Tuesday, March 27, 2007

Speech introducing PSG report this evening

The Peru Support Group was formed in 1983 to campaign for the rights of the Peruvian people, and particularly to support the most vulnerable, the indigenos, in playing a larger part in the affairs of their community and the formal structures of governance. The Group seeks to raise awareness here in the UK of the multiple problems which have confronted Peru: the long-running political violence, the endemic human rights violations; the painful two steps forward one step back towards a more stable democracy; and of course the gross inequalities of wealth and income which have not been addressed. In 1992 a Parliamentary Human Rights Group delegation to Peru, led by Ann Clwyd MP, now Chair of the Group, found that income and wealth differentials were getting wider, and that is still happening. The CIA estimate that the lowest 10% of households account for less than 1% of total expenditure, while the top 10% have over 37%. So although Peru’s economy has expanded rapidly over the last 15 years, very largely due to the phenomenal growth of mineral extraction, the poor have been left behind, and the UK is no longer directly interested because Peru is now classed as a middle income country.

You might imagine that mining and in future natural gas would be an unmixed blessing to Peru. Surely taxes and royalties would mean high investment in public services, better governance, the enhancement of democracy, and particular benefits to the local communities in the vicinity of the operations. But in Peru, as elsewhere, the expectations are not always realised. No doubt the economy looks far stronger at the macro level, but there have been unfortunate side-effects, which the Group first documented two years ago. We reported on protests and demonstrations which led to the suspension of various projects, and on disputes over the control of land, the distribution and security of water for both drinking and irrigation, and on how the revenues generated by mining operations should be distributed, and who should be involved in that process. Over half of Peru’s 6,000 peasant communities were estimated to be in districts that were influenced by these factors, and at the recent Presidential elections the lack of public trust in the mining companies, and in the means of ensuring that they conformed with international and domestic rules, became very evident.

The PSG was particularly interested in these issues because of the involvement of UK companies in Peruvian mining operations. These companies could set benchmarks for the rest of the industry, combining profitable development with the highest standards for consultation with local interests, and investing in the people, infrastructure and environment of the neighbours of their operations. We decided to look at a particular case study, the development of a very large copper mine in the northern highlands by Monterrico Metals, and we commissioned a panel of independent experts, some of whom I will introduce in a minute, to visit Peru and report on this particular operation, and on the lessons to be drawn from it more widely for large-scale resource extraction projects, not only in Peru.

There are guidelines, laid down by the World Bank and the OECD, on how multinationals should conduct their large capital-intensive projects in third world countries, and the Extractive Industries Transparency Initiative is a welcome spur towards the adoption of better mechanisms for managing Peru’s wealth, and for ensuring the fair distribution of the impacts and benefits of mining. But we in the PSG suggest that Peru needs to go further, and institutionalise the participation of local people in the decision-making on these developments, and the continued monitoring of their effects. We believe this is as important for the future consolidation of Peru’s democracy as the guaranteeing of free elections, decentralisation and the representation of local issues at national level.

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