Chapter 12. Mining sector
This chapter presents the main characteristics and trends of the Peruvian mining sector, as well as the legal framework for the mining industry. It reviews the status of exploration and exploitation permits as well as the direct regulation of extraction and processing activities on air and water. It reviews conflict resolution mechanisms with local communities, environmental liability policy and the management of contaminated sites. The chapter discusses efforts to formalise the artisanal mining and avoid local mercury water pollution, which has led Peru to recently ratify the Minamata Convention on Mercury.
Key findings and recommendations
Peru is the biggest producer of gold in Latin America, and the sixth largest in the world. It is the world's third largest producer of copper, after China and Chile, as well as of silver, tin and zinc, and is an important producer of lead and molybdenum. Copper and gold are the most important products in the economy. In 2012, mining accounted for 12.2% of gross domestic product (GDP) and roughly 60% of exports. It is a capital-intensive sector, whose importance is reflected in the fact that investment rose from USD 1.086 billion in 2005 to USD 9.724 billion in 2013. In 2015 there were some 50 mining projects at various stages of development, representing investments of around USD 63 billion, primarily in copper mining. The mining industry makes a significant fiscal contribution as well: in 2013 it accounted for 9.4% of total government tax revenues.
Despite its reputation as a primary minerals producer, Peru has a number of foundries and refineries, including copper refineries at Ilo, a steel mill at Chimbote, a zinc plant at Cajamarquilla (near Lima) and a facility for lead and other metals at Oroya, along with the MINSUR tin foundry and refinery at Pisco (Ica), some of which have been linked to local pollution problems. At the artisanal scale, gold-mining is the most important: 85% of artisanal miners are engaged in this activity, which in 2006 produced an estimated 24 tonnes of gold, representing roughly 10% of national production with an estimated value of USD 390 million.
One of the main problems with small-scale and artisanal mining is the growth of informal and illegal activities that have major consequences, both social and environmental (destruction of vegetation and soils and irresponsible release of mercury into waters and the environment), driven by the high prices obtained for minerals in recent years. As a result, the government is actively promoting a programme to formalise small-scale and artisanal mining and to eradicate illegal mining (Supreme Decree No. 045-2010-PCM). Law No. 30011 gave the Agency for Environmental Assessment and Enforcement (OEFA) authority to conduct environmental audits of mining activities of this kind, which are pursued without any operating or environmental permit. The corrective environmental management instrument, created by Supreme Decree No. 004-2012-MINAM, applies to existing small-scale and artisanal mining operations that are in the process of formalisation, to bring them into line with legally determined environmental obligations.
In Peru, natural resources in the ground are the property of the nation, and the State governs access to them, granting rights for their exploitation through concessions, which in the case of mining give their holder the right to explore and exploit these resources. The General Mining Act (Supreme Decree No. 014-92-EM) regulates mining activity in the country. Supreme Decree No. 020-2008-EM establishes environmental regulations for all mining exploration activities. Supreme Decree No. 040-2014-EM approves environmental protection and management regulations for mining activities, including operations, profits, general work, transportation and storage, replacing the former regulations that were in place for nearly 21 years. Currently, some 15% of the territory is covered by mining rights, and roughly 64% is closed to mining.
In general terms, the preservation of air and water quality is covered by the respective environmental quality standards, Supreme Decree No. 002-2008-MINAM and Supreme Decree No. 006-2013-MINAM, while air emissions and mining effluents are covered by specific maximum permissible limits. In 2013, environmental quality standards for soils were issued (Supreme Decree No. 02-2013-MINAM). In order to reduce discharges into the water from metal mining operations, mining companies were required to submit a comprehensive adjustment plan and to implement the maximum permissible limits and environmental quality standards (Ministerial Resolution No. 154-2012-MEM/DM). The deadlines initially set between 2012 and 2015 for delivery of the comprehensive adjustment plan and compliance with the respective maximum permissible limits and environmental quality standards have been repeatedly extended.
In terms of socioenvironmental concerns, Supreme Decree No. 042-2003-EM, which regulates the previous commitments, was amended in 2010. This is binding on all mining permit holders; it relates to sustainable development, environmental and social excellence, compliance with social accords, responsible relationships, local employment, economic development and ongoing dialogue.
There has been a notable increase in conflicts between mining project developers and the communities or populations affected by these initiatives. The main cause of these conflicts is the concern of local people for their lands, waters and environment, which are nearly always their only means of livelihood. Prior consultation (Law No. 29785, its regulations, Supreme Decree No. 001-2012-MC and the principles of ILO Convention No. 169), participatory workshops and public hearings are instruments for informing the public about mining projects and mitigating potential environmental impacts, as well as for preventing social conflicts. The active participation of the populations of mining areas, through negotiations and adjustments to the project, makes it easier to obtain their approval in the respective regions. The Government of Peru is addressing the management of social conflicts through Ministerial Resolution No. 161-2001-PCM. In 2012, the government established the National Office for Dialogue and Sustainability (ONDS) to help resolve the great number of mining-related disputes.
To address the problem of the environmental liabilities from mining, Law No. 28271 recognises the risks and hazards they pose for the country, particularly in the Andean region. Since 2003, the law regulating mine closures (Law No. 28090 and regulations of 2005 and 2006) holds mining companies liable at the time their operations are closed, and stipulates the measures to be taken to avoid risks to people and the environment. Peru keeps an inventory of mining operations’ environmental liabilities, with 8 616 such operations identified in 2015 by the Department of Mining, Ministry of Energy and Mining), which includes an estimate of the risk to people and the environment. According to that inventory, 50% of these environmental liabilities pose a high or very high risk. Peruvian legislation on the treatment and clean-up of these environmental liabilities is a model for Latin America. In 2006, the government established the enterprise Activos Mineros S.A.C to oversee the environmental remediation of sites abandoned by the former State-owned mining enterprises, CENTROMIN. Those environmental liabilities that cannot be attributed to a responsible party will be treated and mitigated by the Peruvian State at the central and regional levels, under Law 28271. Of all the environmental liabilities identified, only 10% of instances have remediation instruments, and responsible parties have been identified for only 12%: in other words, there are 7 531 environmental liabilities (as of 2015) for which no responsible party has been identified and for which there is no mitigation plan.
Peru has just ratified the Minamata Convention, which establishes strict measures for the production, import, export, use and disposal of mercury. That ratification will be an important step toward reducing environmental pollution and risks to human health.
Recognising the importance of tax revenues from mining, and in a bid to make mining taxation more transparent, Peru was the first country in Latin America to adopt the related standards of the Extractive Industries Transparency Initiative (EITI), setting an example to other major mining countries in the region. Peru's experience shows that considerable progress can be made through EITI in terms of bringing transparency to payments from mining companies and determining the extent to which those payments flow back into the development of mining areas. A growing number of OECD countries are now implementing this standard (for example Norway, the United Kingdom and the United States).
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Continue with policies aimed at resolving the problem of mining environmental liabilities, generating more in-depth information on risks, capitalising on their economic potential (secondary mining), identifying ownership and responsibilities, and designing and implementing monitoring mechanisms. Increase remediation efforts, with particular emphasis on abandoned sites and those that pose the greatest risks. Establish responsibilities and funding needs for the remediation of abandoned mining environmental liabilities and make use of international technical co-operation. Ensure that environmental liability remediation plans are adopted and overseen by the National Environmental Certification Service for Sustainable Investment (SENACE) and OEFA, respectively.
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Continue and step up efforts to eradicate illegal mining and to formalise informal mining activities. Pay particular attention to small-scale and artisanal mining, by means of technological assistance and marketing promotion schemes, to allow them to attain economies of scale and to formalise and adopt environmentally sustainable technologies and practices.
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Move towards artisanal mining methods that use internationally accessible techniques and standards to prevent environmental degradation and repercussions for the health and quality of life of people in the affected areas, particularly in the case of gold-mining.
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Within the scope of their responsibilities for the mining sector, decentralised governments should strengthen the role of regional governments in the area of environmental permits and oversight, and ensure implementation and funding, staff training and co-ordination with the Ministry of the Environment and Mines and OEFA.
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Ensure the full implementation of the principle of internalising costs or requiring polluters to pay. Ensure that the revenue from mining activities contributes to the country’s sustainable development through long-term investments in other forms of capital (human, physical or natural), giving fairer consideration to social and geographical realities.
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Continue to promote greater transparency regarding the impact of mining activities on the environment and people’s health. Strengthen effective access to information and broad active participation in licensing processes. Promote the inclusion of environmental topics in different transparency initiatives, such as the Extractive Industries Transparency Initiative.
1. Characteristics of the sector
Mining is a very important sector for Peru’s economy. Between 2003 and 2013, extraction of oil, gas and minerals generated around 14% of GDP, although in recent years it has contributed around 12%. The mineral extraction subsector is particularly noteworthy. In 2007-2013, it contributed more than 11% of GDP at constant 2007 prices (National Institute of Statistics and Informatics (INEI) online) and accounted for around 60% of Peru’s total exports (MINEM/IIMP, 2010). The main destinations for mineral exports are Canada, China, Switzerland and the United States of America.
Peru is the world’s second largest producer of silver and the third largest producer of copper and zinc. It is Latin America’s leading producer of tin, gold, lead, selenium and zinc and its second producer of copper, silver, molybdenum, cadmium and rock phosphate. Copper and gold account for around 75% of mining exports. In 2013, domestic copper production totalled 1.4 million fine tonnes, or 7.5% of world production, while gold production was 5 million fine ounces, or 5.7% of world production (MINEM, 2015a).
During the 2003-2013 period, copper and silver production increased, zinc production remained stable and gold production decreased (Figure 12.1). According to the Ministry of the Environment and Mines (MINAM, 2014), mining is concentrated in the following Peruvian departments: (i) copper: Áncash, Arequipa and Moquegua; (ii) gold: La Libertad, Cajamarca and Madre de Dios; (iii) silver: Pasco, Áncash and Junín; (iv) zinc: Áncash, Pasco and Junín; (v) lead: Pasco, Lima and Junín.
Source: Prepared by the authors on the basis of MINEM (2015), Anuario Minero 2014.
Investment in mining grew by 814% between 2005 and 2013, from USD 1.086 billion in 2005 to USD 9.724 billion in 2013, reflecting the sector’s current importance, which is projected to continue to grow in the future (MINEM, 2015b). The regions that have received the most investment in recent years are Arequipa, Apurímac, Junín and Cusco, which absorbed more than 50% of the total. In 2015, there were some 50 mining projects, representing investments of USD 63 billion, primarily in copper mining.
The mining sector is highly capital-intensive, but it is also a major source of employment. In 2013, more than 183 000 direct and contract jobs were created in the sector. That same year, 93% of jobs were performed by men and only 7% by women, and around 20% were in the Arequipa region. On average, 45% of mining jobs in each region were performed by workers from other regions. For example, a full 78% of mining jobs were held by migrants in the Amazonas region. Mining makes a significant contribution to government tax revenues, contributing an average 15% of the total in 2003-2013. A peak year was 2007, when mining contributed just under 25% of revenues, compared with 9.4% in 2013.
During the period covered by this environmental performance review, new provisions were adopted on tax collection and the allocation of mining revenue. During that period, the mining sector paid taxes and royalties and made other transfers via a number of mechanisms, including: (i) corporation tax (Supreme Decree No. 179-2004-EF); (ii) mining levy (Law No. 28322 of 2004)1 (iii) royalties applicable to large- and medium-scale mining operations (Law No. 28258 of 2004);2 (iv) “works for taxes”,3 provided for in the law promoting regional and local public investment with private-sector participation (Law No. 29230 of 2008); (v) special mining tax (Law No. 29789 of 2011); (vi) special mining levy (Law No. 29790 of 2011).
In recent years, a more direct relationship has been established between the tax regime and mining companies’ operating profits and income. Although taxation is relatively high, the mining sector still contributes a modest share of government tax revenues. The mining levy has become an important tool for promoting the development of mining areas. It accounts for 50% of the corporation tax paid by the sector and is distributed among the regions, provinces and localities where mining is carried out. Figure 12.2 shows transfers to the regions from the mining levy, royalties, the annual mining good standing fee (allowing mining and mineral prospecting concerns to continue operating) and its associated penalty. Over the 2006-2013 period, these transfers averaged around USD 4.26 billion, of which 85% came from the mining levy. The regions that received the largest amount of transfers were Áncash, Arequipa, Cajamarca, La Libertad and Tacna.
Although progress has been made with the distribution of mining revenues, further action is needed to promote their contribution to Peru’s sustainable development via long-term investment in human, physical and natural capital, with the adoption of more equitable criteria that take into consideration different social and geographical situations.
Source: Prepared by the authors on the basis of MINEM (2016), Anuario minero 2015.
Peru’s underground natural resources are the property of the nation and are administered by the State, which grants exploitation rights, consisting of concessions for exploration and exploitation. In 2015, the relevant activities covered 1.22% of the country’s surface area. As around 14% of the total surface area is subject to mineral rights, there is thought to be great potential for further exploration and extraction. In addition, mining is banned across 65% of the country’s area, due to restrictions aimed at protecting natural areas (core and buffer zones), areas for special projects, archaeological sites and other areas (MINEM, 2016). The Metals Economic Group reported that, in 2007-2014, investment for exploration averaged USD 646 million per year. This peaked at USD 1.035 billion in 2012, before dropping again.
Mining operations in Peru fall into four categories according to the size of the concession and the installed production capacity: large-scale, medium-scale, small-scale and artisanal (Table 12.2). Large-scale mining is highly mechanised, comprises mainly opencast mines and includes prospecting, exploration, development, extraction, concentration, refining and transportation activities. Medium-scale mining is concentrated in some 100 companies, is mechanised and consists of mineral extraction and concentration activities. Small-scale mining consists mainly of extracting and processing gold from underground mines and alluvial deposits (MINEM, 2016).
Of the 10 200 mineral rights holders registered by the Ministry of Energy and Mining (MINEM) in December 2015, a total of 6 946 were engaged in artisanal mining, 2 093 in small-scale mining, and 1 661 in large- and medium-scale mining.
Over the 2006-2015 period, artisanal and small-scale mining produced 13% of the gold mined in Peru, 2.4% of the silver, 1.8% of the lead, 0.6% of the zinc and 0.2% of the copper. A total of 85% of artisanal miners are engaged in gold-mining, producing around 10% of domestic output, with an estimated value of USD 390 million.
Peru has a number of foundries and refineries, including copper refineries at Ilo, a steel mill at Chimbote, a zinc plant at Cajamarquilla (near Lima), a facility for lead and other metals at Oroya and the MINSUR mining company’s tin smelter and refinery at Pisco (department of Ica), some of which are currently causing local pollution problems. In 2014, the country was the world’s thirteenth biggest producer of cast copper and the sixteenth biggest producer of refined copper.
2. Environmental pressures and problems
While the mining sector is a major contributor to Peru’s economy, it is also a source of environmental pressures that often lead to social conflicts of varying intensity.
The environmental pressures exerted by mining include: (i) emissions and contamination of air, water and soil; (ii) mercury pollution; (iii) environmental impact of informal and illegal mining; (iv) risks and hazards associated with environmental liabilities; (v) socioenvironmental conflict.
2.1. Emissions and pollution
The Ministry of the Environment distinguishes different types of impact according to the four categories of mining operation. The Ministry reported (MINAM, 2014) that large-scale mining companies had improved their processes to meet international environmental requirements. In contrast, medium- and small-scale mining operations still use environmentally unfriendly production methods. In addition, illegal mining places an enormous pressure on the environment and has undesirable effects on human health.
Water pollution
The mining sector is one of the biggest water users and produces large volumes of wastewater. A high proportion of the sector’s effluent discharges is authorised, provided that they are treated first. According to the national water authority (ANA), in 2012 mine wastewater made up 81% of all authorised discharges and mine discharges were concentrated in the departments of Cajamarca, Áncash and Junín. In addition, there is unauthorised dumping of inadequately treated or untreated waste from informal mining operations.
Water quality monitoring has been carried out in areas of influence of mining operations to assess compliance with maximum permissible limits. Between 2007 and 2010, Peru’s energy and mining investment regulator (OSINERGMIN) performed several watershed monitoring inspections. Those carried out between 2010 and 2013 revealed significant non-compliance with environmental quality standards for pH, arsenic, cadmium, copper and lead (Table 12.3).
Air and soil pollution
Unsustainable environmental practices contaminate soil and air with heavy metals and other chemicals. Of particular concern in the cities of La Oroya and Pasco is pollution from mining and metallurgy facilities, which exposes workers and local residents to lead emissions (Astete et al., 2009). High mercury levels have also been detected in different areas of Peru, including the Amazonian department of Madre de Dios, where the government was forced to declare a state of emergency in 2016 for that reason.
Soil and air quality studies of mining areas have shown pollution above permitted levels. Soil contamination stems from high levels of non-compliance with emission standards for cadmium, arsenic, lead and mercury, which, in many areas, exceed the limits laid down in national legislation. With regard to air emissions, non-compliance is particularly marked in the case of sulphur dioxide and, to a lesser extent, lead (Table 12.4).
The figures in Table 12.4 show high levels of non-compliance with environmental regulations, making it important to conduct more frequent and extensive monitoring. As environmental quality standards were set fairly recently, the analysis of cumulative effects prior to their adoption needs to be expanded. While increased environmental monitoring by OEFA and the introduction of comprehensive environmental assessment plans are positive, there is still a long way to go in this area. OEFA is responsible for overseeing large- and medium-scale mining operations, whereas regional governments are responsible for overseeing artisanal and small-scale mining, for which no systematised information is available.
Further measures should be implemented to ensure the full application of the principle of internalising costs and the polluter-pays principle, in order to reduce the harmful environmental and social effects of mining. In addition, information on measurements and concentrations of contaminants should be made more widely available to the public.
Mercury pollution
Mercury pollution is one of the most serious problems associated with small-scale informal and illegal gold-mining. Misuse of mercury in gold-mining is extremely harmful to both human health and the environment.
Domestic demand for mercury fuelled growth in imports, which rose from 34 tonnes in 2000 to 194 tonnes in 2011. However, since 2011, mercury imports have decreased significantly as a result of government controls, especially in the wake of Peru’s signature and ratification of the Minamata Convention on Mercury (MINAM, 2016a).
Mercury is a bioaccumulative neurotoxin, meaning that direct and indirect exposure can have critical consequences, the severest of which are damage to the brain and central nervous system, miscarriage, congenital malformations and psychological and physical developmental disorders, especially in children. Bioaccumulation stems mainly from methylmercury contamination of fish, with indigenous communities living near gold-mining areas in the Amazon (for which fish is a staple food) presenting the greatest exposure to this pollutant, with levels far exceeding those recommended by the World Health Organization (Brack et al., 2011).
One of the areas most exposed to pollution, and which exhibits the highest mercury concentrations, is the department of Madre de Dios, where around 10% of Peru’s gold is mined, mainly by the artisanal mining sector, which is characterised by a high level of informality. An estimated 2.8 kilos of mercury are used for every kilo of gold mined, which is a very high ratio (Brack et al., 2011).
Recent studies in Puerto Maldonado (capital of the department of Madre de Dios) found that 78% of adults had an average hair mercury concentration three times higher than the benchmark dose limit and that the highest-risk group was women of childbearing age (MINAM, 2014). Moreover, 60% of the most consumed fish species contained mercury levels above international reference limits. In May 2016, the government declared a state of emergency in the department of Madre de Dios, owing to high levels of mercury contamination of river water, live aquatic species and the general public.
In spite of Peru’s efforts to control mercury discharges from mining operations, these have been inadequate. At the time the environmental performance review was conducted for the 2003-2013 period, strict trade controls on mercury had not been implemented. Furthermore, not enough is yet known about its source and the amount of mercury used in gold production. Further information is also required on the existence of gold mines whose metallogenic structure might mean that they contain natural mercury. In short, it is necessary to ascertain the precise amount of mercury generated as a by-product and where this metal is stored or disposed of.
2.2. Environmental impact of informal and illegal mining
Informal and illegal mining is practised in most regions of Peru, including protected natural areas and buffer zones (Figure 12.3). Such mining activities have proliferated in different areas of the country in response to soaring international prices for metals, particularly gold (SPDA, 2014).
Around 70 000 miners are involved in informal and illegal mining operations, where they process alluvial deposits using highly rudimentary techniques (Gestión, 2014). The use of such techniques has a heavy impact generally and causes irreversible harm to humans and the environment. Brack et al. (2011) mention a number of unregulated extractive practices that cause environmental damage, including: (i) the use of dredgers to extract tonnes of material from the riverbed; (ii) the indiscriminate dumping of mercury into water.
One of the areas most affected by informal and illegal mining is the department of Madre de Dios, where gold is extracted from rivers, causing immense damage. Apart from the effects mentioned above, this practice has led to the mass destruction of vegetation and soil. Such mining activities are carried out in a highly problematic social environment, characterised by the emergence of a large number of totally unplanned settlements whose residents lack basic services.
Control of small-scale and informal mining operations, including environmental monitoring, was transferred to regional governments in line with a decentralisation policy. The delegation of powers from the Ministry of Energy and Mining to regional governments took place in 2006 (Ministerial Resolutions Nos. 179-2006-MEM/DM and 550-2006-MEM/DM).
The State has adopted a number of measures to eradicate illegal mining and formalise informal mining, including the enactment of several laws in recent years. Nonetheless, the measures are still inadequate and should be strengthened. Marketing schemes and technical assistance programmes should also be reviewed, in order to facilitate economies of scale and the formalisation and adoption of sustainable technology and practices to prevent environmental degradation and protect people’s health and quality of life.
2.3. Mining environmental liabilities
Law No 28271 regulating environmental liabilities from mining defines these liabilities as facilities, effluents, emissions, waste or tailings resulting from mining operations at sites that are currently abandoned or inactive and that pose an ongoing threat or potential risk to people’s health, the surrounding ecosystem and property.
Mining environmental liabilities are a serious hazard to life, health and the environment because of the possible presence of toxic substances and heavy metals in tailings and waste rock. The risks are surface run-off, seepage and acid mine drainage, which can contaminate surface and groundwater and a variety of ecosystems. In addition, wind can carry off any particulate matter present, which could affect people through inhalation or the ingestion of contaminated water and food, while extreme weather events could weaken the physical stability of dumps, possibly causing tailings to break loose.
The Ministry of Energy and Mining has kept an inventory of mining environmental liabilities since 2006, with 8 616 such sites registered by 2015. According to the related assessment of risk to humans and the environment, 50% of mining environmental liabilities pose a high or very high risk. Although mining environmental liabilities exist in all regions of Peru, most are found in the regions of Áncash, Cajamarca and Puno, each of which has more than 1 000 such liabilities (Oblasser, 2016).
Note: the boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations and the OECD.
Source: Ministry of the Environment.
Peru has a number of laws regulating mining environmental liabilities and mine closures, many of which set an example to the rest of the region. The biggest problems posed by such liabilities are the existence of abandoned mines whose owners have not been identified and the need for greater funding to remediate them. Remediation mechanisms are available for only 10% of mining environmental liabilities and only 12% of those responsible for mining environmental liabilities have been identified. As of 2015, those responsible for 7 531 liabilities for which there was no mitigation plan had still not been identified (Office of the Ombudsman, 2015). The Ministry of the Environment (MINAM, 2014) highlighted some serious problems arising from abandoned tailings and closed mines that had not been subject to any sort of remediation.
2.4. Socioenvironmental conflicts
Socioenvironmental conflicts relate mainly to the availability of natural resources, competition for their use and conditions that potentially endanger the health of local residents. They also relate to overlaps in various types of concession, including for mineral exploration and mining, and the territory of some communities (MINAM, 2014). The Office of the Ombudsman (2007) identified the following causes of socioenvironmental conflicts in Peru: (i) people’s fear of pollution from extraction activities; (ii) their negative perception of others’ enrichment from land they inhabit; (iii) their lack of confidence in the State’s ability to prevent pollution and degradation of their living environment; (iv) the perceived incompatibility between extractive operations and farming and other economic activities; (v) the impact on communities.
Over the 2003-2013 period, conflicts intensified, especially between mine operators and communities. The Office of the Ombudsman (2013) reported that, in December 2013 alone, there were 139 socioenvironmental conflicts, representing 64.4% of all conflicts recorded. Most related to mining (74.8%) and hydrocarbon extraction (12.2%). The departments with the highest concentration of such conflicts were Áncash, Apurímac, Cajamarca, Ayacucho, Puno and Cusco.
3. Sectoral policies, regulatory framework and oversight
3.1. Institutional framework
During the period covered by the review, both the institutional framework and laws governing the mining sector underwent a number of changes, giving rise to new methods of co-ordination, project approval and environmental impact assessment.
Until the recent establishment of the Ministry of the Environment, the Ministry of Energy and Mining was responsible for overseeing most of the environmental aspects of mining. The responsibilities of the Ministry of Energy and Mining included both promoting mining investment and approving environmental impact assessments. This dual role was a source of conflict because, in many instances, the aims were incompatible: promoting investment or protecting the environment.
Under the national environmental impact assessment system (SEIA), whose rules of procedure were approved in 2009 (Supreme Decree No. 019-2009-MINAM), assessments of investment projects in the mining sector were standardised and environmental certification was made a mandatory prerequisite for new mining operations with a potentially significant environmental impact (MINAM, 2015). Before 2012, the approval rate of environmental impact studies of mining activities was 17% (MINAM, 2014).
The Department of Mining Environmental Affairs of the Ministry of Energy and Mining used to be responsible for conducting environmental impact assessments of mining projects. This changed in December 2012, with the enactment of Law No. 29968 and the creation of the National Environmental Certification Service for Sustainable Investment (SENACE), although the process of transferring the assessment role only began in 2015 (Supreme Decree No. 006-2015-MINAM). The environmental impact assessment system is mainly responsible for conducting semi-detailed environmental impact assessments and environmental impact statements for mining projects, while SENACE concentrates on detailed environmental impact studies for investment projects with a potentially significant environmental impact. One of the main SENACE mechanisms in the future will be a one-stop shop for environmental certification, which will check and approve detailed studies electronically.
3.2. Oversight and co-ordination
In 2007, the supervision and inspection functions originally performed by the Ministry of Energy and Mining were transferred to Peru’s energy and mining investment regulator (OSINERGMIN) and, in mid-2010, to OEFA.4 OEFA is responsible for large-scale activities, while regional governments and the Department of Mining of the Ministry of Energy and Mining oversee smaller-scale activities. OEFA also supervises national, regional and local environmental enforcement entities.
Between 2010 and 2015, OEFA processed around 1 000 files transferred from OSINERGMIN, satisfactorily in nearly 100% of cases (MINAM, 2016b). In 2010-2013, it also carried out 757 inspections of mining operations (68% scheduled and the remaining 32% in response to complaints or environmental emergencies) and issued 186 penalties for infringement of water, air or soil quality regulations (MINAM, 2015).
Following OEFA inspections of environmental enforcement entities, especially those of regional governments, in 2012-2014 the performance of these entities was found to be poor (MINAM, 2016b). OEFA and the Ministry of the Environment should therefore increase their provision of technical assistance, training and co-ordination.
Since 2013, environmental inspections have been carried out on the basis of watersheds, which allows for a comprehensive assessment of the performance of mining units operating in the same area and for an overall analysis of their impact on the environment.
As monitoring and oversight of mining operations are fragmented, it is essential to improve co-ordination between State institutions such as the Ministry of the Environment, OEFA, the national water authority, the Ministry of Health, the National Meteorology and Hydrology Service of Peru (SENAMHI), provincial municipalities and regional governments. In line with their respective roles in relation to the mining sector, they need to improve and expand training for their officials on granting concessions and conducting environmental inspections. They also need to ensure the effective implementation and funding of these tasks.
3.3. Legal framework for mining
The General Mining Act (Supreme Decree No. 014-92-EM), enacted in 1992, is the main regulatory framework for mining in Peru, with the Ministry of Energy and Mines charged with enforcing the Act’s environmental aspects. The last 7 of the Act’s 226 articles contain environmental provisions.
Environmental regulation of mineral exploration and mining activities has been introduced fairly recently. In 2008, environmental regulations were issued for mineral exploration activities (Supreme Decree No. 020-2008-EM) and in 2014, nearly 21 years after the first sector regulation was adopted, environmental protection and management regulations for mining activities, including operations, profits, general work, transportation and storage, were introduced (Supreme Decree No. 040-2014-EM). With regard to the main environmental pressures exerted by this sector, regulatory changes have been adequate overall, although many should be strengthened.
Provisions on water, air and soil pollution
The State has enacted laws and decrees to control and correct the environmental pressures exerted by mining. Even though mining regulations were amended during the 2003-2013 period, in line with World Health Organization guidelines on emissions, there is still a long way to go before they are fully implemented.
The Ministry of the Environment has announced mandatory environmental quality standards for mining. Water protection standards were enacted in 2008 (Supreme Decree No. 002-2008-MINAM) and, in 2013, similar provisions for the air and soil were adopted (Supreme Decree No. 006-2013-MINAM and supreme decree 002-2013-MINAM). Limits were also imposed on the discharge of effluents.
Mining companies are required to submit and adhere to comprehensive plans to bring their operations into line with the maximum permissible limits on the discharge of liquid effluents from mining and metallurgical operations (Ministerial Resolution No. 154-2012-MEM/DM). According to Miyashiro, Méndez and Orihuela de Campos (2014), between 2012 and 2015 successive deadlines were set for the submission of these plans, in an effort to apply the maximum permissible limits and environmental quality standards systematically.
Even though progress has been made at the watershed level in controlling the discharge of liquid effluents from metallurgical plants and mining complexes into water, a comprehensive national environmental monitoring network should be developed.
Provisions on mercury pollution
Environmental quality standards were recently adopted on permissible mercury concentrations in water (Supreme Decree No. 002-2008-MINAM) and in soil (Supreme Decree No. 002-2013-MINAM). In addition, the Solid Waste Act (Law No. 27314) includes rules on handling mercury. However, during the period covered by the review, mercury controls had not been effective enough.
The Government of Peru’s efforts to control the use of mercury culminated in 2015 with the ratification of the Minamata Convention on Mercury (Supreme Decree No. 061-2015-RE), which establishes strict measures for the production, import, export, use and disposal of mercury. Ratification is expected to significantly reduce mercury use, environmental pollution and the risk to human health, as well as to strengthen controls on mercury.
Provisions on informal and illegal mining
Informal and illegal mining activities began several decades ago and have proliferated in response to soaring metal prices. The first attempt to regulate these activities was in 2002 with the enactment of a law to formalise and promote artisanal and small-scale mining (Law No. 27651), which includes a classification of activities in the subsector.
The State is actively promoting the formalisation of informal mining and the prohibition of illegal mining. This has included a national plan for the formalisation of artisanal mining (Supreme Decree No. 045-2010-PCM) and Emergency Decree No. 012-2010, which emphasises the need to regulate gold-mining in the department of Madre de Dios. Law No. 30011 empowers OEFA to conduct environmental inspections of companies working without any operating or environmental permit. The corrective environmental management instrument (IGAC), adopted in 2012 (Supreme Decree No. 004-2012-MINAM), applies to existing artisanal and small-scale mining operations that are in the process of being formalised, to bring them into compliance with current environmental legislation. This instrument seeks to prevent, mitigate and compensate any environmental damage caused by mining operations.
The strategy for rationalising artisanal and small-scale mining (Supreme Decree No. 029-2014-PCM) was adopted to promote environmentally sustainable processes that reduce the use of mercury and cyanide in mining operations, especially small-scale gold mining and processing. Measures implemented in this area have been adequate, but further efforts are required to ensure that internationally accepted techniques and standards are used in artisanal mining, particularly gold mining, to prevent environmental degradation and adverse effects on the health and quality of life of people living in affected areas.
Provisions on mining environmental liabilities
Law No. 28271, regulating environmental liabilities from mining, was enacted in 2004, mainly to prevent the risks they pose to the country. The Law identifies liabilities, establishes accountability and provides for funding remediation measures. The Law regulating mine closures (Law No. 28090 of 2003) and its implementing regulations of 2005 and 2006 defines mine closure plans, rehabilitation measures and required financial guarantees (Oblasser, 2016).
With regard to mine closures, mining companies in Peru have an obligation to take the necessary measures to avoid harming people and the environment. All mine closure plans must be approved by the Ministry of Energy and Mining and endorsed by OEFA. Between 2003 and 2013, the number of mine closure plans submitted rose from 11 to 78 (MINAM, 2015) and 36 closure plans for medium- and large-scale mines were approved in 2015. In 2010-2013, the number of OEFA environmental audits of mine closure plans increased from 8 to 16.
While Peru’s laws on mine closures and mining environmental liabilities, and their respective registers, are considered to be extremely comprehensive and even to set an example for Latin America, real progress has been slow and mine closure and remediation plans have been drawn up for only a small percentage of mining environmental liabilities. One of the biggest problems has been determining the ownership of abandoned mine sites, in which case the high cost of their remediation falls on the State (central government and regional governments). It is therefore recommended to further strengthen funding policies, disseminate more information on risks, identify owners and managers, and develop and implement more monitoring mechanisms.
In 2006, a company called Activos Mineros S.A.C. was formed to handle the remediation of mining environmental liabilities left by former State-owned mining companies (CENTROMIN). In exceptional cases, CENTROMIN also handles the remediation of high-risk liabilities that have been abandoned or whose owners have not been identified.
Law No. 26793 established the National Environment Fund (FONAM) to analyse and promote investment in remediation. In addition, a number of legislative bills have been tabled which, if approved, would promote the remediation of mining environmental liabilities using funding from the State, the private sector and international institutions. In order to increase investment in and funding for remediation activities, consideration should be given to secondary mining to capitalise on the economic potential of mining environmental liabilities. It is also necessary to ensure that remediation plans are approved by SENACE and audited by OEFA.
Provisions on socioenvironmental conflict resolution
Concerns over socioenvironmental conflicts led the Government of Peru to launch, in 2004, a Strategic Analysis and Social Conflict Prevention Unit (UAEPCS) designed to raise funds to tackle social conflict preventively (ANGR, 2014). The project continued to evolve until 2012, when the National Office for Dialogue and Sustainability (ONDS) was established to resolve the large number of mining-related disputes. By June 2015, ONDS had co-ordinated 157 forums for dialogue across the country, 68 in response to mining-related disputes (MINAM, 2015).
Supreme Decree No. 052-2010-EM was issued in 2010, updating the regulations of 2003 on the prior commitment requirement for the development of mining activities. The new provisions, based on a sustainable development approach, attach special importance to such issues as compliance with social agreements, building responsible relationships, local employment, economic development and ongoing dialogue. Another tool available to the State for resolving social conflict is Ministerial Resolution No. 161-2011-PCM, which contains guidelines and strategies for social conflict resolution.
It is essential to disseminate information on mining projects to prevent potential environmental impacts and social conflicts. Of particular note are Peru’s prior consultation instruments, specifically Law No. 29785 and its implementing regulations, Supreme Decree No. 001-2012-MC and the principles of International Labour Organization (ILO) Convention No. 169. Participatory workshops and public hearings have been held in this connection. Project approval is facilitated by involving residents of mining areas in negotiations and by adjusting projects. Effective public access to information and participation in the permit granting process should be expanded further to support this. It is also necessary to monitor compliance with agreements, as part of the effort to promote greater transparency on the possible impact of mining on the environment and human health.
Although the community relations plans stipulate a mining company’s social obligations, identification and verification of such commitments should be improved, as should monitoring of compliance with commitments. Over the period covered by the review, three successive institutions have been responsible for oversight: the Department of Mining (until 2007), OSINERGMIN (until 2010) and now OEFA. In 2014, OEFA adopted an environmental best practices register, to create a culture of corporate social responsibility, and established a national environmental complaints information service (SINADA).
In a bid to make mining taxation more transparent, Peru was the first country in Latin America to adopt the related standards of the Extractive Industries Transparency Initiative (EITI), setting an example to other major mining countries in the region. However, EITI environmental provisions should be incorporated more fully.
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Notes
← 1. Amounting to 50% of government revenues from the mining sector.
← 2. Percentage of the value of minerals extracted, increasing in line with sales volume. This revenue is allocated to local governments (80%), regional governments (15%) and universities (5%) to finance investment.
← 3. Allowing private mining companies to invest the equivalent of up to 50% of their annual corporation tax in building infrastructure in mining areas.
← 4. The Agency for Environmental Assessment and Enforcement (OEFA) is part of the Ministry of the Environment and was established by Supreme Decree No. 001-2010-MINAM.