From the Editor - Humala Makes a Wise Choice

Steve Fiscor
Last month, after Newmont agreed to suspend construction at the Conga Project as a good faith gesture and protesters still refused to lift a blockade in Cajamarca, Peruvian President Ollanta Humala imposed a state of emergency and began to "restore order" in the region. Under the guise of environmentalism, populist radicals have been using road blocks and violence to bring three major Peruvian mining projects to a halt. After about six months in office, Humala, who rose to power after a failed coup against a Peruvian democracy, came to a fork in the road.

Together, the projects (Minas Conga, Rio Blanco and Tia Maria) represent about $6 billion in mining-related investments. Newmont Mining values the Minas Conga gold project at $4.8 billion. China's Zijin Mining owns Rio Blanco, a copper project with a $1.6 billion price tag. The $1 billion Tia Maria remains suspended while Southern Copper completes another environmental impact study (EIS). If investment fears continue to spread, Peru could see as much as $50 billion in mining investments evaporate.

The situation created internal political turmoil for President Humala, who won the office with support from the same people who are now protesting the projects. He recently replaced more than half of his cabinet after his prime minister, Salomon Lerner, resigned. Lerner tried to negotiate with the protest leaders. His resignation triggered several more cabinet resignations. The cabinet of 19 has 10 new ministers, including those for mining, defense and the interior. The new prime minister, Oscar Valdes, a former instructor who taught Humala at Peru's military academy in the 1980s, has advocated a hard line against mining protesters. He has already reportedly asked prosecutors to arrest several protest leaders.

Newmont has conducted an extensive EIS at a considerable expense. To replace four lakes that dwindle during the dry season, Newmont plans to build four reservoirs, which would double the amount of water available to local communities. The locals, however, have been led to believe the mine will harm the land and water by a group called the Environmental Defense Front. One of the leaders of the Environmental Defense Front, Wilfredo Saavedra, is a former member of the Tupac Amaru Revolutionary Movement.

For the past 10 years, the Peruvian economy has grown at an annual average rate that exceeds 6%. As E&MJ has documented, mining investment in Peru has doubled in the last two years. The people of Peru have become more wealthy thanks in large part to mining. This stands in stark contrast to two of Peru's neighbors: Ecuador and Bolivia. The policies of both of those nations have hindered private enterprise.

Humala needed to act, not only for the safety of the citizens of Cajamarca, but for the best interest of the country. Foreign investors are watching and the outcome of these events could seriously impact Peru's future economically. During his election campaign, he promised the poor people of Peru a better life. He will not be able to fulfill that promise if radicals are allowed to drive mining investments from the country.

Steve Fiscor, Editor-in-Chief, E&MJ

As featured in Womp 2012 Vol 01 -