

The fact that Antamina set a fixed price did not prevent attempts to renegotiate it. The community of Angoraju Carhuayoc hired a legal advisor — at Antamina’s suggestion — to assist with property titles, and then later used the advisor to try to raise land prices.

Cash payments injected an unusual amount of capital into the communities. Antamina’s efforts to counsel community members regarding reinvestment were unsuccessful, and the money was spent according to community members’ decisions and aspirations. Nearly US $1.5 million was spent in less than one year. One of the communities invested their money largely on infrastructure (two schools, a medical post, a parabolic antenna and two trucks) and the other bought trucks that they hoped to rent out to Antamina.

Since plots belonging to small landholders are actually part of an extensive familial system, the money had to be divided among residents. Included were some relatives who claimed rights to the land although they did not occupy it. As a result, displaced families received only a small percentage of money from the sale.

Relocation problems

Two problems arose in the relocation process that Antamina’s plan had not anticipated. First, the lack of available lands in the area was not taken into account, since relocation to more distant areas would alter or break the system of goods and service exchange between families from the valley and the higher areas. Second, some former landholders preferred to move to urban centers in the valley and requested housing there.

Antamina’s policy aimed to provide relocated families with new lands similar to those they had sold and with basic services they had previously lacked. In addition, the company made an effort to involve families in its development initiatives. In the end, relocation never occurred because there were no available lands (those that were available were far away and highly priced, and would have required another relocation process for the new sellers) and above all because mine operations had to begin quickly and there was no time for mid-range plans. As a result, the company agreed to pay US $33 000 to each of the 52 resident (non-landowning) families, an attractive figure designed to convince them rapidly.

Currently, Antamina conducts follow-up with relocated families by advising them on reinvestment strategies and how to avoid squandering the money. The company has contracted the Collective Development Institute to work with families on investment strategies.

Demands, expectations and perception of the San Marcos population

Employment

Antamina plans to employ 4 000 workers during the three-year construction phase. Later the number will drop to 1 000 permanent employees. Antamina’s official policy is to give priority to local hires, although it is difficult to calculate the number and origin of workers currently employed by subcontractors in charge of base-camp and highway construction.

Of course, subcontractors hire workers who are best suited to the job. Besides those in certain craft industries (masonry or carpentry, for example), most jobs tend to go to people from other parts of the country (Cajamarca, Puno, Junin, Pasco) or abroad (Chile, Brazil, Canada). While Antamina claims that nearly 5 percent of its workers are from the area, less than 100 people from San Marcos have been hired.

Meanwhile, the subcontractors involved in construction of the main access road to the highway that connects Lima with Huaraz have set up their base in Huallanca, which is where most of their local hires come from. As immigrants arrive seeking work, the town’s population has increased, straining the existing service capacity.

Perspectives of the San Marcos population

The district of San Marcos has had little experience with mining companies. The small, traditional mining company of Contonga that operated until the early 1990s hired some Huaripampa residents (in exchange for use of their lands) and contaminated Pajuscocha Lake. As a result, the population initially did not understand the dimensions and characteristics of the Antamina operationand centered their expectations on access to jobs directly in the mine.

As the operation took shape and Antamina began to receive publicity, these expectations grew. The population was aware of the project’s magnitude and many residents considered the mine as an opportunity for regional development. Expectations remained centered on access to jobs, but broadened to include possibilities for small business development, worker training, infrastructure assistance, sales of local products, roadway construction, and tourism development, in addition to other specific donations.

In spite of being fairly conscious of the possibilities, part of the population is unsatisfied. The development agreements Antamina signed with former landholder communities have been implemented extremely slowly. Job expectations did not pan out (although many people still harbour hopes of getting a job at the mine) leading urban residents to look for other forms of assistance, particularly local product sales, which have not yet come to pass.

Development options and communication strategies

Antamina has begun to coordinate a sustainable development plan for the area. The company initially focused on gathering baseline information and conducting a few propagandistic and cultural diffusion actions (such as dance competitions and meals) via an NGO. Currently Antamina negotiates with three NGOs and the local population in the design of a development plan suitable for the area.

The chosen strategy combines participation by the Community Relations Office and agreements with NGOs for project implementation. As a result, in addition to the basic assistance strategy, Antamina is negotiating a productive development scheme in three areas: agriculture, livestock production, and micro-business creation. A different NGO will be in charge of each area: APROPO for basic assistance, CARE for agricultural development, the Andean Camelid Investigation Center at the Agrarian University (CICA) for livestock production and the Collective Development Institute (CID) for the micro-enterprise program (aimed primarily at resettled families). Nevertheless, to date Antamina has only signed an agreement with CID (for two years). Contracts with CARE and APROPO are pending, while there are disagreements with CICA. Currently, Antamina is promoting the creation of a Local Development Coordinating Committee, which it hopes will become a channel for communication between the company and the local community.

Antamina has opted for a relatively open communication strategy with regard to the population. After a few initial problems due to misinformation, Antamina organized a communication strategy that involved principal local actors within a network of periodic informational meetings where participants discussed the operation’s components and the repercussions its involvement will have in the area.

On paper, Antamina’s philosophy is based on respect for and cooperation with the local population. However, the company’s internal balance of power (and as a result, decision-making powers) tends to marginalize social issues in favour of technical operations involving construction and extraction. The mine gives priority to operations and looks for stop-gap solutions to social problems after they arise. There is a lack of communication within the company, which is evident when affected parties learn in situ of company decisions that officials at the Community Relations Office know nothing about. This lack of internal communication affects the continuity, coherence and fluidity of external communication and has generated contradictory information, misunderstandings and rumours. Together, these trends diminish the company’s credibility.

Potential community benefits.

Since operations have not begun, benefits from the mine are primarily potential at this point. A series of benefits is expected from mine-related operations and local development projects that Antamina is implementing.

Direct and indirect employment

During the three-year construction phase for base camps and processing plants, Antamina is generating 4 000 jobs, 1 000 of which will be filled with people from the department of Ancash. Once operations begin, Antamina will employ 1 250 full-time workers, of whom at least 50 percent will come from Ancash. In addition, subcontractors will require about 750 workers.

Indirect employment generated by the mine has been estimated at 5 000 jobs, including those created by independent contractors and local suppliers. Based on experiences at other mines, we can say that around 60 percent of these new jobs will be created within the department of Ancash. Antamina will pay workers and primary subcontractors an estimated average salary of US $1 000 per month. Table 21 shows the direct and indirect employment from Antamina.

Increased local and regional economic flow

At the height of production, Antamina expects to produce US $950 million worth of minerals annually, which would create nearly US $700 million in foreign currency earnings per year and would boost total mineral exports by 25 percent.

According to information contained in the Environmental Impact Assessment, the total amount of income the mine expects to pay workers and principal contractors is US $23 million per year. Of that figure, an estimated 40 percent would flow into the department’s economy.

During the lifecycle of the mine, Antamina expects to acquire Peruvian goods and services worth approximately US $163.4 million annually. Using the National Input Product table, we can estimate that payments to Peruvian based companies represent, on average, 28 percent of the goods and services purchased. This means that the income from payments to Peruvian suppliers would be on the order of US $45.8 million annually. It is estimated that approximately 15 percent of the demand for goods and services (US $24.5 million annually) would be met within the department, which would result in a total of US $6.8 million annually in wages and salaries for suppliers from the department of Ancash.

Indirect Impact

The total income from wages and salaries paid by Antamina, its subcontractors and local goods and service providers, is US $29.8 million. Of the total income, 40 percent would be spent in the department of Ancash, according to Antamina’s Environmental Impact Assessment.

Due to the proximity and similarity between the Antamina and Yanacocha cases, we will use the same spending multiplier to estimate income to be generated in subsequent cycles, estimated at 1.65. In Table 22, we estimate the total impact of mine-related workers’ income on the department of Ancash.

According to Table 22, mine-related workers spend approximately US $16 million in Ancash, which in turn generates US $26.4 million in income for other families in the department. The multiplier presented in the last column is the result of dividing the total impact on Ancash (direct plus indirect) by the direct impact on workers at Antamina, its subcontractors and suppliers.

For a closer approximation of the total impact generated in the department of Ancash, we can determine the number of families that this income maintains. The average family in Ancash has an annual income of US $5 675.[9] Thus the total impact would maintain 7 500 families,[10] or approximately 4 percent of the department’s total population.

Antamina’s production would generate close to US $83 million annually in taxes.[11] Of this, Ancash should receive US $16.6 million annually in mining royalties, which would be distributed as outlined in Table 23.

Infrastructure and access

In addition, the region will benefit from improvements to the highway to the coast (currently under construction) as well as other secondary roadways that will likely be built along the mineral pipeline route and that could become an alternative route to the coast. Antamina’s presence has obliged the central government to invest in local highway maintenance, resulting in substantial improvement to the road between Huaraz and San Marcos.

Social capital development

Important progress has been made with regards to social capital development in the San Marcos area and other areas of mine influence. With the help of various NGOs, Antamina has prompted affected populations in the region to undertake strategic planning processes in order to identify economic potentials and design local development plans. Various documents have been produced by this participatory process in which mothers’ clubs, peasant communities, and others have come together for the first time to discuss the region’s potential, and to propose concrete development strategies. The reach of this process goes far beyond the area of direct mine influence. Ancash mayors have met to discuss an initiative called the Golden Corridor of the Andes, which would create, for example, a tourism corridor in the department. This process has only recently begun with the development of the mine operation.

Communities are organizing in order to interact in an orderly fashion with Antamina and request assistance in priority areas that have popular backing, and that do not necessarily respond to the individual interests of any certain political leader. Communities that have participated in strategic development planning exercises are looking for sustainable activities and not merely short-term assistance from Antamina. In large part, this process has been possible thanks to the participation of various NGOs.

Mining company best practices and benefits

Local mining-related benefits

This section describes the benefits generated by mining investments in local communities according to the evidence presented. It identifies the practices that produce these benefits, in order to later suggest actions that could have maximized benefits or achieved other benefits.

Increased local economic flow

Antamina’s presence in San Marcos and Huallanca has perceptibly increased the towns’ economic activity. Total impact is estimated at US $42 million per year, which would maintain 7 500 families in the department. The total impact (direct and indirect) of the spending by Yanacocha workers is US $55 million per year, which would maintain 10 200 families in the department of Cajamarca. The automotive fleet and number of local businesses have increased substantially. Nevertheless, it is difficult to determine how much of this is due to Yanacocha’s presence and how much is the result of general economic reforms and the defeat of terrorism.

In addition, the purchase of lands has had an important effect on the economies of campesino villages. Yanacocha purchased close to 10 200 hectares of land between 1992 and 1999. In just 1992 and 1993, land acquisitions injected US $640 000 in the area.

Infrastructure and access

Both Yanacocha and Antamina have contributed to improve access roads in the area of their operations. Yanacocha has built 79 kilometers of new roads, improved 53 kilometers and paved 15 kilometers. Area residents can now sell their milk to the Carnilac company and face substantially less transportation time to the city. In addition, availability of electricity has increased as a result of high tension lines to the mine, and the city of Cajamarca now has cellular telephone service thanks to an agreement between Yanacocha and Telefónica del Peru.

In the case of Antamina, the company is building access roads through Huallanca and has reduced travel time to Lima by two to three hours. Meanwhile, the Peruvian government has invested in improving access to the Callejon de Conchucos from Huaraz. These improvements allow for the creation of a tourism corridor in the area and will facilitate the circulation of people and goods within the region, as well as connection with Lima. In this case, we have observed coordination between the company and the state.

Improvements in basic services

Yanacocha has equipped schools and local health posts and has coordinated with officials from the Health Ministry and teachers to increase the regularity with which such services are offered. In addition, the company has organized workshops for mothers participating in health and nutrition programs. Yanacocha sponsored programs have reduced diarrheic diseases by half in the participating villages. In addition, 264 rural families have benefited from hygiene projects and a drinking water system.

Local development programs and improvements in quality of life

Antamina and Yanacocha have implemented development programs in nearby rural communities that include: technical assistance programs for the introduction of quality inputs (seeds, fertilizers and pesticides) by way of rotating credit funds to groups of campesinos; training courses on pest management, rotating fund basics and agricultural marketing; construction of potato seed storehouses; and income-generation loans and business administration training courses for women. As a result of these programs, potato production doubled in the participating communities between 1996 and 1998, and 88 percent of families have boosted their monthly income from US $61 to US $155, on average.

Direct and indirect employment

Yanacocha and its four main subcontractors employ some 1 200 workers. 45 percent of Yanacocha’s workers (515) are from Cajamarca and 60 percent were hired in the area. Cajamarca-based subcontractors hire around 3 000 additional workers in Cajamarca alone, which provides an initial approximation of the scope of indirect employment. In the case of Antamina, some 4 500 people will be employed during the construction phase. Direct employment will drop during the production phase to 1 250 (50 percent of whom will be from Ancash) and 720 additional subcontractor employees. Antamina estimates that indirect employment will be on the order of 5 000 people.

Consensus, social capital for development and leadership

The presence of Antamina and Yanacocha in their respective areas has convinced rural populations to organize in order to negotiate with the companies and government entities regarding local development. In the area of Huallanca and San Marcos, Antamina and various NGOs have helped draw up development plans for the area that analyze regional productive potential and institutional viability.

In the case of Yanacocha, the results are equally important although they tend to be more rural and localized. The food security and school breakfast programs require the organization of mothers’ clubs from different villages.

Community relations

In this section, we present several recommendations regarding best practices that generate benefits for local communities and for the company. Most of these recommendations are directed toward mining companies, to the extent that it is their presence that modifies the relations between pre-existing actors.

i) Recommendations for the intervention process

Social intelligence studies

The experience of Yanacocha shows that a mining operation requires detailed information about the social dynamics of the host region, especially politics and local organizations, before beginning operations. An anthropological analysis of the host society based on direct interaction with local residents is also required. Knowledge of local actors is essential for establishing good and effective relations with the local population, maintaining fluid lines of communication and minimizing possible conflicts.

Need to monitor social impacts: information gathering and initial social indicators

Unfortunately, mining companies generally do not document the evolution of social indicators in areas around the operation, even in the cases where companies sponsor special projects designed at improving local conditions. Companies must provide for the constant monitoring of various indicators that will allow for an evaluation of local communities’ quality of life.

The problem begins with weak baseline data. Information currently required in the EIA is insufficient to evaluate the local communities’ social conditions. (Canter 1996) The company must develop basic indicators regarding development and grade of service coverage, which will later allow for an evaluation of the positive effects of the mining company’s presence or its local development activities.

The generation of baseline date is not solely the responsibility of the mining company. The central government shares some of the responsibility for the production of basic indicators regarding local communities. Companies and government agencies must coordinate in the provision of necessary basic information. Since this information is not only of use to the mining company but is also essential for local community development plans, part of the cost should be assumed by the state.

In addition, the state should suggest social indicators and parameters acceptable in areas of mining activity to guide the elaboration of the social baseline data section included in the EIA.

In the area of health these could include incidence levels for SDD, SRI, tuberculosis, and maternal and infant mortality rates. In the area of education, these could include schooling levels, repetition levels, and teachers’ education levels.

ii) Recommendations for the process of land acquisition and population resettlement

Land acquisition

Antamina’s experience shows that it is necessary to distinguish between two related processes — the purchase of lands (which involves a process of establishing prices, clarifying land titles and ownership, and convincing the sellers) and evacuation of lands (which involves convincing former landholders, identifying productive alternatives and eventually, resettlement).

Mining companies think that paying a high price for the land will solve problems and that relations with campesinos end once the land is unoccupied. However, campesinos tend to consider the land sale as the beginning of a long-term relationship, and so concentrate less on price than on other, more lasting benefits such as jobs and markets for local products. For this reason, before the land acquisition phase begins, the mining company should develop productive options for campesinos who will sell their lands and receive only money in exchange. In addition, social criteria should be incorporated into the established land prices. We would go so far as to say that campesinos are disposed to exchange their lands for a participatory program of integrated development for the area.

Yanacocha’s land acquisition process and the conflicts generated show that transparent negotiations and objective criteria are essential for minimizing eventual conflicts. Yanacocha’s experience also demonstrates that a land acquisition strategy should foresee the need to contract third parties who can give witness regarding the agreements and eventually act as mediators in future conflicts or complaints between parties.

iii) Recommendations for development strategies

Social assistance and development policies

According to the operation’s scale and lifespan, the company must make an explicit commitment to the host area’s development within a larger process of participatory regional development, while taking care to clearly define its role in the process. A company should be perceived as a new actor that will contribute to existing development initiatives. The Yanacocha experience shows that this is the base upon which harmonious and solid relations with the adjacent communities and area cities are built. The same experience reveals the necessity of implementing different strategies depending on the context: a local micro-level strategy for villages and communities close to the mine and a broader strategy, involving a more diverse range of actors, at the regional level.

Articulation with the local population via employment and services provision

It is necessary to reach a compromise between residents’ demands and the needs of the mining company and its subcontractors. A large company, with years of production ahead of it, should be seen and understood as a member of local society. This presupposes certain agreements between the population and the mining company on issues such as employment, provision of goods and services, and infrastructure. These agreements help create a positive image of the company as an integral part of local society.

The company’s commitment to the local community should be expressed through local development activities and agreements regarding the provision of goods and services, since modern mining operations in general cannot offer the massive creation of unskilled jobs.

Nevertheless, while its ability to generate jobs is limited, the mining company can implement an employment policy that gives priority to local hires. Since local workers’ qualification levels are low, the company should assist with training programs for the area.[12] The employment policy should include offers of direct employment in the mining company and its subcontractors, and should establish long-term goals regarding local hires. For example, the goal could be to increase the percentage of local hires over time to reach at least 30 percent of the labour force in five years.

Mining companies should arrange with local communities for the provision of goods and services and should promote production in areas capable of accessing other markets besides the mine. The company must initiate technical training, capacity building, and product adaptation processes. The adaptation of local products should allow them to compete in terms of quality and price and to conform to company employees’ tastes and consumption patterns, which are generally different to those of the local population.

Options for local community development

Some local actors may have their own development strategies, with differing objectives, activities and timeframes. For example, certain communities combine: immediate actions (in infrastructure projects that increase their importance as an urban center); works that provide regional prestige; and long-term income potential (such as obtaining the category of a district in order to receive budget allocations from the central government). In the first case, town leaders requests works such as stadiums, sports arenas, improvements to the main plaza, and other monuments that can be inaugurated for their short-term political interests. NGOs and the company itself prefer to invest in productive activities such as reforestation, improvements to livestock production, and irrigation projects with medium and long-term benefits. The chosen strategy should be the result of negotiations in which the entire community participates and not just elected leaders concerned with their short-term needs for political reelection.

Co-participation in the improvement of infrastructure and social services

Nearby towns and cities often become “bedroom communities” for mine workers. This can bring improvements to certain communal services (schools, hospitals, recreation centers) following negotiation with other local actors and the state. Government participation and local coordination are crucial to ensure that actions are sustainable and their impact is maximized.

In addition, the Antamina and Yanacocha cases demonstrate the benefits of working with specialized institutions (NGOs) in development promotion activities. This strategy functions better than simply assigning such activities to a department within the company.

iv) Recommendations for communication strategies

While various bilateral dialogues exist at different levels, there is currently no space that provides for simultaneous dialogue between the company, the central government and local communities.

Companies’ communication strategies

Neither a low-profile strategy (equivalent to no communication at all) nor a strategy of over-communication is adequate. At the same time, potential information distribution channels are as diverse their contents. In Cajamarca, for example, information circulates differently in the countryside than it does in the city. Likewise, information circulates differently among authorities, government officials, NGOs and the population in general. These diverse levels and circuits should be taken into account.

The company must establish a clear and organized communication strategy with regards to local authorities, the central government and the population in general. Social programs and environmental protection efforts should be “public knowledge” at the local level.

Meanwhile, local authorities should take part in the process of information distribution. Since the company could be considered to have certain interests in specific themes or critical cases, it is necessary that the communication strategy provide for the participation of third parties (the state or local government, for example) where necessary.

v) Recommendations with respect to a participatory local development plan

The local population’s institutional and organizational weakness is one of the principal limitations to development. In the past, mining companies took advantage of these limitations in order to impose their own conditions. Nevertheless, when the local population perceived agreements as unjust, various problems and complaints arose against the operation, which ended up being costly in the long term.

This requires a concerted effort to utilize agents and resources (including the mining investment) toward local sustainable development that generates permanent sources of wealth beyond the lifecycle of the mine. A participatory process that involves the entire local population (and not just political leaders) should produce a reasonable plan of action in which the company expresses its priorities for financial assistance but does not unilaterally decide what is “convenient” for the local community. In a participatory development plan, the mining company is merely an additional actor and a potential financial source together with international cooperation agencies and the central government. Antamina’s experience in this area is very positive. In certain cases, Antamina directly financed development programs, while in other cases, the company allowed for various NGOs to facilitate the strategic planning process for villages located within the mine’s area of influence.

In general this process must be assumed by the most stable actor with the greatest resources (at least in terms of cash flow), usually the mining company. Nevertheless, the company must avoid crowding out other actors in the process, and it must be clear to all parties that the company’s leadership is temporary and only to get the process moving. Meanwhile, local communities must be strengthened in order to assume leadership of the development process beyond the lifecycle of the mine.

Building local capacities does not happen overnight and so the process should begin as soon as possible, preferably at same time as exploration activities. This is also the ideal moment to begin distributing information about the potential mining operation without generating false expectations. Nevertheless, few companies are disposed to invest in local development without knowing for certain whether they will be operating in the zone. Failure rates for mining explorations are very high, and it is likely that only large transnational companies will view local development as a valuable investment in spite of the uncertainty. If the exploration is successful, a participatory local development plan can greatly facilitate local relations and the operation’s general progress. If the operation never gets off the ground, the company’s reputation of good performance will assist the development of operations elsewhere in the world. A good reputation is an important intangible asset for a company. This concept is understood with regards to environmental issues, but social issues are not yet viewed in the same way. A good social record also contributes to the company’s success at the international level.

Since not all companies can be expected to behave identically (especially when it comes to medium and small companies), the process of building local consensus regarding development priorities and possibilities should begin prior to construction of the mine. This process can be implemented at the same time as an EIA for social issues is conducted. While this process may appear costly since it can delay operations and generate financial problems, we believe that in the medium term it significantly facilitates relations between the company and local populations in various areas such as land acquisition, resettlement, etc. This in turn reduces costs over the long term. Antamina’s experience is illustrative in this regard. The accelerated resettlement process for some 30 families cost the company close to US $1 million due to the operations team’s need to access to certain lands as quickly as possible. A prior program of local development planning, at a cost of no more than US $50 000, that had identified viable productive alternatives would have substantially reduced the cost of the transaction.

References

Apoyo Consultoría S.A. 1997. Impacto de la minería sobre la región sur del país y Cajamarca. Lima, Perú.

B&R Consultants. 1998. Relocation Plan: An opportunity for family progress. Mimeo. Lima, Peru.

Canter, L.W. 1996. Environmental Impact Assessment. McGraw-Hill Inc. New York.

Indacochea, Alejandro. 1998. Cajamarca Competitiva. Saywa Ediciones. Lima, Peru.

INEI–UNDP. 1997. Report on human development in Peru. Lima, Peru.

Kuramoto, Juana. 1999. Productive clusters around mining: The case of Minera Yanacocha S.A. GRADE. Lima, Peru.

Minera Yanacocha. 1998. Socioeconomic conditions of peasant families who sold lands to Yanacocha mining company. Mimeo. Cajamarca, Peru.

MTPS (Ministerio de Trabajo y Promoción Social). 1997. Wage and Salary Survey. MTPS. Lima, Peru.

PROSAY. 1999. Final evaluation for PROSAY. Mimeo. Cajamarca, Peru.

[1]After this study was completed, there was a mercury spill near Yanacocha that was quickly remedied by the mining personnel. Ignorance on the population regarding the toxicity of mercury played a great role in the few intoxication cases reported. People stored mercury in their houses thinking that it was a valuable commodity. In spite of the quick action taken by the company, the mining authority imposed a severe fine of almost US $ 300 000. Education campaigns to prevent future accidents have been implemented in the area.

[2] Four focus groups were conducted: two with primary and seconday school teachers, one with members of a mother’s club from an outlying urban area, and one with students from the Cajamarca National University. The themes of discussion were participants’ general attitudes and opinions regarding Yanacocha Mining Company and its effects on the city, Cajamarca’s economy, and the environment.

[3] By “unintentional relations” we mean those relations or components thereof that originate in the population’s perceptions (always subjective) regarding company agents. These perceptions are generally based on the population’s emotions or subjective interpretation (often culturally based) regarding company employees.

[4] Indeed, the employment figure for Cajamarca suppliers could be augmented with part of the employment generated by companies that supply Yanacocha from other parts of the country, specifically Lima, whose total employment (though not entirely due to Yanacocha contracts) was 1 626 jobs in 1997.

[5] Estimate based on the department of Cajamarca’s GDP for 1997. INEI-UNDP 1997.

[6] This figure is obtained by dividing the total direct and indirect impact by the average family income for the regional department.

[7] On April 21, 1997, a new system of mining royalty distribution went into effect: 40% for the provincial and district municipalities of host regions and 60% for other municipalities. Within those divisions, royalties must be distributed among provincial municipalities (20%) and district municipalities (80%), with two-thirds of the total destined for rural areas and one-third for urban areas.

[8] During the 1970s, when production was on the rise, the Huanzalá camp housed approximately 2 500 workers and their family members. Currently, the total population has dropped to less than 1 000 residents.

[9] Based on the average GDP for Ancash in 1997. INEI.

[10] This figure is obtained by dividing the total direct and indirect impact by average family income for the department of Ancash.

[11] Total taxes paid during the project’s lifecycle are estimated at US $1.1 billion, of which 20% would go to mining royalties.

[12] The Red Dog mine in Alaska is a good example of the convergence of interests and collaboration between a mining company and local population: the company offers preferential employment to Indians (at the technical and executive levels), who meet job requirements thanks to technical training programs and scholarhips (Cooperaccion 1990).

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