LIMA: Mining companies operating in Peru are seeing increasing millions in profits as a result of the surge in international prices for metals, but few are contributing what is needed to alleviate the poverty of the people living in mining areas.

President Alan García, who took office July 28, promised during his electoral campaign to renegotiate the contracts in the mining industry.

But now he appears willing to accept “voluntary contributions” to social investment, with sums as yet undefined. In the northwestern Peruvian region of Cajamarca is Latin America’s leading gold mine, run by the Yanacocha company in partnership with the US-based Newmont and Peru’s Buenaventura.

But the paradox is that this booming mine is located in an area where 74.2 per cent of the population lives in poverty.

The world’s fifth producer of gold, second in silver, third in copper and zinc, and fourth in lead, “Peru is a beggar seated on a throne of gold,” according to a popular local saying. Peru is among the countries in the region with highest poverty rates. Nationwide, 51 per cent of Peru’s 27 million people are poor, and 24 per cent live in extreme poverty, according to the national institute of statistics, INEI.

In the last two years, metal prices have shot up: copper 111 per cent, gold 42.5 per cent, and silver 65.5 per cent. But the increased revenues for the companies did not do much for the communities around the mines. Local residents complain that mining operations are contaminating their rivers and lakes, and they demand that the government step in to force the companies to answer for the harm caused to the environment.

In the southern city of Cusco, where the British-Australian company BHP Billiton Tintaya operates (the third leading copper producer in Peru, after Antamina and the US-based Southern Peru), 59.2 per cent of the 1.17 million residents are poor, according to INEI.

In the western region of Ancash, despite the gold produced by the Canadian firm Barrick Gold, 55.3 per cent of the population is poor, and 23.4 per cent is extremely poor.

In addition to the price hikes for gold, silver and copper, in the last two years, according to the economic news agency Bloomberg, the prices have increased for zinc by 150 per cent, lead 36.5 per cent and tin 15 per cent.

To begin to resolve these inequalities, President García had promised to renegotiate the mining contracts and to implement a tax on the companies’ profits.

But the issue suffered a lukewarm response in the recently begun negotiations. The head of the Council of Ministers, Jorge del Castillo, confirmed for Tierramérica that only a “voluntary contribution” from the mines was deemed acceptable, because of contracts of “juridical stability” signed during the Alberto Fujimori government (1990-2000), some of which are still valid.

Those contracts froze the payment of taxes. And, according to the mining executives, the obligation to pay royalties — recently established in 2004 — should be exonerated because they should be considered a form of taxation.

Nevertheless, that year the Constitutional Tribunal ruled that the royalties are compensation for exploiting the country’s non-renewable resources, and, as such, should be paid.

In 2005 alone, it is estimated that the government failed to receive royalties totalling nearly 158 million dollars because the mining companies claimed legal refuge in the stability contracts, according to Tierramérica’s conversations with former presidential candidate for the Socialist Party, Javier Diez Canseco, and experts from the consortium of non-governmental organisations Propuesta Ciudadana. —Dawn/ IPS News Service