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Virtuous Circles: Mining and community involvement

Article - March 10, 2016

Mining companies are today making the change from extractive approaches to inclusive, participatory approaches, working together with the government and local communities to ensure everyone’s needs are met

Historically, mining companies in Peru focused more on short-term benefits and plans and less on long-term plans for the communities in which they mined. However, over the past few decades mining companies have been making the change from extractive approaches to inclusive, participatory approaches. In these types of approaches, the mining companies, governments, and local communities work together to ensure that everyone’s needs are met, as much as possible, in a spirit of cooperation and compromise.

Carlos Galvez Pinillos, the president of the National Society of Mining, Petroleum and Energy, sees one of the goals of his non-profit organization as improving Peru’s economy. “We have a portfolio of about $65 billion to date to still be developed. … We have to be able to properly inform the population that these outstanding projects are the fulcrum for us to continue to grow and reduce poverty. If we could reduce more than half of the poverty over a period of 10 or 15 years, by implementing these projects we will be able to reduce the other half in the next decade,” he estimates.

“Mining takes welfare to the places where the government does not do enough. It takes with it infrastructure, health, education”

Ernesto Balarezo Valdéz, General Manager of Gold Fields La Cima

In addition, mining activity in Peru serves the nation’s infrastructure, which can be lacking due to the country’s geography. “This is a country that has a semi-desert coastal strip, the almost impregnable Andes that reach 6,000-7,000 meters, and an Amazonian jungle where it is quite difficult to develop any economic activity,” Roque Benavides, Executive President, Chief Executive Officer and Chairman of the Board of Compañia de Minas Buenaventura, describes. “One of the economic activities that can contribute to generating the infrastructure needed to integrate this complicated country is the mining sector.”

Oscar Espinosa Bedoya, the Executive President of Ferreycorp (a supplier of mining equipment and services), explains, “It is estimated that $90 billion in infrastructure projects are needed. This represents valuable opportunities for companies like ours… An expanding market should generate investments, which leads to the revitalization of the virtuous circle of growth: private investment, product growth, job creation, rise in consumption…”

“Only 1.38% of the country has mining activities (between exploitation and exploration)… only less than 1% is in production, so there is still much to be developed”

Carlos Galvez Pinillos, President of the National Society of Mining, Petroleum, and Energy

Ernesto Balarezo Valdéz, General Manager of Gold Fields La Cima, agrees. “Mining takes welfare to the places where the government does not do enough. It takes with it infrastructure, health, education. It gives Peruvians who live up in the heights [of the Andes] access to the world, Internet access, and well-being.”

Communication with all stakeholders, including local community members, is important for everyone’s success. Barrick Gold Corporation has a community relations management system, according to the company’s executive director Manuel Fumagalli, which helps it ensure that it “covers various key aspects, among them local employment, the development of local suppliers, and a complaint management system.”

“PeruMin is inviting the main leaders that do not agree with the mainstream regarding the country’s mining sector. We have to listen to them, and we will make an effort in order to reach an understanding”

Antonio Samaniego, President of Board of Directors Peruvian Institute of Mining Engineers

But community involvement doesn’t focus just on the present situation. “The idea [of the system] is to ensure that members of the community become part of the market, that they develop themselves by taking advantage of the mine’s presence, which is finite in time, but to take advantage of the situation to prepare themselves, to provide services, and then to support themselves apart from the mine,” Fumagalli sums up.  

“Industry uses the term ‘research and development.’ In mining we do not use ‘research’; we use ‘exploration and development’, which is interesting because it is the key to understanding the industry”

Roque Benavides, Executive President, CEO and Chairman of the Board of Compañia de Minas Buenaventura

“We are part of the community,” states Mr. Valdez. “We seek to generate the highest possible welfare in a sustainable way, because when the mine is exhausted we want to be remembered as a company that has left something. For example, we have already given 57 scholarships to students in Hualgayoc and the neighboring areas, who, thanks to us, are studying at university, and we hope they will return to the areas they come from, to create wealth and leave something.”

Involving local community members in the mining process can take the form of equity as well. Minera IRL has offered a 5% caring interest in the operating company, so the community –not the individuals but the community itself– gets to be a participant in the equity of the project.

“(There were) investments of more than $600 million to modernize mining processes in order to a void all types of pollution”

Oscar González Rocha, President and CEO of Southern Copper Corporation of Peru

“As a Peruvian, with roots in Peru, I ask myself how to add value beyond the business itself,” says the executive president of Compañía de Minas Buenaventura. “The final goals have to be to fight poverty, generate wealth and opportunities, especially for the ones that need it the most.”