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by Pratap Chatterjee
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CAJAMARCA, Peru. Splashing across a stream high in the
Andes of northern Peru, the horse bends to sip some
water, but his rider an old bearded man wrapped in a
deep red poncho tugs at the reins, jerking up the
horse's head. As they forded the stream to reach the
peak, some 4,000 meters above sea-level, the man took
off his cream-colored cowboy hat and wiped his brow.
They had ridden for four hours beginning at dawn when
the dew was still frozen on the grass.
"The horse must not drink the water. It is poisoned by the waste over there," said the rider, pointing to the |
horizon where the unnaturally straight-edge line of a distant gray plateau rose out of the grassy hills. The plateau is the work of man and machine at the largest gold mine in South America. It is waste left behind by heap-leaching: the process in which miners pour toxic cyanide over porous ore piled high on thin plastic sheets to extract the gold. Named Yanacocha (black lake), the mine is run by Newmont, a Denver, Colorado-based company, in a joint venture with the Peruvian company Buenaventura. Last year, Yanacocha produced 811,400 ounces of gold. The roughly $87 million in production cost was less than half that of most of the world's major gold mines. If all this gold had been |
sold in international markets at the 1996 average price
of $390 an ounce, the company would have made $317
million, or a gross profit of $230 million.
The mine is changing the landscape not only of Cajamarca, but of the Peruvian economy. The vast amount of new capital spent to develop and open it in late 1993 contributed heavily to the country's dizzying 12.8 percent growth rate the following year. The surge was also fueled by President Alberto Fujimori's liberalization of the economy after he took dictatorial powers in his 1992 "self-coup" (see p. 23). In 1994, surpassing even China and Malaysia, Peru |
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became the
fastest growing economy on the planet. Its image was
transformed: In the 1980s Peru was seen as a bankrupt
nation trying to default on its debts, riddled with drug
smugglers, and plagued by guerrillas. Suddenly, it
became a darling of the international investment
community. Although the crisis surrounding the December
17 takeover of the Japanese ambassador's residence by
T£pac Amaru rebels has temporarily tarnished that image,
most experts expect the interruption to be brief.
GOLD DOESN'T TRICKLE DOWN |
the poor. Despite Peru's impressive showing in 1994 and
a pretty strong performance in 1995,it ranked a dismal
91 on the 1996 United Nations Development Program Human
Development Index, roughly halfway down the ladder of
this highly regarded measure of social well-being. This
standing was well behind Mexico (ranked 48), which
suffered a financial collapse in 1995 that was just as
spectacular as Peru's explosive growth the previous
year, or Cuba (ranked 79) which endures an economy
stunted by the US embargo.
The simple explanation is that little of Peru's new money from either the gold or the wave of |
privatizations has trickled down to local communities.
Not even in Cajamarca has the wealth stayed put. In
1995, by Newmont's own admission, it put a mere $4
million into the local communities with the bulk spent
on building roads to the mine site. None of the
villages surrounding the mine Combayo, Yanacancha
Grande, or Negritos Altos has running water or sewage
facilities, let alone telephones or regular
electricity.
Instead, the wealth from the mine has poured out of the country and back to the US, where Newmont declared a $94 million profit for 1996. What money stayed in |
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Peru
flowed south into central government coffers and into
Lima's wealthy suburbs, where shopping malls and US
chain stores from Domino's Pizza and Kentucky Fried
Chicken to Mailboxes Etc. and Dunkin' Donuts dot the
landscape.
It is this unequal distribution of the wealth and the environmental impact of these new ventures that are beginning to polarize Peruvians in a manner unprecedented since Pizarro. The Spanish conquistador |
arrived in the capital of this very province in 1532 to
trick the King Atahualpa into an ambush that led to the
collapse of the Incan empire. Ironically, one of
Atahualpa's last acts was an attempt to buy off the
Spanish with a room full of gold and two rooms of
silver. The Spanish took him up on the offer but then
murdered him and razed the city to the ground. Today,
the ransom room is the only surviving monument to the
Inca presence.
Last year alone, Yanacocha mined roughly one and a half |
times as much gold as the Incas turned over to Pizarro
more than 460 years before. Like the Spanish before
it, Yanacocha has considerable financial support from
abroad. The money for the mining venture came from the
International Finance Corp. (IFC), the private sector
arm of the World Bank, and from private banks
including the Union Bank of Switzerland. Also like the
Spanish before it, Newmont exported all the gold to
Europe half to Britain and half to Switzerland.
But unlike Pizarro, the new conquistadors have not |
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needed cannons or cavalry to rout angry natives or
secure their investment. Instead, the natives, powerless
and often bound to the cash economy, have few options.
As for Newmont's financial security, World Bank's
Multilateral Investment Guarantee Agency (MIGA) and the
US government-run Overseas Private Investment Corp.
(OPIC) have insured the mine for hundreds of millions of
dollars against political risks such as
nationalization.
BLOOD OF THE DRAGON |
plunge down into the spectacular emerald-green
rainforests of the Amazon Basin, another region is
tasting the bitter fruits of foreign capital. Deep in
the core of this Mara÷on region, an Aguaruna youth draws
his machete silently and swiftly across the white bark
of a tree. At once, a thick frothy liquid the color of
blood trickles down the blade.
"Put this on a cut and it will heal quickly," he says as he catches the sap in a plastic bottle. Called "sangre |
de grado" or "sangre de drago" (translated loosely as
"blood of the dragon"), the sap is found throughout the
Andean countries today. It is one of the possible
"miracle" medicines that has drawn the covetous eye of
drug companies such as Monsanto of St. Louis, Missouri.
Two years ago, Walter Lewis, a scientist from Washington University in St. Louis, was unceremoniously thrown out by the Aguaruna indigenous peoples when they discovered that he had a secret contract with Monsanto to |
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ship potential medicines back to its US laboratories. But
last November, Lewis was back in the country after
signing a new contract with a different group of
Aguaruna that allows Monsanto to exploit their knowledge
of the medical values of the forests. Typically,
drug companies takes advantage of thousands of years of
medicinal knowledge without adequately compensating
those who discovered and tested the drug in the
rainforest.
RIVER OF THE MOON |
the Urabamba Valley in the center of the country, it
would be easy to miss a small clearing close to the
village of Cashiriari ("river of the moon" in the
Machiguengan language) and a cluster of white tents
perched near the jungle's edge. But if you watched long
enough, you would see that this small brown scar is one
of the most visited spots in the region. From a landing
pad in the main clearing, helicopters take off and land
with a regularity unknown as recently as six months ago.
In the center of the clearing sits a small orange pump. This is the |
first of four wells that Shell, the Anglo-Dutch multinational based in London and The Hague, plans to open this year as part of its plan to develop one of the biggest natural gas fields on the continent. Shell has already begun spending an estimated $3 billion. This field is known as Camisea because of its proximity to the eponymous tributary of the Urabamba River which originates near Cuzco, the ancient Inca capital on the eastern flank of the Andes. These rivers flow through a region that hosts the highest recorded number of animal, bird, plant, and insect species in the world, and forms one of the vital headwaters of the Amazon Basin. |
| Shell's new project, which is expected to eventually dump as much as $6 billion into Peru's national treasury, has already sparked fears about the possible impact of the new visitors on the region's people and environment. If past projects on this scale are any guide, the Urabamba Valley can expect widespread pollution, deforestation, and cultural devastation. The scheme has already divided the indigenous Machiguenga people. Even more worrisome is the possible impact on the "uncontacted" Nahua and Kugapakori peoples who live a few hours away by boat. Just a decade ago, some Nahua died from the introduction of common diseases |
such as colds and whooping cough. These plagues were ugly
reminders of the invasion of the Americas by
conquistadors who wiped out millions, deliberately as
well as inadvertently, with Old World diseases for which
New World people had no immunity.
Still further south, in Peru's Amazon forests near the border with Bolivia, Mobil has built some 60 helicopter pads in the Madre de Dios jungle. After signing a contract with the government in May 1996, the Houston-based multinational began exploring in the remote jungle area for oil and natural gas. |
FENAMAD, the organization that represents the indigenous
peoples of this region, says that last year, exploration
crews from Grant Geophysical, a company contracted by
Mobil, frightened people by flying their helicopters low
over an uncontacted group, the Mashco-Piro. Other
incidents include a violent clash where indigenous
people fired arrows at an exploratory team. There are
rumors that up to three workers have been killed in such
battles reports firmly denied by Mobil.
The company, which first refused |
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to negotiate with
either local or international advocacy groups, gave in
and met with Conservation International, a US
environmental group, after a British television crew
arrived to document the matter. Today, it is paying that
environmental group to monitor its work.
FECAL ATTRACTION |
grown rich exporting the country's resources. There are
now 240 sites being explored for gold,20 and some 20
foreign companies looking for oil and natural gas.
In the 19th century, that trail widened into a well-traveled albeit slimy road. Two decades after Jos† de San MartÙn led an army to liberate Peru from the Spanish in 1821, scientists in Britain discovered that guano (bird excrement) could fertilize the soils of Europe, exhausted by the intensive agriculture needed to feed the continent's rapidly growing population. Tons of |
guano, deposited by pelicans and seagulls after feeding
on the rich fisheries in the coastal currents, had
accumulated for centuries in an almost untouched state
on Peru's rainless coastal desert and offshore islands.
In perhaps the first major foreign mining interest in Peru, Britain quickly began buying guano from the state and advancing loans guaranteed by future sales to Peru's small elite. "The uncommonly arrogant Lima oligarchy continued enriching itself and amassing symbols of its power in the palaces and Carrara (Italian |
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marble) mausoleums which sprouted amid the sandy
deserts," wrote Uruguayan writer Eduardo Galeano. The
wealth of these guano deposits and the similar value of
saltpeter (sodium nitrate) as fertilizer, however,
attracted other foreign interests. In 1883, in the War
of the Pacific, Chile seized what was once southern Peru
and western Bolivia.
WORKIN' FOR THE YANKEE DOLLAR |
and gas operations the 20th century conquistadors favor tend to
be grotesquely polluting especially without strict
regulation and foreign firms operating in Peru were
constrained by nothing but the limits of their capital
and the extent of their greed.
The US began investing seriously in Peru after World War I, and by the end of World War II had displaced Britain as the major investor. From 1924 to 1950, US investment rose from $124 million to $295 million. By 1967, the figure had reached $605 million with more than |
half
($340 million) in mining,and another $38 million in oil. Over the same period, the amount of money that US
companies were taking out of Peru was also steadily
rising. Between 1950 and 1967, US firms repatriated $628
million, $23 million more than they had put into the
country.
During that period, US mining interests expanded. On the other side of the Andes from the Madre de Dios is a mine operated by Southern Peru Copper Corp., controlled by US-based Asarco (Newmont was also a major shareholder in |
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this mine until it recently sold its stake). Located in
the southern coastal desert town of Ilo since 1960,
Southern Peru's mines and smelter have contaminated the
valleys of Tambo,Ensenada, and Mejia. Local crops such
as alfalfa, maize, rice, sugar, and olives are fast
disappearing because of the heavy air and water
pollution. The Cerro Verde mine in Arequipa, set up
around the same time with help from a subsidiary of
US-based Anaconda Mining, has caused similar
environmental problems.
During this period, Mobil and Shell got involved, but |
despite major discoveries Mobil of the Aguatia gas reserve in 1962 and Shell of the Camisea field in the mid-1980s neither corporation found it economical to begin immediate exploitation because of low prices and lack of government cooperation. Through the 1980s, they and other foreign investors were also deterred by the power of the Sendero Luminoso (Shining Path) guerrilla insurgency, which controlled substantial areas of the country. All this was changed by two events at the beginning of this decade. The first was the election of Fujimori, who promptly threw the country open to foreign investment; the second was the decimation of the |
Shining Path after the September 1992 capture of its
leader, Abimael Guzm²n.
Within four years of Fujimori taking power, some $6 billion in new money poured into Peru. A full third came from Telefonica, the Spanish government telephone company, which paid $2 billion to buy the recently privatized Peruvian telephone company. Then Cyprus Amax, a US company, purchased the Cerro Verde mine, while China's Shougang Corp. paid for the previously state-owned Hierro Peru iron ore mine. Japan, |
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seeking a base in Latin America, increased its
investments and poured aid into the country. It also
sparked public resentment that the country's other
insurgency, the T£pac Amaru, or MRTA, tapped with its
December seizure of hostages (see pp. 23-25).
Today, as in the time of Pizarro and the days of the British guano trade, mineral exports are still the main legal source of wealth in this country. (The multibillion dollar cocaine trade is the main illegal source of foreign currency.) In 1993, |
mineral exports (including oil) were worth $3.45 billion or 48 percent
of total export revenues. By 1995, the share of
mineral exports in foreign income had risen to 51.3
percent. At the same time, 1995 imports rose to $7.7
billion, creating a $2.1 billion deficit, twice that of
the previous year. With almost everything already sold
off, privatization revenues have dropped to $638
million, a third of the 1994 figure.
LAND FOR A PITTANCE |
mineral extraction are Newmont and Shell. As the first
major developer under Fujimori, Newmont paved the way
for the hundreds of international corporations which
have rushed in to take advantage of the
corporate-friendly neoliberal reforms. Shell now leads
the pack as the biggest of the new conquistadors.
Neither company has enriched local communities; instead
they have paid a pittance in compensation to farmers and
funded token community programs.
As Newmont stepped up operations in Yanacocha, it started scooping |
| up land. In November 1992, the mining giant bought up Nicholas Cruzado's 332 hectares. While raking in a $630,000 daily profit, it paid him 109 soles ($42) a hectare. Some farmers have managed to squeeze out a little more. Last August, Frederico Carrasco, a villager from Negritos Altos, got $540 a hectare for a 42-hectare plot. The problem is that his new wealth will soon evaporate if Carrasco can't reinvest it into farming the only way of life he knows. But the real value of land in his village has skyrocketed to more than $2,000 a hectare on the open market. Cruzado fared little better. He traded the money he got for a small 12-hectare plot. Today, to support a family of 13 and survive, |
he has had to sell off some 250 cows and pigs;
his son Mario works on nearby farms for $1.40 a day.
"There is very little I can do," says Jorge Malca, a lawyer who works for the Catholic Church to help represent local people. "Yanacocha has bought legal title to the land. The farmers should have come to me before they sold their property." So far, only seven of the 50 plus farmers who have sold their land have asked for legal help to sue the company. Others seem to have little hope and less luck. David Cueva, a farmer in neighboring Yanacancha Grande, says that the company |
simply took 26 hectares of his 211-hectare property
without paying. Despite living on top of a potential
fortune in gold that is being extracted by foreign banks
and mining companies, he is too poor even to buy cows.
POISONED WATERS |
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trout in rivers that are now
lifeless. "When the rains come the water runs off the
tailings into the rivers making them turbid. If the
horses and cows drink ... they get stomach problems and
sometimes die," he says.
Hiriberto Ventura, a leader of Rondas Campesinos (Farmer Patrol) in Negritos Altos, says that company operations have had even more disastrous consequences. Last August, he charges, Rosa Castrej¢n and four others died after drinking water from discarded plastic containers apparently used by the company to store cyanide. |
Adding insult to injury, local mayors charge that
Newmont employs almost no local residents. What few jobs
it doles out pay $5.60 a day. Four mayors wrote to the
company repeatedly asking for a meeting to discuss
problems without results.
While unresponsive to locals, Nicholas Cotts, manager of environmental affairs for Minera Yanacocha, replied to questions for CAQ. The company recognizes "fair value prices" for all land transactions, he contended. "Approximately 95 percent of the land purchases conducted by Minera have been |
knowledge and in direct negotiation with the land owner. In other cases, expropriation was used at the request of, and in complete cooperation with, the landowner." Nor is there a problem with pollution, he wrote. Yanacocha regularly monitors approximately 120 water sources and maintains a herd of 60 sheep and alpaca at the site which have never displayed any signs of heavy metal contamination. A 1994 investigation conducted by Newmont into deaths of local cattle showed that the animals had died of "liver fluke and related indigenous diseases." The company also maintains an "open door policy" for "any and all" requests from local people and interested groups to visit the site. In addition, Yanacocha says that it spent conducted under full |
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$3 million in 1995 to help
the local community by building roads, schools, and
providing free hot lunches to local children.
Some remain skeptical. Ephrain Castillo, a Catholic priest who has been helping the local villagers with agricultural services, food, and legal help, doubts that the company will create a sustainable future for the local people. "People here are very poor. The mine promises to change things but the problem is that one naturally excludes the other," he says. |
GREEN SPIN CYCLE Nor is the situation much different for the Machiguenga peoples who had hunted and fished around the Urabamba river for 5,000 years before Shell arrived to drill for gas. Like Newmont, Shell promises to take great pains designing a model of environmental management and local participation. But on closer inspection, the company appears to be creating problems for the people in this village and surrounding communities without offering much by way of compensation or security against pollution. Shell estimates that Camisea |
contains 11 trillion cubic feet of natural gas and 600 million barrels of natural gas liquids, enough fuel to meet a century of energy needs for the capital city of Lima, some 500 kilometers to the east. With a fortune at stake, Shell is vigorously promoting itself as a good corporate neighbor and recently signed an agreement with locals for the use of two hectares of land (Shell admits that it has used more than agreed initially). The contract does not guarantee any compensation in case of accident, contamination of the local rivers, or destruction of the forests. Many locals have not been won over; they remember an oil drilling project Shell launched a decade ago. Then, according to human rights activists and |
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environmentalists, the project divided local leadership,
disrupted the economy and undermined the culture. They
also charged that Shell contract workers abused local
women and brought diseases that killed a major part
of another indigenous community of Nahua peoples who
have lived in isolation for centuries.
Today, to avoid such mistakes, Shell has hired a leading expert on the local communities, Peruvian anthropologist Alonso Zarzar. He has drawn up detailed guidelines for |
Shell and conducted workshops for the company's 360
local and expatriate contract workers to ensure that
they do not violate local customs or bring in disruptive
practices. Shell is trying to vaccinate all its workers
and visitors to deter the importation of new diseases.
It has also drawn up extensive plans to protect
surrounding forests and, instead of building roads, is
bringing in all supplies by air or boat. Staff who hunt
or fish or simply wander outside the drilling area are
to be fired immediately.
But Peruvian activists say that Shell has overlooked its |
impact on local peoples who have no idea what is
happening at the drilling site or what the future
operations might involve. Doris Balvin, an environmental
lawyer from Ilo who spent the last decade tracking the
impact of Asarco, is not convinced by the efforts. "If Shell really wanted to work with the communities," she noted, "why have they not provided them with enough information? The agreement was signed in a hurry and the local people had no chance to consult a lawyer." As for the compensation, she called it nothing more than a Christmas present. Zarzar defends the company's behavior and his role. |
| "It's my job to ensure that Shell provides appropriate benefits to the community," the anthropologist adds. "We have made sure that all the compensation will help the community as a whole and to make sure that we develop social capital for the long term." And while acknowledging that the community has a right to a lawyer, he says it is up to their representatives to get such help. "I have even attended the regional meetings of the Machiguenga organizations to tell them about our plans months before this agreement was signed," he points out. |
Meanwhile, Shell's activities have exacerbated existing
divisions among the Machiguenga. Factions have hardened
and the "indigenous council" Shell created to unite
locals behind the project quickly fell apart. "We wanted
to work with the communities in devising a mediation
system to settle any complaints, but so far, we have not
succeeded," admits Murray Jones, the environmental chief
for Shell's operations in Peru, who says he is willing
to consider any alternatives.
BACK TO THE FUTURE |
Peru's revenues, the nation's future looks as bleak as
that of Inca leader Atahualpa. When the resources are
exhausted, the companies will move on and the
communities will be left with little money and much
environmental and cultural devastation.
Throughout the Americas and the rest of the world, similar resource extraction operations have devastated agriculture and health and left a legacy of disaster. Two years ago in Guyana, a massive cyanide spill from what was once the largest gold mine on the continent, destroyed the local river system. Like Yanacocha, the |
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mine had political risk insurance from the World Bank.
It covered the companies' financial losses but failed to
compensate the people affected for the health,
financial, and social consequences, some of which will
endure for generations.
Newmont's US operations have paralleled those in Guyana. In 1990, its right to mine uranium on land near Spokane, |
Washington, was withdrawn after it ignored repeated
government demands to clean up 15.5 billion liters of
acidic water in pits that threatened to leak into the
Columbia River.
And last year, Bopp van Dessel, Shell's former environment chief in Nigeria, exposed as an abject sham his employers' well-promoted corporate concern for the environment. |
He revealed that Shell executives had ignored his repeated warnings that operations in Ogoni territory were violating international standards and causing widespread pollution. Some 82 communities that make up Ogoniland have been affected. The pollution, including at least 111 oil spills between 1985 and 1993, has destroyed farmland and forced landowners to grow food in tiny plots. For its part, Shell claims that 77 of the Ogoni spills resulted from sabotage and says that rapid population growth has shrunk the people's farmland. |
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But for the flora, fauna, and peoples of Peru, it may not be too late. Although Newmont is well into commercial development, Shell, together with many of the other new companies in the country, have yet to begin full-scale exploitation of resources they hope to extract, and may withdraw yet if there is sufficient public pressure. There is a precedent for this just five years ago, environmentalists were able to kill a plan by |
Houston-based Texas Crude to drill in a nature
preserve considered one of the last refuges of the
nearly extinct Amazon manatee. Conservationists took the
company to court here over the environmental impact and won.
The environmentalists may just have been lucky so far. Stories of the exploitation of the natural resources of Peru be they gold or guano have never ended happily. Certainly not in Cajamarca where the conquistadors, as well as the small miners |
who have followed their
footsteps for the last four centuries, have always left
destruction behind.
Atahualpa and the Inca army are good examples. In 1533 the Spanish massacred most of the unarmed Inca soldiers, converted their suspicious king to Christianity, found him guilty of having too many wives and then proceeded to kill him. Today most of Peru's indigenous peoples are being fleeced of their land while some have skeptically accepted the new religion of the market. But if they are found guilty of having too many resources, they may soon discover an environmental knife at their throats. |
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