The Extractive Industries and Society 2 (2015) 73–84

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The Extractive Industries and Society

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Original Article

Challenges with resolving mining conflicts in Latin America§

Ann Helwege
Global Development and Environment, Tufts University and Global Economic Governance Institute, Boston University, United States

A R T I C L E I N F O A B S T R A C T

Article history: Despite violent protests across Latin America, policies to make mining more environmentally sound and
Received 22 August 2014 socially acceptable remain elusive. This essay explores the factors that hinder progress in resolving
Received in revised form 23 October 2014 mining conflicts. It describes the fiscal incentives that drive governments to promote mining, the
Available online 18 December 2014
environmental risks inherent in open pit mining, and the divisive property rights that contribute to
conflict. While no mining is environmentally benign, more can be done to protect the health and
Keywords: livelihoods of local communities. Progress requires not only improving the technical capacity of
Mining protests
institutions tasked with environmental monitoring but also resolving the deeply rooted social divisions
ILO169
in the region. Affirming the rights of local communities – nonindigenous as well as indigenous – to
Latin America
Environmental risk control zoning, water supplies and the financial benefits of mining would both better link governance to
Canon minero those most affected and, in many cases, reduce poverty.
ß 2014 Elsevier Ltd. All rights reserved.

‘‘Their reason for killing and destroying such an infinite number of  Police tore down highway blockades erected by Ngöbe-Buglé
souls is that the Christians have an ultimate aim, which is to Panamanians who opposed mining projects near their lands,
acquire gold, and to swell themselves with riches in a very brief killing two people.
time and thus rise to a high estate disproportionate to their merits.’’  Suspicions over closed-door planning meetings in Doima,
De las Casas (1542) Colombia, boiled over into violent protests against the AngloGold
Ashanti mining company.
 In April 2014, Ecuadorian campesino leader Javier Ramirez was
1. Introduction arrested without a warrant while returning from a meeting with
the Interior Minister, triggering a wave of anti-mining violence.
The recent boom in mineral prices has set off violent protests  Two Mexican environmental rights activists were shot on the
over the environmental degradation and inequitable distribution steps of City Hall in San Jose del Progreso by gunmen allegedly
of benefits from mining in Latin America. Subsistence farmers have connected to the Trinidad/Cuzcatlán mining project.
been displaced from land, water supplies have been poisoned, and  10,000 Uruguayans marched down the Avenida 18 de Julio in
the protests themselves have led to fatalities. In recent years, Montevideo in August 2013 in opposition to large-scale mining
protests have occurred in almost every country. Consider the regulations proposed by the government.
following:1
 Six protesters, including two teenage boys, were shot in April In response to these conflicts, new initiatives to promote
2013 while opposing the environmental harm caused by a less hazardous and more equitable mining have been implemented
Canadian-owned Tahoe Resources mine in San Rafael dos Flores, by Latin American governments, international institutions,
Guatemala. nonprofit organizations and mining firms. Governments have
promised moratoria against mining in sensitive areas and greater
§ inclusion of local communities in planning processes; internation-
This research benefitted from colleagues’ insights at the Global Development
and Environment Institute (GDAE) at Tufts University and the Global Economic al organizations have sought fiscal transparency as a means of
Governance Institute (GEGI) at Boston University. Josh Lacey provided helpful combatting corruption; foreign governments have threatened
research assistance. sanctions against firms to deter human rights violations; and
E-mail addresses: [email protected], [email protected]. nonprofit groups have launched consumer awareness campaigns
1
Mining has generated conflict in every country in Latin America. These
to support sustainability certification. Even mining firms –
examples are drawn from Acosta (2013), Lakhani (2014), Latin American Herald
Tribune (2012), Stringer (2013), Treat (2012), Zorilla (2014). cognizant that political stability enhances profitability – have

http://dx.doi.org/10.1016/j.exis.2014.10.003
2214-790X/ß 2014 Elsevier Ltd. All rights reserved.
74 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84

voluntarily contributed funds to local communities in the name of livelihoods as a result of mining. Often it isn’t clear who deserves
sustainability. Yet the protests and violence continue. to be compensated and how best to help people to reconstruct
What accounts for the failure to resolve these conflicts? Can their lives. The redistribution of mineral revenues from national to
governments ensure that mining is done sustainably – i.e., safely state and municipal coffers has failed to mitigate conflict, in part
and fairly – and if so, what stands in the way of progress? The because so little is actually distributed in most countries, and
obvious barriers to the resolution of these conflicts include poorly because local governments lack fiscal discretion and the adminis-
enforced environmental standards, insecure land tenure, disputes trative capacity to fully address local needs.
over national versus regional governance, unresolved aspects of Section 4 examines potential solutions to these problems, and
fiscal decentralization, and the contested jurisdiction of interna- explores the extent to which the global sustainable mining
tional trade tribunals. Underlying these issues are deep divisions movement can address the underlying causes of environmental
within Latin America over economic inequality, cultural identity and social injustice. This movement entails both local protests and
and political enfranchisement. These problems vary considerably supporting efforts by transnational organizations. For example, a
across Latin American countries, as do the mineral endowments coalition of developed and developing countries created the
that ignite conflict. Extractive Industry Transparency Initiative (EITI) to discourage
The focus of this paper is open pit or surface mining, which corruption; the No Dirty Gold Movement has called for a boycott of
accounts for most gold, copper and silver mining in the region.2 It is unjustly mined gold; and some foreign officials (e.g., in Canada)
this kind of mining that has generated widespread protests against have sought to restrict access to public financing and trade support
multinational corporations, free trade agreements, and corrupt if mining companies violate human rights.
regimes. Artisanal gold mining also poses serious environmental Beyond moral suasion, sustainability proponents outside the
and occupational risks in the Amazon regions of Peru, Brazil, host country have little direct power to force mining companies to
Bolivia, Colombia and Venezuela. However, the issues at stake and adopt best practices and to pressure governments to promote
strategies for resolving problems associated with this type of equity. Nonetheless, developed country governments and multi-
mining are very different and thus the topic of a different line of lateral organizations can do more than merely insist upon
research. transparency and a mechanistic application of rules regarding
Given its tiny direct economic contribution in several countries, indigenous consultation. They can cooperate in building the
many activists ask, ‘‘Why not just stop mining altogether?’’ technical capacity of environmental agencies in Latin America;
Declarations of moratoria in El Salvador, Costa Rica and Honduras they can end subsidies to mining companies in the form of low cost
notwithstanding, the prospects for moratoria elsewhere are poor. financing and trade promotion; they can deny the use of trade
Section I discusses the economic role of mining in Latin America, tribunals to intimidate governments that seek greater control over
including its contribution to GDP, exports, and tax revenue. Mining mining activity; and they can redefine how multilateral agencies
dominates the economies of Bolivia, Chile and Peru, and elsewhere promote mining as a path to poverty alleviation.
the allure of potential growth driven by mining has proven Changes must also come from within Latin America, from
irresistible.3 While it is true that until about 2004 mining firms governments that value social inclusion and ecological integrity as
paid few taxes, this has changed in recent years as tax holidays the essence of development. This entails enforcing environmental
have expired. The payoff to governments – which have proven standards, establishing credible mechanisms for public participa-
incapable of tax reform in other areas – often outweighs incentives tion in mining policies, resolving conflict over entitlement to
to protect those hurt by mining. mineral revenue, providing economic security for vulnerable
Industry representatives insist that modern techniques can populations, and securing the sovereignty of domestic courts.
minimize environmental damage, an issue taken up in Section Even with such efforts, mining will be a dirty process that imposes
2. Many risks such as those from spills of cyanide can be reduced, substantial costs on local communities and habitats.
but the scale of natural disruption associated with low-grade ore The challenge of sustainable mining is likely to persist well into
defies easy remedy. By its nature, surface mining destroys the future, despite a recent decline in mineral prices. As Asian
ecosystems and creates hazards from acid mine drainage that wealth grows, the demand for minerals will rise in the long term,
persist for decades. Because each mine poses a unique set of risks, even if prices remain volatile. The question is whether Latin
uncertainty clouds environmental assessments. And where the American institutions – and those outside the region that frame the
impact is on disenfranchised poor people who lack access to rules of investment, trade and economic aid – can make mining
healthcare, claims of long-term health effects are easily dismissed more equitable and environmentally sound.
as unrelated to mining. Yet even if benign mining were feasible,
few environmental agencies have the resources and political 2. Why not just stop? The mineral boom and its significance to
mandate to strictly enforce strict mining laws. International Latin American governments
tribunals, created as a result of trade agreements, have exacerbated
policy failures by undermining the role of already weak domestic Why do governments not act more decisively to defuse conflict
environmental institutions. by limiting mining activity? Only Chile, Peru and Bolivia draw
The challenges of distributional governance are addressed in more than a quarter of export revenues from hard minerals.
Section 3. Inconsistent property rights, patterns of regional Elsewhere – in most of Central America, Brazil and the Dominican
inequality, and a lack of alternative employment opportunities Republic – the sector has been too small to drive national
confound efforts to compensate those who suffer a loss of development. Mining typically accounts for 1% to 3% of GDP in
these countries (see Table 1). The employment impact of mining is
2 equally small: according to CEPAL, it accounts for less than 3% of
In much of the region, ore grades are low and labor-intensive underground
mining is uneconomical. Even Chile, home to the world’s largest underground employment, even in Chile and Peru (United Nations, 2013).
copper mine (El Teniente) and renowned for the rescue of miners trapped in Fiscally, many mining companies paid little or no royalty tax until
Copiapó, holds four of the world’s ten largest open-pit copper mines (Mini- recently because of tax holidays written into contracts under
ngtechnology.com, 2013). neoliberal regimes eager to attract investment in the 1990s.
3
Except in Chile, almost all mining is managed by the private sector. This is true
even in socialist Bolivia, where the San Cristobal mine managed by Sumitomo of
Despite mining’s relatively minor economic impact, nearly
Japan produces half of the country’s mineral exports. In socialist Nicaragua, where every Latin American country has been drawn into mining
gold is one of the top five exports, public sector mining is negligible. exploration and extraction in the past decade – in part due to
 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84 75

Table 1 Table 2
Mineral exports as a share of exports and GDP, 2013. Mineral prices, 2002–2012 (2002 = 100).

Country Mining as a share Mining as a share Commodity 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
of exports (%) of GDP (%)
Copper 100 114 189 249 440 462 452 338 510 614 549
Argentina 6.1 0.8 Tin 100 130 207 174 210 349 434 325 480 629 504
Bolivia 25.6 10.2 Iron 100 91 114 175 203 206 299 230 361 588 469
Brazil 20.6 2.2 Molybdenum 100 137 534 904 718 920 907 306 447 452 369
Chile 59.2 16.5 Gold 100 116 130 142 192 222 278 310 390 501 530
Colombia 6.7 1.0 Silver 100 106 145 158 249 290 325 308 413 731 656
Costa Rica 3.2 0.7 Zinc 100 118 147 200 482 535 276 229 347 406 353
Dominican Republic* 14.2 1.7 Source: Baca et al. (2013), Vigilancia Peru, Informe N. 17: p. 11, based on Central
Ecuador 2.8 0.8 Bank of Peru data.
El Salvador 4.9 1.1
Guatemala 7.8 1.5
Honduras* 8.3 2.2
Mexico 5.7 1.7
Nicaragua* 17.3 4.4 to its ecotourism industry. Guatemalan leaders considered (but did
Peru 57.7 11.9
not implement) a suspension of mining at Goldcorp’s Marlin site in
Uruguay 1.6 0.3
response the International Labor Organization’s concern about
Source: Author’s estimate based on United Nations Comtrade data for mineral
exports and World Development Indicators for GDP values, accessed July 24,
violations of indigenous rights. Elsewhere, calls for moratoria have
2014. Starred (*) values refer to 2012. fallen on deaf ears.
Part of mining’s attraction lies in its potential for growth. As the
global economy crashed in 2009, Peru’s gold exports rose by 21.7%
(a US$1.2 billion increase), displacing copper as the country’s
primary mineral export. On a much smaller scale, mineral exports
in Honduras more than doubled between 2005 and 2008
(Wacaster, 2009). The search for new ore, driven by high prices,
has attracted massive investment and yielded stunning discover-
ies.5 Ecuador, for example, which exported almost no gold prior to
2007, attracted investor attention (and an outpouring of opposi-
tion) after the discovery of one of Latin America’s richest deposits
of gold and silver at its Fruta del Norte site.6 Although development
of this site stalled, Chinese development of a separate site, the
Mirador copper mine, has now launched the country into large-
scale mining.
Even so, it is argued, much of the revenue from mining accrues
to transnational companies. The small share of revenue that
governments receive in the form of royalties seems at odds with
their pursuit of new concession sales. By one trade group’s
Fig. 1. Select mineral prices, 2002–2012. estimate, only 44% of mining revenue in Peru, for example, is paid
to the state and local workers (Latinominerı́a, 2010). In the case of
sharp increases in the value of these commodities (Fig. 1 and Guatemala’s Marlin Mine, which had been partly financed by the
Table 2). Gold has led this rush,4 but other minerals, including World Bank, company records show that payments to the state and
copper, uranium, zinc, lead and molybdenum, have raised similar local workers account for only 8% of revenue from the mine (On
distributive and environmental issues. Common Ground Consultants, 2010, p. 10). Why do sovereign
Outside of mineral-dependent countries, why not simply stop nations endure ecological disruption and social tumult for so little
mining? Honduran President Manuel Zelaya signed a moratorium money?
on new mining concessions in 2006 in response to mining conflicts. Certainly, elite capture is part of the problem: local stock
After Zelaya’s ouster in a coup, the moratorium was officially market development has blurred the distinction between foreign
overturned in 2013 (Reuters, 2013). President Mauricio Funes and domestic industry. In fact, some two-thirds of investment in
declared a moratorium on new mining in El Salvador in 2009, as did mining in Peru is said to come from domestic sources, often in the
Costa Rica’s President Laura Chinchilla upon her inauguration in form of joint ventures with foreign firms (World Gold Council,
2010 (McDonald, 2010). None of these moratoria closed existing 2009). One industry report indicated that Lima’s stock market, the
mines and none proved permanent. Such policies involve BVL, not only increased access to capital for mining but, to quote an
considerable risk: not only is El Salvador being sued by the Pacific industry representative, ‘‘Peruvians feel we are a local company
Rim Corporation in a DR-CAFTA tribunal for a loss in the value of its because we are listed here.’’ The same report notes that local stock
assets, but its stance on mining threatened access to US$1.5 billion market listing has facilitated ‘‘good relations with local govern-
in aid from the United States and the World Bank (Los Angeles ments’’ (Global Mining Finance, 2010, p. 44).
Times, 2010). By the same token, the cost of mining is high in El Domestic investors with access to news about geological
Salvador because a dense rural population lacks access to clean discoveries also benefit by buying surface rights of prospective
water and in Costa Rica because ecological integrity is closely tied mining properties from rural landholders. They can then sell
surface rights to mining companies, reaping controversial benefits,
as local residents complain they have been underpaid for their
4
From 1995 to 2004 (before the boom in prices), gold attracted at least 60% of
mining exploration activity in Latin America in terms of sites, and copper
5
exploration accounted for 18% (Wilburn, 2005). China’s construction industry Between 2003 and 2010, annual investment in mining exploration increased
supported a fourfold increase in Chinese investments in copper mining between six-fold in Latin America, from US$0.56 billion to US$3.1 billion (Acquatella, 2013).
6
2002 and 2009 (Global Mining Finance, 2010, p. 38). India’s growth has fueled Interestingly, despite massive inferred deposits at Fruta del Norte, this site
demand for gold, most of which is used for jewelry. remained undeveloped as of 2014 because of disputes over Ecuador’s tax rates.
76 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84

land. Where literacy rates are low and access to mining Table 3
Mineral sector contribution to internal revenue in Peru, 2002–2012.
information is limited, there is a pervasive sense that these deals
are exploitive rather than a reward to entrepreneurship.7 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
The government itself has a substantial interest in the mining 4% 5% 7% 11% 21% 25% 19% 11% 15% 17% 14%
sector in the form of royalties and taxes. In the case of Chile, for Source: Grupo Propuesta Ciudadana (2013), Vigilancia Peru, Informe N. 17, p. 15.
example, proposed mining taxes to finance earthquake recovery
were expected to generate an additional US$1.2 billion over three
years (Craze and Woods, 2010). In Peru, in part because of tax
It is important to view these fiscal revenues in the context of a
holidays granted during the neoliberal 1990s, canon and mining
region that seems incapable of imposing taxes on its wealthy.
royalty grew tenfold as a percent of GDP between 2001 and 2007,
Income inequality in Latin America far exceeds that in other
from 0.2% to nearly 2% of GDP (Breuer et al., 2009, p. 33). In the
regions, while tax revenues remain low. Just 4% of revenue comes
Dominican Republic, new tax rates agreed to by Barrick Gold in
from income taxes on individuals, compared to 27% in the OECD. As
2013 were expected to raise US$1.5 billion in additional revenue
Tanzi observe (2013, p. 9), ‘‘Redistribution through tax policy is
from a single mine (Dominican Today, 2013).
almost non-existent in the region.’’ Despite democratization since
The typical royalty rate for mining is a mere 1–7% of gross sales
1990, few countries have significantly reformed their tax codes to
– even Ecuador’s 5% rate is seen as ‘troublesome’ by industry
reduce inequality (Mohan, 2012). Instead, many governments rely
analysts (Global Mining Finance, 2010, p. 5). However, royalties are
on indirect taxes and extractive resource revenues to finance
only a small part of the fiscal revenue generated by the sector, often
popular social programs.
less than 10% of the total.8 Direct sources of revenue include
The ease of collecting revenue from the mining sector arguably
corporate and personal income taxes, windfall profits taxes (as
undermines efforts at tax reform. Baca et al. (2007: p. 9) argue, in
high as 70% in Ecuador), asset taxes, export taxes, municipal taxes,
the case of Peru:
taxes on the repatriation of earnings, labor taxes, import tariffs and
miscellaneous fees from transportation, registration, and water ‘‘The rapid rise in taxes of these industries – that originates in
use.9 In addition to fiscal revenue, mining companies promise a the extraordinary rise of prices of minerals and oil – generates
variety of other indirect payoffs, including landowner compensa- an optical illusion: tax pressure has passed from 13% to 16% of
tion, the transfer of technology, joint venture opportunities with the GDP with no effort by SUNAT, thus the idea of a tax reform
governments, and acceptance of local content rules. Most firms has vanished from the public agenda. . .[C]orporate groups have
also make voluntary contributions to local communities. begun to suggest a reduction of income tax rates, the
Weighing against these benefits are accelerated depreciation elimination of the ITF (tax to financial transactions), among
and amortization of investment costs, deduction of interest costs to others, which to us seem unacceptable.’’
finance projects, depletion allowances, loss carry-forward rules to
In short, while it is arguably the case that revenues paid by the
reduce taxes on profit, and outright tax holidays (regionally known
mining sector are too small (an issue addressed in Section 3), the
as stability contracts). Taken together, these can reduce actual tax
sector holds the promise of a fiscal bonanza. If the hope is that Latin
payments even where tax rates are high. Ecuador’s new
American governments will more strictly regulate the mining
2013 Mining Law, for example, allowed firms to recoup capital
sector to reduce conflict, the financial incentives to do so are
costs before incurring taxes, a step aimed at attracting investors.
generally absent.
Actual tax payments thus vary considerably across mine sites
The distributional impact of this revenue is another matter.
and over time. The controversial Marlin mine in Guatemala
Taxes and concession fees, which accrue to national governments
produced US$258 million in revenue in 2008, but generated only
(unlike royalties), constitute as much as 90% of all direct revenue
US$2.5 million in royalties and US$12.5 million in corporate
from mining projects. Argentina, Bolivia, Brazil, Colombia and Peru
income taxes despite a tax rate of 31% on earnings of US$100
distribute a share of royalties to state and local governments.
million (On Common Ground Consultants, 2010, p. 10; Goldcorp,
However, only a handful of countries – notably Peru and now
2010; Zarsky and Stanley, 2011). By contrast, in Peru, mining
Colombia – distribute more than half of total mineral revenue to
accounted for only about 4% of total internal revenue in the early
state and local governments, and many countries impose restric-
2000s because of tax stability contracts; however, by 2007 the
tions on the local use of mineral revenues (Viale, 2013).11 In theory,
sector accounted for 25% of fiscal revenue (Table 3).10 Even after
revenue at any level has the potential to finance education and
the recent precipitous decline in commodity prices, mining still
social policies to support disadvantaged groups; indeed, poverty
accounted for more than three times its earlier share in
rates have fallen sharply where mineral revenue has eased national
government revenues due to rising volumes and higher tax rates.
budget constraints. However, much of the conflict caused by
mining is related to the regional distribution of mining’s benefits,
7
particularly given who bears the burden of its environmental costs.
See, for example, video footage by Lassalle, ‘‘Eight Mayan Women,’’ on protests
in San Miguel Ixtahuacan, Guatemala. Complaints about inadequate compensation
can persist for decades: in 2014, Barrick Gold insisted that it was not involved in 3. Environmental challenges: can surface mining be done
compensatory payments in the Dominican Republic in the 1950s (Dominican cleanly?
Today, 2014).
8
See Peru’s Extractive Industry Transparency Report (2012, p. 93).
9
As an example of the range of taxes at stake, mining concessions in the Modern mining is inherently destructive. Strict environmental
Dominican Republic directly pay royalty fees, export fees, income taxes, asset fees standards can prevent the most egregious damage, but it is never
and municipal extractive industry taxes. The royalty fee is relatively small, capped entirely benign. Surface mining accounts for approximately 80% of
in value, and subject to negotiation at the time of concession. The export fee,
new mines in the Western Hemisphere.12 In mountainous areas,
comparable to royalty fees elsewhere, is 5%of the value of the mineral exported. In
addition, firms pay a 25% income tax; they are subject to an annual asset tax of 1% of
vegetation and topsoil (the ‘overburden’) are cleared from large
concessionaire value; they pay 5% of net profits from mining activity to relevant
11
municipalities; and they pay a small tax based on the mineral volume extracted Chile and Mexico maintain highly centralized control of mineral revenue. See
(Rizik and Garcı́a, 2010). Tables 5 and 6 in Section 3 for more information.
10 12
Note that there is a distinction between tax revenue and total internal revenue, As surface mines become exhausted and the technology for horizontal drilling
which includes royalties and revenue from concessions and joint ventures. This advances, there is renewed interest in underground mining but so far there are few
explains some differences in the assessment of mining’s contribution to the state. new investments in underground mines.
 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84 77

swaths of land and deposited in nearby valleys. Layers of leaching pads or in slurry tanks that drain into receiving ponds. (In
underground rock are either cast aside (‘waste rock’) or finely copper mines, a flotation process involves the use of harmful
crushed with explosives. In the case of gold mining, the crushed sulfuric acid.) The most acute crises result from spillage of cyanide
rock is exposed to cyanide to leach out valuable minerals. (Copper in transport or because of the collapse of leaching pond walls.
mines use sulfuric acid.) The pregnant ore solution is treated Stronger pond walls, coupled with the construction of secondary
chemically and electrically to release minerals, which are then overflow ponds can reduce leakage, but collapses continue to
refined at smelters. occur. In June 2010, for example, 21,430 m3 of cyanide-tinged
Environmental problems emerge at almost every stage of this wastewater spilled from the Caudalosa Chica mine into Peru’s
process: Opamayo River, affecting animals as far as 70 km away (Guerra and
Isabel, 2010). Copper mines are not immune to such risks: in 2014,
 The initial clearing destroys productive topsoil and forests; a massive spill of copper tailings waste tinged with sulfuric acid
 Waste rock is dumped in nearby areas, destroying additional occurred in northern Mexico.
habitat; Recently, there have been efforts to minimize such risks.16
 The use of explosives damages buildings and stresses wildlife Roads leading to mines have been widened to improve transpor-
and livestock, and dust from these operations causes respiratory tation safety. In well-managed mines, the processed cyanide
problems; solution is now captured and recycled to reduce the total amount
 The leaching process uses vast amounts of water, often in very used. But because tailings retain cyanide after processing, and
dry environments; cyanide takes years to break down naturally, runoff from spent
 Cyanide leachate poses a health threat if holding pond walls are tailings poses a serious threat in the long run. For many years,
weakened by rain or earthquakes; cyanide spills have also mining companies simply ‘‘rinsed’’ tailings with fresh water to
resulted from transportation to and from mines. Even diluted, dilute cyanide runoff, but the vast amount of water required raised
cyanide kills fish, causes skin rashes and sickens livestock; objections, as did the still-toxic runoff. Tailings are too voluminous
 Tailings – vast quantities of finely crushed and processed ore rock to retain in double-walled vats, and efforts to bury tailings have not
– must be disposed of safely once they have been exposed to proven durable or are seen as too costly. Instead, tailings ponds are
cyanide; lined with clay or geosynthetic material and underground
 Acid mine drainage (AMD)13 results from the exposure of sulfide- monitors are installed to alert managers to leakage. Dam walls
rich crushed rock (tailings and waste rock) to rainfall. AMD are also engineered to withstand earthquakes and extreme
carries heavy metals such as aluminum, arsenic, cadmium, lead, rainwater loads.
mercury, nickel and zinc that would otherwise remain buried in Contemporary mines also use a process developed by INCO (or
intact rock;14 and one similar) to transform cyanide compounds into more stable
 Smelting, often done off-site, causes severe air pollution, cyanates and ammonia, both of which are significantly less toxic.
particularly if modern pollution controls are not in place. The INCO process is not expensive, but its monitoring is difficult
because the appropriate levels of admixture depend on season,
These problems are widely recognized. The question is whether alkalinity and the presence of other metals. Post-INCO tests for free
recent mitigation efforts sufficiently protect local residents and cyanide can miss weakly bonded metal cyanides and thiocyanates,
ecosystems. requiring tougher standards than have been applied in the past.17
In theory, strict environmental oversight can prevent the most Moreover, anticipating the concentration of these diverse bypro-
egregious damage and minimize health risks. However, open pit ducts in runoff depends on understanding local hydrology. A
mining will always disrupt habitats, as mountaintop removal and process well within the grasp of most chemists becomes less
rock crushing destroy both the target area and disposal sites. straightforward when the scale of operation is vast, the reactants
Reclamation, or an effort to put soils back together in their original have an inconsistent chemical composition, and erratic seasonal
form, rarely yields an exact recreation of the original ecosystem. influences are in play. Thus the effectiveness of cyanide manage-
Reconstructed slopes are typically unlike the original terrain, ment is still the source of considerable conflict.
vegetation establishes itself in new patterns, and drainage patterns Equally problematic is acid mine drainage (AMD), caused when
change. Biodiversity suffers. crushed rock is exposed to water, regardless of whether or not it
Mining’s visible affront is only part of the problem, however. carries cyanide. Where ore rock is rich in sulfides, as it is
From a public health perspective, the most serious problems throughout the Andes, acid runoff carries with it harmful elements
involve risks that are hard to assess. These arise from cyanide and that remain on broken rock surfaces.18 In addition to targeted but
sulfuric acid leakage, long-term exposure to acid mine drainage, potentially toxic ores (especially copper and nickel) AMD can carry
respiratory problems from dust inhalation, and altered water traces of lead, arsenic, aluminum, and manganese. Toxic levels of
quality caused by the diversion of existing water supplies. arsenic can be found naturally in undisturbed groundwater and are
Cyanide is the most frequently mentioned environmental risk known to cause skin lesions and bladder and lung cancer. Because
associated with gold mining. Yet is it so central to modern mining arsenic is commonly found alongside gold, the combination of
that a lack of alternatives undermined a resolution by the European AMD-borne arsenic and water supply disruption can exacerbate
Parliament in 2010 to ban cyanide use within the EU.15 Gold is exposure that may already be too high.19
extracted by filtering a cyanide solution over crushed rock on heap The common response to AMD is to backfill tailings and waste
rock into open pits, add binding agents such as bentonite or
13
cement, and seal it ‘permanently’ from percolating water. This
AMD is referred to as acid rock drainage (ARD) in much of the industrial
literature.
14 16
Mercury is not widely used as a reagent in industrial mining, but it often results The International Cyanide Management Institute disseminates standards for
as a byproduct due to mercury content in the ore. It is extensively used in artisanal cyanide production, transport, on-site use and emergency response. See
mining. www.cyanidecode.org.
15 17
The difficulty of safely managing cyanide use in mining prompted a resolution For a fuller discussion, see Dzombak et al. (2013).
18
by the European Parliament in 2010 to ban cyanide use in mining. On review, the EU Acid Mine Drainage is typically associated with sulfides, which contribute to
Commission rejected such a ban, claiming that strict safeguards could protect the acidity and metallic mine drainage. Sulfates, also commonly exposed by mines, are
environment and that a lack of alternative technologies would mean a loss of not usually regulated as part of AMD. They are not toxic but can cause diarrhea.
19
employment (European Union Commission, 2010). See Straskarba and Moran (1994).
78 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84

strategy can work in the short run provided the hydrology of the miscommunication exists among stakeholders . . . the term
mine is well understood, but permanent covers have not proven ‘misinformación’ was heard every day.’’ Not only is regular
durable over time.20 Neutralization (usually with lime) and monitoring necessary to prevent chronic low-level exposure,
mineral precipitation can also succeed, but this method requires but safety and risk analysis is important to avert accidental
constant oversight if the waste rock is rich in sulfides that may spillage of acutely toxic tailings water, particularly in the context of
generate sulfuric acid. seismic areas.26
Absent credible official monitoring of environmental impacts, Although it tends to get less attention than water, air pollution
misinformation and speculation circulate as evidence of toxicity.21 is also a significant hazard near mines. It includes dust from rock-
In response to early accusations of pollution at its Marlin mine, crushing and explosions, exhaust from heavy vehicles, and gaseous
Goldcorp referred to a study by the Guatemalan Ministry of Health, emissions from melting and fluxing furnaces that carry elevated
Ministry of Environment and Natural Resources and Ministry of levels of airborne mercury, arsenic and other metals, depending on
Energy and Mines demonstrating ‘‘there is no evidence that the ore content (ELAW, 2010, p. 12).27 Dust is a significant challenge
community water supplies are contaminated and that they are fit for firms: beyond paving roads, most strategies involve spraying
for human consumption. The Government also stated that an water and chemicals to bind loose rock. Where water is scarce, dust
assessment by the Ministry of Health and Social Welfare did not levels tend to remain high.
detect any disease linked to suspected contamination produced by Except for incidents of acute poisoning, as in the case of toxic
the Marlin Mine’’ (Goldcorp, 2010, p. 1). A closer look, however, spills, health problems due to acid mine drainage, cyanide and dust
showed that this report was based on a single dry season visit in can easily be attributed to other illnesses, since many rural Latin
the early stages of mine expansion.22 Later studies (Goldcorp, Americans lack access to doctors. Evaluation of water quality is
2012) involved more extensive sampling, but by then conflict had also problematic in poor areas: more than a third of rural
escalated and Goldcorp’s credibility within the community was Guatemalans and Salvadorans lack access to piped water on their
lost. premises, much less to water that is monitored for contaminants
At the same time, community organizations lack adequate data (World Health Organization, 2014). In some cases, illnesses are the
to prove toxicity. Some NGOs have blamed Central American mines result of a combination of environmental and social factors; cancer
for skin rashes, respiratory disease and gastrointestinal disor- and emphysema, for example, can be exacerbated by mining but
ders.23 Photos of residents with black lesions and irritated skin are may also stem from smoking, indoor wood stoves and other risk
suggestive of cyanide exposure, but evidence that can serve in a factors. Understanding the extent and causes of chronic exposure
legal context is missing (Comisión Pastoral Paz and Ecologı́a, 2009). requires baseline health data that tends to be absent in poor
A widely disseminated analysis (Basu and Hu, 2010) has been communities.28 Without it, firms have a free hand to deny
quoted by the media as finding that ‘‘a sample of residents living responsibility for illnesses that arise near mines.
near the mine have higher levels of mercury, copper, arsenic and Some governments lack the capacity – or the will – to
zinc in their urine, and of lead in their blood, than a sample of implement precautionary environmental laws in poor rural
persons living seven kilometers away’’ (Guatemala Times, 2010). communities.29 Often the enforcing agencies’ budgets depend
However, the report itself – an admittedly preliminary effort to on mineral revenues and their mandate is to enforce property
counter company claims – was based on a single trip to Guatemala rights, including rights to use local water. Several countries have
and showed no toxic levels of contamination.24 Similar efforts by only recently separated the agencies responsible for environmen-
activists to use outside experts to assess pollution at the San Martin tal oversight from those that promote mining. Even this does not
mine in Honduras and the El Mauro mine in northern Chile ensure autonomous oversight or inter-agency cooperation: the
have been dismissed as inconclusive, biased, corrupt and even Colombian mining agency (ANM) recently granted a ‘national
criminal.25 interest’ exemption for mining in a protected area to counter a
Monitoring by religious organizations and nonprofits – and prohibition by the Ministry of the Environment and Sustainable
counterclaims by the mining companies – are a poor substitute for Development (Cohen, 2013). In the poorer countries, authorities
effective government oversight, particularly when pollution risks that might enforce environmental rights lack the technical
are prospective rather than immediate. To quote Basu and Hu resources and appropriate standards to monitor mines. Political,
(2010, p. 15), ‘‘There is a need for an enhanced and expanded drug and gang violence and corruption can also undermine the
ecological research study to monitor environmental quality on entire structure of government oversight; indeed, many of the
spatial and temporal scales. Such a study should include several violent disputes described at the outset of this paper have been
monitoring sites, more than are currently being tracked by various dismissed as unrelated to mining.
organizations; each site should be monitored regularly – several
times per year – and over many years . . . [M]uch distrust and 26
Even diligent oversight is subject to criticism. According to geoscientists
Younger and Robins (2003, p. 5), ‘‘more environmental damage is wrought by
polluted drainage from abandoned workings [AMD] than from waste rock/tailings
20
See Taylor et al. (2003). The authors found that termites, ants, root growth, and [cyanide],’’ yet modeling the hydrology and chemistry of a mine site over several
the shrinkage of clay led to water intrusion over time. While the technology exists decades is difficult. Ribbe et al. (2008) show that by allowing the removal of the
to prevent such leakage, the scale and time horizon involved make durable closure most contaminated third of water samples as statistical outliers, Chilean officials
costly. may undersample seasonal contamination caused by a mine.
21 27
During surveys, comments included ‘‘river is dangerous,’’ ‘‘stopped using the Mining’s most egregious air pollution problems, caused by smelting, have been
river completely three years ago,’’ and ‘‘if cattle die from using the river then who urban. La Oroya, Peru was on the Blacksmith Institute’s list (Blacksmith Institute,
knows what will happen to us’’ (Basu and Hu, 2010, p. 16). 2007) of the world’s most polluted places in 2007 because of a smelter owned by
22
The report is available on the website of Guatemala’s Ministry of the Doe Run. Disputes about responsibility for the cleanup involve arbitration under the
Environment, http://www.marn.gob.gt/documentos/novedades/marlin.pdf. US-Peru Free Trade Agreement. Tighter smelter regulation is credited with reducing
23
See http://intercontinentalcry.org/alarming-levels-of-arsenic-found-in-rivers- lead levels in children in Torreon, Mexico (Rubio-Andrade et al., 2011). In 2014, Peru
near-goldcorp-mine/ and www.rightsaction.org. tightened regulation of a smelter in Ilo (Emery, 2014).
24 28
See similar contradictions in studies by COPAE, a religious organization, and The assessment of ecosystem damage can also be problematic. Deforestation
AMAC, a community group supported by the mining company, cited in Asociación around mines in the Siria Valley, Honduras, is blamed for water shortages, but
de Investigación and Estudios Sociales (2010, p. 45). whether these are due to mining or drought is unclear, particularly as legal
25
For information on the San Martin case, see The Guardian (2009). The case in evidence.
29
Caimanes, Chile is covered in IPS News (2012). Disagreement about toxic runoff In fact, Peruvian officials adopted weaker environmental rules in 2014 to attract
persists in both cases. investment as mineral prices fell. See Shortell (2014).
 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84 79

Resolving conflict that centers on environmental damage is thus Table 4

Peruvian poverty rates by region (headcount ratios based on household data).
both an institutional and technical challenge. Policymakers com-
mitted to ensuring better oversight have a variety of technical Year Moderate urban Moderate rural
resources at their disposal: The Initiative for Responsible Mining 2002 46.4 77.7
Assurance (IRMA) disseminates a comprehensive guide to best 2004 37.1 69.8
practices in mining, including techniques to reduce the risk of 2006 31.2 69.3
pollution and strategies for public participation in setting standards. 2008 23.5 59.8
2010 19.1 54.2
In addition, the US Environmental Protection Agency publishes
2012 (est.) 16.6 53.0
detailed information about the regulation of active mines and
Source: Socio-Economic Database for Latin America and the Caribbean (SEDLAC)
Superfund cleanup of abandoned mines. To their credit, industry http://www.depeco.econo.unlp.edu.ar/sedlac/eng/statistics-detalle.php?idE=34.
standards for recycling water, engineering tailings dams, backfilling
pits, and reforesting mines have improved, with industry-sponsored
workshops now among the most detailed sources of information on and investment in the early stages of development. But because
best-practice mine remediation. Nearly all companies claim to few governments can cope with the political liability of high profit
comply with the International Cyanide Management Code. Some remittances when investments pay off, they often renege with tax
new projects take advantage of geological modeling to tap non- increases that undermine future credibility, fueling a cycle of
potable underground aquifers or to create spillways that avoid distrust. Even absent neoliberal biases, governments may find
watersheds, and others use dry tailings management to reduce themselves signing overly concessional contracts and subject to
water. Nonetheless, no company has mastered the challenge of safe accusations of corruption.
mining. Good management minimizes, but does not eliminate, risk The question thus becomes how to undo this process, given that
and environmental damage. stability contracts are intended to raise credibility and most
Environmental degradation and loss of land use have been core politicians work with short time horizons. Improving the state’s
protest themes throughout the region: surface mining destroys capacity to negotiate contracts and to audit industry costs would
ecological habitat and agricultural land, poisons water supplies, help: few governments have resolved the dilemma between taxing
uses vast quantities of scarce water, and causes air pollution, revenues (which are transparent but fail to account for costs at
nearly all of which violate contemporary environmental laws. The different sites) and taxing profits (which requires oversight of
distribution of economic benefits has been a secondary issue in industry expenses).31 Stronger in-house engineering skills can help
public debate – perhaps because legal systems offer so few to define probable values for contract negotiations, and better
distributional remedies – as discussed below, economic equity is auditing can prevent overpricing of imported inputs and under-
intertwined with issues of environmental justice that incite pricing of exports. Increasing marginal tax rates, clearly defined at
demonstrations. the outset, can reduce the uncertainty and political pressure
associated with volatile commodity prices. In fact, in recent years,
4. Distributional challenges: equity and social responsibility in better-trained legal teams have written contracts that anticipate a
mining regions wider range of market circumstances.
Internal distributional conflict, on the other hand, is much more
Mining involves two distinct distributional contests: the difficult to resolve. Before turning to this, however, it is worth
partition of revenues between the state and foreign mining noting that national governments often implicitly negotiate on
companies, and the distribution of revenues from national behalf of local communities by selling mineral concessions and by
governments to state and local residents. giving away water rights and creating expectations of lax
The problem of overly generous tax concessions to mining environmental enforcement. Often it seems that local communi-
companies is complex, as noted earlier. In some cases the inequity ties are in conflict with both corporations and their own national
is a historical legacy of neoliberal excess in the 1990s; in others, government.32
concessional royalty rates are offset by other tax levies, and the As in centuries past, mining is widely criticized for failing to
issue is whether the full burden of taxation over the life of a mine – raise the standard of living in local and indigenous communities.33
a difficult measurement task – is adequate. Several regimes, from Hinojosa (2009, p. 1) points to ‘‘the paradoxical situation of Andean
leftist Venezuela to more conservative Chile, have rewritten regions in countries experiencing growth, increasing expansion of
mining tax codes, added supplementary charges or renegotiated extractive industries (mineral metals and fuels) and recurrent
contracts with mining companies in recent years. poverty and/or inequality.’’ In Peru, for example, some municipali-
In general, developing countries have fared poorly in ex ante ties have benefited much more than others from mining. While
negotiations with mining companies, eliciting criticism for partici- poverty rates have declined in the past decade, rural poverty
pation in a ‘race to the bottom.’ In fact, in the 1990s and early 2000s, remains sharply higher than urban poverty (see Table 4).34 The
Chile and Peru charged no royalties at all in an effort to attract same is true in non-Andean countries. Even if many rural
investment, and Honduras’ effective royalty rate after allowances
was a mere 0.1%.30 They, like others, have sought to remedy this with 31
In fact, some taxes are based on acreage, which has no connection to mineral
ex post adjustments. The problem is that in repeated negotiations, a value. Guatemala, for example, imposes a canon based on surface area for both
loss of credibility leads to greater upfront concessions. exploration and exploitation. See Invest in Guatemala (2014).
32
Hogan and Sturzneggar (2010) argue that these ex post Not all internal distributional conflicts involve communities per se. In Bolivia,
recent mining conflicts have centered on the extent to which mining cooperatives
adjustments lead to a loss of credibility in repeated negotiations
can continue to partner with large scale mining to take advantage of tax breaks.
and ultimately to the need for greater upfront concessions. Because 33
Whether minerals contribute to growth or present a ‘natural resource curse’ has
extractive industries involve considerable up-front capital, the risk been debated in the economics literature. Sachs and Warner (1995) were widely
of expropriation or tax increases during the profitable stage can be cited for their contention that resource-poor economies outperform resource-rich
countries in economic growth. For a discussion of this claim, its critics and policy
costly. As a result, states with poor credibility must offer attractive
responses, see Frankel (2010).
terms such as tax holidays to secure needed technical expertise 34
According to the World Bank (2013), ‘‘the gap between rural and urban areas [of
Peru] remains large, especially in three of the country’s regions: Apurı́mac,
30
For an analysis of concessions made in the 1990s and 2000s, see ChristianAid Cajamarca and Ayacucho.’’ Cajamarca and Apurı́mac are the top two destinations
(2009). for mining investment in Peru (Grabski, 2012).
80 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84

communities are not hosts to mining operations, the sense that its Organization’s Convention 169, a binding agreement to protect the
benefits are unfairly distributed is pervasive. rights of indigenous peoples and to consult with them on issues
Who should benefit from mineral wealth? Local communities, that affect their welfare. ILO 169 requires that indigenous people
the communities most in need, or the country as a whole? Answers are ‘able to engage in free, prior and informed participation in
to these questions raise issues of fiscal centralization, absent or policy and development processes that affect them.’ It does not
insecure land tenure in rural areas, vague delineation of the rights require community consent. The 2007 United Nations Declaration
of indigenous communities, and outright repression by authorities on the Rights of Indigenous People (UNDRIP) sought to strengthen
with access to the means of force. further the control of indigenous communities over their territo-
Throughout the region, subsurface mineral rights are owned by ry.37 However, ILO 169 and UNDRIP do not bind signatories to
the state, regardless of surface rights. National governments hold create specific laws, nor do they clearly identify who shall be
the power to lease mineral rights – known as concessions – to land protected as indigenous nor under what circumstances. Most
beneath private property, indigenous land and national protected signatory countries have some measures in place to protect the
areas. As a region richly endowed with minerals, this has led to rights of indigenous people, but these tend to be vague and
permitting for exploration of vast swaths of land, on the order of as contradict other laws. As a case in point, Ecuador’s 2008 constitu-
much as half of national territory. Surface right holders are entitled tion recognizes the right of indigenous groups to prior consulta-
to compensation for loss of land use as a result of mining, but the tion, but the right is not operationalized with enabling legislation,
distinction between surface and underground values is poorly and the courts upheld the Mining Law of 2009 over the opposition
delineated. Even where land titling is clear – and in much of rural of indigenous groups.
Latin America, it is not – compensation for the loss of surface value Notwithstanding external political pressure – the ILO, for
is a matter of asymmetric negotiation or government fiat. example, forcefully demanded the closure of Guatemala’s Marlin
Moreover, many publicly held rural lands are customarily used mine – indigenous communities have exercised little control over
for grazing. mining negotiations anywhere in the region.38 As Bebbington
Because of this, there is a sense in Latin America that everyone (2009: p. 18) puts it: ‘‘The Garcı́a, Morales, and Correa govern-
affected by mining disturbances, whether a putative landowner or ments each approach the domestic political ecology of extraction
not, should have a voice in negotiation and may be due in a remarkably similar way. Put simply: These resources belong to
compensation. ‘Stakeholders’ range from migrant workers to local the nation, not to local or indigenous populations. They will be
shopkeepers. While some local residents will gain jobs in mining, developed, consultation will be a managed process, and dissent will
most will find it difficult to secure alternative employment, not be brooked.’’
creating internal differences within communities. In practice, A few recent cases suggest that this situation may be changing.
decision-making is not so much an adjudication of rights as a In Chile, for example, the Pascua–Lama and El Morro projects were
negotiation of interests among groups with different levels of suspended in 2013 due to failure to consult indigenous groups; in
power and influence. Bebbington (2011) has described the conflict Argentina, the Supreme Court upheld the results of a Mapuche
in the extractive sector as part of a larger process of institution- community vote to stop the Campana Mahuida mine in Neuquén;
building and democratization, as communities and formerly and in Colombia, the courts have upheld the rights of several
disenfranchised groups seek to define and assert new rights and indigenous and Afro-Colombian communities to consultation and
to resolve internal differences. some municipalities have held plebiscites on mining.39 Private
In emerging democracies, the scale of mining can overwhelm firms have also voluntarily withdrawn from projects in the face of
the capacity of local institutions. De Echave (2005) notes that opposition: the suspension of plans for the Conga mine in Peru has
nearly two fifths of Peruvian agricultural land belongs to rural been widely attributed to local protests. Nonetheless, such
communities, and of them, more than half are affected by mining.35 progress is slow, often of temporary consequence, and now
He argues, thwarted by government efforts to counter declining investment
as commodity prices fall. In two telling instances, Ecuador
It appears to entire populations in Peru that there is a lack of
proceeded with Chinese investment in the Mirador mine over
control over the territorial expansion of mining, a lack of means
well-organized Shuar opposition, and in 2013 Peruvian officials
to protect their rights, and a lack of effective instruments to
declined to recognize Quechua speakers as ‘indigenous’ and
safeguard the natural resources of the country: 82.5% of land in
entitled to consultation.
the district of Cajamarca, where Cerro Quilish is located, is today
How much local communities benefit from mining revenue
occupied by mining concessions; in the case of the neighboring
varies considerably. Because the state owns all mineral rights,
district of Encañada it is 91%. In Tambogrande it has reached
revenues pass through the central government. In turn, it shares a
almost 50% of the territory. This presence of mining, even at the
portion of revenues with state and local governments. Whether this
exploration phase, exerts strong pressure on the control and
is fair or not depends on how one views the idea of national
management of natural resources strategic to the life of these
ownership of mineral rights. Moreover, not all mining communities
populations. The perception of the communities is that the
current legal framework grants them neither the channels nor
the instruments with which to defend their rights. (p. 124) 37
In fact, 14 of the 22 countries that have ratified ILO 169 are Latin American.
UNDRIP, which is non-binding, was approved by most countries in the world,
Indigenous communities, which represent only a portion of though the US, Canada, Australia and New Zealand voted against it. For the full text
affected groups, face somewhat different legal circumstances, of ILO 169, visit http://www.ilo.org/indigenous/Conventions/no169/lang–en/
although in practice they have not fared much better.36 Most Latin index.htm.
38
In Bolivia, while some mining conflicts involve consultation with indigenous
American countries have signed onto the International Labor
groups, Morales has masterfully merged the politics of nationalization, mining
cooperatives, indigenous rights, and national ethnic identity so that few cases
35
The scale of concessions has alarmed opponents. Concessions grant permission center on ILO 169 obligations per se.
39
for exploration and thus are not an indication of the size of the eventual mine. In 2013, a vote held in the municipality of Las Piedras, Colombia, rejected
However they cast uncertainty about property use across wide areas. mining. Under Colombia’s law on plebiscites, the result of the vote is binding since it
36
Ejidal land in Mexico poses unique challenges due to reforms in the 1990s that met with sufficient turnout. However, representatives from the Ministry of Mines
encourage privatization and land transfers. Together with the rental of land for large and Energy claim that authorization by the Ministry or by the national
scale mining, these reforms have weakened ejidal governance and divided environmental permitting authority takes precedence over popular votes or
communities. plebiscites (Viera, 2013).
 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84 81

Table 5
Distribution of Canon Minero in Peru.

Remaining 50% distributed to subnational governments

Beneficiary Percent received How funds are distributed

Mining Canon (50% goes to the The local government(s) where natural 5 If the resources are spread across multiple
national government) resources are found municipalities, this share must be split evenly
Other local governments in the province 12.5 According to (1) population and (2) unmet
where natural resources are found basic needs
Other local governments in the department 20 According to (1) population and (2) unmet
where resources are found basic needs
The government of the region where natural 12.5 80% goes directly to the regional
resources are found government, 20% goes to universities
Source: Peru’s Extractive Industry Transparency Report (Peruvian Ministry of Energy and Mines, 2012).
Note: Since 2002, departments have been replaced by regions. Despite this, the law was written with reference to departments.

Table 6
Decentralization of mining fiscal revenues to subnational governments.

Country Type of revenue Revenues collected Mechanism to compensate Percent of revenue

non-producing regions? distributed

Argentina Royalties 1–3% value of production No 12.8

Bolivia Royalties 1–7% of gross sales No 37.3
Brazil Royalties 0.2–3.0% of net sales No 9.9
Chile Patent and sales taxes (for copper) 0.5–5.0% of sales No 0.0
Colombia Royalties 1–12% of value at mine site Yes 51.5
Ecuador Royalties 3% value of production No No data
Mexico All federal revenues No 0.0
Peru Royalties 4–18% of profits No 56.9
Income tax 30% of profits
Source: Viale (2013).

are poor, and many of the poorest communities do not administrative capacity to formulate such proposals were at a
have minerals. Efforts to redistribute revenue back to areas from disadvantage. In recent years, as restrictions on local control have
which the minerals are extracted has led to further claims of been eased, critics have complained about money wasted on sports
injustice, as some richer communities benefit while poorer facilities and other ‘trivial’ expenditures, but these complaints also
communities do not. raise bigger questions about the process of participatory gover-
Because taxes, not royalties, constitute the bulk of revenue nance.40
derived from mining projects, it is often difficult to assess the full Poorly defined rights and norms of internal redistribution fuel
distribution of mineral revenue. Demands for access to a wider conflict. In fact, some argue that it is this ambiguity, and not
range of mineral revenue led Peru to change its distribution laws in necessarily the revenue received per se, that causes violence.
2004. It now allocates 50% of income taxes (not royalties or other Democratization has not closed differences in political power that
revenues) from mining (Table 5). prevent local communities from successfully opposing mining.
Local and regional governments also receive 100% of royalty Instead, the failure to provide marginalized rural groups with
revenues in Peru, although royalties are small relative to income representation in legislative processes, the right to control rural
taxes. The national government retains 100% of special mining land use, and a fuller voice in decisions that affect local livelihoods
taxes (gravamen and impuesto especial de la mı´nerı´a), so that exacerbates conflict. Decisions continue to be taken at the national
roughly half of direct revenues are shared (Peruvian Ministry of level while costs are borne locally, and too few judicial avenues
Energy and Mines, 2012). Whether these distributions affect the exist for nonviolent pursuit of remedies.
allocation of other fiscal revenues, such as ordinary income and
value-added taxes (the question of additionality), is uncertain. In
5. Challenges in taking action: advocacy efforts to improve
any case, Peru and Colombia have been by far the most active in
sustainability
redistributing revenues to local governments. In most other
countries, only royalties are automatically redistributed to
Despite efforts to brand activists as ‘childish’ or ‘terrorists’ in
subnational governments (see Table 6).
some Latin American countries, there has been a global outpouring
Restrictions on the use of these funds have prevented
of support for sustainable mining. Human rights organizations
communities from using them with full autonomy. In Peru and
have worked with communities as they confront a loss of land,
Colombia, communities had initially been required to present
water rights, and livelihoods. Latin American organizations such as
well-formulated proposals consistent with national development
GRUFIDES (El Grupo de Formación e Intervención para el
plans. In Colombia, according to Arbelaez (extracted in Consiglieri
Desarrollo Sostenible) and OLCA (Observatorio Latinoamericano
et al., 2004, p. 10), ‘‘In order to have access to NRF [natural resource
de Conflictos Ambientales) have been joined by global organiza-
funds], governors and mayors should present investment projects
tions such as Oxfam, RightsAction, Physicians for Human Rights,
the feasibility of which must be previously endorsed by the
Peace Brigades International, the Pastoral Commission on Peace
Ministry of Mines and Energy, with the National Planning
and Ecology (COPAE), and ChristianAid in providing resources to
Department determining their priority. The choice of projects
affected communities. As outsiders, their role in resolving these
must take into account: regional balance, compatibility with
the National Development Plan, percentages stipulated by the law, 40
Concerns have also been raised about how regional governments will raise
the projects’ environmental, social and economic benefits, etc.’’ revenue when mineral prices decline, as few municipalities have developed
Under these circumstances, local governments that lacked the effective tax structures.
82 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84

conflicts is circumscribed as they cannot represent local residents groups. Even if it can be argued that mining revenues finances a
or engage in politics. reduction of overall national poverty,41 imposing the environ-
Using a different approach, the No Dirty Gold Campaign has mental and social burden of mining on poor communities deprives
sought to leverage global market power by educating consumers them of agency in their own development.
about the social and environmental costs of jewelry. Its strategy
focuses on engaging retailers such as Tiffany, Cartier, Walmart and
JC Penney to track their supply chains. The frequent recycling of 6. Conclusion
gold, however, hinders its identification and sustainability
certification, and the importance of purchases by speculative Mining is a destructive, risky business, yet firms are likely to
investors and central banks limits the impact of a consumer-based explore and extract minerals far into the future. Latin Americans
fair trade movement. In fact, the NDG agenda has recently shifted must decide how much mining to allow and how to regulate the
toward working alongside mining firms and national governments industry. Answers are easy to outline but hard to implement
in projects like the Initiative for Responsible Mining Assurance without strong political will:
(IRMA) to reduce the most egregious mining practices.
Until recently, some multilateral organizations have done more (1) Economic diversification – the holy grail of development policy
harm than good. The World Bank continues to fund projects, – would reduce reliance on mineral revenues. Tax reform can
although the Oil, Gas and Mining Division has changed its rhetoric. also reduce the pressure to base decisions about mine
Where it once emphasized extractive industries as sources of job development on current fiscal needs and political imperatives.
creation, fiscal revenue and technology transfer, it now offers Independent stabilization funds can help in this regard,
strategies to improve fiscal transparency and environmental although Chile’s success has not been replicated in Peru, Brazil,
monitoring. More positively, the International Labor Organization Mexico or Panama, all of which now set aside some revenue
and the Inter-American Commission on Human Rights (IACHR) from the extractive sector for broader development.
exercised rare assertions of their influence by demanding the (2) Tighter environmental oversight can limit mining to less fragile
suspension of operations at Guatemala’s Marlin mine in 2010. The ecosystems and away from critical watersheds. Compliance
IACHR also released a 2014 report titled The Impact of Canadian with the International Cyanide Management Code, stronger
Mining in Latin America and Canada’s Responsibility, which tailings pond dams, water recycling, dry tailings management,
documents instances of irregular land acquisition, displacement spillways and filtering to manage acid mine drainage, and
of communities, criminalization of resistance to mining projects, careful monitoring of mine closure can reduce risks. The US EPA
and the failure of mining companies to participate in prior disseminates technical information based on its experiences
consultation with indigenous communities (IACHR, 2014). Both with mine regulation, and IRMA provides procedural guidance
organizations work with indigenous communities and national based on experiences in the developing world. That said, even
governments to support legislation that meaningfully implements developed countries find it impossible to mine safely, as
ILO 169. evidenced by a massive tailings pond collapse in British
The Extractive Industry Transparency Initiative (EITI), created Columbia in 2014.
with the support of the UN, World Bank, IMF and industry, aims to (3) Because risk remains inherent in open-pit mining, communi-
discourage corruption and increase financial transparency. ties need more access to information about environmental
Despite its embrace in Africa, it is only slowly gaining traction risks from the outset. Communities require an accurate
in Latin America. Peru and Guatemala have earned approval as assessment of the probability and severity of potential damage,
compliant countries, and Honduras is a candidate for inclusion. as well as an understanding of underlying mechanisms such as
The EITI mission is focused on improving financial accounting, seismic activity that may influence outcomes. In the case of
which might indirectly support local communities and promote AMD, the relevant time horizon is long and subject to
sustainability (Minesandcommunities.com, 2004). It stops well discounting of future costs. Assessment of such complex risk
short of insisting on a redefinition local land rights, changes in the is not a task that rural communities can accomplish on their
redistribution of revenue, or stronger enforcement of environ- own. Environmental agencies must have the funding and
mental laws. political independence to regulate risks to community health,
Much more can be done outside the region. The Canadian and a commitment to public participation that respects the
Parliament threatened to withdraw low cost financing and trade language, literacy and scientific knowledge of local residents.
promotion from mining companies that violate human rights, but (4) Property rights and customary uses of land are still poorly
that threat proved hollow. Support of investigation into criminal defined in many rural areas of Latin America. The distinction
and environmental transgressions would reduce the sense that between surface and subsurface rights that grants national
Canadian firms act with impunity in Latin America. (The same control over land use creates inevitable tension. It not only
holds for other investing countries, including the US and now generates conflict over appropriate levels of compensation, but
China.) Instead, the use of trade tribunals such as NAFTA and DR- leads to forced displacement of residents. Moreover, traditional
CAFTA to protect investors has prevented Latin American uses of open land such as grazing may lack legal title but are
governments from exercising full sovereignty in their manage- nonetheless seen as community resources that mining firms
ment of mining and its conflicts. The Pacific Rim dispute with El appropriate.
Salvador, for example, has sown fear of a loss of sovereignty in free (5) Affirming the rights of local communities – nonindigenous as
trade agreements. well as indigenous – to control zoning, water supplies and the
The real work must be done within Latin America. Conflict over financial benefits of mining would both better link governance
the distribution of mining’s economic benefits and the burden of its to those most affected and, in many cases, reduce poverty.
environmental costs reflects deeply rooted social divisions and
poorly developed democratic institutions. Not only does the
41
distribution of surface land rights remain contentious, but the According to Bebbington et al. (2013, p. 169), ‘‘More than ever across the greater
Andean region, one sees the emergence of a development model in which the
state’s right to subsurface minerals also creates ambiguity in the extractive sector is being viewed as the backbone of a growth strategy that will
right to use land. In a region with extremely high income generate the surplus to finance the social investment and cash transfer programs
inequality, mining exacerbates hardship among many vulnerable that are viewed as pivotal to government legitimacy.’’
 A. Helwege / The Extractive Industries and Society 2 (2015) 73–84 83

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