US embassy cable - 05LIMA2540

C O N F I D E N T I A L SECTION 01 OF 02 LIMA 002540 
 
SIPDIS 
 
E.O. 12958: DECL: 06/03/2015 
TAGS: PGOV, PINS, EAGR, ETRD, CASC, PE 
SUBJECT: TINTAYA MINE: FROM CONCILIATION TO CONFLICT 
 
REF: A. LIMA 2335 
 
     B. LIMA 2115 
 
Classified By: A/DCM Alexander Margulies, Reason 1.4 (d) 
 
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Summary: 
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1.  (U) Problems remain at BHP Billiton's Tintaya Mine in the 
wake of the May 23-25 agricultural strike (Ref A). 
Protesters temporarily occupied part of the mine's facilities 
on 5/24, demanding that the company revise a September 2003, 
Oxfam America-brokered agreement with local communities 
whereby the mining company would provide financial support 
for development projects (Ref B).  Since the takeover, BHP 
has closed its mine and refuses to negotiate until the 
security of its facility is guaranteed.  The company is 
compelled to take a hard line, not only to protect its own 
interests, but also the integrity of its entire negotiating 
process with the local community.  End Summary. 
 
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Mine Situation Still Unresolved 
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2.  (U) Though the May 23 agricultural strike was largely 
wrapped up in two days, two areas of contention remain.  Rice 
farmers in San Martin Province are still not satisfied with 
concessions offered by the GOP and accepted by their 
counterparts in other provinces (Septel).  And the situation 
at the Tintaya Mine remains unresolved.  Protesters no longer 
threaten the facility, but BHP Billiton is refusing to reopen 
their copper mine in the area until, the company says, full 
security conditions can be re-established. 
 
3.  (U) Tintaya Mine in Espinar Province in Puno was the site 
of a promising experiment in mining company-NGO-local 
community cooperation.  In September 2003, BHP agreed to 
establish a permanent dialogue roundtable with the 
Municipality of nearby Espinar and several local community 
groups to resolve conflicts and promote development.  Oxfam 
America brokered the accord which also created a fund for 
investing USD 1.5 million/year of the company's mining 
profits into local development projects (Ref B). 
 
4.  (U) On 5/24, coincident with an agricultural strike that 
hit ten regions, 2000 protesters led by two local groups -- 
the United Front of the Peasants of Espinar (FUCAE) and the 
United Front for the Defense of Espinar Province (FUDIE) -- 
temporarily occupied part of the mine's facilities (Ref A). 
Both FUCAE and FUDIE had originally participated in the 
initial talks that led to the September 2003 agreement 
between BHP and Espinar representatives, but neither signed 
the final accord.  Both groups represent peasants from towns 
outside the circle of the five communities that are Tintaya 
Mine's immediate neighbors.  The protesters demanded that BHP 
invest in more community projects in their specific areas and 
raise its offered support from USD 1.5 million/year to USD 20 
million/year.  The protesters temporarily called off their 
action and met with a high level GOP commission led by Vice 
Minister for Energy and Mines Felipe Quea on 6/2.  They have 
since rejected that Commission as too low ranking and have 
demanded that the GOP send either President Toledo or 
Ministerial-level interlocutors to resolve the conflict. 
(Note: Speaking to local radio on 6/6, Vice Minister of 
Energy and Mines Romulo Mucho rejected the idea that the GOP 
would send higher level persons in to negotiate under present 
conditions.  Mucho said that the GOP would not "give in to 
blackmail" and that all that remained was for the GOP "to 
apply the law" in the Tintaya case.  End Note.)  If the GOP 
does not respond, the protesters have threatened to renew 
demonstrations on 6/7.  In response to the partial takeover 
of the mine, BHP has closed its facility and has not 
announced when it will reopen. 
 
5.  (C) Oxfam Mining expert Javier Aroca, who helped 
negotiate the agreement between BHP Billiton and the local 
communities, described the leaders of the protests as 
"socialists" and left-wing radicals who were interested in 
undermining the APRA Mayor of Espinar, who is a signatory to 
the original agreement.  Speaking to Poloff on 6/6, Aroca 
characterized the protesters' demand for USD 20 million per 
year as an outrageously high offer designed to start a 
bargaining process.  He did not think that BHP should offer 
more aid under present conditions.  Aroca did hope, however, 
that BHP would consider making its grant process more 
flexible and establishing an environmental oversight group, 
something called for in the original agreement but not yet 
implemented. 
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BHP Will NOT/NOT Negotiate 
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5.  (C) A BHP Official told Emboff on 6/2 that the company 
had no/no interest in dialogue with the protesters and that 
the Tintaya's mine would remain closed for the foreseeable 
future.  Company officials feel that they have already worked 
out a dialogue process with the local community and that 
there is no need to open talks with destructive outsiders who 
hope to elbow their way to the negotiating table with 
outrageous demands. 
 
6.  (C) While the mine is shut, the official said, BHP plans 
to continue paying its 1,500 workers for the next 2-3 months, 
whether the mine reopens or not.  The company hopes to 
encourage the workers to demonstrate in favor of the mine's 
re-opening.  In fact, the company, this official said, is in 
a good enough financial position that it does not need to 
reopen the mine.  Surplus stocks are ample and can be sold at 
a profit.  In addition, with the mine closed insurance costs 
drop.  The mine's strategy of mobilizing its supporters may 
be working.  According to press reports, 500 workers and 
local students who study mining engineering marched through 
Espinar on 6/5 to express publicly their desire to see the 
Tintaya Mine put back in operation. 
 
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Comment: 
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7.  (C) BHP Billiton has little choice but to play hard ball. 
 The company has proven to be flexible and generous in its 
willingness to negotiate with local communities, and as a 
result has been seen as the most community-friendly mining 
company in Peru.  Its agreement with local communities has 
been held up as a model for other mining companies to follow. 
 The company has many local allies, including municipal 
authorities, its work force, and local organizations party to 
the original agreement, who oppose the protesters and support 
the existing accord. 
STRUBLE