Saturday, October 29, 2005

Newmont Mining in Peru

The New York Times published an excellent article on Newport Mining Corporation's activities in Peru.

The piece details how Newmont enlisted the help of U.S. government officials and a man on the CIA payroll whom U.S. Intelligence likened to Darth Vader to further its exploitation of the natural resource of local Peruvian communities. The lesson of the whole saga for mining companies and corporations in general seems to be: put a little money into social programs locally so people don’t get angry enough to force you out - they'll never like you, because you are exploiting them, but you can buy them off enough to dampen their anger.

Some excerpts:

Then, an unmistakable sign that this land, too, may soon be devoured: Policemen with black masks and automatic rifles guarding workers exploring ground that the mine's owner, Newmont Mining Corporation, has deemed the next best hope.
"This is the Roman peace the company has with the people: They put in an army and say we have peace," said Father Arana as he surveyed the land where gold lies beneath the surface like tiny beads on a string.
Yanacocha is Newmont's prize possession, the most productive gold mine in the world.
***

The armed guards are here because of what happened in the fall of 2004 at a nearby mountain called Cerro Quilish. For two weeks, fearing that the company's plans to expand Yanacocha would mean Quilish's desecration and destruction, thousands of local people laid siege to the mine. Women and children were arrested, tear gas was thrown, the wounded hospitalized after clashes with the police.
In the end, the world's No. 1 gold-mining company backed down. Father Arana, who runs a local group formed to challenge the mine, helped negotiate the terms of surrender. Newmont withdrew its drilling equipment from Quilish - and the promised reserves from its books. Now, in large part because of the loss of Quilish, the company says production at Yanacocha may fall 35 percent or more in two years.
***

Newmont gained undisputed control of Yanacocha in 2000 after years of back-room legal wrangling. Behind the scenes, Newmont and its adversaries - a French company and its Australian ally - reached into the upper levels of the American, French and Peruvian governments, employing a cast of former and active intelligence officials, including Peru's ruthless secret police chief, Vladimiro Montesinos.
Much of that arm-twisting has been dragged into the light, in secret recordings by the spy chief. The tapes, apparently intended to blackmail and manipulate Peru's powerbrokers, surfaced in 2000 and led to the downfall of Mr. Montesinos and the president he served, Alberto K. Fujimori.
The tapes captured everything from plotting to fix elections to shopping bags of money being unloaded for payoffs in Mr. Montesinos's office at the Peruvian National Intelligence Agency.
They captured Newmont's maneuverings, too. In one audio recording, the No. 3 Newmont executive at the time, Lawrence T. Kurlander, is heard offering to do a favor for Mr. Montesinos.
"Now you have a friend for life," Mr. Kurlander tells the spy chief.
"You have a friend for life also," Mr. Montesinos replies.
Last year, a Justice Department investigation into whether Newmont's victory resulted from bribing foreign officials was dropped after the Peruvian government failed to cooperate fully and the statute of limitations expired, according to law enforcement officials familiar with the case. The Peruvian government investigated the Yanacocha affair without bringing charges.
***

At first, people here saw possibility in the mine. Yanacocha - "black lake" in the indigenous Quechua tongue - sits in one of the poorest agricultural regions of Peru.
"When Yanacocha began its operations, we would only hear about how everyone was happy," Father Arana said. "The mine was going to bring jobs, improve roads." No one thought much, he said, about the inevitable collisions.
The collisions began almost immediately.
In the Andean peasants' universe, water is the heart of the land. The people depend on it - for their animals, for drinking, for bathing. Community life is organized around it.
But the mine lives on water, too. The bits of gold here, so small they are called "invisible gold," can be mined profitably only by blasting mountains, then culling the gold with vast quantities of cyanide diluted with similarly vast quantities of water.
It was not long before the peasants began to complain. Streams and canals were drying up, they said. They were filled with murky sediment. The water smelled foul.
***

The World Bank's investment arm, the International Finance Corporation, later took a 5 percent stake,
***

From Lima, in the days after the Supreme Court agreed to take the case, Mr. Kurlander headed to Washington to enlist help on the American side. By the end of October 1997, Stuart E. Eizenstat, under secretary of state for economic affairs, wrote Peru's prime minister to press for "a fair and impartial hearing," according to documents released under the Freedom of Information Act.
"A politically tainted decision would adversely affect U.S. investment in Peru," he wrote
***

Vladimiro Montesinos's titles never matched his stature. Officially, he was "counselor" to Mr. Fujimori and de facto head of the National Intelligence Service. In reality, he was the second-most-powerful man in Peru - "Rasputin, Darth Vadar, Torquemada and Cardinal Richelieu" rolled into one, according to an American Army intelligence report.
The National Intelligence Service was also on the payroll of the C.I.A., which gave Mr. Montesinos a million dollars a year for his supposed help in combating the narcotics trade, according to former C.I.A. officials who approved the payments.
This was the man Mr. Kurlander headed to see alone on Feb. 26, 1998. While he says he knew that Mr. Montesinos was "an extremely bad man," he maintains that the extent of the government's corruption and human rights abuses were not well known at the time. There was, however, one case he was aware of.
***

Soon Mr. Kurlander raises the Ivcher case. Mr. Montesinos assures him that the pursuit of Mr. Ivcher is not an anti-Semitic "persecution," and Mr. Kurlander offers to help by lobbying his fellow Jews in the United States and abroad.
"Tell him I going to help him with the voting," Mr. Montesinos directs his translator. He is well aware of the "tricky practices of the French government," he says, making a joke about "The French Connection."
***

Peter Romero, then assistant secretary of state for Western Hemisphere affairs, acknowledged in an interview that he had twice called Mr. Montesinos to show that the case was being "monitored" in Washington.
"He seemed to be a nice enough fellow," he recalled.
The "compelling reason" to get involved, he said, came from Peruvian and American Embassy officials who confirmed the direct involvement of President Chirac and others at the top of the French government.
"We wanted to ensure that that was neutralized," Mr. Romero said.
Two and a half years later, Mr. Romero left government and was hired by Mr. Kurlander as a consultant on Peru for Newmont, where he remained for 18 months.
On April 14, six weeks after the Montesinos-Kurlander meeting, the video cameras were rolling for a visit from the C.I.A. station chief, Don Arabian.
As the meeting nears its end, Mr. Montesinos says he has been collecting information on the French attempt to influence the case and will not let them use "extortion, blackmail and other gangster" methods.
"I'm not working with the telephones, but we will if necessary," Mr. Montesinos says, an apparent reference to wiretapping. "We'll sort out the technical support." The men laugh.
Mr. Arabian, who recently retired, declined a request for an interview.
On May 8, the sixth Supreme Court justice voted in favor of Newmont and Buenaventura. With the vote deadlocked, 3-3, the court administrator appointed a final judge, Jaime Beltrán Quiroga. He was summoned the next day by Mr. Montesinos.
A videotape shows the justice settled on the couch as Mr. Montesinos talks about how, as a lawyer he, too, would normally "keep a distance" from events. But "in these cases," he says, "one has to intervene directly."
Mr. Montesinos avoids direct pressure - "as if we are imposing on you" - but reminds the judge that the case is a matter of national interest: the United States is a key guarantor of coming deliberations over Peru's border conflict with Ecuador.
There is no discussion of payoffs, but the spy chief does question the judge about his professional ambitions. The men reminisce.
"Well, doctor, you have a friend here," Judge Beltrán says.
"My dear, Jaime, then, a pleasure to see you, brother," Mr. Montesinos replies, assuring his guest that he will soon be transferred to Peru's Constitutional Court.
Judge Beltrán's vote was announced two weeks later: Newmont and Buenaventura were awarded BRGM's share - at the purchase price set in 1993: $109.7 million.
When the final transfer was negotiated a year later, the stake was valued at more than five times that.
***

And with every ton of earth sifted, it became ever clearer that the mine had not just ripped up the landscape; it had remade the social architecture, too.
There were growing class divisions, between the many campesinos who had received well-paying jobs - Yanacocha would eventually employ as many as 2,200 people, two-thirds locals, full time, and up to 6,000 on shorter-term contracts - and the tens of thousands more who had not. People migrating to the region in pursuit of work brought overcrowding and rising crime.
In June 2000, a truck contracted to carry canisters of mercury, a byproduct of mining, spilled 330 pounds of the poisonous metal over 25 miles of road around Choropampa, 53 miles from the mine.
The villagers believed that the mercury was mixed with gold. They scooped it up. Some took it home to cook on their stoves. A World Bank report later said the mine delayed reporting the accident to the national authorities and initially played down its seriousness to the bank.
***

Mr. Kurlander found "a high level of mistrust" of the mine.
But the 44 findings of Mr. Kurlander's audit, which was given to The Times, also confirmed many of the villagers' specific complaints: that fish were disappearing and that lakes, streams and canals were being contaminated, at least one with cyanide.
One stream, Quebrada Honda, had 13 fish per kilometer in 1997, but none by 2000, the audit said. Thousand of tons of rock not processed for gold recovery were generating dangerous acidic runoffs.
In a letter after the audit, Mr. Kurlander says that as the mine expanded, "we eliminated many environmental safeguards that were in the construction and environmental management plans." In all, he wrote to Newmont's new chief executive, Wayne Murdy, the findings were so serious that they could jeopardize the mine's continued operation and leave senior executives subject to "criminal prosecution and imprisonment."
***

To Mr. Kurlander, the spill showed the folly of a company ignoring the people, particularly the people most set against the mine. In a memo, he warned that with the mine sunk so low in the peasants' esteem, Newmont would never be able to mine Quilish.
***

Back in 2000, the local government had passed an ordinance declaring Quilish and its watershed a protected natural reserve. But Newmont had persuaded a Peruvian court that it had the right to mine because it had acquired the concession years before. In August 2004, the machines moved in.
To many people, that was the final betrayal, said Mr. Vera, the former Newmont consultant. He quit this summer, saying his advice had been ignored.
On Sept. 2, deploying boulders, vehicles, anything they could find, hundreds of campesinos blockaded the narrow mountain road that runs from Cajamarca to the mine.
Several hundred armed officers, including 150 special operations police officers from Lima, were sent in to guard the mine.
The first day was the most violent; protesters were arrested, many of them women and old people, according to Father Arana's colleague, Jorge Camacho. At times during the siege, the police used tear gas. One man was shot in the leg. The company kept the gold coming out of Yanacocha, but only by helicoptering the workers in.
On Sept. 15, there was a regionwide strike, with street demonstrations in Cajamarca. The message, on one of the blizzard of placards in town, was: "Listen Yanacocha. Cajamarca is to be respected."
The protests were organized by the peasants themselves, Mr. Camacho and others say. But the 43-year-old Father Arana, son of teachers from Cajamarca, had been nurturing the movement for many years, even before he founded his group, Grufides, in the late 1990's. (These days, it receives financial assistance from Oxfam.)
***

Newmont's Peruvian partner, Mr. Benavides, argued that exploration of Quilish had not been abandoned, simply suspended.
"We have the concession, and we have the land," he said. He added: "I do not understand what social license means. I expect a license from the authorities, from the minister of mines. I expect a license from the regional government. I don't expect a license from the whole community."
Still, the idea of social license is at the heart of the agreement that ended the siege: If Newmont hopes ever to mine Quilish, it first must win the community's consent.
So to promote Yanacocha's well-being and expansion, Mr. Hinze has become the kind of mine manager he never imagined being. He says he had asked for the job running Yanacocha because of its sheer scale - "it's big, it's profitable," is how he puts it. Fifty years old, silver-haired and steely eyed, 6 foot 3 and 255 pounds, he is a man of scale himself. His idea of recreation, he says, is riding his Harley or swimming with hammerhead sharks.
Now, he says, he spends 70 to 80 percent of his working time on social issues. On a recent day, he ate roasted guinea pig at a lunch with a peasant group. A few days later, he attended a ceremony celebrating a gift of $500,000 for a new road around San Cerillo.
"Modern mining can coexist with cattle, agriculture and tourism," he told one gathering. "Today we begin a new history for communities around here."
Newmont says that it paid $180 million in taxes to Peru's government last year, and that under a new law, half was returned to the Cajamarca region. But to its frustration, the company says, the local government has largely been unable to use the money to benefit the people - and most of the people here remain achingly poor.
So the company, albeit ambivalently, has become something of a surrogate government. It is contributing money for schools and clinics and building some small water treatment plants in the villages. In all, the company says it will spend nearly $20 million this year on social programs.
Water remains a divisive issue: Father Arana and his allies argue that a new, every-three-weeks testing protocol is insufficiently independent. The peasants continue to complain.
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