Q&A: Creating shared value for sustainable development in Peru’s extractive sector

[Editor’s Note: Over the past few weeks, R4D’s Leveraging Transparency to Reduce Corruption (LTRC) team reconnected with country experts and practitioners they have engaged with over the last couple of years to discuss their work together, and the challenges ahead. In a five-part series of interviews, they highlight the experiences and perspectives each of them have on strengthening extractives governance, transparency, and accountability. In this post, Miguel Inchaustegui shares his work with LTRC on improving collaborative learning and participation among Peru’s mining stakeholders and what lies ahead for the country’s mining sector.]

Miguel Inchaustegui is an expert in corporate affairs, strategic issues, and sustainable development in Peru’s extractive sector. With more than 13 years of experience in the private and public sectors, Miguel has been working to generate value and trust among mining stakeholders through an approach based on the shared value concept, which promotes more collaboration between mining companies, the community, and governments.

Miguel has worked at top-level transnational companies (such as Gold Fields, Lumina Copper Peru, Volcan Mining Company, and Barrick Gold Corp) and served as the Vice Minister of Energy and Mines (2018-2019) and Minister of Energy and Mines of Peru (2020). He has promoted and implemented shared value initiatives in various capacities to help reduce social conflicts in Peru’s mining communities and has been involved in drafting and implementing the country’s mining vision, also known as RIMAY.

We sat with Miguel to discuss the state of extractives governance in Peru, his work with LTRC on improving collaborative learning and participation among its stakeholders, and what lies ahead for the mining sector, especially concerning the energy transition.

You have rich experience in the private and public sectors and were deeply involved in the development and design of the RIMAY Mining Vision. What was different about this process, as opposed to what was done previously? How did you and others involved realize that the existing dialogue processes around mining governance needed to be changed?

Rimay is a Quechua word meaning “conversation” and “to articulate words in a conversation.” Facilitated by the Inter-American Development Bank (IDB), the RIMAY process was established in 2018 to solve challenges in the mining sector and establish a shared mining vision for Peru. It consisted of a series of roundtables with one part being leaders representing civil society and NGOs in Peru, the second part representing the mining companies and the third part representing public actors.

The RIMAY initiative was a good step to promote transparency in extractives governance in Peru because before, the mining stakeholders — the communities, local leaders, civil society groups, mining companies, and the national government — were on opposing sides. I remember when we reached out to each of these groups, none of them were eager to sit together and have a conversation because there was so little trust between them. But after six months of bi-monthly meetings, we were able to establish good dialogue, a mining vision, and good relationships among these actors.

The RIMAY process created a new dynamic by promoting step-by-step dialogue among mining stakeholders. It was then replicated at the regional level, first in the Moquegua region of Southern Peru, and most recently in the Cajamarca region (Northern Peru). This is significant. When stakeholders have the opportunity to talk in a mutually agreed space, it promotes transparency, ultimately yielding a better result.

From your perspective, what are the key challenges in improving mining governance in Peru? What are the responsibilities of the state vs. the private sector?

The political situation in Peru is very complicated because of the social conflicts that persist due to the very low levels of trust in governance and among stakeholders.

In the last fifteen years, the national government — of different successive parties — has found it challenging to resolve these social conflicts and implement actions that respond to the needs of all stakeholders involved, especially mining communities as well as to start new extractive initiatives and promote them correctly. This situation is not specific to Peru alone but prevalent in other countries as well, especially in Latin America.

When I was working in the corporate affairs of Gold Fields in 2014-2015, I was part of a delegation sent to meetings with the International Council of Mining of Metals, an organization promoting improved governance and sustainability efforts of mining companies in the sector. I tried to implement an initiative to generate trust and foster collaboration with other key stakeholders in the mining sector. However, many of them were not supportive or did not believe in this initiative.

Then, when I was Vice Minister of Energy and Mines, I fostered joint, regular meetings of mining companies and civil society organizations. Although there was resistance at first, they eventually agreed to dialogue. What was revealing is that the more we insisted on transparent mining governance and taking a shared value approach, the more resistance we got from some mining companies — but not from civil society.

Unfortunately, there are sector leaders who think that the only responsibility of mining companies should be to operate legally and pay their taxes, and that the responsibility to resolve the needs of the communities or gaps in development lies with the public sector (particularly, the national government). In my opinion, this is not a good approach.  Times have changed. It is important for any company, especially mining companies, to collaborate with the national government and the communities where they operate. The idea is not to replace the national government. The idea is to promote collaboration among stakeholders and ensure that taxes paid by the companies are used to resolve the needs of mining communities.

I think the RIMAY dialogue is a good example of how, when the government establishes a dialogue space supported by independent actors (in this case, the IDB), trust is built among all stakeholders, and everyone gets motivated to work together on a shared objective. 

What are the changes brought by the RIMAY process, and what other changes do you see going forward?

Implementing RIMAY was a bit challenging, but the outcome was worth it. In the beginning not everyone was on board when the initiative was first presented. Why? Because some people don’t think it’s a good idea to have a central vision for mining. They think others may use the process to attempt to propose new mining taxes or new laws imposing more control, or that it may generate more concerns from populations and ultimately have a negative effect on their mining investments.

It’s been four years since the national mining vision was charted (February 2019), and now the actors involved better understand the opportunities and better governance practices that the process highlighted. If this had been done earlier, the results would have been more advanced.

We need to continue promoting initiatives to improve transparency and governance in Peru. And for this reason, I believe that the Community of Learning initiative launched in Moquegua region by R4D this year is very important and necessary to generate more transparency in mining governance there. It is also important for the Cajamarca region, where a similar dialogue is happening, as well as in other areas of Peru where mining operations take place.

How does the community of learning in Moquegua advance extractives governance?

The Community of Learning is a good initiative because it is a participatory, collaborative space for exchange of learning and practice among mining stakeholders, and an independent actor is facilitating it – championed by the LTRC initiative of R4D. The fact that the Community of Learning is initiated by an international NGO promotes the independence needed for such an initiative. It has helped to build trust among stakeholders in the mining sector at the regional level and encouraged the evaluation and advancement of mining initiatives in the region.

Thanks to the success of this initiative in Moquegua, other mining regions, notably Cajamarca, have become interested. This regional uptake and trust building process is important given the history of social conflicts in Peru’s mining communities, because as I mentioned, the communities and the local leaders don’t trust the national authorities and the mining companies.

Do you see any opportunities for LTRC and other international entities to further support stakeholders for improved mining governance?

It is an important time for the governance agenda in Peru’s mining sector. There’s a portfolio of around $53 billion in mining projects around the country. 66% of these are copper projects, which is necessary and essential to the energy transition. Peru has one of the largest copper reserves in the world, which is important for renewable energy and the climate change agenda.

However, the communities and the local actors don’t believe in the national government and the mining companies, and it is difficult to implement mining projects without trust among stakeholders. Also, we have some leaders who are more focused on short-term wins and what will benefit them.

LTRC can help strengthen the fragile relationship between mining communities, mining companies, and the different levels of government. By using their conflict resolution tools and helping to address concerns on the use of mining revenue, LTRC can continue to build on the progress achieved so far.

Here are two contrasting stories showing why this contribution is important. The first story is that of the Tia Maria project in the Arequipa region and the Conga project in Cajamarca, both suspended because the communities and local authorities were concerned about water contamination. The second story is that of the Quellaveco mine, a project of Anglo American and Mitsubishi in the Moquegua region, which in 2012 was having problems with the community. A roundtable dialogue was initiated with the community and local authorities. This lasted for about one and a half years, and during this period, the actors were able to talk, listen more, and build trust among themselves. This eventually made the establishment of the Quellaveco mine possible. Why? Local authorities, CSOs, and the national government were able to agree on commitments around environmental issues, social issues, and technical issues.

These stories confirm the importance of initiatives such as LTRC’s Community of Learning that offer a space where the community, CSOs, and local leaders can come together with other mining actors to understand the benefits of the mining activities, talk about their concerns, and establish and collaborate on a social agreement together with the mining companies and the government.

I think it is important we establish good mining governance and dialogue among actors in Peru because the world needs metal for the energy transition. These projects can only be successfully implemented when good governance and trust between all actors are in place. And I believe LTRC is in a strategic position to establish an initiative focused on good dialogue such as the Community of Learning — not only in Moquegua but also in Cajamarca, Apurimac, and Cuzco regions where Peru also has copper mining projects.

I think there is an opportunity for LTRC and other international partners to work on the existing challenges in the mining sector. It is possible and necessary now to implement such an initiative to strengthen governance and increase transparency in these regions and across the country.

In what other ways do you think LTRC can add value in tackling issues of mining governance?

Besides the lack of trust among mining actors, another issue is the lack of transparency. We need transparency not only on mining projects but also on other economic activities. This applies not only to Peru but to other Latin American countries like Chile and Ecuador as well.

I think it is important to support the LTRC initiative and their work in the oil regions in Peru, especially now with the recent election of new local authorities. The new local authorities (elected in October 2022) will probably want to have dialogue and more initiatives to promote and build trust with the communities. That is a good opportunity where LTRC can have more impact in Peru.

I look forward to collaborating more with LTRC on managing these challenges in Peru and Latin America.

Promoting these dialogues is not easy, but it’s the right path to enhance and sustain transparency in Peru.

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