MAC: Mines and Communities

In Peru, one of the world's worst polluters is set to reopen

Published by MAC on 2012-03-06
Source: Global Post, Business News Americas, Dow Jones (2012-02-28)

It's all a massive mess - in more than one sense.

Doe Run's multi-metal smelter at La Oroya, Peru, is one of the most polluting anywhere in the world.

Although it's been closed since 2009, now there's government support for its re-opening.

The Mines and Energy minister claims that this would "protect the workers... respect the environment and, above all...ensure the health of La Oroya".

However, there's plenty of evidence that the opposite would be the case.

Meanwhile, Doe Run is trying to remove the government itself from its list of creditors, even though it owes substantial unpaid fines to the state.

Adding insult to injury, the company is also suing Peru for US$800 million, claiming the government violated "equal-treatment clauses" in the U.S.-Peru Free Trade Agreement.

Previous article on MAC: Doe Run Perú's future looking gloomy, lawyer says

External link: Plataforma La Oroya por un cambio

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In Peru, one of the world's worst polluters is set to reopen

Simeon Tegel

Global Post

28 February 2012

LIMA, Peru - For almost 90 years, the smelter at La Oroya, high in the Peruvian Andes, spewed out a toxic cocktail of heavy metals that slowly poisoned the town’s people.The contamination became so bad that La Oroya has been compared to Chernobyl and ranked among the world's 10 most polluted places.

Doe Run Peru's plant in La Oroya
Doe Run Peru's plant in La Oroya.
Photo: Ministry of Energy and Mines

The plant has been offline for over two years due to financial troubles, the owners have said.

Now - despite concerns that Renco Group, the US company that runs the plant, has largely failed to install the new technology needed to prevent it from again emitting clouds of deadly smoke - the smelter may be set to reopen.

"We are totally exposed, especially the poorest, the children and the elderly," said retired local teacher Rosa Amaro, who heads the Movement for the Health of La Oroya, or MOSAO, a local activist group.

The smelter is one of just a handful in the world that can process multiple metals, including copper and lead, as well as refine zinc. But its antiquated technology emits contaminants such as arsenic, cadmium, lead and sulfur dioxide, which cause serious health problems.

In one study, by St. Louis University in 2005, more than 90 percent of children from La Oroya had excessive levels of lead in their bodies. And ambient levels of sulfur dioxide, which causes acid rain, have been recorded at a mind-boggling 27,000 parts per cubic meter - almost 100 times the limit established by Peruvian law.

The smelter stopped production after banks cut off credit to Doe Run Peru, Renco's local subsidiary, in 2009. The firm pleaded financial hardship and failed to implement the environmental management plan that was a condition of its purchase of the smelter from state ownership in 1997.

Asked about allegations that Doe Run had misled Peruvian authorities during the purchase of the smelter, Luis Hernandez, spokesman for the company, insisted: "The company has complied with all relevant laws."

Now, three years later, local congressman Casio Huaire is attempting to get the Peruvian Congress to pass a new law giving Doe Run Peru two more years to complete the environmental clean up - and allow the smelter to operate in the meantime.

If passed, the law would mark the third time the company has been allowed to delay completion of the environmental management plan.

Despite the contamination, many locals actually back Doe Run, which has kept 4,000 La Oroya employees on full pay since the plant closed down, a powerful incentive in an impoverished region some 12,000-feet high in the Andes.

Jose de Echave, a former deputy minister for the environment who now heads the nonprofit CooperAccion, said Peru should be more careful about how it allows foreign companies to operate here.

"It would send a terrible message about the kinds of investments that Peru as a country is looking for," he told GlobalPost. "The renewed emissions would have an immediate negative effect on the population of La Oroya."

Behind Doe Run Peru's failure to modernize the smelter and stop the pollution lies a complicated and controversial tale of financial woes.

Privately-owned by New York-born tycoon Ira Rennert and his family, Renco's global sales in 2011 were an estimated $7.75 billion, according to Forbes.

But that has not stopped Doe Run Peru from pleading poverty and failing to pay a series of multi-million dollar debts, including to the Peruvian taxman. Recently, the company even asked the Peruvian government to subsidize the costs of its clean-up.

Under the terms of Renco's purchase of the smelter, it agreed to set aside more than $100 million for the environmental management plan. But, according to local reports, that plan never materialized.

Doe Run insists it has gone to great lengths to upgrade the smelter and help local people. But few in Peru believe the company, which because it is privately-held only releases limited financial information.

"The problem is the company is not transparent," Echave said.

Hugo Villa, a doctor who worked at a public clinic in La Oroya for three decades, is unconvinced that the company has complied with the Peruvian law.

"There is a silent epidemic here," he said. "The effects on the children are not easily visible, but they have all kinds of serious health problems, and those will only get worse if the smelter reopens."

One person who is already suffering is Moises, the 18-year-old son of Amaro, the local campaigner. Moises has a series of ailments such as fatigue, aches, mood swings and respiratory problems.

When he was 5-years old, Amaro said lead levels in her son's blood were measured at 58.3 micrograms per deciliter, almost six times the safe limit established by the US Center for Disease Control.

"Jobs are important," Amaro said. "But they should not come at the cost of our health. What kind of development is that?"


Govt supports resumption of operations at La Oroya despite Doe Run Perú lawsuit

Business News Americas

28 February 2012

Peru's government continues to support the resumption of operations at Lima-based Doe Run Perú's La Oroya metallurgical complex in Junín region despite the recent lawsuit filed by the latter in an effort to remove the government from its list of creditors.

Operations at the complex have to restart as soon as possible, according to mines and energy (MEM) minister Jorge Merino.

"We confirm the government's position... [which is] to support the resumption of operations at La Oroya because we believe that we need to protect the workers, to respect the environment and, above all, to ensure the health of La Oroya," Merino said in an interview on local channel TV Perú.

"We hope that the restructuring program that the creditors approve will contemplate those basic conditions," he added.

The lawsuit was a "surprise," according to the minister, who said he expects the company to withdraw the measure as a goodwill gesture.

"You can't have on the one hand a lawsuit for US$800mn and on the other have congress helping someone that is suing the state," Merino said.

Peru's congress is expecting to approve a legal measure in H1 to extend the timeline for Doe Run Perú's environmental cleanup plan (PAMA) at La Oroya.

Meanwhile, Doe Run Perú is suing the Peruvian government in the US for US$800mn for allegedly violating equal-treatment clauses in the US-Peru free trade agreement.

Operations at La Oroya were stopped in 2009 when the company ran into financial difficulties as a result of the global financial crisis. In September of the same year, congress approved a 30-month extension to the deadline to complete PAMA but this was not complied with.

La Oroya produced 11 different metals but mainly copper, zinc, lead and silver.

Built in 1922 by the Cerro de Pasco Corporation and acquired in 1997 in a privatization process by St Louis-based Doe Run, the plant is known for having caused serious lead contamination around La Oroya.

Doe Run Perú is an affiliate of the New York-based Renco Group.


Doe Run Peru Applauds Possible Extension Of Environmental Program

Dow Jones Newswires

17 February 2012

LIMA - Doe Run Peru has applauded declarations from the president of Peru's Congress that lawmakers could extend the deadline for the completion of an environmental cleanup program at the company's La Oroya metallurgical complex.

Congressman Daniel Abugattas, a close ally of President Ollanta Humala, said Thursday that legislators will likely approve a bill to extend the period that Doe Run Peru has to complete the environmental program.

If the bill is approved, Doe Run Peru would be given 30 months to finish the program, beginning from when the company restarts operations at La Oroya. Doe Run Peru aims to restart operations on May 1.

Doe Run Peru's La Oroya complex, which produced copper, lead and zinc, was closed in 2009 after the company fell badly into debt, and the company wasn't able to secure financing. The plant is owned by Doe Run Peru, a unit of U.S.-based Renco Group Inc.

Doe Run Peru said in a statement late Thursday that it has nine projects to complete as part of the environmental program, including updating La Oroya's copper circuit and sulfuric acid plant.

The company, its creditors and the government reached a deal in January that is expected to lead to the reopening of the La Oroya facility.

Doe Run Peru said that in the coming weeks a board of creditors is expected to approve a proposal to restructure the company that includes $200 million in financing from Glencore International (GLCNF, GLEN.LN, 0805.HK) and the Renco Group.

The company said that it has invested $314 million in the environmental program, and that it will need to invest a total of $498 million to finish the program.


Doe Run Peru takes government to court again

Nick Rosen

Perut This Week

27 February 2012

The rocky relationship between mining and metals company Doe Run Peru and the Peruvian government has taken another twist, as the company has sued the government before Indecopi.

According to El Comercio, the company is suing to have the government removed from its list of creditors, after Indecopi recognized the debt that Doe Run Peru owes to the government in unpaid fines.

Meanwhile, in the United States, Doe Run Peru is suing the Peruvian government for $800 million for violating equal-treatment clauses in the U.S.-Peru Free Trade Agreement.

In 1997, Doe Run Peru purchased a government-run smelter in La Oroya, one of the most polluted cities in the region. In 2006 and 2009, it was found that the company was not complying with the environmental management plan it had agreed to follow, though its license was not revoked.

In 2009, the company experienced cash-flow problems and shut its plant in La Oroya. The next year, the government revoked its operating license of failure to comply with the environmental plan; Doe Run Peru accused the government of not fulfilling its responsibilities to clean up the soil, and brought suit in the United States. Doe Run Peru's creditors are currently seeking a way to restructure the company so that it can resume operations.

Meanwhile, some lawmakers have proposed changing existing laws to help Doe Run Peru reopen in La Oroya. Congressman Casio Huaire Chuquichaico has introduced a bill that would make the environmental management plan more flexible and eliminate Doe Run Peru's debt to the government. According to El Comercio, prominent members of Congress, including Freddy Otorola and Humberto Lay, have come out against the bill. Daniel Abugattas, President of the Congress, has voiced support for the general idea of giving the company benefits in order to allow it to reopen.

Jorge Merino, Minister for Energy and Mines, said he was "surprised" by the suit, according to Andina.

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