Pages

Friday, December 2, 2011

The Peruvian President's Balancing Act


The Peruvian President's Labor Balancing Act

The Peruvian President's Labor Balancing Act
Andean people protesting the Conga mine in Cajamarca, Peru, on Nov. 24
Summary
Peru’s president might not attend various regional summits so that he can focus on a mining dispute at home. The dispute over the Conga gold mining project is just one of many labor disputes in negotiation between Lima and the largely poor, indigenous masses. The president’s challenge will be to find a middle path between placating his supporters — thus scaring off foreign investment — or cracking down on the protesters, which would alienate his base.
Analysis
Peruvian President Ollanta Humala might not attend a summit of the Community of Latin American and Caribbean states in Caracas on Dec. 2 or the Pacific Alliance meeting in Mexico City from Dec. 4 to Dec. 5, Peruvian Foreign Minister Rafael Roncagliolo said Dec. 1 as he left for Caracas. Instead, Humala may stay in Peru to take part in ongoing negotiations with the communities of Cajamarca, whose violent protests have halted the $4.8 billion Conga gold mining project. Despite the suspension of the project by U.S. mining company Newport, the major investor in the Yanacocha consortium in charge of the proposed mine, the protesters have vowed to continue until the government formally ends the project.
The failure of the Conga project is an ominous sign not only for Humala’s capacity to contain his base, but also for the precedent it sets.
Locals object to the consortium’s plan to use three different lakes in the area for drainage and processing. Lima approved the plan in 2010 despite its expected environmental impact; local communities were not heavily involved in the planning process. The Cajamarca/Conga protests began Nov. 3, halted Nov. 9 per a 15-day suspension agreed to with the government, and heated back up Nov. 24. After six days of violent protests, Newport announced its withdrawal Nov. 30, citing the Peruvian government’s failure to meet its obligations. Protests have continued in Cajamarca and Celendin (near the mine), and protesters have said they will expand the protests to the cities of Arequipa, Cuzco and Puno, which was wracked with violence in the lead-up to Humala’s election.
The cancellation of the Conga project is not particularly unusual given Peru’s often-volatile relationship with foreign investment. Still, it represents a significant shift in the political conditions Peru’s left-wing president faces. Since his June 5 election, Humala has worked to reassure foreign investors that, despite his place on the political spectrum, he values the economic growth foreign investment brings to Peru. Humala has not only sought to reassure investors, but to maintain credibility with Peru’s substantial right-wing political parties, which together hold a majority in the legislature. Without the help of parties like Alejandro Toledo’s Peru Posible, Humala’s Gana Peru party lacks the votes to pass initiatives.
To his base, largely consisting of poor, indigenous Peruvians, Humala has urged patience and advocated expanding social aid and encouraging investment. But as the protests in Cajamarca and elsewhere in Peru seem to demonstrate, Humala’s base has grown tired of waiting, and Humala seems to have lost substantial credibility. Without significant leverage over protesting communities, it will be difficult for Humala to negotiate in good faith.
In fact, Humala finds himself in much the same position as his predecessor, former Peruvian President Alan Garcia. Under Garcia’s watch, protests forced the government to suspend the license of Southern Copper Corp.’s Tia Maria project in May. Given his platform of income redistribution and catering to the indigenous masses — which typically constitute the bulk of protesters — Humala had the potential to change the government’s relationship with these communities, but this is now in doubt. More ominously for Humala’s efforts to reassure foreign investors, the protesters’ success at stopping the Conga project demonstrates to communities across Peru — where hundreds of active and dormant disputes simmer — that violent protest is an effective means of forcing change. It also establishes that Humala is incapable of stopping them or of offering sufficient incentives to peaceful negotiation.
So far, Humala appears to have adopted a strategy of seeking to prolong or delay negotiations, while personally staying away from the majority of the action. In the lead-up to Newport’s decision, Humala said he would not meet protesters until they already had decided they would compromise with the government. Humala has instead relied heavily on his council of ministers, particularly Peruvian Prime Minister Salomon Lerner, to negotiate with community leaders. Though this may keep him above the fray, the strategy’s failure makes him appear distant, uninvolved and unable to control his base.
Humala is trapped between two difficult choices. On the one hand, he could capitulate to his supporters and risk losing control of the country’s legislative agenda and hampering the foreign investment currently projected at $50 billion in mining alone over the next decade. On the other hand, he can resort to the hard-handed tactics of governments before him, alienating his base altogether. And more than the mining sector will challenge Humala. Port workers, cocaleros (growers of coca, the precursor of cocaine), natural gas workers and labor groups in general appear poised to challenge him over various grievances.
Though the Cajamarca protests are the most significant at the moment, more than 200 conflicts are in negotiation between local communities and various economic interests. These include:
Apurimac: Farmers in Apurimac have been protesting the activities of wildcat miners, claiming the miners are polluting local water sources and damaging crops. The protest began Nov. 3 and continued through Nov. 14. A government delegation traveled to Andahuaylas city Nov. 9-10 to negotiate with community leaders, but the negotiations failed when Peruvian Agriculture Minister Miguel Caillaux Zazzali refused to agree to a blanket ban on mining in the region. The city erupted into riots that left dozens injured. The protests have cost the region $145 million, according to regional Chamber of Commerce Vice President Augusto Fernandez-Cabero, who also alleged that the protests have been infiltrated by outside interests, including supporters of former Peruvian President Alberto Fujimori, Alianza Popular Revolucionaria Americana (American Popular Revolutionary Alliance) and the Peru Teachers Union. Apurimac Regional President Elias Segovia said Dec. 1 that an extremist wing of the District Board of Irrigation Users of Andahuaylas is likely to renew violent protests, an outcome that appears likely in the absence of a comprehensive agreement.
Puno: The situation in Puno is quiet at the moment. However, the city was the center of massive unrest over the summer until Humala came into office. Humala met Oct. 18 with the Puno regional president for more than five hours to discuss development projects in the region. The meeting seems to have calmed issues but the city remains in a delicate balance. If protesters in Cajamarca are serious about reaching out to people in Puno, there is a significant risk of unrest.
Ancash: The San Marcos community in the Ancash region experienced protests Nov. 11 that resulted in eight people being injured. Protesters are demonstrating against pollution caused by local mining operations. Earlier in November, protesters temporarily invaded a mining duct pumping station outside Antamina, one of the world’s top copper-zinc mines. Protesters also tried to occupy roads, one day after police fired tear gas to clear blockades on major highways.
Wildcat Miners: Wildcat miners also have issues at stake in the region. Growing pressure against illegal mining has pushed various miner groups to stage their own protests, pressuring the government to allow them to mine freely. These protests range in size and frequency. An estimated 4,000 miners protested Dec. 1 against a government crackdown on illegal mining in Puerto Maldonado, Madre de Dios region. That same day, 700 miners from Caramarca, Palpa and Otoca, in Peru’s Huancavelica region, blocked the southern Pan-American Highway in Nasca, in the Ica region, near the 440-kilometer (273-mile) point.
Given the political dangers he faces on all sides, Humala probably will continue to seek a middle way between cracking down on unrest and capitulating to the left. Though this will allow him to avoid serious political pain in the short term, it will embolden protest and encourage unrest throughout Peru for years to come.
Give us your thoughts on this report
Read comm


Read more: The Peruvian President's Labor Balancing Act | STRATFOR