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Historical Overview

Mining and Water Governance in Peru

LEONITH HINOJOSA | OPEN UNIVERSITY

Peru is a country rich in natural resources. It is the worlds largest producer of silver, the second of copper
and zinc, and the sixth of gold. It is also among the twenty countries with the largest water resources
worldwide. Yet the distribution of these resources within the country is highly uneven. Nearly 98% of
Perus water is found in the Atlantic basin, while the Pacific and Titicaca basins contain just 1.8% and
0.5%, respectively. Mineral deposits are similarly highly concentrated. Over 90% of the copper extracted in
the country comes from the Andean regions of Ancash, Moquegua, Tacna, Arequipa and Cuzco; 82.9% of
extracted gold comes from Cajamarca, La Libertad, Ancash and Arequipa; and 92.2% of zinc and 67.0%
of silver come from Pasco, Ancash, Lima and Junin. In a number of these mineral-rich areas water levels
are often subject to considerable seasonal variation, which periodically serves to exacerbate supply
shortages.
The Expansion of Mining
Since the economic liberalisation of the 1990s all governments have promoted foreign direct investment
(FDI). Incentives offered to foreign firms have included tax exemptions, stability agreements, reduced
royalty fees (and exemptions) and credits for reinvesting and repatriating profits. As a result, FDI has
grown consistently: 296% under President Fujimori (1990 - 2000), 22% under Toledo (2001-2006) and
134% under Garca (2006-2011). Over the past five years total capital investment in the mining sector,
including both foreign and domestic finance, has nearly tripled.
Yet in some areas, the sectors contribution to the Peruvian economy has been fairly limited. Between
1991 and 2009, just 6.5% of Perus Gross Domestic Product (GDP) was attributed to mining activity, while
manufacturing and agriculture contributed 16.4% and 8.2%, respectively. According to the latest census
(in 2007), mining employed only 1.3% of the economically active population, whereas agriculture
employed 23.3%. The mining sector is today estimated to have created 125,976 jobs directly, and 503,904
indirectly.
Where the Peruvian economy does depend on the mining sector is in its exports and state revenues. By
2009 mineral exports comprised some 66% of Perus total export revenue. Between 2006 and 2009
government revenue from the canon minero (income and capital tax on mining companies), royalties and
concession rights totalled around US$ 2.5bn per year. Of this, regional governments in mining areas
received between US$ 0.68bn (2006) and US$ 1.15bn (2009). The possibility for new development and
poverty-reduction programmes funded by such revenues today constitutes one of the principal arguments
for further expansion of the sector.
Conflicts between Mining and Agriculture
Public attitude to mining, in particular to large-scale corporate mining, depends largely on a local
populations own expectations, the areas mining history and the reputation built up by companies over
time. Seeking to lessen popular resistance to expansion of the mining sector, in 2004 Congress introduced
a bill providing for the taxation of mining activities and the redistribution of associated revenues to affected
regions and municipalities. This raised hopes that increased government earnings and new job
opportunities could help accelerate local development in the country. However, the subsequent significant
increase of the size of territory under concession and of exploration activity, particularly in the western
Andes, created concern among farmers and other rural populations over the large amounts of water to be
used by the mines.
The impact of mining on water resources has always been a matter of dispute between mining firms and
farmers. More recently the dispute has spread to other sectors of society. Of approximately 250 social
conflicts (average per year 2006 - 2009) recorded by the Peruvian Human Rights Ombudsman 60% were
related to mining and one in eight concerned water issues.
While conflicts relate to access and use of water, vital for both mining and agricultural activities, they also
represent political and ideological struggles over the correct path to economic and human development in
rural areas. They further reflect the widespread sense among local populations that they are excluded
from the benefits that mining can bring. Conflicts, both new and long-standing, are currently delaying
enormous investment projects, such as the enlargement of the Toquepala copper mine in the south and
the Conga gold mine project in the north.
Underlying these conflicts are four factors: 1) natural water scarcity and the scarcity produced by the
inefficient distribution of water resources, 2) competition, instead of cooperation, between mining and
agriculture users, 3) inefficient water management by both sectors, and 4) the different (economic and non
-economic) values placed on water by different consumers. Alongside this are structural factors that affect
the potential for growth and the expansion of large-scale mining. High levels of
unemployment/underemployment and poverty in rural areas, as well as a legacy of poor relationships
between some companies and communities, are several such factors.
Further, the extraction of groundwater and the expansion of mining activity into high mountain areas and
near basin headwaters have all caused massive at times violent reactions by local populations who
believe mines responsible for water scarcity and environmental degradation. Competition for water
between mining and other users has been portrayed mainly as a contention between large companies and
small farmers (campesinos). Historical competition for water among agricultural users has received less
attention, perhaps because it has been resolved without much difficulty through ad hoc arrangements or
by illegal practices of water theft.

Over the past century Peru

has suffered a series of
autocratic governments and a
civil war in which nearly
70,000 people died. Many of
the country's ongoing political
and social problems are a
legacy of its somewhat
turbulent past.

Society and Conflict

Perus indigenous and

peasant communities
continue to suffer political
marginalisation and
discrimination. Insufficient
consultation with such groups
over political and
developmental decisions has
fostered feelings of
disenfranchisement and led to
elevated levels of social
conflict.

Why join the PSG?

Keep up to date with latest
news and developments
in Peru
Learn about key issues of
poverty, development and
human rights in Peru
Support the work of the
Peru Support Group

BECOME A MEMBER

One reason that the relationship between mining and local populations has proved so problematic is that
the various parties place different values and meaning to water resources. The idea of water as only an
industrial material with a commercial value is challenged by the communities broader understanding of
water as a life-giving resource. While the 2009 Water Law very generally acknowledges both meanings,
the symbolic value of water for most of the rural indigenous population has not been sufficiently
understood, let alone institutionally addressed. The value placed on water by such groups combines both
elements of economic rationality with elements of cultural and territorial identity. As such, the meaning and
value of water is continuously evolving and can be negotiated.
Challenges for the Presidential Agenda
The 2009 Water Law established a new legal framework and created opportunities for more equitable and
efficient management of water resources. These opportunities, however, are threatened by uncertainties
over the laws interpretation, weak state enforcement, new forms of centralised decision-making over
access to and distribution of water and, most importantly, by the asymmetry in power between the state,
mining companies and communities. All this could challenge Humalas proposed agenda for "inclusive
growth".
Fears that water scarcity will increase if mining operations expand are exacerbated by extremely low
investment in water management and infrastructure. Furthermore, the use of water as a political and
economic bargaining tool has produced conflicts between local, regional and central governing authorities.
There is no easy solution to conflicts over water and mining. Its clear that Perus economy needs a mining
sector which makes a significant contribution to government finances and technological progress. But it is
also clear that sustainable, long-term growth will require poverty reduction through increasing the rural
poors access to irrigated land and investing in water management training. Developing emerging areas,
such as high-value agriculture and agro-industry, will also require sufficient access to clean water.
To achieve Humalas aim of sustained and inclusive growth the government will need to address the
issues of water and mining. To be successful, negotiations between the government, mining companies
and other water users will have to deal not just with technical or ecological matters, but also with issues of
sustainability and justice.

This article is based on two research projects, both funded by the ESRC: Extractive industries and
changing waterscapes in the Andes (The Open University, 201012,http://www.open.ac.uk/socialsciences/andean-waterscapes) and Territory, conflicts and development in
the Andes (University of Manchester, 2007-9, http://www.sed.manchester.ac.uk/research/andes).

ALL ARTICLES

CONTACT US
Unit F5, 89-93 Fonthill
Road
London N4 3JH
Friend on Facebook
Follow on Twitter

2010 Peru Support Group

Coordinator

Peter Low

Telephone

+ 44 (0) 207 263 1016

Email

info@perusupportgroup.org.uk

Skype

peru.support.group

Web design and development: isd-sign

BECOME A MEMBER

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Home Articles Mining and Water Governance in Peru

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Historical Overview

Mining and Water Governance in Peru

LEONITH HINOJOSA | OPEN UNIVERSITY

Peru is a country rich in natural resources. It is the worlds largest producer of silver, the second of copper
and zinc, and the sixth of gold. It is also among the twenty countries with the largest water resources
worldwide. Yet the distribution of these resources within the country is highly uneven. Nearly 98% of
Perus water is found in the Atlantic basin, while the Pacific and Titicaca basins contain just 1.8% and
0.5%, respectively. Mineral deposits are similarly highly concentrated. Over 90% of the copper extracted in
the country comes from the Andean regions of Ancash, Moquegua, Tacna, Arequipa and Cuzco; 82.9% of
extracted gold comes from Cajamarca, La Libertad, Ancash and Arequipa; and 92.2% of zinc and 67.0%
of silver come from Pasco, Ancash, Lima and Junin. In a number of these mineral-rich areas water levels
are often subject to considerable seasonal variation, which periodically serves to exacerbate supply
shortages.
The Expansion of Mining
Since the economic liberalisation of the 1990s all governments have promoted foreign direct investment
(FDI). Incentives offered to foreign firms have included tax exemptions, stability agreements, reduced
royalty fees (and exemptions) and credits for reinvesting and repatriating profits. As a result, FDI has
grown consistently: 296% under President Fujimori (1990 - 2000), 22% under Toledo (2001-2006) and
134% under Garca (2006-2011). Over the past five years total capital investment in the mining sector,
including both foreign and domestic finance, has nearly tripled.
Yet in some areas, the sectors contribution to the Peruvian economy has been fairly limited. Between
1991 and 2009, just 6.5% of Perus Gross Domestic Product (GDP) was attributed to mining activity, while
manufacturing and agriculture contributed 16.4% and 8.2%, respectively. According to the latest census
(in 2007), mining employed only 1.3% of the economically active population, whereas agriculture
employed 23.3%. The mining sector is today estimated to have created 125,976 jobs directly, and 503,904
indirectly.
Where the Peruvian economy does depend on the mining sector is in its exports and state revenues. By
2009 mineral exports comprised some 66% of Perus total export revenue. Between 2006 and 2009
government revenue from the canon minero (income and capital tax on mining companies), royalties and
concession rights totalled around US$ 2.5bn per year. Of this, regional governments in mining areas
received between US$ 0.68bn (2006) and US$ 1.15bn (2009). The possibility for new development and
poverty-reduction programmes funded by such revenues today constitutes one of the principal arguments
for further expansion of the sector.
Conflicts between Mining and Agriculture
Public attitude to mining, in particular to large-scale corporate mining, depends largely on a local
populations own expectations, the areas mining history and the reputation built up by companies over
time. Seeking to lessen popular resistance to expansion of the mining sector, in 2004 Congress introduced
a bill providing for the taxation of mining activities and the redistribution of associated revenues to affected
regions and municipalities. This raised hopes that increased government earnings and new job
opportunities could help accelerate local development in the country. However, the subsequent significant
increase of the size of territory under concession and of exploration activity, particularly in the western
Andes, created concern among farmers and other rural populations over the large amounts of water to be
used by the mines.
The impact of mining on water resources has always been a matter of dispute between mining firms and
farmers. More recently the dispute has spread to other sectors of society. Of approximately 250 social
conflicts (average per year 2006 - 2009) recorded by the Peruvian Human Rights Ombudsman 60% were
related to mining and one in eight concerned water issues.
While conflicts relate to access and use of water, vital for both mining and agricultural activities, they also
represent political and ideological struggles over the correct path to economic and human development in
rural areas. They further reflect the widespread sense among local populations that they are excluded
from the benefits that mining can bring. Conflicts, both new and long-standing, are currently delaying
enormous investment projects, such as the enlargement of the Toquepala copper mine in the south and
the Conga gold mine project in the north.
Underlying these conflicts are four factors: 1) natural water scarcity and the scarcity produced by the
inefficient distribution of water resources, 2) competition, instead of cooperation, between mining and
agriculture users, 3) inefficient water management by both sectors, and 4) the different (economic and non
-economic) values placed on water by different consumers. Alongside this are structural factors that affect
the potential for growth and the expansion of large-scale mining. High levels of
unemployment/underemployment and poverty in rural areas, as well as a legacy of poor relationships
between some companies and communities, are several such factors.
Further, the extraction of groundwater and the expansion of mining activity into high mountain areas and
near basin headwaters have all caused massive at times violent reactions by local populations who
believe mines responsible for water scarcity and environmental degradation. Competition for water
between mining and other users has been portrayed mainly as a contention between large companies and
small farmers (campesinos). Historical competition for water among agricultural users has received less
attention, perhaps because it has been resolved without much difficulty through ad hoc arrangements or
by illegal practices of water theft.

Over the past century Peru

has suffered a series of
autocratic governments and a
civil war in which nearly
70,000 people died. Many of
the country's ongoing political
and social problems are a
legacy of its somewhat
turbulent past.

Society and Conflict

Perus indigenous and

peasant communities
continue to suffer political
marginalisation and
discrimination. Insufficient
consultation with such groups
over political and
developmental decisions has
fostered feelings of
disenfranchisement and led to
elevated levels of social
conflict.

Why join the PSG?

Keep up to date with latest
news and developments
in Peru
Learn about key issues of
poverty, development and
human rights in Peru
Support the work of the
Peru Support Group

BECOME A MEMBER

One reason that the relationship between mining and local populations has proved so problematic is that
the various parties place different values and meaning to water resources. The idea of water as only an
industrial material with a commercial value is challenged by the communities broader understanding of
water as a life-giving resource. While the 2009 Water Law very generally acknowledges both meanings,
the symbolic value of water for most of the rural indigenous population has not been sufficiently
understood, let alone institutionally addressed. The value placed on water by such groups combines both
elements of economic rationality with elements of cultural and territorial identity. As such, the meaning and
value of water is continuously evolving and can be negotiated.
Challenges for the Presidential Agenda
The 2009 Water Law established a new legal framework and created opportunities for more equitable and
efficient management of water resources. These opportunities, however, are threatened by uncertainties
over the laws interpretation, weak state enforcement, new forms of centralised decision-making over
access to and distribution of water and, most importantly, by the asymmetry in power between the state,
mining companies and communities. All this could challenge Humalas proposed agenda for "inclusive
growth".
Fears that water scarcity will increase if mining operations expand are exacerbated by extremely low
investment in water management and infrastructure. Furthermore, the use of water as a political and
economic bargaining tool has produced conflicts between local, regional and central governing authorities.
There is no easy solution to conflicts over water and mining. Its clear that Perus economy needs a mining
sector which makes a significant contribution to government finances and technological progress. But it is
also clear that sustainable, long-term growth will require poverty reduction through increasing the rural
poors access to irrigated land and investing in water management training. Developing emerging areas,
such as high-value agriculture and agro-industry, will also require sufficient access to clean water.
To achieve Humalas aim of sustained and inclusive growth the government will need to address the
issues of water and mining. To be successful, negotiations between the government, mining companies
and other water users will have to deal not just with technical or ecological matters, but also with issues of
sustainability and justice.

This article is based on two research projects, both funded by the ESRC: Extractive industries and
changing waterscapes in the Andes (The Open University, 201012,http://www.open.ac.uk/socialsciences/andean-waterscapes) and Territory, conflicts and development in
the Andes (University of Manchester, 2007-9, http://www.sed.manchester.ac.uk/research/andes).

ALL ARTICLES

CONTACT US
Unit F5, 89-93 Fonthill
Road
London N4 3JH
Friend on Facebook
Follow on Twitter

2010 Peru Support Group

Coordinator

Peter Low

Telephone

+ 44 (0) 207 263 1016

Email

info@perusupportgroup.org.uk

Skype

peru.support.group

Web design and development: isd-sign

BECOME A MEMBER

DONATE

MEMBERS AREA

THE PERU SUPPORT GROUP

GO

QUICK SEARCH

HOME

ABOUT US

FACTS AND KEY ISSUES

NEWS

ARTICLES

RESOURCES

Home Articles Mining and Water Governance in Peru

SUPPORT US

LINKS

CONTACT

Like

Historical Overview

Mining and Water Governance in Peru

LEONITH HINOJOSA | OPEN UNIVERSITY

Peru is a country rich in natural resources. It is the worlds largest producer of silver, the second of copper
and zinc, and the sixth of gold. It is also among the twenty countries with the largest water resources
worldwide. Yet the distribution of these resources within the country is highly uneven. Nearly 98% of
Perus water is found in the Atlantic basin, while the Pacific and Titicaca basins contain just 1.8% and
0.5%, respectively. Mineral deposits are similarly highly concentrated. Over 90% of the copper extracted in
the country comes from the Andean regions of Ancash, Moquegua, Tacna, Arequipa and Cuzco; 82.9% of
extracted gold comes from Cajamarca, La Libertad, Ancash and Arequipa; and 92.2% of zinc and 67.0%
of silver come from Pasco, Ancash, Lima and Junin. In a number of these mineral-rich areas water levels
are often subject to considerable seasonal variation, which periodically serves to exacerbate supply
shortages.
The Expansion of Mining
Since the economic liberalisation of the 1990s all governments have promoted foreign direct investment
(FDI). Incentives offered to foreign firms have included tax exemptions, stability agreements, reduced
royalty fees (and exemptions) and credits for reinvesting and repatriating profits. As a result, FDI has
grown consistently: 296% under President Fujimori (1990 - 2000), 22% under Toledo (2001-2006) and
134% under Garca (2006-2011). Over the past five years total capital investment in the mining sector,
including both foreign and domestic finance, has nearly tripled.
Yet in some areas, the sectors contribution to the Peruvian economy has been fairly limited. Between
1991 and 2009, just 6.5% of Perus Gross Domestic Product (GDP) was attributed to mining activity, while
manufacturing and agriculture contributed 16.4% and 8.2%, respectively. According to the latest census
(in 2007), mining employed only 1.3% of the economically active population, whereas agriculture
employed 23.3%. The mining sector is today estimated to have created 125,976 jobs directly, and 503,904
indirectly.
Where the Peruvian economy does depend on the mining sector is in its exports and state revenues. By
2009 mineral exports comprised some 66% of Perus total export revenue. Between 2006 and 2009
government revenue from the canon minero (income and capital tax on mining companies), royalties and
concession rights totalled around US$ 2.5bn per year. Of this, regional governments in mining areas
received between US$ 0.68bn (2006) and US$ 1.15bn (2009). The possibility for new development and
poverty-reduction programmes funded by such revenues today constitutes one of the principal arguments
for further expansion of the sector.
Conflicts between Mining and Agriculture
Public attitude to mining, in particular to large-scale corporate mining, depends largely on a local
populations own expectations, the areas mining history and the reputation built up by companies over
time. Seeking to lessen popular resistance to expansion of the mining sector, in 2004 Congress introduced
a bill providing for the taxation of mining activities and the redistribution of associated revenues to affected
regions and municipalities. This raised hopes that increased government earnings and new job
opportunities could help accelerate local development in the country. However, the subsequent significant
increase of the size of territory under concession and of exploration activity, particularly in the western
Andes, created concern among farmers and other rural populations over the large amounts of water to be
used by the mines.
The impact of mining on water resources has always been a matter of dispute between mining firms and
farmers. More recently the dispute has spread to other sectors of society. Of approximately 250 social
conflicts (average per year 2006 - 2009) recorded by the Peruvian Human Rights Ombudsman 60% were
related to mining and one in eight concerned water issues.
While conflicts relate to access and use of water, vital for both mining and agricultural activities, they also
represent political and ideological struggles over the correct path to economic and human development in
rural areas. They further reflect the widespread sense among local populations that they are excluded
from the benefits that mining can bring. Conflicts, both new and long-standing, are currently delaying
enormous investment projects, such as the enlargement of the Toquepala copper mine in the south and
the Conga gold mine project in the north.
Underlying these conflicts are four factors: 1) natural water scarcity and the scarcity produced by the
inefficient distribution of water resources, 2) competition, instead of cooperation, between mining and
agriculture users, 3) inefficient water management by both sectors, and 4) the different (economic and non
-economic) values placed on water by different consumers. Alongside this are structural factors that affect
the potential for growth and the expansion of large-scale mining. High levels of
unemployment/underemployment and poverty in rural areas, as well as a legacy of poor relationships
between some companies and communities, are several such factors.
Further, the extraction of groundwater and the expansion of mining activity into high mountain areas and
near basin headwaters have all caused massive at times violent reactions by local populations who
believe mines responsible for water scarcity and environmental degradation. Competition for water
between mining and other users has been portrayed mainly as a contention between large companies and
small farmers (campesinos). Historical competition for water among agricultural users has received less
attention, perhaps because it has been resolved without much difficulty through ad hoc arrangements or
by illegal practices of water theft.

Over the past century Peru

has suffered a series of
autocratic governments and a
civil war in which nearly
70,000 people died. Many of
the country's ongoing political
and social problems are a
legacy of its somewhat
turbulent past.

Society and Conflict

Perus indigenous and

peasant communities
continue to suffer political
marginalisation and
discrimination. Insufficient
consultation with such groups
over political and
developmental decisions has
fostered feelings of
disenfranchisement and led to
elevated levels of social
conflict.

Why join the PSG?

Keep up to date with latest
news and developments
in Peru
Learn about key issues of
poverty, development and
human rights in Peru
Support the work of the
Peru Support Group

BECOME A MEMBER

One reason that the relationship between mining and local populations has proved so problematic is that
the various parties place different values and meaning to water resources. The idea of water as only an
industrial material with a commercial value is challenged by the communities broader understanding of
water as a life-giving resource. While the 2009 Water Law very generally acknowledges both meanings,
the symbolic value of water for most of the rural indigenous population has not been sufficiently
understood, let alone institutionally addressed. The value placed on water by such groups combines both
elements of economic rationality with elements of cultural and territorial identity. As such, the meaning and
value of water is continuously evolving and can be negotiated.
Challenges for the Presidential Agenda
The 2009 Water Law established a new legal framework and created opportunities for more equitable and
efficient management of water resources. These opportunities, however, are threatened by uncertainties
over the laws interpretation, weak state enforcement, new forms of centralised decision-making over
access to and distribution of water and, most importantly, by the asymmetry in power between the state,
mining companies and communities. All this could challenge Humalas proposed agenda for "inclusive
growth".
Fears that water scarcity will increase if mining operations expand are exacerbated by extremely low
investment in water management and infrastructure. Furthermore, the use of water as a political and
economic bargaining tool has produced conflicts between local, regional and central governing authorities.
There is no easy solution to conflicts over water and mining. Its clear that Perus economy needs a mining
sector which makes a significant contribution to government finances and technological progress. But it is
also clear that sustainable, long-term growth will require poverty reduction through increasing the rural
poors access to irrigated land and investing in water management training. Developing emerging areas,
such as high-value agriculture and agro-industry, will also require sufficient access to clean water.
To achieve Humalas aim of sustained and inclusive growth the government will need to address the
issues of water and mining. To be successful, negotiations between the government, mining companies
and other water users will have to deal not just with technical or ecological matters, but also with issues of
sustainability and justice.

This article is based on two research projects, both funded by the ESRC: Extractive industries and
changing waterscapes in the Andes (The Open University, 201012,http://www.open.ac.uk/socialsciences/andean-waterscapes) and Territory, conflicts and development in
the Andes (University of Manchester, 2007-9, http://www.sed.manchester.ac.uk/research/andes).

ALL ARTICLES

CONTACT US
Unit F5, 89-93 Fonthill
Road
London N4 3JH
Friend on Facebook
Follow on Twitter

2010 Peru Support Group

Coordinator

Peter Low

Telephone

+ 44 (0) 207 263 1016

Email

info@perusupportgroup.org.uk

Skype

peru.support.group

Web design and development: isd-sign

BECOME A MEMBER

DONATE

MEMBERS AREA

THE PERU SUPPORT GROUP

GO

QUICK SEARCH

HOME

ABOUT US

FACTS AND KEY ISSUES

NEWS

ARTICLES

RESOURCES

Home Articles Mining and Water Governance in Peru

SUPPORT US

LINKS

CONTACT

Like

Historical Overview

Mining and Water Governance in Peru

LEONITH HINOJOSA | OPEN UNIVERSITY

Peru is a country rich in natural resources. It is the worlds largest producer of silver, the second of copper
and zinc, and the sixth of gold. It is also among the twenty countries with the largest water resources
worldwide. Yet the distribution of these resources within the country is highly uneven. Nearly 98% of
Perus water is found in the Atlantic basin, while the Pacific and Titicaca basins contain just 1.8% and
0.5%, respectively. Mineral deposits are similarly highly concentrated. Over 90% of the copper extracted in
the country comes from the Andean regions of Ancash, Moquegua, Tacna, Arequipa and Cuzco; 82.9% of
extracted gold comes from Cajamarca, La Libertad, Ancash and Arequipa; and 92.2% of zinc and 67.0%
of silver come from Pasco, Ancash, Lima and Junin. In a number of these mineral-rich areas water levels
are often subject to considerable seasonal variation, which periodically serves to exacerbate supply
shortages.
The Expansion of Mining
Since the economic liberalisation of the 1990s all governments have promoted foreign direct investment
(FDI). Incentives offered to foreign firms have included tax exemptions, stability agreements, reduced
royalty fees (and exemptions) and credits for reinvesting and repatriating profits. As a result, FDI has
grown consistently: 296% under President Fujimori (1990 - 2000), 22% under Toledo (2001-2006) and
134% under Garca (2006-2011). Over the past five years total capital investment in the mining sector,
including both foreign and domestic finance, has nearly tripled.
Yet in some areas, the sectors contribution to the Peruvian economy has been fairly limited. Between
1991 and 2009, just 6.5% of Perus Gross Domestic Product (GDP) was attributed to mining activity, while
manufacturing and agriculture contributed 16.4% and 8.2%, respectively. According to the latest census
(in 2007), mining employed only 1.3% of the economically active population, whereas agriculture
employed 23.3%. The mining sector is today estimated to have created 125,976 jobs directly, and 503,904
indirectly.
Where the Peruvian economy does depend on the mining sector is in its exports and state revenues. By
2009 mineral exports comprised some 66% of Perus total export revenue. Between 2006 and 2009
government revenue from the canon minero (income and capital tax on mining companies), royalties and
concession rights totalled around US$ 2.5bn per year. Of this, regional governments in mining areas
received between US$ 0.68bn (2006) and US$ 1.15bn (2009). The possibility for new development and
poverty-reduction programmes funded by such revenues today constitutes one of the principal arguments
for further expansion of the sector.
Conflicts between Mining and Agriculture
Public attitude to mining, in particular to large-scale corporate mining, depends largely on a local
populations own expectations, the areas mining history and the reputation built up by companies over
time. Seeking to lessen popular resistance to expansion of the mining sector, in 2004 Congress introduced
a bill providing for the taxation of mining activities and the redistribution of associated revenues to affected
regions and municipalities. This raised hopes that increased government earnings and new job
opportunities could help accelerate local development in the country. However, the subsequent significant
increase of the size of territory under concession and of exploration activity, particularly in the western
Andes, created concern among farmers and other rural populations over the large amounts of water to be
used by the mines.
The impact of mining on water resources has always been a matter of dispute between mining firms and
farmers. More recently the dispute has spread to other sectors of society. Of approximately 250 social
conflicts (average per year 2006 - 2009) recorded by the Peruvian Human Rights Ombudsman 60% were
related to mining and one in eight concerned water issues.
While conflicts relate to access and use of water, vital for both mining and agricultural activities, they also
represent political and ideological struggles over the correct path to economic and human development in
rural areas. They further reflect the widespread sense among local populations that they are excluded
from the benefits that mining can bring. Conflicts, both new and long-standing, are currently delaying
enormous investment projects, such as the enlargement of the Toquepala copper mine in the south and
the Conga gold mine project in the north.
Underlying these conflicts are four factors: 1) natural water scarcity and the scarcity produced by the
inefficient distribution of water resources, 2) competition, instead of cooperation, between mining and
agriculture users, 3) inefficient water management by both sectors, and 4) the different (economic and non
-economic) values placed on water by different consumers. Alongside this are structural factors that affect
the potential for growth and the expansion of large-scale mining. High levels of
unemployment/underemployment and poverty in rural areas, as well as a legacy of poor relationships
between some companies and communities, are several such factors.
Further, the extraction of groundwater and the expansion of mining activity into high mountain areas and
near basin headwaters have all caused massive at times violent reactions by local populations who
believe mines responsible for water scarcity and environmental degradation. Competition for water
between mining and other users has been portrayed mainly as a contention between large companies and
small farmers (campesinos). Historical competition for water among agricultural users has received less
attention, perhaps because it has been resolved without much difficulty through ad hoc arrangements or
by illegal practices of water theft.

Over the past century Peru

has suffered a series of
autocratic governments and a
civil war in which nearly
70,000 people died. Many of
the country's ongoing political
and social problems are a
legacy of its somewhat
turbulent past.

Society and Conflict

Perus indigenous and

peasant communities
continue to suffer political
marginalisation and
discrimination. Insufficient
consultation with such groups
over political and
developmental decisions has
fostered feelings of
disenfranchisement and led to
elevated levels of social
conflict.

Why join the PSG?

Keep up to date with latest
news and developments
in Peru
Learn about key issues of
poverty, development and
human rights in Peru
Support the work of the
Peru Support Group

BECOME A MEMBER

One reason that the relationship between mining and local populations has proved so problematic is that
the various parties place different values and meaning to water resources. The idea of water as only an
industrial material with a commercial value is challenged by the communities broader understanding of
water as a life-giving resource. While the 2009 Water Law very generally acknowledges both meanings,
the symbolic value of water for most of the rural indigenous population has not been sufficiently
understood, let alone institutionally addressed. The value placed on water by such groups combines both
elements of economic rationality with elements of cultural and territorial identity. As such, the meaning and
value of water is continuously evolving and can be negotiated.
Challenges for the Presidential Agenda
The 2009 Water Law established a new legal framework and created opportunities for more equitable and
efficient management of water resources. These opportunities, however, are threatened by uncertainties
over the laws interpretation, weak state enforcement, new forms of centralised decision-making over
access to and distribution of water and, most importantly, by the asymmetry in power between the state,
mining companies and communities. All this could challenge Humalas proposed agenda for "inclusive
growth".
Fears that water scarcity will increase if mining operations expand are exacerbated by extremely low
investment in water management and infrastructure. Furthermore, the use of water as a political and
economic bargaining tool has produced conflicts between local, regional and central governing authorities.
There is no easy solution to conflicts over water and mining. Its clear that Perus economy needs a mining
sector which makes a significant contribution to government finances and technological progress. But it is
also clear that sustainable, long-term growth will require poverty reduction through increasing the rural
poors access to irrigated land and investing in water management training. Developing emerging areas,
such as high-value agriculture and agro-industry, will also require sufficient access to clean water.
To achieve Humalas aim of sustained and inclusive growth the government will need to address the
issues of water and mining. To be successful, negotiations between the government, mining companies
and other water users will have to deal not just with technical or ecological matters, but also with issues of
sustainability and justice.

This article is based on two research projects, both funded by the ESRC: Extractive industries and
changing waterscapes in the Andes (The Open University, 201012,http://www.open.ac.uk/socialsciences/andean-waterscapes) and Territory, conflicts and development in
the Andes (University of Manchester, 2007-9, http://www.sed.manchester.ac.uk/research/andes).

ALL ARTICLES

CONTACT US
Unit F5, 89-93 Fonthill
Road
London N4 3JH
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2010 Peru Support Group

Coordinator

Peter Low

Telephone

+ 44 (0) 207 263 1016

Email

info@perusupportgroup.org.uk

Skype

peru.support.group

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Historical Overview

Mining and Water Governance in Peru

LEONITH HINOJOSA | OPEN UNIVERSITY

Peru is a country rich in natural resources. It is the worlds largest producer of silver, the second of copper
and zinc, and the sixth of gold. It is also among the twenty countries with the largest water resources
worldwide. Yet the distribution of these resources within the country is highly uneven. Nearly 98% of
Perus water is found in the Atlantic basin, while the Pacific and Titicaca basins contain just 1.8% and
0.5%, respectively. Mineral deposits are similarly highly concentrated. Over 90% of the copper extracted in
the country comes from the Andean regions of Ancash, Moquegua, Tacna, Arequipa and Cuzco; 82.9% of
extracted gold comes from Cajamarca, La Libertad, Ancash and Arequipa; and 92.2% of zinc and 67.0%
of silver come from Pasco, Ancash, Lima and Junin. In a number of these mineral-rich areas water levels
are often subject to considerable seasonal variation, which periodically serves to exacerbate supply
shortages.
The Expansion of Mining
Since the economic liberalisation of the 1990s all governments have promoted foreign direct investment
(FDI). Incentives offered to foreign firms have included tax exemptions, stability agreements, reduced
royalty fees (and exemptions) and credits for reinvesting and repatriating profits. As a result, FDI has
grown consistently: 296% under President Fujimori (1990 - 2000), 22% under Toledo (2001-2006) and
134% under Garca (2006-2011). Over the past five years total capital investment in the mining sector,
including both foreign and domestic finance, has nearly tripled.
Yet in some areas, the sectors contribution to the Peruvian economy has been fairly limited. Between
1991 and 2009, just 6.5% of Perus Gross Domestic Product (GDP) was attributed to mining activity, while
manufacturing and agriculture contributed 16.4% and 8.2%, respectively. According to the latest census
(in 2007), mining employed only 1.3% of the economically active population, whereas agriculture
employed 23.3%. The mining sector is today estimated to have created 125,976 jobs directly, and 503,904
indirectly.
Where the Peruvian economy does depend on the mining sector is in its exports and state revenues. By
2009 mineral exports comprised some 66% of Perus total export revenue. Between 2006 and 2009
government revenue from the canon minero (income and capital tax on mining companies), royalties and
concession rights totalled around US$ 2.5bn per year. Of this, regional governments in mining areas
received between US$ 0.68bn (2006) and US$ 1.15bn (2009). The possibility for new development and
poverty-reduction programmes funded by such revenues today constitutes one of the principal arguments
for further expansion of the sector.
Conflicts between Mining and Agriculture
Public attitude to mining, in particular to large-scale corporate mining, depends largely on a local
populations own expectations, the areas mining history and the reputation built up by companies over
time. Seeking to lessen popular resistance to expansion of the mining sector, in 2004 Congress introduced
a bill providing for the taxation of mining activities and the redistribution of associated revenues to affected
regions and municipalities. This raised hopes that increased government earnings and new job
opportunities could help accelerate local development in the country. However, the subsequent significant
increase of the size of territory under concession and of exploration activity, particularly in the western
Andes, created concern among farmers and other rural populations over the large amounts of water to be
used by the mines.
The impact of mining on water resources has always been a matter of dispute between mining firms and
farmers. More recently the dispute has spread to other sectors of society. Of approximately 250 social
conflicts (average per year 2006 - 2009) recorded by the Peruvian Human Rights Ombudsman 60% were
related to mining and one in eight concerned water issues.
While conflicts relate to access and use of water, vital for both mining and agricultural activities, they also
represent political and ideological struggles over the correct path to economic and human development in
rural areas. They further reflect the widespread sense among local populations that they are excluded
from the benefits that mining can bring. Conflicts, both new and long-standing, are currently delaying
enormous investment projects, such as the enlargement of the Toquepala copper mine in the south and
the Conga gold mine project in the north.
Underlying these conflicts are four factors: 1) natural water scarcity and the scarcity produced by the
inefficient distribution of water resources, 2) competition, instead of cooperation, between mining and
agriculture users, 3) inefficient water management by both sectors, and 4) the different (economic and non
-economic) values placed on water by different consumers. Alongside this are structural factors that affect
the potential for growth and the expansion of large-scale mining. High levels of
unemployment/underemployment and poverty in rural areas, as well as a legacy of poor relationships
between some companies and communities, are several such factors.
Further, the extraction of groundwater and the expansion of mining activity into high mountain areas and
near basin headwaters have all caused massive at times violent reactions by local populations who
believe mines responsible for water scarcity and environmental degradation. Competition for water
between mining and other users has been portrayed mainly as a contention between large companies and
small farmers (campesinos). Historical competition for water among agricultural users has received less
attention, perhaps because it has been resolved without much difficulty through ad hoc arrangements or
by illegal practices of water theft.

Over the past century Peru

has suffered a series of
autocratic governments and a
civil war in which nearly
70,000 people died. Many of
the country's ongoing political
and social problems are a
legacy of its somewhat
turbulent past.

Society and Conflict

Perus indigenous and

peasant communities
continue to suffer political
marginalisation and
discrimination. Insufficient
consultation with such groups
over political and
developmental decisions has
fostered feelings of
disenfranchisement and led to
elevated levels of social
conflict.

Why join the PSG?

Keep up to date with latest
news and developments
in Peru
Learn about key issues of
poverty, development and
human rights in Peru
Support the work of the
Peru Support Group

BECOME A MEMBER

One reason that the relationship between mining and local populations has proved so problematic is that
the various parties place different values and meaning to water resources. The idea of water as only an
industrial material with a commercial value is challenged by the communities broader understanding of
water as a life-giving resource. While the 2009 Water Law very generally acknowledges both meanings,
the symbolic value of water for most of the rural indigenous population has not been sufficiently
understood, let alone institutionally addressed. The value placed on water by such groups combines both
elements of economic rationality with elements of cultural and territorial identity. As such, the meaning and
value of water is continuously evolving and can be negotiated.
Challenges for the Presidential Agenda
The 2009 Water Law established a new legal framework and created opportunities for more equitable and
efficient management of water resources. These opportunities, however, are threatened by uncertainties
over the laws interpretation, weak state enforcement, new forms of centralised decision-making over
access to and distribution of water and, most importantly, by the asymmetry in power between the state,
mining companies and communities. All this could challenge Humalas proposed agenda for "inclusive
growth".
Fears that water scarcity will increase if mining operations expand are exacerbated by extremely low
investment in water management and infrastructure. Furthermore, the use of water as a political and
economic bargaining tool has produced conflicts between local, regional and central governing authorities.
There is no easy solution to conflicts over water and mining. Its clear that Perus economy needs a mining
sector which makes a significant contribution to government finances and technological progress. But it is
also clear that sustainable, long-term growth will require poverty reduction through increasing the rural
poors access to irrigated land and investing in water management training. Developing emerging areas,
such as high-value agriculture and agro-industry, will also require sufficient access to clean water.
To achieve Humalas aim of sustained and inclusive growth the government will need to address the
issues of water and mining. To be successful, negotiations between the government, mining companies
and other water users will have to deal not just with technical or ecological matters, but also with issues of
sustainability and justice.

This article is based on two research projects, both funded by the ESRC: Extractive industries and
changing waterscapes in the Andes (The Open University, 201012,http://www.open.ac.uk/socialsciences/andean-waterscapes) and Territory, conflicts and development in
the Andes (University of Manchester, 2007-9, http://www.sed.manchester.ac.uk/research/andes).

ALL ARTICLES

CONTACT US
Unit F5, 89-93 Fonthill
Road
London N4 3JH
Friend on Facebook
Follow on Twitter

2010 Peru Support Group

Coordinator

Peter Low

Telephone

+ 44 (0) 207 263 1016

Email

info@perusupportgroup.org.uk

Skype

peru.support.group

Web design and development: isd-sign