MAC: Mines and Communities

New Peru law weakens environmental safeguards

Published by MAC on 2014-07-22
Source: Associated Press

New Peru law weakens environmental safeguards

Frank Bajak

Associated Press

19 July 2014

LIMA, Peru (AP) - Dozens of international groups, the United Nations, and even Peru's own citizen ombudsman are objecting to a new law that weakens environmental protections in the Andean nation even as it prepares to host international climate-control talks this year.

The law, aimed at increasing investment, strips Peru's six-year-old environment ministry of jurisdiction over air, soil and water quality standards, as well as its ability to set limits for harmful substances. It also eliminates the ministry's power to establish nature reserves exempt from mining and oil-drilling.

The nation pocked by more than 300 major mines already offers the industry incentives unmatched in the Americas, even by mining-friendly Chile and Mexico.

Enacted July 11 by President Ollanta Humala after limited debate in Congress, the new law also further streamlines environmental reviews for new projects, and, for the next three years, lowers by half the maximum fines for all but the most serious of environmental violations.

At the same time, it re-establishes tax breaks for big mining multinationals, which already enjoy such benefits as simultaneous, indefinite concessions for both exploration and exploitation as long as they make nominal payments. In some Peruvian states, more than half the territory is under concession.

"As far as Latin America goes, we are the country backpedaling the most," said Jose de Echave, a former deputy environment minister.

Activists predict the weakened protections will spark more clashes between police who protect mines and highlanders angered by contamination and diminished water supplies they blame on the open pits. At least 80 mining-related social conflicts simmered in June, by government count.

The law stipulates that Peru's environmental protection agency occupy itself for the next three years more with "preventative" than disciplinary actions.

Its timing is especially awkward for Environmental Minister Manuel Pulgar-Vidal, who surprised many with his decision to stay in the job despite the weakened powers. In December, he will host 15,000 people including delegates from 194 nations for U.N.-sponsored climate talks, the last major climate conference before the countries meet in Paris next year in hopes of signing a new global treaty.

Veronika Mendoza, a Cuzco congresswoman, called it "an embarrassment" for a country with "a completely debilitated environment ministry" to be trying to lead efforts to draft a global emissions reduction pact.

Peru's economy depends heavily on mining, which accounts for about 60 percent of export income. But after a decade of annual growth rates averaging better than 6 percent, its expansion recently slowed with softening global demand for metals.

Over the past decade, Peru has reaped some $38 billion in mining investment. Government officials argue that easing environmental regulations will spur investment. But they have offered no specifics. Peru's finance, mining and environment ministers were not made available for interviews despite repeated requests by The Associated Press.

Environmentalists say it's not overregulation, as government and some industry officials argue, but rather lower global commodity prices that are hurting the economy.

"I can't think of a single example of a project that has been frozen by an excess of red tape," said de Echave.

The U.N.'s top official in Peru, Rebeca Arias, wrote the foreign minister on June 26 objecting to the new law. She said "a growth model spurred by investments respectful of the environment is the only viable possibility for sustainable development in a country like Peru, which is among the most vulnerable to the effects of climate change."

Peru's national ombudsman, Eduardo Vega Luna, similarly objected in a letter to Congress' president.

More than 100 environmental and other non-governmental groups including Oxfam and The Sierra Club complained in a letter to Humala, saying the law would reward polluters and spur the expansion of eco-hostile industries.

Some critics say the law violates Peru's free trade agreements with Washington and the European Union, which stipulate that environmental protections cannot be weakened to spur investment. Asked to comment, spokespeople the United States and E.U. said officials were studying the measure.

Peru's environmental watchdog is under attack on a second front by the mining sector, which has filed lawsuits that could further dilute its enforcement powers.

The mining companies say a "regulatory" levy instituted in December that helps fund the agency, amounting to 0.15 percent of company profits, is unconstitutional confiscation.

If they win, the agency known by its Spanish-language initials OEFA would see its 2014 budget slashed by about 40 percent, to $21 million.

"We would basically have to return to a scheme of limiting ourselves to something on the order of visual inspections," said OEFA's chief inspector, Delia Morales.

The plaintiffs include Minera Yanacocha SRL, which is majority-owned by U.S.-based Newmont Mining Co. It owns the Conga gold-mining project, which stalled after security forces killed five people during 2012 protests.

"Every time that a kind of hidden tax - like this contribution to OEFA - is imposed, our company's sustainability is affected," said Javier Velarde, Yanacocha's general manager.

Indigenous leaders in the Amazon say their communities will be among the biggest losers under the new law.

OEFA imposed its biggest fine ever last year - $14 million - against Argentina-based Pluspetrol for befouling jungle lots that native leaders say sickened their people.

But most fines have been relatively modest.

While a new law enacted last year boosted top fines to $40 million, OEFA's director, Hugo Gomez, said big fines are rare - with $90,000 the average for the 941 fines levied over the agency's lifetime.

Some transgressions aren't even fined.

One example is the $4.8-billion Chinese-owned Toromocho copper mine that Humala inaugurated in December - and that Finance Minister Luis Miguel Castilla has said would add a half percentage point to gross domestic product this year.

OEFA ordered Toromocho to halt operations in March after finding "acidic" runoff from a tailings pile pouring into two mountain lagoons. Two weeks later, it allowed operations to resume.

With the new law, de Echave said, OEFA "no longer has the power to paralyze that project."

Associated Press writer Franklin Briceno contributed to this report.

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