This week's likely top stories: a deadly fire ravages Valparaíso, Chile; French Foreign Minister Laurent Fabius visits Cuba; Glencore sells Las Bambas mine to Chinese consortium; Venezuela investigates abuses during protests; a shipwreck spills fuel off the coast of Colombia.
Fire in Valparaiso, Chile: At least 12 people have died in a disastrous fire in Valparaíso, Chile that has forced some 10,000 people from their homes. The fire started on Saturday and rapidly engulfed the historic seaside city, whose town center is an UNESCO World Heritage Site. Many of Valparaíso’s buildings are perched on hillsides and susceptible to fire, posing a great challenge to the 1,200 firefighters that have been dispatched to the city. High winds fanned the blaze on Saturday night and the fires could still spread. The Chilean Red Cross has appealed for donations, and President Michelle Bachelet is in Valparaíso to oversee the emergency response. Meanwhile, a forest fire in the Colombian department of Boyaca has consumed at least 250 acres of land in the last three days, also due to high winds.
France’s Fabius Meets with Raúl Castro: French Foreign Minister Laurent Fabius met with Cuban President Raúl Castro on Saturday to discuss politics, human rights and economic reforms in Cuba, just weeks after the European Union agreed to begin negotiations with Cuba. Fabius’ meeting with Castro was the first visit to Cuba by a high-ranking French official in 31 years. Talks between the EU and the Cuban government are expected to begin on April 29 in Havana.
Glencore Sells Las Bambas Mine to Chinese Consortium: A consortium of Chinese companies announced Monday that it will purchase Peru’s Las Bambas copper mine from Glencore Xstrata for approximately $6 billion. The deal is expected to be complete by the end of September, but the consortium has agreed to cover costs of developing the mine from the beginning of 2014 until the transaction closes. The open-pit mine is currently being constructed and is expected to initially produce two million tons of copper a year.
Venezuela Investigates Abuses During Protests: Venezuela’s strategic command chief, Vladimir Padrino, said that 97 members of the country’s security forces are being investigated for abuses committed during the country’s two months of protest. So far, at least 41 people have been killed since the protests began on February 12, and some 2,000 people have been detained. Padrino said that the Venezuelan military has committed “some excesses,” but added that the officers being investigated represent less than 1 percent of the force.
Drummond Says Diesel Spilled in Shipwreck: A barge carrying construction materials off the Northern coast of Colombia for Drummond Co. Inc—a U.S. based mining company and Colombia’s second biggest coal miner—was shipwrecked on Friday, causing diesel fuel to leak into the sea. Drummond said that the cause of the accident is being investigated, but did not provide an estimate of the amount of fuel that was spilled. The company was fined nearly $3.6 million in December for spilling tons of coal into the ocean in a prior accident off the coast of Santa Marta, and its port was shut down between January and April. The company is still working to comply with new infrastructure requirements designed to lessen spillage.
Barrick Gold Corporation, a Canadian mining company and the world’s largest gold producer, announced Thursday that it has temporarily halted operations at its Pascua-Lama gold mine in the Andean border region between Argentina and Chile. Production was scheduled to begin by early 2014, but environmental regulations, depreciating gold prices and declining company profits led to a decision to indefinitely suspend construction at the mine. Barrick said it has already spent over $5 billion of the total estimated project cost of $8.5 billion. The company told investors in a quarterly earnings statement that the postponement would provide capital savings of up to $1 billion in 2014.
Barrick’s stock prices fell 8.65 percent in April when a Chilean appeals court announced that it would block operations at Pascua-Lama due to “environmental irregularities.” The announcement came after members of Diaguita Indigenous communities filed a complaint that the mine had polluted glacial deposits and contaminated scarce water resources in the Atacama Desert. Chilean Interior Minister Andrés Chadwick welcomed the April announcement and said he hoped the company would be able to address the court’s concerns and conduct environmentally sound operations. The Chilean government has not announced plans to revise or lift the restrictions.
Officials voiced greater concern in Argentina, where operations were not discontinued until the company’s recent announcement. On the Argentine side of the mine, Barrick operations provide thousands of jobs and accounts for a third of San Juan province’s economy. Officials there have advocated repeatedly for the project, and it remains unclear how the closure will affect the region’s economy. Nevertheless, Guillermo Calo, Barrick’s top official in Argentina, said the company still plans to invest $400 million there next year.
Employees of Colombia’s largest coal mine, Cerrejón, went on strike yesterday after the company and its 4,500 union members failed to reach an agreement on wages and benefits for the first time in 22 years.
Orlando Cuello, manager of the National Union of Coal workers (Sindicato Nacional de Trabajadroes de la Industria del Carbón – Sintracarbón) confirmed that 3:00 pm (COT) Thursday was the cutoff time for the negotiations. The union’s grievances center on the lack of appropriate compensation for the high-risk nature of the job, with an estimate that miners in other parts of the world earn three times more than Cerrejón employees. Other factors in the negotiations include recognition of health and occupational hazards, dignity of employees, equity with contract workers, environmental protection of the department of La Guajira where the mine operates, and respect of local communities.
Cerrejón, the subject of a new AQ documentary, is a joint venture between BHP Billiton, Anglo American and Xstrata. It produced 34.6 million tons of coal and exported 32.8 million tons globally in 2012. The strike threatens the company’s potential production targets for 2013 and may damage the local and regional economy by up to $5.4 million a day.
Natural resource extraction is a key contributor to economic growth in various parts of the Western Hemisphere, but governments, businesses and civil society are faced with how to improve extractive activity and its effects on broad-based socioeconomic development in respective communities. A special section in the Winter 2013 issue of Americas Quarterly, released today, includes photo essays and analysis to look at these challenges and compare the potentials and pitfalls for the natural resource industry in Chile, Colombia and Peru in four critical areas: community relations and consulta previa (prior consultation); value-added economic development; the nature of governance and public management; and the environment.
In the case of consulta previa, although Convention 169 of the International Labour Organization—on the right of Indigenous and tribal peoples to prior consultation—has been ratified by 20 countries, most of which are Latin American nations, the accord is still subject to competing interpretations by community leaders and governments.To maximize success and mitigate conflict, the AQ special section urges all stakeholders to view consulta previa as a regular process throughout the life of the exploration or exploitation project, and for businesses to broaden the scope of consultative mechanisms beyond extraction’s original impact zone.
The special section also suggests that governments and businesses work together to ensure a positive impact of extractive industry over national economies. By leveraging tax and royalty resources, governments can attract investment and promote local innovation. It cites Chile as a model in terms of its Fondo de Innovación para la Competitividad (Innovation Fund for Competitiveness). However, clear priorities for social policy and investment must be in place to ensure an equitable resource distribution.
In addition, despite some progress in economic and community development over the life of extractive industry in the three countries, governments and businesses still lag behind in protecting the environment from the negative effects of mining exploration. The AQ section asks governments to boost the capacity and strengthen the authority of federal environment ministries and for businesses to monitor energy consumption levels and seek creative ways to reduce them.
In addition to the photo essays and analysis, an exclusive AQ documentary looks at a proposed project by the coal mining company Cerrejón to move an entire river 16 miles (26 kilometers) and the effects that would have on the Wayúu Indigenous community that lives alongside it .
Top stories this week are likely to include: post-election protests in Mexico; OAS to issue its report on Fernando Lugo’s ouster; anti-mining protests continue in Peru; Raúl Castro arrives in Vietnam; and ASEAN-Latin America Business Forum gets underway.
PRD Alliance Questions Peña Nieto’s Victory: Although officially declared the winner on Friday by the autonomous Instituto Federal Electoral (Federal Electoral Institute—IFE), Mexican President-elect Enrique Peña Nieto still faces criticism of fraud by second-place candidate Andrés Manuel López Obrador (AMLO) of the Partido de la Revolución Democrática (Party of the Democratic Revolution—PRD) . Ricardo Monreal, AMLO’s campaign manager, accused the PRI of vote-buying at a press conference this morning. In addition, tens of thousands of demonstrators claiming to belong to no political party protested over the weekend in Mexico City decrying the IFE result. Will the situation turn to a repeat of 2006? AQ Senior Editor Jason Marczak notes there’s a clear difference between the 2012 election and what happened six years ago: “With only a few hundred thousand votes separating López Obrador and Calderón in 2006, AMLO saw an opening for a recount through protests and pressure on a still fragile electoral process. But this time, in losing by about 3.5 million votes, AMLO will only serve to discredit his nationwide appeal by crying foul and once again being a sore loser.”
Updates on Lugo’s Ouster: The Organization of American States (OAS) is expected to release its report today on its fact-finding mission last week to Paraguay to investigate former Paraguayan President Fernando Lugo’s removal from office. The delegation was headed by OAS Secretary-General José Miguel Insulza. The U.S. has said it would wait for the OAS verdict to issue a formal statement on the legality of the ouster—a move that has drawn criticism. With Venezuelan Foreign Minister Nicolás Maduro reportedly endorsing a military coup to restore Fernando Lugo to power, the situation in Paraguay is still contentious and perhaps the OAS report will provide more clarity on the issue.
Peruvian Anti-Mining Protests Heat Up: After police clashed with protesters demonstrating against natural resource extraction in northwest Peru, the death toll has climbed to five. A state of emergency has been imposed in the Cajamarca region, and Peruvian President Ollanta Humala has come under fire for his administration’s handling of the demonstrations. Nevertheless, tensions are still high and this week could very likely see a new wave of protests. AQ Editor-in-Chief Christopher Sabatini, who is in Huaraz, Peru this week, notes, “President Humala will have to do something to address the protests, including trying to verify claims of pollution and improving overall access to social services in mining communities—while not appeasing some of the more extreme groups.”
Raúl Castro in Vietnam: After wrapping up a trip to China last week, Cuban President Raúl Castro arrived in Vietnam yesterday for a four-day official visit aimed to strengthen bilateral relations. This is Castro’s first visit to Vietnam as Cuba’s president, and he is scheduled to meet with Vietnamese Prime Minister Nguyen Tan Dung, Community Party General Secretary Nguyen Phu Trong and Vietnamese President Truong Tan Sang. Sabatini observes, “The purpose of the trip is twofold: First, to help Raúl and the group better understand the process of economic and limited political reform that has taken place in Vietnam as a model for Cuba—though the comparison is thin. But second, Cuba—in this and other efforts it has made—is trying to diversify its economic relations and lifeline beyond Venezuela.”
ASEAN, Latin America Deepen Commercial Ties: The third annual business forum between Latin American nations and ASEAN (Association of Southeast Asian Nations) members takes place today and tomorrow in Jakarta, Indonesia. The theme of the forum is: “Towards a Sustainable Future.” ASEAN is comprised of Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam. For more information on the forum, including programs, speakers, organizers, and partners, access its website.
Peru’s government declared a 30-day state of emergency in the southern Andean province of Espinar yesterday after clashes between anti-mining protesters and police officers. The state of emergency suspends a number of civil liberties, including the right to freedom of assembly. It also grants local police officers responsibility over public order.
Protestors have been demonstrating against the Tinaya copper mine in Espinar, near Cuzco, since last week, blocking highway access to the mine and halting production. Violence escalated last weekend, resulting in the deaths of two civilian protestors and the injury of 46 police officers on Sunday. An additional 30 police officers were injured on Monday. Interior Minister Wilver Calle, who announced the deaths yesterday, did not explain how they occurred other than to say that police were forced to open fire in self-defense.
Protestors claim that operation of the Tinaya mine is polluting two local rivers and damaging the environment. They also say the mine has not contributed sufficiently to the local economy, and are demanding that the mine owner, Xtrata, increase the amount of royalties it provides the local government to 30 percent, from 3 percent. Xtrata, a Swiss-based company and the world’s fourth-largest copper producer, has denied the pollution allegations.
This is not the first time President Ollanta Humala has resorted to declaring a state of emergency to end anti-mining protests. Last December, his government issued a state of emergency in the northern province of Cajamarca in response to protests against the $4.8 billion Conga gold mining project. That project, owned largely by U.S.-based Newmont Mining Co., has been suspended pending further negotiations over the protection of highland water sources.
Top stories this week are likely to include: continued fallout over YPF expropriation; Leon Panetta to South America; Humala approves controversial mining project; and IMF warns of protectionism in Latin America.
Global Response to YPF Seizure: Repsol has threatened to take legal action against any company that invests in YPF SA, its Argentine subsidiary that was nationalized last week. This will complicate efforts by Argentine Planning Minister Julio de Vido to elicit investments in YPF. Beyond Repsol’s response, Argentine President Cristina Fernández de Kirchner faces continued condemnation from Spain and the European Parliament, which is looking at the possibility of imposing trade sanctions on Argentine imports. Petrobras, Brazil’s state-owned oil corporation, has pledged to expand cooperation with Argentina. Look for further official reaction from Europe this week.
Panetta in South America: U.S. Secretary of Defense Leon Panetta departs today for a five-day tour in South America, where he will visit Colombia, Brazil and Chile. A defense official reports that Panetta will stop in Bogotá to evaluate U.S.-funded Plan Colombia and discuss further measures to combat the Revolutionary Armed Forces of Colombia (FARC). Then, he heads to Brasilia and Rio de Janeiro to discuss potential military deals, including Embraer’s participation in a now-cancelled military aircraft contract for the U.S. effort in Afghanistan. AQ Senior Editor Jason Marczak notes, “Although the Embraer deal was worth less than $400 million, getting it back on track would be a huge plus for U.S.-Brazil relations.” Panetta and his Brazilian and Chilean counterparts will also discuss drug interdiction measures off the coasts of Africa and Central America—two of the world’s worst drug transit points.
Peru Approves Conga Mine: Peruvian President Ollanta Humala gave conditional approval last week to the controversial Conga mining project, constructed by U.S.-owned Newmont Mining Corporation. Previously, it had been stalled due to environmental concerns and protests by local Indigenous peoples in the Cajamarca region. Independent environmental auditors recommended a series of changes including larger artificial reservoirs that would allow for the adequate supply of water to local populations; Humala gave Newmont the green light for construction on the condition that these suggestions be met. Cajamarca President Gregorio Santos remains unconvinced, so watch out for the possibility of further local backlash.
IMF Warns of Protectionism: During its spring meetings over the weekend, the International Monetary Fund predicted 3.75 percent growth for the Latin America and Caribbean region this year. The IMF also warned emerging economies against adopting protectionist measures in response to the “accommodative monetary policy” adopted by the U.S. and other developed countries. The 3.75 percent figure represents a moderation of the region’s 4.5 percent growth in 2011. Given Brazil’s criticism of the United States’ monetary behavior, pay attention to whether Latin American economies heed the IMF’s advice.
*RELATED – Angelina Jolie Visits Refugees in Ecuador: In her capacity as a United Nations High Commissioner for Refugees ambassador, Angelina Jolie visited displaced Colombian refugees in Ecuador over the weekend. Read an Americas Quarterly dispatch on refugees in Ecuador from the Winter 2012 issue.
En el Perú, las aguas de la Amazonía que viajan en forma de ríos, que bañan las riberas de los bosques, que traen la vida desde las nubes hasta las sombras de un árbol, que aseguran un hogar a las especies animales o que se deslizan cuenco adentro en las manos de una niña a orillas de una comunidad nativa son las venas de este mundo; el eje de comunicación de muchas poblaciones y la fuente de sustento para pescadores, transportistas, albergues turísticos y operarios de algunas actividades extractivas.
En la Amazonía Peruana, las áreas naturales protegidas buscan salvaguardar que los ríos, bosques, hábitats de especies animales y de comunidades nativas; puedan perpetuarse en el perfecto equilibrio de los ecosistemas amazónicos. Las actividades económicas, sin embargo, que se desarrollan dentro del espacio amazónico no viven, ni dependen del equilibrio amazónico, aparentemente. Es decir, madereros que depredan el bosque sin respetar planes de manejo o mineros artesanales que contaminan las aguas con una visión de corto plazo no asumen que si el ecosistema se rompe, no habrá donde realizar las actividades que los sustentan.
An article in the fall issue of Americas Quarterly, released today, explores the record of Chinese state-owned mining corporations on labor and the environment. In “Do Chinese Mining Companies Exploit More?” three researchers from the Peterson Institute for International Economics (PIIE) explore the impact of China’s foreign direct investment in natural resource extraction in Peru—underlining China’s increasing economic footprint in emerging regions like Latin America.
The article highlights an issue that is of growing concern. Just this month, Human Rights Watch (HRW) released a 122-page report outlining labor abuses by Chinese firms operating in copper mines in Zambia. The HRW paper states that the Chinese firms clamp down on union activity, promote low pay compared to the international average of copper mines, enforce 18-hour workdays, and operate mines with workplace safety concerns. The Chinese embassy in the Zambian capital of Lusaka has flatly denied HRW’s charges.
In comparing the practices of two OECD-owned companies to those of two Chinese companies, the PIIE scholars note some alarming differences in adherence to international labor and environmental standards. For example, the Shougang Corporation, which purchased the Hierro Perú mine in 1992, “angered the local population by cutting the Peruvian workforce in half and bringing in Chinese laborers. It reduced the quantity and quality of workers’ housing, while leaving blocks of homes once occupied by workers vacant in a town with an acute housing shortage.”
Nonetheless, Chinese firms may be treading a different path since the days of their earliest investments. According to the PIIE research, the Aluminum Corporation of China “appears to be working to avoid the behavior of Shougang.” It has not imported labor from China, has conducted public hearings with members of the local community, and has invested in infrastructure and community development.
The Peruvian Minister of Mines and Energy Carlos Herrera told Congress on Wednesday that the $4.8 billion Minas Conga mine project would not continue without the approval of the local community. “Projects should be approved by the people who will be affected by them," said Minister Herrera. Accompanied by the ministers of agriculture and the environment, Minister Herrera traveled to the project site in the northern Cajamarca region late Wednesday to negotiate an accord between the American mining company Newmont Mining and the local community.
Minas Conga is being developed in collaboration with Peruvian mining company Buenaventura and is expected to produce between 580,000 and 680,000 ounces of gold per year, starting in 2015. But local residents are concerned that the mine’s proximity to a water basin will cause pollution and sap vital water supplies. Responding to protests by local communities, some of which turned violent, Minister Herrera told Congress that "the position of the government is that it wants investment, but not at any price."
While it is unlikely that the project will be abandoned, Prime Minister Salomón Lerner Ghitis said on Wednesday that the government will carry out a "strict" evaluation of the mine’s environmental impact. On the other hand, the National Mining, Oil and Energy Society (SNMPE) said the government “cannot allow small, violent groups to impede inclusive development and private investment." An Americas Quarterly article to be released in the Fall issue on November 9 ("Do Chinese Mining Companies Exploit More?") looks at the labor rights and environmental records of Chinese mines in Peru.
As the world’s sixth largest gold producer, mines like Conga have fueled Peru’s stunning 7 percent annual growth rate. At the same time, President Ollanta Humala has made social inclusion a priority for his administration, promising to resolve the countless social and environmental conflicts plaguing Peru—many of them over mining and oil projects. President Humala will address the issue of responsible investment and social inclusion at the Americas Society and Council of the Americas Latin American Cities Conference in Lima tomorrow.