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MINING AND CORPORATE SOCIAL RESPONSIBILITY: A NOTE ON
MINING IN PERU

David Wesley wrote this note under the supervision of Sheila Puffer solely to provide material for class discussion. The authors do
not intend to provide legal, tax, accounting or other professional advice. Such advice should be obtained from a qualified

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professional.

Richard Ivey School of Business Foundation is the exclusive representative of the copyright holder and prohibits any form of
reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization
by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing,
Richard Ivey School of Business Foundation, c/o Richard Ivey School of Business, The University of Western Ontario, London,
Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.

Copyright © 2012, Northeastern University, College of Business Administration Version: 2012-02-28

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THE MINING INDUSTRY

Surface mining imposes major social, environmental and health costs wherever it is undertaken. It
negatively impacts the health and well-being of millions of primarily poor people around the world. And
because mining is “frequently located where the ore deposits are found, often in remote and mountainous
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areas,”1 it disproportionately harms the indigenous communities who live in these areas. Yet, according to
the National Mining Association, “with the exception of agriculture, mining is the only method of
obtaining the raw materials we need to maintain our way of life.”2 The world’s energy and infrastructure
needs depend heavily on mined products. Even newer “sustainable” technologies, such as hybrid cars and
solar panels, rely heavily on mined products. In short, without mining, the world would come to a
standstill. Therefore, any policy aimed at curtailing the destruction caused by mining must be balanced
with the world’s mineral resource needs.
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Although remediation plans and pollution reduction technologies are not perfect, they are less expensive
and less harmful than cleaning up a contaminated site. In the United States, billions of dollars have been
spent on rehabilitating toxic sites, yet many will remain “polluted indefinitely” despite coordinated efforts
by governments, environmentalists and industry.3

At best, clean-up operations provide a band-aid solution for a problem that is best addressed through
prevention. Yet, many of the same mining companies that have adopted responsible mining practices in
developed countries continue to poison Peru’s water and air with impunity. Corruption within the political
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system and judiciary signal to mining companies that ignoring existing laws will result in minimal

1
Blacksmith Institute, The World’s Worst Polluted Places, New York, 2007.
2
National Mining Association, Overview of Modern Mining, http://www.nma.org/modern/5_ws.asp, accessed February 8,
2011.
3
K.B. Sauer, “Where Are We in Cleaning Up Contaminated Sites,” Albany Law Environmental Outlook Journal 4, 1998, p.
35

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penalties. Documented evidence of bribery and influence extends from local leaders to the highest levels of

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Peru’s federal government, including the office of the president and the Supreme Court.4 Against such
powerful interests, Peru’s largely uneducated indigenous people seem powerless.

Native Americans once faced the same challenges as Peru’s indigenous population. The protections they
now enjoy were achieved over a relatively short period of time through the coordinated efforts of Native

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tribes and environmentalists who built unlikely alliances with conservative ranchers and business interests.
The question is whether the circumstances that led to mining reform in the United States also exist in Peru
and whether various interests can unite behind mining reform. A comparison of mining in Peru and the
United States may help indigenous rights advocates formulate better strategies for preventing further harm
to Peru’s indigenous peoples.

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MINING IN THE UNITED STATES

The story of mining in the United States is one of rampant destruction of fragile ecosystems, contamination
of fresh water resources and annihilation of the ancestral lands of indigenous tribes. Large open pit mines
in western states were dubbed “national sacrifice areas” because of the reduced capacity for reclamation. In
1974, the U.S. National Academy of Sciences published a report that held little hope for the restoration of
arid lands impacted by mining activities.5
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Native American tribes suffered the most under U.S. mining policy, which allowed federal and state
governments to lease out large tracts of tribal lands without prior authorization from indigenous residents.
Up until the 1970s, mining companies destroyed indigenous lands and contaminated fishing grounds with
impunity. Tribes that were located on top of valuable mineral resources were forcibly relocated to trailer
parks. Many were traumatized by the experience. Others were left impoverished and marginalized. “The
per capita mean income among Navajos in 1974 was $834, as contrasted with a national mean of $4,400,”
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and unemployment reached as high as 45 per cent.6

Although the mining companies were required to pay royalties to the tribes, they did not adequately
compensate them for the permanent loss of their ancestral lands. In most cases, tax revenues paid to state
and federal governments exceeded the royalties paid to tribes. “Moreover, their use of the land is not
considered to have contributed to the long-term well-being of the local people; clauses guaranteeing Indian
employment and establishing the companies’ responsibility to repair environmental damage, for example,
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were vaguely phrased or simply not included.”7

In the 1970s, Native American tribes began to bring multiple lawsuits against mining companies for a
variety of grievances, ranging from illnesses caused by mine contamination to the ability to tax companies
on revenues generated from mining operations on native lands. Tribes also began working with the
Organization of Petroleum Exporting Countries (OPEC), non-governmental organizations (NGOs)8 and
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4
L. Bergman and B. Knappenberger, Frontline/World Stories from a Small Planet (video), PBS, Alexandria, VA, October 25,
2005.
5
E. Allen, “The Restoration of Disturbed Arid Landscapes with Special Reference to Mycorrhizal Fungi, Journal of Arid
Environments 17, 1989, 279–86.
6
D. Nelkin, “Native Americans and Nuclear Power,” Science, Technology, and Human Values 6, 1981, 2–13.
7
Ibid, p. 4.
8
Ibid.; also, R. Gottlieb, Forcing the Spring: The Transformation of the American Environmental Movement, Island Press,
Washington, DC. 2005.

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rural white farmers, ranchers and fishers, who set aside racial differences to join forces with indigenous

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tribes in protecting natural resources from a “perceived outside threat.”9

Meanwhile, public opinion was beginning to shift in favor of reform after mine disasters brought the
industry considerable unwanted media attention, such as the Buffalo Creek Flood in West Virginia, in
which “numerous communities were virtually obliterated” when a tailings dam burst.10 By the mid-1970s,

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the political environment was ripe for mining reform.

When Congress enacted the Surface Mining Control and Reclamation Act (SMCRA) in 1977, mine safety
had already improved considerably (see Table 1). The period following the enactment of the SMCRA saw
the lowest recorded number of accidents in US history, even though mining activity accelerated during the
same period.11

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The Surface Mining Control and Reclamation Act of 1977 also established the Office of Surface Mining
Reclamation and Enforcement (OSM), a bureau within the U.S. Department of the Interior. In time, the
OSM became the world leader in establishing and enforcing sound environmental policies for the mining
industry.12

The SMCRA established a floor that mining companies must meet in order to extract minerals in the
United States, leaving states free to impose stricter requirements. For example, in 2003 the State of
California introduced regulations “such that no material lies more than twenty-five feet above the original
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topography”13 and complete backfilling is required of mines located within “one mile of any Native
American sacred site.”14

Table 1: Number of Documented Mine Disasters Involving Five or More Deaths

Historic Period Coal Mine Metal & Nonmetal Total Disasters

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Disasters Mine
Through 1875 19 4 23
1876-1900 101 17 118
1901-1925 305 51 356
1926-1950 147 23 170
1951-1975 35 9 44
1976-present 16 1 17
Source: US Mine Rescue Association15
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In addition, mining companies must adhere to other federal and state laws, such as the Archeological
Resources Protection Act of 1979, which imposes criminal and civil penalties on excavation of culturally
important sites. The protection of indigenous culture was strengthened by the passage of the Native
American Graves and Repatriation Act in 1990, which protects any lands from disturbance where Native

9
Z. Grossman, 2005. “Unlikely Alliances: Treaty Conflicts and Environmental Cooperation between Native American and
Rural White Communities,” American Indian Culture and Research Journal 29, 2005, 21–43.
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10
J. Church, “The Buffalo Creek Disaster: Extent and Range of Emotional and/or Behavioral Problems,” OMEGA—Journal
of Death and Dying 5, 1974, 61–63.
11
D. Hall, “Reclamation Planning for Coal Strip-mined Lands in Montana,” Landscape and Urban Planning 14, 1987, 45–55.
12
M. Hamilton, Mining Environmental Policy: Comparing Indonesia and the USA, Ashgate, Surrey, UK, 2005.
13
A. Ochs, 2005. “Glamis Gold Ltd. — A Foreign United States Citizen: NAFTA and Its Potential Effect on Environmental
Regulations and the Mining Law of 1872.” Colorado Journal of International Environmental Law and Policy 16, 2005, 495.
14
J. Kahn, 2009. “Striking NAFTA Gold: Glamis Advances Investor-State Arbitration,” Fordham International Law Journal 33,
2009, 101–206.
15
Available at http://www.usmra.com/saxsewell/historical.htm, accessed February 6, 2011.

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American remains or funerary objects are found, and by an executive order in 1996 that prohibits activities

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that could adversely affect sacred sites.

As part of the planning process, mining companies wishing to obtain permits in the United States are
required to work with local communities and indigenous tribes to identify potential concerns and ensure
compliance with federal and state laws. This includes consultation with tribal elders, archeologists and

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environmentalists. If protected sites are identified, mining companies are often required to establish buffer
zones around sensitive areas to prevent any potential disturbance.

Once sites are approved for open pit mining, they require a comprehensive reclamation plan, which
typically involves backfilling old sites with waste rock from newer adjacent sites. The backfill is then
graded, capped and revegetated. In some cases, old mines are restored to better than original condition
through the creation of parks, wilderness reserves and recreational areas.

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PERU

Those boundless deserts [of the upper mountain regions of the South American
Highlands], full of organic life, are … among the most interesting characteristics of the
new world.
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The Indians frequently employ themselves in handicrafts, in some of which they attain a
high degree of perfection … which, for taste and exquisite finish, cannot be excelled in the
capitals of Europe. 16

Peru’s mining history can be traced back to the Inca Empire when goldsmiths and silversmiths used
“various elaborate metalworking techniques” to create exquisite objects reserved exclusively for elite
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members of Incan society.17 When the Spaniards arrived in the early sixteenth century, they “marveled at
the technology and wealth of the Incas.”18 However, within a few years, the Inca were decimated by a
smallpox epidemic that claimed the lives of millions of indigenous inhabitants across the Americas. Many
of those who survived were enslaved by the Spanish, who used them to extract gold and silver for personal
gain.

When the Spanish Crown outlawed slavery, Peru became the first colony to rise up in insurrection in 1544.
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Since then, Peru has seen numerous wars and insurrections over indigenous rights and natural resources.
Among the many native revolts that occurred during Spanish occupation, the most famous was the Túpac
Amaru uprising in 1780.19

Peru’s independence from Spain in 1821 did little to quell the violence. Its most recent civil war occurred
in the 1980s during the rise of the Shining Path Maoist guerilla movement, which purportedly “fought in
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16
J.J. von Tschudi, “Travels in Peru During the Years 1838–1842: On the Coast, in the Sierra, across the Cordilleras and
the Andes, into the Primeval Forests, Wiley & Putnam, New York, 1847.
17
G. Hörz and M. Kallfass, “The Treasure of Gold and Silver Artifacts from the Royal Tombs of Sipan, Peru: A Study on the
Moche Metalworking Techniques,” Materials Characterization 45, 2000, 391–420.
18
B.A. Somervill, Empire of the Incas, Chelsea House Publishers, New York, 2009, p. 11
19
The insurrection led by José Gabriel Túpac Amaru II, who claimed to be a descendant of the last remaining Inca rulers,
was suppressed by the colonial army. After his execution in 1781, Túpac Amaru II became an important symbol in the
struggle for indigenous rights. See G.C. Leon, “The Army of Peru and the Túpac Amaru Revolt, 1780–1783,” The Hispanic
American Historical Review 56, 1976, 31–57.

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the name of Peru’s poor” and was often (incorrectly) identified as an indigenous movement.20 In reality,

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the Shining Path demonstrated open hostility toward indigenous traditions, values and customs by banning
traditional religious and spiritual practices, replacing tribal elders with people’s councils and kidnapping
children to be fighters in the liberation army. At the same time, government troops routinely attacked rural
villages, killing all inhabitants to avoid witnesses to human rights abuses.21

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Although the Shining Path uprising officially ended in 1992, a deep mistrust continues between the
predominantly white ruling class and rural indigenous communities. As a result, NGOs working for
indigenous rights in Peru are often viewed as leftist sympathizers who cannot be trusted.

Mining in Peru

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The current state of mining in Peru in many ways mirrors the United States prior to mining reform in the
1970s. Indigenous communities are relocated at will, reclamation is rarely undertaken and accidents are
frequent.

Even when reclamation projects are undertaken, the fragile ecosystem of the Peruvian high Andes is
difficult to restore once it has been disturbed by open pit mining. One of the more ambitious reclamation
projects was undertaken at the Antamina copper-zinc mine as a condition of international funding. Of the
original 1,700 hectares mined, only 770 hectares were deemed suitable for restoration. The reclamation
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project successfully restored 400 hectares, amounting to less than a quarter of the land used by the
project.22

Mining has also made Peru’s air and water some of the dirtiest in the world. According to the Blacksmith
Institute, one of the 10 most polluted places on earth is the mining town of La Oroya. The town’s 35,000
inhabitants are constantly exposed to dangerous levels of air pollutants from the local metal smelter, which
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is owned by Doe Run Corporation of Missouri.23 La Oroya mine workers all show “abnormally high levels
of cadmium in their urine”24 and 99 per cent of the town’s children had “blood lead levels that exceed
acceptable limits, according to studies carried out by the director general of Environmental Health in Peru
in 1999.”25

In response to the Blacksmith Report, Doe Run Corporation claims to have installed equipment to curb
dangerous emissions. However, a more recent study by the Joint Center for Earth Systems Technology at
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the University of Maryland contradicts Doe Run. With the assistance of NASA's EOS/Aura spacecraft,
researchers observed pollutants emitted from Peru’s La Oroya and Ilo smelters, both of which continue to
emit pollutants at levels greater than volcanic eruptions in nearby Ecuador and Colombia. The authors note
that “most polluting smelters are now situated in developing countries, where modern sulfur capture
technology may be unavailable or unaffordable” and that “both Peruvian copper smelters are implicated in
poor local air quality and health crises.”26

20
M. García, Making Indigenous Citizens: Identities, Education and Multicultural Development in Peru, Stanford University
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Press, Stanford, CA, 2005.

21
Ibid.
22
D.J. Riehm, “High Altitude Reclamation at the Antamina Mine, Peru,” paper presented at the BC Mine Reclamation
Symposium 2002, University of British Columbia, Dawson Creek, BC, 2002.
23
Blacksmith Institute, The World’s Worst Polluted Places.
24
A. Ramírez, “Cadmium Pollution in La Oroya, Peru,” Bulletin of the Pan American Health Organization 20, 1986, 373–79.
25
Blacksmith Institute, The World’s Worst Polluted Places.
26
S. Carn, A. Kreuger, N. Krotkov, K. Yang and P Levelt, “Sulfur Dioxide Emissions from Peruvian Copper Smelters
Detected by the Ozone Monitoring Instrument,” Geophysical Research Letters 34, 2007, L09801.

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OTHER STAKEHOLDERS

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The ability of Native Americans to change U.S. mining policy was largely dependent on alliances with
powerful special interests, including environmentalists and white ranchers. Peru’s history of internal
conflict makes building alliances much more difficult. In addition to a general lack of trust, indigenous
rights groups must also overcome the fact that most of Peru’s population is concentrated in major cities, far

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removed from the ongoing plight in the highlands.

For Peru’s middle-class urban population, the problem of mining in the country’s remote highlands is
largely hidden. Yet, the contamination of the Peruvian highlands watershed has important implications for
all Peruvians. Studies in various scientific and medical journals have demonstrated the adverse health
effects that mining has on Peru’s urban population.

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For instance, the Rimac River provides 71.8 per cent of drinking water for the city of Lima, home to one-
third of Peru’s 30 million citizens, but contamination of the river with mine tailings has resulted in
dangerous levels of copper, lead, mercury, cadmium and other metals.27 In one Lima district, medical
researchers found a strong link between “mine tailings and the appearance of precancerous lesions such as
arsenical keratosis.”28

Agriculture has long been Peru’s most important industry, earning foreign exchange surpluses until 1975.
As mining has grown in importance, agricultural earnings have plummeted, leaving rural farmers more
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destitute than ever. In general, as mining grows in importance, “a country’s agricultural comparative
advantage” diminishes.29 However, unlike farming, which can be sustained over generations, minerals are
an exhaustible resource that offer only short-term benefits. Once the minerals are extracted, the land can no
longer generate revenues. Reclamation “can restore soil quality over time,” but if it is not done properly,
the land may never be suitable for agricultural use.30 In Peru’s fragile alpine ecosystems, reclamation “may
well be impossible over any reasonable time-scale.”31
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Mining may also be responsible for a dramatic decline in Peru’s fresh water fisheries. Prior to the 1970s,
Peruvian fisheries exported 250,000 kilograms of canned trout per year to Europe and North America.
Then, suddenly and “for unknown reasons” wild fish stocks experienced a drastic decline. Notwithstanding
the Peruvian government’s efforts to restock rivers and lakes, Peru’s wild fish stocks never recovered to
pre-1970 levels.32
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27
W. Méndez, Contamination of Rimac River Basin Peru, Due to Mining Tailings, Royal Institute of Technology, Stockholm,
2005.
28
W. Ramos, C. Galarza, G. Ronceros, F. De Amat, M. Teran, L. Pichardo, D. Juarez, R. Anaya, A. Mayhua, J. Hurtado and
A.G. Ortega-Loayza, “Noninfectious Dermatological Diseases Associated with Chronic Exposure to Mine Tailings in a
Peruvian District,” British Journal of Dermatology 159, 2008, 169–74. According to the study, “out of 230 adults, 121 were
exposed and 109 were not exposed to mine tailings...71% of the exposed cases had some noninfectious dermatological
disease while in the nonexposed group the frequency was 34%.” Likewise, “71 exposed and 64 nonexposed children were
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evaluated. Sixty-nine per cent of the exposed group had some noninfectious dermatological disease vs. 30% in the
nonexposed group.”
29
K. Anderson, “Globalization's Effects on World Agricultural Trade, 1960–2050,” Philosophical Transactions of the Royal
Society B: Biological Sciences 365, 2010, 3007.
30
R.K. Shrestha and R. Lal, “Changes in Physical and Chemical Properties of Soil After Surface Mining and Reclamation,
Geoderma, 2011. pp.168-176
31
J.M. Amezaga, T.S. Rotting, P.L. Younger, R.W. Nairn, A.J. Noles, N,R. Oyarzu and J. Quintanilla, “A Rich Vein? Mining
and the Pursuit of Sustainability,” Environmental Science & Technology 45, 2010, 21–26.
32
C. Robertson and D.T.A Wesley, Trout Farming in Peru, Richard Ivey School of Business Foundation, London, 2007.

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LAWS AND REGULATIONS

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Despite the lack of trust between the Peruvian government and indigenous communities, the country has
passed numerous laws and regulations pertaining to environmental protection, air and water quality,
worker safety and indigenous rights. In many ways these laws resemble those of the United States. For
example, in 1994 Peru’s national Parliament ratified International Labor Organization Convention No. 169

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on the protection of the rights of indigenous peoples. Among the articles are provisions to “eliminate socio-
economic gaps,” to encourage participation in “all levels of decision-making,” “to protect and preserve the
environment of the territories they inhabit” and to rights of ownership and possession “over the lands
which they traditionally occupy.”33 The convention also included several provisions on subsurface mineral
rights that gave indigenous residents the right to participate in any mining decisions and to receive fair
compensation. More importantly, it prohibited expropriation and forced relocation.

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The following year, Peru amended its land law to give the Ministry of Energy and Mines authority to issue
“easements” on indigenous land to allow mining companies access to subsoil resources. This interpretation
allowed the government to bypass Convention 69 and continue its policy of forcibly removing residents for
indefinite periods of time. Although, technically, indigenous communities have the right to resume
ownership when the mining companies leave, the land is most often destroyed by the mining process.34

Another major problem is a general lack of enforcement. A case in point is the June 2010 spill that
contaminated 80 per cent of the Opamayo River with 21,420 cubic meters of cyanide-laced toxic mine
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tailings. Several months later, a Peruvian court allowed the mine to reopen, stating that “there are no
grounds on which to base the assertion that the toxic agents are ‘extremely dangerous for all forms of life
in the environment.’” However, “the concentration of manganese was eight times higher than the
maximum permitted level, and cadmium concentration was more than six times higher than the acceptable
level.”35
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As a result, some indigenous communities have sought justice in U.S. courts. Although some cases have
resulted in major settlements against U.S. mining companies, the majority fail due to forum non conveniens
and comity among nations. These two doctrines are applied to cases when courts believe that the action
“would offend ‘amicable working relationships’ with another country.”36 For example, in Flores v.
Southern Peru Copper Corp., 253 F.Supp.2d 510, 525 (S.D.N.Y.2002), the court determined that Peru
offers “adequate fora for Peruvian plaintiffs alleging international law violations committed in Peru,”37
despite well-documented evidence of corruption within the Peruvian judiciary.38
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33
L. Swepston, “New Step in the International Law on Indigenous and Tribal Peoples: ILO Convention No. 169 of 1989, A,”
Oklahoma City University Law Review 15, 1990, 677.
34
B. Barton, “A Global/Local Approach to Conflict Resolution in the Mining Sector: The Case of the Tintaya Dialogue Table,”
Master’s Thesis in Law and Diplomacy, Tufts University, Boston, 2005.
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35
M. Salizar, “After Toxic Mine Spill, Locals Demand Both Jobs and Cleanup,” Inter Press Service, 2010.
36
R. Brand and S. Jablonski, Forum Non Conveniens: History, Global Practice and Future Under the Hague Convention on
Choice of Court Agreements, Oxford University Press, New York, 2007.
37
C.f. Torres v. Southern Peru Copper Corp., 113 F. 3d 540, Court of Appeals, 5th Circuit 1997; F. Martin, “The International
Human Rights and Ethical Aspects of the Forum Non Conveniens Doctrine,” University of Miami Inter-American Law Review
35, 2003, 101–21.
38
“The factual allegations of fraud, bribery, extortion and corruption involve actions and actors at high levels of the Fujimori
regime which has been the subject of both national and international investigation and criminal charges.” Maugein v.
Newmont Mining Corp., 298 F. Supp. 2d 1124 — Dist. Court, D. Colorado, 2004.

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A CONTINUING CYCLE OF CONFLICT

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The sense of helplessness has led some communities to take the law into their own hands. They have
blocked roads, occupied mines and held mining executives hostage. In some cases, protests and violence
have proven effective in forcing mining companies and the Peruvian government to provide compensation
and fulfill legal obligations. In others, they have forced mining companies to completely withdraw from an

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area. For instance, in 2004 indigenous communities blocked access to Colorado-based Newmont Mining
after they learned of the company’s plans to level a sacred mountain. After weeks of violent
confrontations, Newmont withdrew its equipment and promised not to return.39

In 2005, U.S. Ambassador Curtis Struble expressed concern over the impact protests were having on
multinational mining operations. He also noted that some “mining companies have claimed
unconvincingly that narcotraffickers were behind opposition to their operations in an effort to enlist our

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assistance.” Nevertheless, the U.S. government has agreed to work with mining companies to make Peru
“a priority target” for intelligence gathering.40

With commodity prices reaching record highs and mining companies rushing to places such as Peru in
search of quick profits, the stage is being set for more violent confrontations. Meanwhile, overall mining
policy in the country remains unchanged.

Multinational mining companies, with the backing and support of the Peruvian federal government, have
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violated the basic human rights of Peru’s indigenous people by expropriating land without permission and
adequate compensation, by destroying the land and water that supports the health and welfare of
indigenous communities and by failing to plan for and implement appropriate remediation. Although these
rights are protected under international and Peruvian law, the Peruvian government has done little to force
mining companies into compliance. In many cases, Peruvian government officials, judges and enforcement
agencies have colluded with mining companies to circumvent the law. The goal for indigenous rights
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supporters is to find ways to overcome the obstacles created by these powerful interests.

In Peru, mining has led to numerous confrontations over pollution, property rights and the right to
democratic representation. In the United States, Native Americans have been far less confrontational.
Instead, they built powerful alliances or had their grievances heard in impartial courts. In contrast, Peruvian
courts have been ineffective and, in many cases, guilty of corruption. Therefore, indigenous rights
advocates have sought alternative approaches to resolve grievances. Nevertheless, a comparative approach
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may help Peruvians devise strategies to limit the negative impact of mining on the health, welfare and
culture of indigenous peoples.

BUILDING ALLIANCES

Stone observes that alliances are “a necessary ingredient of power,”41 allowing groups to compete more
effectively with their opponents. In much the same way as Native Americans formed alliances with
environmental groups in the 1970s, Peru’s indigenous residents have begun to form alliances with
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international human rights and development organizations.42 Such alliances have proven critical for
developing strategic resources, organizing protests, issuing news releases, filing lawsuits and negotiating
39
J. Perlez and L. Bergman, “Tangled Strands in Fight Over Peru Gold Mine,” New York Times, October 25, 2005.
40
J.C. Struble, Embassy Cable 05LIMA3571, Wikileaks, 2011.
41
D.A. Stone, Policy Paradox and Political Reason, Scott, Foresman, Glenview, IL, 1988.
42
J. Bury, “Mining Mountains: Neoliberalism, Land Tenure, Livelihoods, and the New Peruvian Mining Industry in
Cajamarca,” Environment and Planning A 37, 2005, 221–39.

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with mining companies. However, unlike Native Americans who allied themselves with powerful interests

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such as OPEC, Peru’s indigenous people have relied mainly on support from NGOs with limited financial
resources.

Nevertheless, NGOs working on behalf of local indigenous communities have made important gains. For
example, the Tintaya Copper Mine was accused of numerous human rights abuses ranging from illegal

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expropriation of land to physical and sexual assault by mine employees. The local community worked with
Oxfam to convince the mining company to enter into a dialogue. Eventually the company recognized the
validity of most of the claims, and developed a social contract to compensate for the harms of the past and
prevent future abuses.43

The U.S. experience demonstrates that comprehensive mining reform may depend on the ability of
indigenous tribes to unite behind a single strategic vision. However, such an undertaking is fraught with

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difficulties, given that Peru’s indigenous communities represent dozens of cultures and languages. The
peoples of the northern highlands reside less than 100 miles from those of the Amazon Basin, yet their
language and culture are worlds apart. Additionally, instead of uniting against a common perceived threat,
evidence suggests that mining is causing new divisions within and between communities as people who are
forced off their land vie with neighboring communities over limited agricultural resources. Bury observes
that “because interhousehold tensions over access to resources have increased within communities, there
has also been a significant decline in social resources, including interhousehold trust and cooperation,
community participation, and communal conflict-resolution mechanisms.”44 Consequently, organizations
op
such as Oxfam, which have contacts with many of the communities affected by mining, need to facilitate
cooperation in the development of a national strategy.

In the United States, Native American tribes formed alliances with non-natives who would benefit from
mining reform. A similar approach could be effective in Peru if urban residents can be made aware of the
health risks poses by contamination of the water supply and how mining is threatening the country’s
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sustainable industries (agriculture, crafts, etc.) that are vital to Peru’s long-term prosperity.

Mining companies and their supporters claim that stricter regulations and enforcement will result in a loss
in economic productivity in Peru. However, the U.S. experience has demonstrated that environmental
protection actions do not result in an exodus of private industry.45 Moreover, stricter environmental
regulations often lead to innovations that result in less destructive practices and may even reduce overall
production costs. For example, when the State of Montana banned the use of cyanide in gold mining, one
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mining company began to explore alternative extraction techniques using bacteria.46 Such innovations,
when successful, can lead to valuable patents and help companies become industry leaders.

The people of Lima need to understand that mining reform is in the best interests of all Peruvians. In the
United States, the financial benefits of environmental regulation frequently outweigh the costs. They
include access to clean water resources, improved agricultural productivity, increased tourism and greater
worker productivity. In addition, new industries have been created in areas such as renewable energy,
environmental consulting, remediation services and recycling. As a result, environmental leadership
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43
V. Rangan, B. Barton and E. Reffico, Corporate Responsibility and Community Engagement at the Tintaya Copper Mine,
Harvard Business School Case Study, 2006.
44
Bury, “Mining Mountains,” p. 235.
45
J.F. Dimento, “Citizen Environmental Litigation and the Administrative Process: Empirical Findings, Remaining Issues and
a Direction for Future Research,” Duke Law Journal, 1977, 409–48.
46
A.T. Lawrence and J. Weber, Business and Society: Stakeholders, Ethics, Public Policy, McGraw-Hill Irwin, New York,
2011.

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frequently produces the types of technological innovations that are needed to build a knowledge-based

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economy.47

During commodity booms, an overreliance on mining can make agriculture and tourism uncompetitive.48
In Peru, agricultural exports and tourism have long been important sources of revenue. More recently, new
markets have opened for such high value goods as fair trade organic coffee, alpaca wool and quinoa (a

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grain from the Peruvian highlands that is sold in health food stores). Therefore, public awareness
campaigns need to emphasize the financial harm mining has on Peru’s long-term prospects for economic
growth and productivity by limiting growth in sustainable industries.

Despite the numerous problems posed by mining, a ban would be unrealistic. The world needs mineral
resources, and extraction provides employment and revenues that can be used to improve national welfare.
Mining opponents will more likely achieve success if they can work towards sustainable solutions, such as

yo
limiting the use of dangerous chemicals and requiring comprehensive reclamation plans for any new
mining permits. Still, Peru should follow the example of the United States and proclaim a total ban on
mining in areas with fragile ecologies and restrict mining near important heritage sites.

In the United States, environmental regulation, combined with improved mining technology, has resulted
in a reclamation rate of 95 per cent, whereas in less developed countries, fewer than 10 per cent of
abandoned mines are restored to productive use.49 Since less developed countries do not have the financial
resources to shoulder the expense of reclaiming abandoned mines, they have a strong interest in
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minimizing potential longer term costs by ensuring that responsible practices are followed prior to
companies abandoning unproductive sites.

Although any effort toward mining reform will prove challenging, Peru may be able to enlist the support of
other countries that already have the experience in implementing reforms. The United States, for example,
offers its expertise to countries that want to undertake improvements. In 1995, Indonesia requested U.S.
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assistance in establishing a “more effective mining environmental policy.” The U.S. Office of Surface
Mining Reclamation and Enforcement sent several of its most experienced inspectors to Jakarta to conduct
an assessment and offer recommendations. The team included geologists, mining engineers and at least one
mining policy specialist.50

In Indonesia, a policy team examined differences between the Indonesian and U.S. legal and regulatory
systems, as well as the problem of enforcement. One of the main outcomes of this process was the need for
No

financial incentives to compel mining companies to comply with environmental regulations and
reclamation practices. The team recommended that companies post bonds that would cover the costs of
reclamation should the company fail to meet its obligations or become insolvent. The amount of the bond
would vary from mine to mine based on studies of topsoil, water quality, vegetation, etc. As a result, in
1996 Indonesia began requiring reclamation bonds before issuing mining permits. “This was a significant
step toward the goal of sound environmental management through mine reclamation” and helped reduce
the gap between the United States and Indonesia.51

Although mining policy in Indonesia continues to lag behind the United States, Indonesia’s willingness to
Do

engage foreign experts has resulted in essential improvements. More importantly, it set Indonesia on a path
47
Ibid.
48
R.M. Auty, Sustaining Development in Mineral Economies: The Resource Curse Thesis, Routledge, London and New
York, 1993.
49
M. Hamilton, Mining Environmental Policy: Comparing Indonesia and the USA, Ashgate, Surrey, UK, 2005.
50
Ibid.
51
Ibid.

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toward sustainable environmental policies. This “planned diffusion of innovations,” as Hamilton calls it,

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not only created an international team of experts who were capable of tackling challenging environmental
problems, but also cross-cultural opportunities for policy development.52

Although Peru lacks a sophisticated independent enforcement agency similar to the U.S. Office of Surface
Mining Reclamation and Enforcement, the example of Indonesia demonstrates that international resources

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are available to facilitate improved monitoring and enforcement. Moreover, international development
agencies, including the World Bank, are often willing to subsidize such reform efforts. The only question is
one of motivation.

POLITICAL ACTION

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The rights of indigenous peoples are enshrined in international laws and treaties. Both the United Nations
and the International Labor Organization have included provisions for mineral extraction in their various
declarations. For example, Principle 22 of the Rio Declaration on Environment and Development (1992)
states that

Indigenous people and their communities, and other local communities, have a vital role in
environmental management and development because of their knowledge and traditional
practices. States should recognize and duly support their identity, culture and interests and
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enable their effective participation in the achievement of sustainable development.53

The Rio conference also called for “coordination of regional efforts to protect fragile mountain
ecosystems,” such as those found in the highlands of Peru.

Equally important is the 1989 International Labor Organization’s “Convention concerning Indigenous and
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Tribal Peoples in Independent Countries,” which included specific remedies for indigenous peoples
impacted by mining operations. The Convention called for an end to expropriation and relocation without
adequate consultation, compensation and remediation. Peru’s legislature ratified the convention in
December 1993, making its provisions part of Peruvian federal law.

Regrettably, international bodies lack enforcement mechanisms to ensure the compliance of signatory
nations. In theory, the United Nations may impose sanctions and other penalties on countries that fail to
No

comply with international law, but such measures are rarely exercised except in the most egregious cases.
Even when undertaken, the effectiveness of sanctions as a foreign policy tool is disputed.54 The United
Nations has recognized that without “accompanying measures” the right of indigenous peoples to self-
determination, including “the inherent and prior rights of indigenous peoples to their lands and resources”
will continue to be infringed.55

In practice Peru has either ignored provisions in international law or adjusted its laws to circumvent
implementation. For example, in 1994, Peru’s legislature reworded the country’s land law to allow for
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52
Ibid.
53
United Nations, Agenda 21: Programme of Action for Sustainable Development; Rio Declaration on Environment and
Development; Statement of Forest Principles, United Nations Department of Public Information, New York, 1993.
54
G.C. Hufbauer, J.J. Schott and K.A. Elliott, Economic Sanctions Reconsidered: Supplemental Case Histories, Institute for
International Economics, Washington, DC, 1990.
55
I. Peoples, “Report of the International Workshop on Methodologies Regarding Free Prior and Informed Consent,” ed.
Economic and Social Council: E/C, 2005, http://www.un.org/esa/socdev/unpfii/documents/workshop_FPIC_CBD.doc,
accessed February 28, 2012.

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mining “easements” instead of “expropriation.” This has allowed the government to continue to forcibly

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remove indigenous inhabitants from mineral rich areas.

In some cases, the Peruvian government has delegated authority to parcel out and expropriate land to
mining executives. This is like asking the fox to guard the henhouse. With the government out of the way,
Newmont Mining Corporation (Newmont) was able “to facilitate the reparcelization of land” to make way

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for the massive Yanacocha Gold Mine.

[Newmont] initiated a series of rapid land-titling initiatives in communities … [Newmont]

employees organized community meetings, transported people to the city in mine vehicles,
and ushered them through the land-titling process so that the mine could then purchase
their land. Thus [Newmont] became the principal agent affecting land-tenure institutions
in the area of its planned operations.56

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To claim ownership of “communally managed lands,” Newmont created land parcels which it then
“purchased” from local residents for $80 per hectare.57 At this rate, the mine would have paid out a total of
$2 million in compensation for land that has generated more than $30 billion in revenues.58 Those who did
not agree to the parceling of communal lands were forcibly removed.

Historically, most political action against mining has occurred at the local or municipal level. However,
local officials are in the weakest position to influence mining policies. Whenever elected officials and
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municipal officers have attempted to take action against companies for violating social and environmental
laws, they have been overridden by state and federal officials. For example, when the mayor of
Choropampa led a protest to demand compensation for mercury spill victims, he was arrested by the
federal police and charged with disturbing the peace. When the city of Cajamarca declared Cerro Quilish a
protected area because it supplies most of the water for the city’s 130,000 residents, Newmont sought and
received a Peruvian federal court injunction nullifying the city ordinance.
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At the state level, mining company election funding has ensured the installment of pro-mining governors.
However, as more rural residents become disenchanted by the broken promises of jobs and economic
development, they are rejecting candidates who appear to be linked to mining interests.

The October 2010 election of Gregorio Santos as governor of the state of Cajamarca, where mining
concessions cover nearly half of the territory, was seen by some as a major turning point. Santos, who is a
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member of the Patria Roja Maoist party, campaigned on a platform of cleaning up the mining industry.
One mining industry official described his election as “devastating” to mining interests. Nevertheless,
Santos had taken a conciliatory tone. Instead of recommending new laws, he called for enforcement of
existing laws, including the requirement to obtain approval from local communities before commencing
new mining projects. “If they comply with the law, they have nothing to be afraid of,” said Santos after his
election.59

Peru’s April 2011 presidential election created an unprecedented political window for indigenous rights
advocates. For the first time, mining and oil extraction have become key election issues, with all four
Do

presidential candidates promising some type of mining reform. The most vocal critic of the government’s

56
Bury, “Mining Mountains” p. 232
57
Ibid.
58
This assumes that the mine paid the same rate for each of the 25,000 hectares of land that it occupies.
59
A. Paez, “Mining Firms Alarmed at Election of Leftist Governor,” Inter Press Service, 2010,
http://www.ipsnews.net/redir.php?newid=53529.

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current policies toward indigenous communities was Ollanta Humala, who was elected President of Peru

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after his popularity surged when he confronted the government over its violent suppression of indigenous
protesters.60 Although most Peruvians are less than sympathetic to the plight of the rural population, the
surge in violence created a political backlash to mining and oil interests that Humala alone has been able to
take advantage of. Many in the mining industry viewed Humala’s presidential victory as a “worst case
scenario.”61

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TRANSPARENCY INDUCEMENTS

Even when laws exist to protect indigenous communities, high level corruption has protected violators
from prosecution. That is beginning to change as developed countries begin to tackle corruption at the
international level. Recently, the Peruvian government reformed the state agency in charge of privatization
as a way to combat corruption and increase transparency.62 Although corruption appears to be declining in

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Peru,63 it would be unrealistic to expect it to be eliminated overnight. However, as noted earlier, corruption
did not stop Indonesia from undertaking mining reform despite the fact that it is considered worse than
Peru in perceived corruption.64

The United States is leading the war on corruption through its aggressive enforcement of the Foreign
Corrupt Practices Act (FCPA) of 1977. Anyone or any company that has interests in the United States can
be subject to significant fines and/or imprisonment if found to be paying bribes to foreign officials in order
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to “obtain or retain business.” Business executives found guilty of violating the FCPA have received prison
sentences as long as 10 years.65

Deborah Stone argues that negative inducements are often necessary when public and private and public
interests diverge66 The fear of prosecution under the FCPA should help to stem some of the abuses of due
process in Peru, including the practice of paying bribes to regulators and judges. Koehler observes that “the
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lure of profits in emerging production hotspots can bring mining companies dangerously close to running
afoul of the FCPA.”67 High commodity prices have driven more mining companies to seek opportunities in
developing countries, but because of the U.S. Department of Justice’s aggressive enforcement of the
FCPA, they may think twice before engaging in corrupt practices.

Unfortunately, other countries have been less aggressive in their efforts to fight corruption in developing
countries. Canada developed a “Standard of Principles for Canadian Business,” but since they are merely
No

guidelines, they lack enforcement mechanisms and are largely seen as symbolic. Nevertheless, two large
Canadian mining companies, Alcan Aluminum and Placer Dome, have announced that they will abide by
the “principles of sustainable development which include respect for human rights” outlined in the guide.68
60
E. Schmall, “The Devil's Curve,” World Policy Journal 28, 2011, p. 111.
61
D. Cambone, “Peru Elections: Humala Win Worst Case for Mining in Peru — Mining Exec.,” Kitco News, April 8, 2011,
http://www.kitco.com/reports/KitcoNews20110408DC_peru.html, accessed February 27, 2012.
62
Bury, “Mining Mountains.”
63
M. Clark, “Latin America's Surprise Rising Economic Star: Peru,” Christian Science Monitor, January 5, 2010.
64
The 2010 Corruption Perceptions Index, Transparency International,
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http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results, accessed February 14, 2011.

65
Currently, the Federal Bureau of Investigation (FBI) is investigating Arkansas-based ALS Technologies for paying bribes
in Peru and other countries. See R. Cassin, “Shot-Show Prosecution May Expand,” The FCPA Blog, 2010,
http://www.fcpablog.com/blog/tag/peru, accessed February 8, 2011.
66
Stone, Policy Paradox and Political Reason, Scott Foresman & Co, Glenview, Illinois, 1988.
67
M. Koheler, “Avoiding FCPA Pitfalls in Emerging Mining Hotspots,” 2007,
http://www.allbusiness.com/government/government-bodies-offices/16292493-1.html.
68
W. Cragg, “Human Rights and Business Ethics: Fashioning a New Social Contract,” Journal of Business Ethics 27, 2000,
pp. 205–14.

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LEGAL REMEDIES

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Corruption within the judiciary has clearly created barriers for indigenous communities who are seeking to
exercise their rights under Peruvian and international law. In Peru, mining companies have bribed supreme
court justices to win favorable judgments.69 As a result, some plaintiffs have sought justice in the United
States under the Alien Tort Claims Act (ATCA).

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The ATCA allows foreigners to sue in U.S. federal court for damages resulting from conduct committed
outside the United States. Stone observes that this often happens when someone is not winning, and seeks
to have decisions made by a different authority or in a different jurisdiction.70 History has proven U.S.
courts to be sympathetic to plaintiffs who have been denied justice in their home countries. Several
substantial judgments against companies located in the United States have prompted defendants to seek to
have cases heard outside of the U.S. or have such cases dismissed under forum non conveniens and comity

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among nations. Moreover, even when successful, the ATCA is limited to tort judgments. Many companies
view ATCA settlements as a cost of doing business. To dissuade further harmful behavior, new laws need
to be enacted that impose criminal penalties on companies and executives who are in clear violation of
internationally accepted laws.

The success of the FCPA in combating bribery on a global scale demonstrates the need for extraterritorial
jurisdiction in matters pertaining to human rights and the environment. In most developed countries, strict
environmental laws ensure that natural resource companies significantly limit the potential harm their
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operations have on the environment and human health. However, as Kalas observes, “these regulations do
not apply extraterritorially to similar operations in foreign countries.” She argues that this creates a “double
standard” whereby U.S. and multinational corporations comply with environmental laws in their own
countries but completely disregard them in less developed countries.71

Neff proposes “a Foreign Environmental Practices Act” (FEPA) that would require companies to adhere to
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international environmental standards. He points to the FCPA as a model for how the FEPA could be
enforced.72 Although Neff’s proposal falls short of requiring companies to adhere to international human
rights declarations or recognizing the right of indigenous peoples to self-determination, it is a useful model
for building a more comprehensive law that covers both environmental and social harms. Moreover, the
FEPA would be easier to enforce than the FCPA because the harms caused by mining are visible, whereas
FCPA enforcement often requires uncovering hidden payments that are disguised by using clever
accounting techniques.73
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Nevertheless, as Stone observes, management turnover can exacerbate problems by insulating leaders from
responsibility.74 For instance, Newmont Senior Vice President Larry Kurlander, who oversaw the
company’s mercury spill audit, retired from the company shortly after being implicated in an international
bribery scandal involving top officials in the Fujimori government.75 Thus, any laws aimed at forcing
companies to follow best practice need to ensure that executives and companies remain responsible for the

69
Bergman and Knappenberger, Frontline/World Stories from a Small Planet.
70
Stone, Policy Paradox and Political Reason.
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71
P.R. Kalas, “Implication of Jota v. Texaco and the Accountability of Transnational Corporation,” Pace International Law
Review 12, 2000, 47.
72
A. Neff, “Not in Their Backyards, Either: A Proposal for a Foreign Environmental Practices Act,” Ecology Law Quarterly 17,
1990, 477.
73
For example, a company might pay “consulting fees” to third parties who act as intermediaries, paying bribes on the
company’s behalf. Such payments appear to be legitimate and are often only discovered through the actions of company
whistleblowers.
74
Stone, Policy Paradox and Political Reason.
75
Bergman and Knappenberger, Frontline/World Stories from a Small Planet.

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harms they cause. For instance, the Resource Conservation and Recovery Act (RCRA) of 1976 establishes

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“cradle-to-grave” liability for hazardous waste disposal in the United States,76 and FCPA violations can
result in jail terms for executives even when they are no longer employed by the company under
investigation.

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STANDARDS VERSUS INDUCEMENTS

Stone argues that standards are more effective than inducements.77 However, effective policies should
involve a combination of standards and inducements. A cap and trade system, for example, ensures that
polluters meet a certain standard. Yet, it also provides an inducement for companies to go beyond
standards. The FCPA requires companies to steer clear of rent-seeking behavior, but it also provides
inducements for companies that comply with the law, such as the ability to bid on U.S. government

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contracts.

Other inducements may also prove effective, albeit in a more limited way. For example, Peru has sought to
encourage foreign investment through a combination of additional mining and exploration licenses and a
variety of financial incentives. Unfortunately, these are the wrong incentives and will only result in more
conflicts and human rights violations, as more indigenous residents are displaced from their ancestral
lands. The problem may not be incentives per se, but the types of incentives. Instead of opening Peru’s
lands to any and all comers, Peru’s Ministry of Energy and Mines should reward responsible companies
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with new permits and revoke permits of companies that ignore environmental laws and human rights. I
believe that mining and oil companies would be more than willing to adhere to strict monitoring and
reclamation requirements if it meant they could gain access to new mining and oil concessions.

With commodity prices near record levels, Peru does not need to offer financial incentives to attract
foreign investment. The world’s supply of oil and minerals is limited. If companies choose not to invest in
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exploration today, they will in the future. One can be certain that commodity prices will continue to rise as
demand continues to outpace supply in an increasingly overpopulated planet. Also, as mining technology
improves, companies will likely improve their ability to reclaim open pit mines and reduce potential health
and environmental risks. Peru can wait to ensure that development occurs at a more sustainable pace. By
doing so, the country will be better placed to reap the benefits of its bountiful natural resources.
No
Do

76
D. Dobbin, R.D. Turpin, K. Silver and M. Watters, “Hazardous Waste,” in Occupational and Environmental Health:
Recognizing and Preventing Disease and Injury, ed. Levy, Barry S. , David H. Wegman, Sherry L. Baron, and Rosemary K.
Sokas, Oxford University Press, New York, 2011, pp. 181-191.
77
Stone, Policy Paradox and Political Reason.

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