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Friday, 15 March, 2002, 17:08 GMT
Aid case study: Peru's Yanacocha gold mine
Yanacocha mine
Yanacocha: The second-largest gold mine in the world
Perched at over 4,000 metres in the mountains of northern Peru, some 50 kilometres from the ancient Inca city of Cajamarca, Yanacocha is Latin America's largest and most profitable gold mine.

The mine is owned by the US-based Newmont Mining Corporation - which controls 51%, Buenaventura of Peru and the World Bank's International Finance Corporation (IFC), which has a 5% stake.

Commercially, the venture is a success - geological conditions make it economical to exploit, local experts say the operation is well run by Peruvian standards and the government is happy with the foreign exchange it receives.

Not everyone is happy though: local residents complain that not only have they not benefited from the mine, but their water has been polluted and their traditional way of life destroyed.

The non-governmental organisations who back them say the IFC should not be involved in big projects that multinational companies such as Newmont could finance themselves.

Engine for reform

The IFC argues that by promoting sustainable private sector investment in developing countries, it is helping to reduce poverty and improve people's lives.

We have also lost our traditional medicinal plants and the animals have been scared away

Julio Marin,
farmers' leader

The Yanacocha project, it says, might never have materialised without its participation.

The IFC first invested in the Yanacocha mine in 1993 when, it says, sponsors were reluctant to get involved because of the political and economic conditions in Peru, including the threat of terrorism.

Later in 1999, the IFC helped finance the mine's expansion plans when the debt crisis prevented Peru's borrowers to access capital markets.

The IFC says the project was the first new mine development involving foreign investors in the country for 20 years, and that its "successful implementation lead to reforms in the Peruvian economy, including privatisation, and resulted in other new mining ventures by the international mining community."

But critics say that even if mining industries contribute to economic growth, they do not benefit local communities.

This is why many NGOs have called on the World Bank to end its financial support for large-scale oil and mining projects.

Pollution debate

Farmers' leader Julio Marin Rodriguez says the residents of Cajamarca province were not consulted about the mining project before it was set up in the early 1990s.

"The company's arrival caused many problems. And there was never any dialogue. If there had been, maybe things would have been different," he told BBC News Online.


"The water that comes down from the mountains is now brown, full of sediments. The trout are dying.

"We have also lost our traditional medicinal plants - they used to grow on the lands that are now being mined - and the animals have been scared away," Mr Marin Rodriguez says.

Many NGOs support local claims that the waters of the Cajamarca basin which they depend on for subsistence crops and farm animals have been polluted with the cyanide used to extract the gold.

The IFC contests this and more studies are being conducted.

Local opposition to the mine deepened in 2000 when mercury was spilled along a 40km section of road.

The spill was not reported until the next day, and hundreds of people had to be treated after collecting the mercury.

City transformed

It is not only the effect on the environment that is worrying community leaders.

The mining company says it has created more than 1,600 jobs in the area. But locals say most of these jobs are menial.

All available records suggest that land purchases were at fair values given land values in Peru at the time of the sales


The up to 6,000 contractor staff - many of whom come from outside the region - have transformed the area. For the worse, say community leaders.

Once a secluded agricultural city, locals say Cajamarca is fast losing its rural character.

Strip bars have opened in the old colonial town, while prostitution, crime, alcoholism and domestic violence are soaring, says Mr Marin.

But John Dow, director of Newmont Peru, says there is a lot of misinformation. He says 60% of staff and contractor employees are from Cajamarca, and the company is investing in training programmes for local people.

The area's indigenous inhabitants - many of whom speak Quechua as their mother tongue - say they are being priced out of their homeland.

Property prices are reported to have gone up tenfold, as have prices for schools and basic goods, because higher-paid foreigners can afford to pay more.

Signs of change

Mr Dow told BBC News Online that Yanacocha had provided support and benefits for the local communities.

The company invested $8m annually in community development, he said.

"The population often expects us to do the work of the government so there is no end to their expectations."

After years of protests against the Yanacocha mine, Mr Marin Rodriguez admits things are beginning to change.

The company is building drinking water plants and educational centres.

And the IFC says that with its assistance, a broad process has been established that includes community validation of local development projects and a mechanism for talks among the different parties.

The farmers' leaders say that among other things they want Yanacocha to:

  • create conservation programmes for the local flora and fauna
  • conduct new environmental impact surveys of the water and soil
  • establish educational and health programmes for the local residents

For its part, farmers' leaders say they are no longer demanding the closure of the mine - which they admit benefits the national economy

See also:

03 Feb 02 | Business
Towards a fairer world
05 Feb 02 | Business
Annan plea to help world's poor
14 Jan 02 | Business
IMF chief calls for open markets
07 Jul 00 | Americas
Mercury victims seek $40m damages
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