Date: Fri, 28 Mar 97 18:21:35 CST
From: rich@pencil.UTC.EDU (Rich Winkel)

/** covertaction: 65.0 **/
** Topic: Peru's New Conquistadors **
** Written 12:53 PM Mar 25, 1997 by caq in cdp:covertaction **

Peru's new conquistadors: Pizarro's toxic trail

By Pratap Chatterjee, in Covert Action Quarterly, 25 March, 1997

The path that shines for transnational corporations in Peru is lined with gold, both black and glittering yellow. But most Peruvians, like this woman in the mining town of Morococha, are driven into deeper poverty.

CAJAMARCA, Peru. Splashing across a stream high in the Andes of northern Peru, the horse bends to sip some water, but his rider an old bearded man wrapped in a deep red poncho tugs at the reins, jerking up the horse's head. As they forded the stream to reach the peak, some 4,000 meters above sea-level, the man took off his cream-colored cowboy hat and wiped his brow. They had ridden for four hours beginning at dawn when the dew was still frozen on the grass.

"The horse must not drink the water. It is poisoned by the waste over there," said the rider, pointing to the horizon where the unnaturally straight-edge line of a distant gray plateau rose out of the grassy hills. *1 The plateau is the work of man and machine at the largest gold mine in South America. It is waste left behind by heap-leaching: the process in which miners pour toxic cyanide over porous ore piled high on thin plastic sheets to extract the gold. Named Yanacocha (black lake), the mine is run by Newmont, a Denver, Colorado-based company, in a joint venture with the Peruvian company Buenaventura. Last year, Yanacocha produced 811,400 ounces of gold. The roughly $87 million in production cost was less than half that of most of the world's major gold mines. If all this gold had been sold in international markets at the 1996 average price of $390 an ounce, the company would have made $317 million, or a gross profit of $230 million. *2

The mine is changing the landscape not only of Cajamarca, but of the Peruvian economy. The vast amount of new capital spent to develop and open it in late 1993 contributed heavily to the country's dizzying 12.8 percent growth rate the following year. The surge was also fueled by President Alberto Fujimori's liberalization of the economy after he took dictatorial powers in his 1992 "self-coup" (see p. 23). In 1994, surpassing even China and Malaysia, Peru became the fastest growing economy on the planet. Its image was transformed: In the 1980s Peru was seen as a bankrupt nation trying to default on its debts, riddled with drug smugglers, and plagued by guerrillas. Suddenly, it became a darling of the international investment community. Although the crisis surrounding the December 17 takeover of the Japanese ambassador's residence by Tupac Amaru rebels has temporarily tarnished that image, most experts expect the interruption to be brief.


Some things, however have not changed, especially for the poor. Despite Peru's impressive showing in 1994 and a pretty strong performance in 1995,it ranked a dismal 91 on the 1996 United Nations Development Program Human Development Index, roughly halfway down the ladder of this highly regarded measure of social well-being. This standing was well behind Mexico (ranked 48), which suffered a financial collapse in 1995 that was just as spectacular as Peru's explosive growth the previous year, or Cuba (ranked 79) which endures an economy stunted by the US embargo. *3

The simple explanation is that little of Peru's new money from either the gold or the wave of privatizations has trickled down to local communities. Not even in Cajamarca has the wealth stayed put. In 1995, by Newmont's own admission, it put a mere $4 million into the local communities with the bulk spent on building roads to the mine site. *4 None of the villages surrounding the mine Combayo, Yanacancha Grande, or Negritos Altos has running water or sewage facilities, let alone telephones or regular electricity.5

Instead, the wealth from the mine has poured out of the country and back to the US, where Newmont declared a $94 million profit for 1996.6 What money stayed in Peru flowed south into central government coffers and into Lima's wealthy suburbs, where shopping malls and US chain stores from Domino's Pizza and Kentucky Fried Chicken to Mailboxes Etc. and Dunkin' Donuts dot the landscape.

It is this unequal distribution of the wealth and the environmental impact of these new ventures that are beginning to polarize Peruvians in a manner unprecedented since Pizarro. The Spanish conquistador arrived in the capital of this very province in 1532 to trick the King Atahualpa into an ambush that led to the collapse of the Incan empire. Ironically, one of Atahualpa's last acts was an attempt to buy off the Spanish with a room full of gold and two rooms of silver. The Spanish took him up on the offer but then murdered him and razed the city to the ground. *7 Today, the ransom room is the only surviving monument to the Inca presence.

Last year alone, Yanacocha mined roughly one and a half times as much gold as the Incas turned over to Pizarro more than 460 years before. *8 Like the Spanish before it, Yanacocha has considerable financial support from abroad. The money for the mining venture came from the International Finance Corp. (IFC), the private sector arm of the World Bank, *9 and from private banks including the Union Bank of Switzerland. Also like the Spanish before it, Newmont exported all the gold to Europe half to Britain and half to Switzerland. *10

But unlike Pizarro, the new conquistadors have not needed cannons or cavalry to rout angry natives or secure their investment. Instead, the natives, powerless and often bound to the cash economy, have few options. As for Newmont's financial security, World Bank's Multilateral Investment Guarantee Agency (MIGA) and the US government-run Overseas Private Investment Corp. (OPIC) have insured the mine for hundreds of millions of dollars against political risks such as nationalization.11


Across the Andes of northern Peru, where mountains plunge down into the spectacular emerald-green rainforests of the Amazon Basin, another region is tasting the bitter fruits of foreign capital. Deep in the core of this Mara$on region, an Aguaruna youth draws his machete silently and swiftly across the white bark of a tree. At once, a thick frothy liquid the color of blood trickles down the blade.

"Put this on a cut and it will heal quickly," he says as he catches the sap in a plastic bottle. Called "sangre de grado" or "sangre de drago" (translated loosely as "blood of the dragon"), the sap is found throughout the Andean countries today. *12 It is one of the possible "miracle" medicines that has drawn the covetous eye of drug companies such as Monsanto of St. Louis, Missouri.

Two years ago, Walter Lewis, a scientist from Washington University in St. Louis, was unceremoniously thrown out by the Aguaruna indigenous peoples when they discovered that he had a secret contract with Monsanto to ship potential medicines back to its US laboratories. *13 But last November, Lewis was back in the country after signing a new contract with a different group of Aguaruna that allows Monsanto to exploit their knowledge of the medical values of the forests. *14 Typically, drug companies takes advantage of thousands of years of medicinal knowledge without adequately compensating those who discovered and tested the drug in the rainforest.


If you flew south from the Mara$on over the Amazon to the Urabamba Valley in the center of the country, it would be easy to miss a small clearing close to the village of Cashiriari ("river of the moon" in the Machiguengan language) and a cluster of white tents perched near the jungle's edge. But if you watched long enough, you would see that this small brown scar is one of the most visited spots in the region. From a landing pad in the main clearing, helicopters take off and land with a regularity unknown as recently as six months ago.

In the center of the clearing sits a small orange pump. This is the first of four wells that Shell, the Anglo-Dutch multinational based in London and The Hague, plans to open this year as part of its plan to develop one of the biggest natural gas fields on the continent.15 Shell has already begun spending an estimated $3 billion. This field is known as Camisea because of its proximity to the eponymous tributary of the Urabamba River which originates near Cuzco, the ancient Inca capital on the eastern flank of the Andes. These rivers flow through a region that hosts the highest recorded number of animal, bird, plant, and insect species in the world, and forms one of the vital headwaters of the Amazon Basin.16

Shell's new project, which is expected to eventually dump as much as $6 billion into Peru's national treasury, has already sparked fears about the possible impact of the new visitors on the region's people and environment. If past projects on this scale are any guide, the Urabamba Valley can expect widespread pollution, deforestation, and cultural devastation. The scheme has already divided the indigenous Machiguenga people. Even more worrisome is the possible impact on the "uncontacted" Nahua and Kugapakori peoples who live a few hours away by boat. Just a decade ago, some Nahua died from the introduction of common diseases such as colds and whooping cough. These plagues were ugly reminders of the invasion of the Americas by conquistadors who wiped out millions, deliberately as well as inadvertently, with Old World diseases for which New World people had no immunity.17

Still further south, in Peru's Amazon forests near the border with Bolivia, Mobil has built some 60 helicopter pads in the Madre de Dios jungle. After signing a contract with the government in May 1996, the Houston-based multinational began exploring in the remote jungle area for oil and natural gas.

FENAMAD, the organization that represents the indigenous peoples of this region, says that last year, exploration crews from Grant Geophysical, a company contracted by Mobil, frightened people by flying their helicopters low over an uncontacted group, the Mashco-Piro. Other incidents include a violent clash where indigenous people fired arrows at an exploratory team. There are rumors that up to three workers have been killed in such battles reports firmly denied by Mobil. *18

The company, which first refused to negotiate with either local or international advocacy groups, gave in and met with Conservation International, a US environmental group, after a British television crew arrived to document the matter. Today, it is paying that environmental group to monitor its work. *19


New conquistadors have been avidly adding branches to Pizarro's poisoned trail now half a millennium long. Cajamarca, the Mara$on, Cashiriari, and Madre de Dios are but a few of the places where foreign interests have grown rich exporting the country's resources. There are now 240 sites being explored for gold,20 and some 20 foreign companies looking for oil and natural gas.21

In the 19th century, that trail widened into a well-traveled albeit slimy road. Two decades after Jos de San Mart!n led an army to liberate Peru from the Spanish in 1821, scientists in Britain discovered that guano (bird excrement) could fertilize the soils of Europe, exhausted by the intensive agriculture needed to feed the continent's rapidly growing population. Tons of guano, deposited by pelicans and seagulls after feeding on the rich fisheries in the coastal currents, had accumulated for centuries in an almost untouched state on Peru's rainless coastal desert and offshore islands.

In perhaps the first major foreign mining interest in Peru, Britain quickly began buying guano from the state and advancing loans guaranteed by future sales to Peru's small elite. "The uncommonly arrogant Lima oligarchy continued enriching itself and amassing symbols of its power in the palaces and Carrara (Italian marble) mausoleums which sprouted amid the sandy deserts," wrote Uruguayan writer Eduardo Galeano. The wealth of these guano deposits and the similar value of saltpeter (sodium nitrate) as fertilizer, however, attracted other foreign interests. In 1883, in the War of the Pacific, Chile seized what was once southern Peru and western Bolivia. *22


Soon minerals far outweighed bird droppings in economic importance, but that trade made the earlier exports seem pristine by comparison. The mining, oil, and gas operations the 20th century conquistadors favor tend to be grotesquely polluting especially without strict regulation and foreign firms operating in Peru were constrained by nothing but the limits of their capital and the extent of their greed.

The US began investing seriously in Peru after World War I, and by the end of World War II had displaced Britain as the major investor. From 1924 to 1950, US investment rose from $124 million to $295 million. By 1967, the figure had reached $605 million with more than half ($340 million) in mining, and another $38 million in oil. Over the same period, the amount of money that US companies were taking out of Peru was also steadily rising. Between 1950 and 1967, US firms repatriated $628 million, $23 million more than they had put into the country. *23

During that period, US mining interests expanded. On the other side of the Andes from the Madre de Dios is a mine operated by Southern Peru Copper Corp., controlled by US-based Asarco (Newmont was also a major shareholder in this mine until it recently sold its stake). Located in the southern coastal desert town of Ilo since 1960, Southern Peru's mines and smelter have contaminated the valleys of Tambo,Ensenada, and Mejia. Local crops such as alfalfa, maize, rice, sugar, and olives are fast disappearing because of the heavy air and water pollution. *24 The Cerro Verde mine in Arequipa, set up around the same time with help from a subsidiary of US-based Anaconda Mining, has caused similar environmental problems. *25

During this period, Mobil and Shell got involved, but despite major discoveries Mobil of the Aguatia gas reserve in 1962 and Shell of the Camisea field in the mid-1980s *26 neither corporation found it economical to begin immediate exploitation because of low prices and lack of government cooperation. Through the 1980s, they and other foreign investors were also deterred by the power of the Sendero Luminoso (Shining Path) guerrilla insurgency, which controlled substantial areas of the country. All this was changed by two events at the beginning of this decade. The first was the election of Fujimori, who promptly threw the country open to foreign investment; the second was the decimation of the Shining Path after the September 1992 capture of its leader, Abimael Guzm n.

Within four years of Fujimori taking power, some $6 billion in new money poured into Peru. A full third came from Telefonica, the Spanish government telephone company, which paid $2 billion to buy the recently privatized Peruvian telephone company. Then Cyprus Amax, a US company, purchased the Cerro Verde mine, while China's Shougang Corp. paid for the previously state-owned Hierro Peru iron ore mine. *27 Japan, seeking a base in Latin America, increased its investments and poured aid into the country. It also sparked public resentment that the country's other insurgency, the T#pac Amaru, or MRTA, tapped with its December seizure of hostages (see pp. 23-25).

Today, as in the time of Pizarro and the days of the British guano trade, mineral exports are still the main legal source of wealth in this country. (The multibillion dollar cocaine trade is the main illegal source of foreign currency.) In 1993, mineral exports (including oil) were worth $3.45 billion or 48 percent of total export revenues. *28 By 1995, the share of mineral exports in foreign income had risen to 51.3 percent. At the same time, 1995 imports rose to $7.7 billion, creating a $2.1 billion deficit, twice that of the previous year. With almost everything already sold off, privatization revenues have dropped to $638 million, a third of the 1994 figure.29


The two rising stars in the economic firmament of mineral extraction are Newmont and Shell. As the first major developer under Fujimori, Newmont paved the way for the hundreds of international corporations which have rushed in to take advantage of the corporate-friendly neoliberal reforms. Shell now leads the pack as the biggest of the new conquistadors. Neither company has enriched local communities; instead they have paid a pittance in compensation to farmers and funded token community programs.

As Newmont stepped up operations in Yanacocha, it started scooping up land. In November 1992, the mining giant bought up Nicholas Cruzado's 332 hectares. While raking in a $630,000 daily profit, it paid him 109 soles ($42) a hectare. Some farmers have managed to squeeze out a little more. Last August, Frederico Carrasco, a villager from Negritos Altos, got $540 a hectare for a 42-hectare plot. The problem is that his new wealth will soon evaporate if Carrasco can't reinvest it into farming the only way of life he knows. But the real value of land in his village has skyrocketed to more than $2,000 a hectare on the open market. Cruzado fared little better. He traded the money he got for a small 12-hectare plot. Today, to support a family of 13 and survive, he has had to sell off some 250 cows and pigs; his son Mario works on nearby farms for $1.40 a day.

"There is very little I can do," says Jorge Malca, a lawyer who works for the Catholic Church to help represent local people. "Yanacocha has bought legal title to the land. The farmers should have come to me before they sold their property." So far, only seven of the 50 plus farmers who have sold their land have asked for legal help to sue the company. Others seem to have little hope and less luck. David Cueva, a farmer in neighboring Yanacancha Grande, says that the company simply took 26 hectares of his 211-hectare property without paying. Despite living on top of a potential fortune in gold that is being extracted by foreign banks and mining companies, he is too poor even to buy cows.30


Profiteering on land is only one of the complaints farmers have leveled against Newmont. Dozens of communities scattered across the districts of Cajamarca, La Encanada, and Yanacancha fear that cyanide and other chemicals used in massive quantities to extract gold from ore have contaminated their water. Just three years ago, says Yanacancha Mayor Gil Paisic, villagers were catching thousands of trout in rivers that are now lifeless. "When the rains come the water runs off the tailings into the rivers making them turbid. If the horses and cows drink ... they get stomach problems and sometimes die," he says.

Hiriberto Ventura, a leader of Rondas Campesinos (Farmer Patrol) in Negritos Altos, says that company operations have had even more disastrous consequences. Last August, he charges, Rosa Castrej"n and four others died after drinking water from discarded plastic containers apparently used by the company to store cyanide.

Adding insult to injury, local mayors charge that Newmont employs almost no local residents. What few jobs it doles out pay $5.60 a day. Four mayors wrote to the company repeatedly asking for a meeting to discuss problems without results. *31

While unresponsive to locals, Nicholas Cotts, manager of environmental affairs for Minera Yanacocha, replied to questions for CAQ. The company recognizes "fair value prices" for all land transactions, he contended. "Approximately 95 percent of the land purchases conducted by Minera have been conducted under full knowledge and in direct negotiation with the land owner. In other cases, expropriation was used at the request of, and in complete cooperation with, the landowner." Nor is there a problem with pollution, he wrote. Yanacocha regularly monitors approximately 120 water sources and maintains a herd of 60 sheep and alpaca at the site which have never displayed any signs of heavy metal contamination. A 1994 investigation conducted by Newmont into deaths of local cattle showed that the animals had died of "liver fluke and related indigenous diseases." The company also maintains an "open door policy" for "any and all" requests from local people and interested groups to visit the site. In addition, Yanacocha says that it spent $3 million in 1995 to help the local community by building roads, schools, and providing free hot lunches to local children.32

Some remain skeptical. Ephrain Castillo, a Catholic priest who has been helping the local villagers with agricultural services, food, and legal help, doubts that the company will create a sustainable future for the local people. "People here are very poor. The mine promises to change things but the problem is that one naturally excludes the other," he says. *33


Nor is the situation much different for the Machiguenga peoples who had hunted and fished around the Urabamba river for 5,000 years before Shell arrived to drill for gas. Like Newmont, Shell promises to take great pains designing a model of environmental management and local participation. But on closer inspection, the company appears to be creating problems for the people in this village and surrounding communities without offering much by way of compensation or security against pollution.

Shell estimates that Camisea contains 11 trillion cubic feet of natural gas and 600 million barrels of natural gas liquids, enough fuel to meet a century of energy needs for the capital city of Lima, some 500 kilometers to the east. *34 With a fortune at stake, Shell is vigorously promoting itself as a good corporate neighbor and recently signed an agreement with locals for the use of two hectares of land (Shell admits that it has used more than agreed initially). The contract does not guarantee any compensation in case of accident, contamination of the local rivers, or destruction of the forests. Many locals have not been won over; they remember an oil drilling project Shell launched a decade ago. Then, according to human rights activists and environmentalists, the project divided local leadership, disrupted the economy and undermined the culture. They also charged that Shell contract workers abused local women *35 and brought diseases that killed a major part of another indigenous community of Nahua peoples who have lived in isolation for centuries.36

Today, to avoid such mistakes, Shell has hired a leading expert on the local communities, Peruvian anthropologist Alonso Zarzar. He has drawn up detailed guidelines for Shell and conducted workshops for the company's 360 local and expatriate contract workers to ensure that they do not violate local customs or bring in disruptive practices. Shell is trying to vaccinate all its workers and visitors to deter the importation of new diseases. It has also drawn up extensive plans to protect surrounding forests and, instead of building roads, is bringing in all supplies by air or boat. Staff who hunt or fish or simply wander outside the drilling area are to be fired immediately. *37

But Peruvian activists say that Shell has overlooked its impact on local peoples who have no idea what is happening at the drilling site or what the future operations might involve. Doris Balvin, an environmental lawyer from Ilo who spent the last decade tracking the impact of Asarco, is not convinced by the efforts. "If Shell really wanted to work with the communities," she noted, "why have they not provided them with enough information? The agreement was signed in a hurry and the local people had no chance to consult a lawyer." As for the compensation, she called it nothing more than a Christmas present.

Zarzar defends the company's behavior and his role. "It's my job to ensure that Shell provides appropriate benefits to the community," the anthropologist adds. "We have made sure that all the compensation will help the community as a whole and to make sure that we develop social capital for the long term." And while acknowledging that the community has a right to a lawyer, he says it is up to their representatives to get such help. "I have even attended the regional meetings of the Machiguenga organizations to tell them about our plans months before this agreement was signed," he points out.

Meanwhile, Shell's activities have exacerbated existing divisions among the Machiguenga. Factions have hardened and the "indigenous council" Shell created to unite locals behind the project quickly fell apart. "We wanted to work with the communities in devising a mediation system to settle any complaints, but so far, we have not succeeded," admits Murray Jones, the environmental chief for Shell's operations in Peru, who says he is willing to consider any alternatives.38


If copper, gold, and oil continue to make up half of Peru's revenues, the nation's future looks as bleak as that of Inca leader Atahualpa. When the resources are exhausted, the companies will move on and the communities will be left with little money and much environmental and cultural devastation.

Throughout the Americas and the rest of the world, similar resource extraction operations have devastated agriculture and health and left a legacy of disaster. Two years ago in Guyana, a massive cyanide spill from what was once the largest gold mine on the continent, destroyed the local river system. Like Yanacocha, the mine had political risk insurance from the World Bank. It covered the companies' financial losses but failed to compensate the people affected for the health, financial, and social consequences, some of which will endure for generations. *39

Newmont's US operations have paralleled those in Guyana. In 1990, its right to mine uranium on land near Spokane, Washington, was withdrawn after it ignored repeated government demands to clean up 15.5 billion liters of acidic water in pits that threatened to leak into the Columbia River. *40

And last year, Bopp van Dessel, Shell's former environment chief in Nigeria, exposed as an abject sham his employers' well-promoted corporate concern for the environment. He revealed that Shell executives had ignored his repeated warnings that operations in Ogoni territory were violating international standards and causing widespread pollution. Some 82 communities that make up Ogoniland have been affected. The pollution, including at least 111 oil spills between 1985 and 1993, has destroyed farmland and forced landowners to grow food in tiny plots. For its part, Shell claims that 77 of the Ogoni spills resulted from sabotage and says that rapid population growth has shrunk the people's farmland.*41

But for the flora, fauna, and peoples of Peru, it may not be too late. Although Newmont is well into commercial development, Shell, together with many of the other new companies in the country, have yet to begin full-scale exploitation of resources they hope to extract, and may withdraw yet if there is sufficient public pressure. There is a precedent for this just five years ago, environmentalists were able to kill a plan by Houston-based Texas Crude to drill in a nature preserve considered one of the last refuges of the nearly extinct Amazon manatee. Conservationists took the company to court here over the environmental impact and won. *42

The environmentalists may just have been lucky so far. Stories of the exploitation of the natural resources of Peru be they gold or guano have never ended happily. Certainly not in Cajamarca where the conquistadors, as well as the small miners who have followed their footsteps for the last four centuries, have always left destruction behind.

Atahualpa and the Inca army are good examples. In 1533 the Spanish massacred most of the unarmed Inca soldiers, converted their suspicious king to Christianity, found him guilty of having too many wives and then proceeded to kill him. Today most of Peru's indigenous peoples are being fleeced of their land while some have skeptically accepted the new religion of the market. But if they are found guilty of having too many resources, they may soon discover an environmental knife at their throats.


CAQ (CovertAction Quarterly) has won numerous awards for investigative journalism. In 1996 it swept "Project Censored" top 10 awards for investigative reporting, winning four awards including first place. CAQ is read around the world by investigative reporters, activists, scholars, intelligence buffs, news junkies, and anyone who wants to know the news and analysis behind the soundbites and headlines. Recommended by Noam Chomsky; targeted by the CIA.

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