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Peruvian Mining: Industry for Economic Growth or National Disaster

Suchakrey (Toys) Koomplee Latin America and Caribbean History Spring 2013

A long time ago, the Europeans explored the globe and founded many colonies. They came to North America, the Caribbean, and South America. Peru was one of those countries that the Europeans colonized in South America. Due to its abundance in natural resources, Peru became a popular destination for those seeking fortune. The first new settlers experimented with more effective ways to access these natural resources. Eventually, they found minerals underground. This led to mining. Despite many economic benefits provided by the mining industry, most scholars agree that Peruvian mining should be discontinued, due to the danger it poses to laborers health and longevity and the governments instability. Since Peru has many valuable minerals, such as gold, silver, and copper, much attention has been given to mining. Silver was discovered in 1630 and since then mining has been the country's chief activity.1 Starting on the level of small family businesses, many entrepreneurs emerged and began to invest in bigger mining operations. The mining business had a similar effect on the increase of the Peruvian population as would the gold rush in California. This brought a great amount of money to Peru. For decades, Peru has been the world's largest producer of silver; it ranks second in copper and zinc; and it is the third largest in tin, fourth in lead and fifth in gold. When looking at Latin America only, Peru is number one on all of these fronts with the obvious exception of copper, where Chile is still far ahead.2 With these great amounts of minerals, Peru has been able to bring much money into the
Gritzner, Charles F., and Yvonne Gritzner. Peru. Philadelphia: Chelsea House, 2005. Print. Pg. 78. 2 "PERU: A Mining Power In South America. " Engineering & Mining Journal (00958948) 209.5 (2008): 78. Advanced Placement Source. Web. 8 Apr. 2013.
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country. In 2007, mining exports also amounted to $17.3 billion, 62% of the countrys total exports.3 This means that more than half of the money that Peru earns from exporting products depends on mining. As a result, mining industries in Peru have expanded from being solely domestic to becoming international businesses. Many foreign companies have also started investing in Peru. About $475 million, or 5% of the world's exploration budget (the money spent during the Europeans global exploration), was spent in Peru in 2007.4 Not only did foreign invertors find many resources, which brought them significant profits, they also found that Peruvian people are kind and qualified as good workers. Ian Kilgour, President and CEO of Antamita (a mining complex that mainly produces copper, zinc and molybdenum), said, "it is a fantastic country to work in, not only because of its amazing natural resources but because of the people available. Workers are very good and able to adapt very quickly to the environment,"5 after this rumor diffused, more foreigners came to Peru to start their businesses, making Peruvian mining industries prosper quickly. Moreover, David Lemor of the Peruvian State agency engaged in the promotion of business opportunities with high growth and return rates in Peru, also explained the situation about pollution from mining. He emphasized, "There are still some environmental liabilities, but those were caused by the old mining, not by the companies today."6 This gives trust to people that modern mining industries will not affect their environments. This makes the mining industries receive more support
"PERU: A Mining Power In South America." Ibid. 5 Ibid. 6 Ibid.
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from people and the government for decades. Eventually, mining became one of the most successful businesses in the country. However, industries always have weaknesses. Because mining is an underground business, lots of explosives were used. Many chemicals were washed into the water sources. This leads to pollution problems, which have become a big issue within the nation since the 1990s. This brought Peru into a big conflict as to whether they should keep mining, or the environmental and health issues of the country should come first. Many anti-mining groups in Peru were formed. Protests started. Unfortunately, there were not only pollution issues that occurred because of mining. Charles F. Gritzner, a historian and Professor of Geography at South Dakota State University, also pointed out the dangers and disadvantages of mining. For example, because of the high altitude of mining location and less oxygen in the atmosphere, work is very fatiguing. Most miners last only a few years before they are worn out. Moreover, lowlanders find it all but impossible to work the mines due to the long commute.7 This could cause injuries and deaths toward the workers. In addition, the landowners may be dissatisfied from these outcomes, and stop supporting mining, which could lead to instability of the industry. All these major problems about the industrial location could point to a big health issue for the workers. For example, working in a low-oxygen area would affect the efficiency of humans body. All living cells need oxygen to work properly. If a humans body does not get enough oxygen, all the organisms processes will slow down. Each organic system would have to work harder to maintain the same rate of
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Gritzner, Charles F., and Yvonne Gritzner. Peru. Philadelphia: Chelsea House, 2005. Pg. 78.

bodys metabolism. With this condition, workers will feel tired more easily, and become more susceptible to all diseases. Since the work areas in the mines are dusty and dirty, workers are easily infected. This makes it more risky to work in the mines. Additionally, the fact that the miners would last only a few years before they are worn out could also create a long-term effect. This condition points to instability of mining industry. If the miners were worn out early, that mining company would lose a big profit, as the products would be reduced. Furthermore, if the mining industry does not get enough support from the landowner, the business could be shut down easily. This means that whenever a mistake happens, there is a high risk that mining would be affected. Thus, considering all of these factors, mining is one of the most risky businesses in Peru. Besides mining location, the access to the mining resources is also a hard work and dangerous for the workers. Charles F. Gritzner stated that the access to the mining area is very difficult and costly to construct because of the rugged terrain.8 Because most Peruvian mines are in the mountainous area, the surrounding lands are rough and dry. In order to construct a commuting way to those areas, the constructors have to use such explosive and dangerous equipment, such as bombs and fire. This equipment poses risk to the workers. Some people lost parts of their bodies during the excavation. Many people died during the construction. Besides, the remaining workers also had to inhale all the dust and dangerous gasses created during this process, endangers their health and increasing

Gritzner, Pg. 78.

chances of asthma and lung cancer. The water sources near the mines can also be contaminated, which would give the workers more illnesses, such as diarrhea, and digestive sickness. This caused some people to consider whether mining is worth such an unsafe situation that the workers have to face, along with gambling their lives. Not only the location that makes the mining industry hard to work, the country itself is also not ready for a big investment from abroad. Javier ArellanoYanguas, a Researcher at Deusto University, spain, stated that Peru has consistently ranked among the most attractive countries in terms of the economic potential of its mineral reserves, but very low in terms of political variables - security, political stability and conflicts over land and indigenous issues.9 This means that most of the foreigners found that Peru is not yet considered a stable country. This could also reduce the trust from the foreign company to come and invest in Peru. Moreover, Peru is still having conflicts between lands and borders. This implies that some boundaries might be changed, which could affect the location of the mine. This factor could make the other countries feel that the land itself is not stable. Thus, if they come and invest a big factory around these areas, they could be assured that the land they chose would remain Perus until they have earned enough profits. This could lead to short-time industry from foreign company, and it is more stable and safer from boundary conflict.

Arellano-Yanguas, Javier. "Aggravating The Resource Curse: Decentralisation, Mining And Conflict In Peru." Journal Of Development Studies 47.4 (2011): 617. Advanced Placement Source. Web. 22 Apr. 2013.
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Not only is the land unstable, but some Peruvians also feel that government is still unbalance. Because of the high cost of development, the government has given many concessions to foreign interests to develop the mines.10 Even though this might bring more money to the country, Peruvian business would be mostly tied to the foreigner. This means that as a country, Peru might not be able to stand on its own. People still need to lean on the foreigners to make sure that the whole country can conduct itself independently. This could imply that Peruvian mining might be beneficial, but also could not last without investment from other country. Peruvian government itself also has a great impact toward mining industries in Peru. Once it became popular in the country, in the early 2000s, President Fujimori, who was in charge during that period, signed a fiscal stability agreement with mining companies renouncing the right of the government to change the mining tax regime without the companies' consent.11 This brought dissatisfaction from those buyers, both domestically and internationally. Their markets will be no longer stable because of the taxes that they would never know when and how much they had to pay. In addition, these changeable taxes could also give an economical impact toward the country. Once the taxes rate goes up, the price of mining products must also be increased. This could lead to a fluctuation of product price. Consumers, then, would be afraid to buy it, as they would not know if the price might go down the next day, so they would get a better deal. This can decrease the incomes earning from mining businesses in Peru.

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Gritzner, Pg. 79. Arellano-Yanguas, Pg. 620.

This whole process on behalf of Peruvian government shows the carelessness of handling a new industry in the country. It is reasonable that taxing more from these mining companies would bring the country more income. However, this could lose trust from those companies, as they would have to face a risk from unpredictable taxing. Moreover, without high taxes, Peru had already earned lots of money from mining products. The exports of mining industry played a role of 10% of the countrys income,12 which is considered a big amount compared to other industries. Thus, higher taxing rates toward mining company are not necessary, and this would lead to the end of mining industries in Peru at the end. In addition to Fujimori, Alejandro Toledo's government, which succeeded Fujimori, tried to manage mining industries by decentralizing the country by generating the region in order to spread opportunities to some other areas to have access to the mine. This could create some gaps between each regions.13 As each region has different resources in its mine, people would be more separated. If they are lucky to be divided into a mineral-rich area, they could earn much money from it. If not, their lives would be harder. For example, most of the country's 4,000 mining centers are located in the Andes.14 This gives more opportunities to people who are districted into this region to earn money than the other areas. Thus, people who live in these areas will become richer, while those in other areas will become poorer.
Nyrop, Richard F. Peru, a Country Study. Washington, D.C.: For Sale by the Supt, of Docs., U.S. G.P.O., 1981. Print. Pg. 119. 13 Arellano-Yanguas, Pg. 621. 14 Gritzner, Pg. 78.
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Even though the mining industries in Peru bring much money to the country and increase the employment rate among the population, the sources from each scholar show that Peru is not yet ready for a big mining industry. The reasons run from the risk of the workers, who had to construct a road from the cities to the mines using dangerous equipment (such as explosives), the danger of their work location, which is scarce of oxygen and can affect the laborers health and longevity, to the government itself that lacks of stability and could not handle big international industries. Thus, in conclusion, Peruvian mining should not be continued.

Bibliography Books: Gritzner, Charles F., and Yvonne Gritzner. Peru. Philadelphia: Chelsea House, 2005. Print. Nyrop, Richard F. Peru, a Country Study. Washington, D.C.: For Sale by the Supt, of Docs., U.S. G.P.O., 1981. Print. Internet: Arellano-Yanguas, Javier. "Aggravating The Resource Curse: Decentralisation, Mining And Conflict In Peru." Journal Of Development Studies 47.4 (2011): 617. Advanced Placement Source. Web. 22 Apr. 2013. "PERU: A Mining Power In South America." Engineering & Mining Journal (00958948) 209.5 (2008): 78. Advanced Placement Source. Web. 8 Apr. 2013. Taylor, Lewis. "Environmentalism And Social Protest: The Contemporary AntiMining Mobilization In The Province Of San Marcos And The Condebamba Valley, Peru." Journal Of Agrarian Change 11.3 (2011): 420. Advanced Placement Source. Web. 22 Apr. 2013. Van Geen, AlexanderBravo, CarolinaGil, VladimirSherpa, ShakyJack, Darby. "Lead Exposure From Soil In Peruvian Mining Towns: A National Assessment Supported By Two Contrasting Examples." Bulletin Of The World Health Organization 90.12 (2012): 878. Advanced Placement Source. Web. 22 Apr. 2013.

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