Four multiplications on his cell phone calculator turn the announcement of the year into a disappointment.
“It should be 800 million soles (about US$208 million)!” Gonzalo Velázquez complained with the figures on the screen on November 29.
This civil engineer, mayor of the Peruvian municipality of Haquira, was outraged to see that the numbers did not add up to what the Deputy Minister of Finance, Gustavo Guerra, had come to announce to him and the rest of the community leaders and local authorities of the department of Apurimac, in southern Peru .
This is one of the richest areas of the country in terms of resources, but also one of the poorest.
The purpose of the meeting was to address what in that region, which grows potatoes with draft animals, they had been waiting since 2016: how much money they were going to pay them for the exploitation of the Las Bambas copper mine .
Around this exploitation there is an emblematic conflict in a country that has generated wealth with its economic model for 30 years but does not distribute it.
In the Peruvian Andes, problems abound between communities and mining companies, such as that of Las Bambas.
Peru provides 10% of the world’s copper; it is the second largest producer after Chile. Las Bambas is the ninth largest copper mine in the world: 400,000 metric tons, according to the latest yearbook of the International Copper Study Group. It is operated by a consortium led by Chinese miner MMG.
Commercial operations at Las Bambas began in 2016, but the mining company did not accrue income tax until 2021.
Apurímac , therefore, had not received the part of the cake that corresponded to it: 50% of the tax, what is known as the mining canon that Velázquez calculated on the screen of his cell phone. Hence the constant protests.
The dialogue table on November 29 went to three sides: communities, Lima authorities and representatives of the mining company. They met in a sports pavilion located on the slope of a mountain in the municipality of Mara, a corner of the Andes at 3,770 meters above sea level.
A typical lunch prepared by several ladies with braided hair and alpaca stockings awaited them at the entrance. The traditional: trout or chicken accompanied with chuño, dehydrated potato.
The event started after 1 in the afternoon. The national anthem declared the session open. The attendance was close to a hundred people, most of them men.
“The total estimated canon for this year is 300 million soles (about US$70 million), 150 in January and the other 150 in June,” Vice Minister Guerra finally pronounced before an expectant audience.
Guerra, who left his position as deputy minister this February, acknowledged that a third of the 300 million soles have been deducted to compensate for the advances that the municipalities had received in recent years.
An investment that already pays off
Velázquez, a slight man with a serious expression and abundant black hair, has one year left to finish his term as mayor of Haquira, a municipality of about 14,000 inhabitants.
He is convinced that if it were not for the coming to power of President Pedro Castillo in July 2021, this year they would not have received the canon either. “They have never shown us figures, this is that they hide something,” he says in relation to the company’s account statements.
Castillo won by promising, among other things, that the mining companies leave a greater percentage of their profits in Peru. In Apurímac, Castillo swept the presidential elections last year.
Both MMG and the Ministry of Economy have explained that during the four years of commercial operations, the mining company was compensating losses for everything invested since exploration began in 2004.
The investment in Las Bambas has been one of the largest in the history of Peru, with an initial US$10.3 billion plus an additional US$1.2 billion invested in the last five years, according to figures from the mining company.
Even the government itself was taken by surprise by the news that the mine had finally generated net profits and that, therefore, it would pay the corresponding 32% tax, between US$150 and US$170 million. And all thanks to the copper boom.
In 2021, the price of the mineral broke historical records with an annual average of US$4.22 per pound, more than a 50% increase compared to the previous year.
“It is estimated that in the next four or five years we will continue at these levels. We are optimistic,” Álvaro Ossio, Commercial and Finance Vice President of the MMG mining company, assures BBC Mundo.
Copper is a cornerstone in all electrical technologies.
It is recyclable, has high thermal and electrical conduction capacity. 63% of its primary use is for wiring while most of its final use is divided between equipment (32%) and construction (28%). “An electric vehicle contains approximately four times more copper than a conventional one,” reads the latest yearbook of the International Copper Study Group.
This, together with the post-pandemic economic reactivation of China — the world’s largest importer, refiner and consumer of copper — helped the Apurímac region finally enter the mining canon it has been claiming for years.
The Apurimac region, one of the poorest in Peru, borders the department of Cusco, the cradle of Machu Picchu. It is reached by following a winding road that borders the Andes mountains, a two-way road that is so narrow that you have to brake every time a vehicle approaches you and honk your horn when you enter a sharp curve.
In the 2017 census almost 406,000 inhabitants were registered; eight out of ten over 12 years old identified themselves as Quechua and 70% acknowledge having learned to speak that language.
The economy in the region is agricultural; the traditional constructions, of adobe, and the modern ones, of brick. More than 89% of the population works informally, according to 2020 data from the Peruvian Institute of Economy, a research center. The pandemic pushed poverty levels that year to 35%, five points higher than the national average.
“If I’m going to get sick, I’m going to die while they transfer me to Cusco, because there are no specialists in the hospital,” says María Noa Martínez, owner of a food store.
“We are at the foot of a mine that is large at the national level and you see that here, in the town of Tambobamba, you don’t see anything that the mine contributes to development. We are still in poverty,” he adds.
The words of this lady summarize the feeling of many in that region: that the mining company has been exploiting their wealth for five years and leaves them with nothing.
Until now, the different municipalities of Apurímac have been receiving the so-called contractual royalties, a tribute equivalent to 3% of the mining company’s sales, in addition to advances of the mining canon made by the central government.
“Five years sounds like a lot but, unfortunately, it is not enough for the historical abandonment of these areas,” says Ossio, the representative of the mining company.
“Las Bambas cannot meet the needs of the population, it is the responsibility of the State,” he adds.
MMG presented a study at the end of December putting figures on the economic impact it has already had. Among them, that Las Bambas has represented 75% of Apurimac’s GDP since 2016 and that GDP per capita went from being number 23 in the national ranking of 2007 to 8 in 2020, with 15,047 soles (about US$3,920). , exceeding the national average of 11,000 soles, all at the constant exchange rate of 2007.
In Haquira, the city council will double its budget compared to 2021 thanks to the injection of money.
Until now, the royalties and the advances were enough to buy six agricultural tractors and to start producing 200 to 300 liters of yogurt a day in the municipality, among other investments. With the almost $6.5 million they have for 2022, the mayor has a list of 15 or 20 priority projects.
“The most urgent thing is the construction of a market and a land terminal, sewage system, treatment plants…”, Velázquez explains the future investments he wants.
“All this amounts to more or less US$6 or US$7 million,” he says. “And I have detected 50 roads to be done!” She adds.
The most important road in the region, and one of the most important in Peru, is the southern mining corridor. It begins in Apurímac and along its almost 500 kilometers, it allows the different mining companies in the area to transport the ore to the port of Matarani , in the department of Arequipa.
At the height of Las Bambas, the road is unpaved. In the morning, a tanker truck irrigates with water so as not to fill the towns that the route crosses with dust.
Every once in a while, a pickup vehicle appears with a sign indicating the number of units in the convoy that is following it. On the way, they transport everything from toilet paper to fuel for the mine; back, from the company’s waste to the copper that is sold to China.
The southern mining corridor has become a powerful instrument of struggle. The blockades serve the communities to force the authorities and the mining companies to sit down at the table and negotiate. A double-edged sword, because between 2016 and 2021 Las Bambas was blocked for 421 days, without being able to take the ore to the port.
“It has affected us terribly,” admits Mayor Velázquez about the latest blockade in the province of Chumbivilcas, which forced MMG to announce the suspension of operations in December last year.
“In December (2021) and January (2022) I did not receive royalties because the trucks did not leave,” laments the mayor, despite the fact that he believes that the incident set a good precedent for negotiating with the mining company.
From the Ministry of Economy and Finance they believe that the payment of the canon will have an effect on the protests.
“Now the population will relate more directly the flow of tons (of copper) with the size of the canon,” says Vice Minister Guerra.
However, blockades continue, forcing the pace of production at the mine to be halted or slowed down.
The official explains that the 88 days of blockades in 2021 cost the region, per day, between half a million and US$1 million in canon and between US$250,000 and US$500,000 in royalties.
All this money, which could have been invested in development, together with the change of government and the arrival of Castillo, led to appease the long history of mining confrontations and repression in Peru and to start dialogue tables such as the one on November 29.
Although they ended up negotiating the wording of the minutes with the agreements, relations between the parties were one of mistrust.
And not only because of the distribution of money, but because of the clash of worldviews. “It is not understood that the hills belong to the State,” explains Velázquez.
“For us, the State is a strange being that comes and takes the side of the investor with laws that we do not understand,” adds the mayor, emphasizing how these native peoples understand property relations.
But in the meantime, the mayor does the math with the calculator on his phone and thinks of projects in which to invest the millions he finally has.
- Anna Portella
- BBC World special in Apurímac, Peru