Time to Strengthen Ties with Peru

Relations between the United States and several Latin American nations have sunk to their lowest level in years. Last September, both Bolivia and Venezuela expelled U.S. ambassadors (Bolivia accused the United States of interfering with its energy policy and Venezuela saw a North American attempt to depose President Hugo Chávez.). Venezuela then recalled its ambassador to the United States, and President George W. Bush expelled Bolivia’s ambassador. In February, Ecuador expelled two U.S. diplomats on charges of interfering in internal affairs. Most recently, in March 2009, Bolivia threw out a U.S. diplomat believed to be helping the CIA sabotage its energy industry. In Guatemala, a country with close ties to the United States, discord emerged as declassified U.S. government documents showed that Washington knew that U.S.-supported Guatemalan officials were behind the disappearance of thousands of people during Guatemala’s 36-year civil war.

Peru seems different. Peru–U.S. ties are stable. However, Peru’s indigenous population, labor unions, and farmers have begun to retaliate against decades of destructive extraction practices by mining and oil companies, including many based in the United States, for what in many cases is the wholesale devastation of their health, ecosystems, and livelihoods. This retaliation has for the most part been peaceful, but at times violence has flared.

In August 2008, some 4,000 protesters — many armed with spears and machetes — seized a natural gas substation the Northeast Peruvian pipeline at Imaza, and captured some 20 members of the National Police Force. The police had been sent to break up the indigenous protestor’s occupation of a gas field protesters felt was polluting their water and land. Then, in January, protesters upset with a new mining development kidnapped four employees of the mining company Minera Afrodita and two others.

This year, peaceful civil disobedience actions have also increased in number. In January, Peruvian farmers went on a three-day strike over water issues. On January 15, the membership of 1.6-million-strong National Users Council of the Irrigation Districts of Peru (JNUDRP) went on an open-ended strike. Campesinos blocked highways and railroads. In the northern state of Tumbes, protesters held a sit-in at the international bridge between Ecuador and Peru, paralyzing commerce between the two nations. In the south, a group of campesinos blocked the railroad to Machu Picchu, stranding 400 tourists. In Arequipa, 10,000 landowners held a strike, and some 1,000 protesting campesinos kept trucks from transporting food to the cities for sale, in order to draw attention to their demands for an equitable share of the profits generated by the extraction of resources from their region.

The Peruvian government’s response to these nonviolent protests has been heavy-handed and often violent. Peruvian President Alan Garcia pushed through by executive decree Law 840 last year. This legislation undermined the collective property regime of indigenous peoples, by conceding supposedly “uncultivated” lands to lumber companies and surrendering the nation’s rights over natural resources to foreign investors. This move was prompted by the newly instituted U.S.–Peru free trade agreement.

Soon after, violence against peaceful protesters began to emerge, and Garcia declared a “state of emergency” that suspended basic democratic rights and forced elected civil officials to surrender authority to the military in indigenous areas. In February 2008, during a two-day national agrarian strike against the pending Peru–U.S. trade pact, police killed four protesters who refused to leave. In October 2008, two protesters were killed by police and another 60 people were injured during an action protesting the reduction of the amount of mining tax that would be allocated to the people of Tacna, where the mine was located. To add to the chaos, in February of this year National Human Rights Coordinator, a Peruvian organization, released a report containing photos of 28 community members who were allegedly detained and tortured by Rio Blanco Copper mine security and police during an incident in 2005. This report infers that violence against indigenous people has been a long-standing problem. Law 840 was eventually repealed by Peru’s legislature for being unconstitutional; however, more subtle surrendering of the country’s resources continues.

The Background

How did this all come about in a nation that’s rich in natural resources?

Since 2006, Peru has seen an impressive annual economic growth rate of more than 6%. Mining and extraction of oil, gas, copper, and gold have been the main drivers of this growth. Over the past five years, copper extraction has doubled, and gold production is up 30%. Mining exports surpassed $17 billion in 2007, amounting to 62% of the country’s total exports. New resources are being discovered, and the pace of extraction is increasing.

In the face of this growing economy, 40% of all Peruvians live in poverty; in the mineral and oil-rich areas where these commodities are extracted, poverty exceeds 70%. This is the paradox that troubles many developing countries such as Peru. As wealth flows out of the country, poverty remains high. This vast wealth of natural resources should serve as a basis for poverty reduction and sustainable development. But this isn’t the case. The question to ask is: Why not?

One problem is that large-scale extraction of oil, gas, and ore generates relatively few jobs. Companies import their workforces for the most part, rather than training locals. Money generated from mining and extraction is supposed to trickle down to indigenous communities through government programs that redistribute revenues. Instead, indigenous communities believe that the wealth is concentrated in Lima and other western coastal cities.

Inadequate governance and lack of accountability in the use of revenue from natural resources keeps most of Peru from prospering, and the areas from where the resources are drawn remain steeped in poverty. This process is overseen by Peru’s Ministry of Energy and Mines, which is tasked with both enforcing social and environmental regulations governing extraction, and promoting mining investment from abroad. Until now, this conflict of interest has benefited mining and energy companies, leading to charges that government officials and the wealthy are lining their pockets. The redistribution of funds generated by these industries is slow to nonexistent.

Resource extraction has left many areas of the country devastated. The indigenous peoples of Peru’s Northern Amazon have endured over 30 years of oil production and pollution. Instead of prosperity, it has resulted in malnutrition, disease, and social disruption. For instance, since 1971, U.S.-based oil company Occidental Petroleum has employed practices outlawed in the United States and elsewhere for the purpose of maintaining lower production costs and maximizing revenues. During this time, Occidental has pumped an average of 850,000 gallons each day of salty formation water and other toxic wastewaters into local rivers. Toxic substances such as boron, barium, and arsenic are also commonplace in areas where gold and copper extraction takes place.

Peru’s indigenous peoples depend on clean rivers and forests for subsistence. However, because of extraction, many rivers contain high levels of heavy metals, salt, oil, and unhealthy levels of chloride. Numerous communities have no alternative sources of drinking or irrigation water and are thus forced to use the polluted river water. Toxins have accumulated in the aquatic food chain, and agricultural crops have been contaminated. Livestock and fish are poisoned, and over half of all local children have dangerously high blood-lead levels and cadmium poisoning. Residents suffer from countless unexplained illnesses, and believe that many premature deaths have resulted from pollution-caused health problems.

This scenario has been taking place all over Peru, with many extraction companies replicating the practices of Occidental. Deforestation, the expansion of gold and copper mines, and new oil pipelines and pumping projects are underway, exacerbating the problems noted above.

So, why does Peru’s government allow pollution, poverty and displacement to continue, and how are they able to do so? Currently in Peru, all payments to the country for natural resources from all companies combined are published as one lump sum. This rule was pushed through by the country’s national association for the oil, gas, and mining industries. It keeps payments totally non-transparent, leaving open the possibility of bribery to government officials by the extractive industries, and making it difficult for Peru’s citizens and the international community to hold the government accountable for the manner in which they are spending the billions in profits.

This pattern has been seen in other South American nations, and has led some to distance themselves from the United States as they realize that many of the companies destroying their land are based there. It would therefore be in the best interest of the United States to intervene and to try to solve these problems, for pragmatic if not altruistic reasons.

A Course of Action

What steps can the United States take to bring about positive change?

To begin with, legislation has been brought before the U.S. Congress that would help bring transparency to U.S. mining companies doing business with Peru and its neighbors. H.B 6066, the Extractive Industries Transparency Disclosure (EITD) Act, was introduced on May 15, 2008 in the House Financial Services Committee. A companion bill was introduced by the Senate Committee on Banking, Housing and Urban Affairs on August 1, 2008.

The EITD Act requires companies to report all payments of over $100,000 made to foreign governments for oil, gas, and minerals. The information would be included in financial statements with the Securities and Exchange Commission (SEC). This would apply to both United States and international companies listed with the SEC, covering the majority of the largest oil, gas, and mining companies in the world. The EITD wasn’t passed in 2008 but is due back before the House and Senate this year. The Obama administration should push for this legislation to pass. This would be in keeping with their campaign promises on fostering transparency and holding our government and its citizens accountable for actions we take in foreign lands.

Secondly, the Obama administration could more actively support the International Extractive Industries Transparency Initiative (EITI). Similar to the EITD, but international in origin and scope, the EITI sets a global standard and supports improved governance in resource-rich countries, through the verification and full publication of company payments and government revenues from oil, gas, and mining. The EITI is a coalition of governments, companies, civil society groups, investors, and international organizations. Implementation is the responsibility of individual countries, and Peru doesn’t yet support the initiative. The United States, a supporter of EITI, could encourage Peru and U.S.-based companies to support the initiative and could provide technical support in resource management to Peru, which currently has low technical capacity to implement the initiative.

Next, the United States could become a resolute supporter of the United Nations Declaration on the Rights of Indigenous Peoples. This resolution (61/295) was adopted by the General Assembly in September 2007. It’s a comprehensive document that affirms indigenous peoples are equal to all other peoples and that, in the exercise of their rights, they should be free from discrimination. It also dictates that indigenous peoples have a say over developments affecting them, their lands and resources. It will enable them to maintain and strengthen their institutions, cultures and traditions, and promote development in accordance with their aspirations and needs. The document says all governments should consult the indigenous peoples of their nation before natural resources are extracted, that they shouldn’t suffer any harm from the extraction of those resources, and that they should benefit equally from revenues generated from that extraction. That’s currently not the case, and the United States could begin a sincere dialogue with Peru to try to bring this about.

The United States could require U.S.-based extraction companies to put into place Best Management Practices (BMP) when doing business in other countries. This would require companies to minimize pollution by using the best-known operational procedures and practices, maintenance procedures, and treatment requirements to control site runoff, spillage or leaks, sludge or waste disposal, and containment of contaminants. Such a requirement could help safeguard the health and welfare of Peru’s people, whose resources are being used to benefit us.

And lastly, the Obama administration should revisit the United States – Peru Free Trade Agreement, which has been lambasted for worsening Peru’s problems: making child labor violations easier, diminishing unions and labor rights, exposing the country’s subsistence farmers to disruptive competition with subsidized U.S. crops, and leading to increased mining and deforestation.

With great power comes great responsibility. The U.S. government has the capability to right these wrongs. It also bears responsibility because U.S. citizens and corporations benefit directly from the extraction of resources from Peru, at the same time knowing the damage being wrought. The United States is thus culpable in this devastation.

It’s time for change. The focus shouldn’t be on convenience and maximizing profits. Such a strategy has brought us to our current low standing in the world and has led to destruction. The United States needs to serve as a “role model” for others, to be transparent in its dealings, and to bring about positive change in the circumstances of others whenever possible. President Barack Obama and Congress have within their grasp the ability to make changes to improve the lives of our neighbors to the south. Business as usual can’t continue.

James Polk, a Foreign Policy In Focus contributor, works as a consultant in the area of Conflict Analysis and Resolution. His focus is on the effects of the WTO, CAFTA, and other trade agreements on the people and economies of the United States and our partner nations, as well as on indigenous people’s land rights.