Living in Peru : your everyday companion

By Carl Hennings

The country is basking in the glow of high metal prices and an unprecedented number of exploration and development projects, coupled with the investment funds that are ready to pour in. The media and resource conferences are buzzing with the news of the great potential and great projects in the country. Government officials at home and traveling the world are pounding their chests proclaiming the great investment climate and geological potential of Peru. The government had one of the more prominent exhibits at the recent PDAC in Toronto.

However on the ground, things move at a snail’s pace! The President’s office, fed up with the slow pace of advancing larger projects for the benefit of the country and its economy, tried to initiate legislation to give the 20 most prominent projects priority in the country. The initiative was killed by political wrangling in the Congress.

One of the strongest retardants of advancement is the legal and regulatory framework (or absence thereof) to overcome the conflicting interests of the holders of the mineral rights and the holders of the surface rights. The law requires that the holder of the mineral rights obtain the consent of a two thirds majority in a full village or community assembly (not just its council) for an agreement and conditions under which the mineral rights can be utilized.

Most foreign junior and senior mineral exploration and mining companies subscribe to the concept of environmentally and socially responsible and sustainable development for the simple reason of the need to being able to find financial backers and investors, if not for more altruistic reasons. They also benefit from the presence of a local labour pool as do the local populations from the job opportunities and the support that is given to local health, education and infrastructure.

Nevertheless, the industry average for obtaining an agreement with the surface rights holders stands at 11 months, even for a simple drilling program in early stage exploration. Some have taken several years and are still not there and others are getting interrupted or blocked even after they have gotten the approvals.


So, why does it not work? The largely rural and agricultural holders of the surface rights are being misinformed by certain (non-elected) agitating NGOs that are financed from outside the country, some church elements, local politicians and persons with their own agenda like illegal (not informal or artisan) miners.

In one case known to the writer, the community and its council are dominated by illegal miners, i.e. claim robbers(!) who refused to even hold a vote in the community assembly regarding the mineral rights holder’s  wish to work on his claims. While the same claim robbers get away with theft, non-payment of any form of taxes, transportation of stolen goods, bribery and corruption, the use of mercury, acids and dynamite, the government is absent and no law enforcement takes place.

Mining companies are blocked by people who are angry at the government for not spending the “canon minero” which it collects from the mining companies, on social infrastructure and improvement projects. With no government available to throw rocks at, the anger is directed at the mining companies. The police is unwilling or incapable of enforcing the law or even keeping the peace at times.

Rural communities are often under a misconception about companies and cannot distinguish between large producers and exploration companies that are financed solely by their share holders ( in many cases increasingly Peruvian share holders) and what they can afford to offer to the communities in the early stages of exploration and development before they have made a discovery. Rural communities often do not understand the responsibility that a company’s management has towards its share holders.

The law still foresees a process of adjudicating such conflicts and to eventually facilitate work on the mineral rights. The process of SERVIDUMBRE has rarely been applied and there is a notion that it will be abolished altogether, leaving the field wide open to abuse.

When asked, a representative of the Ministry of Energy and Mines recently indicated that the government has no intention of getting involved, leaving the negotiations “in the spirit of free enterprise” all to the parties involved. The problem with this is the fact that the holders of the surface rights can hold the holders of the mineral rights (for which they make annual payments) at ransom or block them indefinitely. With no conflict resolution process available, such mineral rights become worthless!

What the rural communities also fail to understand is the fact that mineral exploration and mining are the only industries that can be located in their area and backyard, providing opportunities of employment, skill training and education to the next generation which is exploding in numbers and which will never be able to sustain itself on a finite acreage of agricultural lands.

In addition, the industry provides opportunities for the development of secondary service and supply businesses and a ripple effect of further job opportunities. If these opportunities cannot be generated for the exploding rural population it creates the breeding ground for another revolution, against which the shining path may pale by comparison.

On top of it all the bureaucracy works at a snail’s pace as well, is often absent with no replacements filling in for absentees and generally not caring about getting anything done even if the applicants have met all regulatory requirements, including environmental ones.

 There are literally hundreds of millions of dollars waiting for such resolutions or permits before they can be – often at high risk – invested in the country. This capital is not going to wait forever at the doors of Peru and may well turn elsewhere if it cannot be spent. Peru runs the serious risk of losing its attractiveness to investment and going back to becoming a beggar sitting on a golden bench.”