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Mining and sustainable development: territorializing the mining industry

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Abstract

The mining industry today faces a new set of environmental, social, economic, and political challenges. Despite efforts deployed by companies to improve their sustainable practices, and the proliferation of international initiatives aiming at enhanced sector management governance, mining is again being challenged. Centralized management and contradictory legal and institutional arrangements governing public sector institutions—especially the relation between the mining and the environmental authorities—create tensions between central governments and subnational authorities, mandated to manage territories in the context of decentralization. Given the lack of alignment in dealing with mining’s environmental, socio-economic, and territorial impacts, central government’s top-down decisions are becoming difficult to enforce. The politic dimension of the environmental and social impact assessment processes, in the context of poor inter-institutional coordination, accentuated the lack of trust in the formal procedures of consultation and increased the number of conflicts around projects. Revenue sharing mechanisms introduced by central governments to reduce tensions mostly failed to achieve their objectives. On the contrary, they often created new sources of conflict. To overcome this challenge, mining legislation must be harmonized with other sectors and adapted to territorial management. This requires participatory approaches to define integrated legal and institutional frameworks to manage the territories’ natural resources in the context of coherent decentralization processes. It also calls for the aligned intervention of different levels of government using the Municipality as the relevant coordination space.

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Notes

  1. In this paper, “mining” refers to the production of higher value commodities that are traded on international markets. The extraction of lower value aggregates and industrial minerals is not considered.

  2. It should be noted that the analysis is not based on experiences from all mining sector reforms throughout the world. Rather, it is mainly concerned with examples from Latin America and Africa. The conclusions drawn are not applicable to countries like China or many parts of the former Soviet Union.

  3. For a detailed analysis of the privatization of Zambia Consolidated Copper Mines (ZCCM) see Craig (2001).

  4. The Washington Consensus included ten broad sets of policy recommendations: (i) Fiscal discipline, with reduction of fiscal deficits relative to GDP; (ii) Reorientation of public expenditure from subsidies towards broad-based provision of pro-growth, pro-poor services like primary education, primary health care, and investment in infrastructure; (iii) Tax reform, broadening the tax base and adopting moderate marginal tax rates; (iv) Positive real interest rates determined by the market; (v) Competitive exchange rates; (vi) Trade liberalization, with emphasis on elimination of quantitative restrictions; (vii) Liberalization of inward foreign direct investment; (viii) Privatization of State-Owned Enterprises; (ix) Deregulation (abolition of regulations that restrict competition, and prudential oversight of financial institutions); and (x) Legal protection of property rights. See Williams (2004).

  5. For a critical analysis of the Washington Consensus see Birdsall et al. (2010).

  6. Many Latin American countries ratified Convention 169 of the International Labor Organization (ILO) on Indigenous and Tribal Peoples in Independent Countries. See Bastida and Bustos (2017).

  7. For a description of the key elements of the World bank approach to mining after the Extractive Industries Review see Weber-Fahr (2002).

  8. For a discussion of the 1980–1990s World Bank mining sector reforms see ECA (2011).

  9. In 1992, the World Bank set out in its Strategy for African Mining the first systematic presentation of reforms considered as necessary to address Africa’s poor mining performance. Perceived mineral endowment, availability of infrastructure, political stability, investment policies, and institutional framework were considered key determinants for the ability to attract private investments. See World Bank (1992).

  10. A comprehensive description of the updated approach appears for the first time in World Bank (1996).

  11. McMahon (2010) describes the evolution of the World Bank approach to mining over the last 20 years.

  12. All data on Peru comes from MINEM- Ministerio de Energía y Minas (Peru), Boletín Estadístico Minero (n.d.).

  13. For a review of DRC’s recent economic performance see IMF (2015).

  14. The last two decades have also seen the development of a variety of reporting initiatives in social performance and sustainability such as the Global Reporting Initiative (GRI) which provides a set of standards for sustainability reporting with specific guidelines for different sectors. GRI’s “G4” mining and metals guidelines are one of the most influential reporting initiatives for the sectors and ICMM’s member companies are required to align their sustainability reports with them.

  15. For a description of IFC’s environmental and social performance standards see IFC (2012).

  16. See Acosta (2013).

  17. WEF’s Responsible Mineral Development Initiative (RMDI), and its Minerals Value Management framework, provide a useful tool to discuss issues of mineral-related linkages and cluster development, local procurement of goods and services, local employment, downstream uses of natural resources, resource-based industrialization, and shared use of mining infrastructure to catalyze development in other sectors of the economy. See WEF (2013).

  18. For a complete discussion on mineral-related linkages see ECA (2011).

  19. Acosta (2013) uses the term extractivism to refer to those activities which remove large quantities of natural resources that are not processed (or processed only to a limited degree), especially for export.

  20. For a detailed analysis of the political dimensions of EIAs see Li (2009) in which this passage is based.

  21. For a discussion of several case studies in Peru see Jaskoski (2014).

  22. While there are examples of projects that ‘fail to launch’ or are delayed due to strong community opposition, once a project is underway, it is often harder to shut it down. See Owen and Kemp (2012).

  23. SIAs are seldom seen as a management tool that can be used to promote social and economic development. See Harvey (2014).

  24. For an assessment of mining companies’ use of SIAs and their social investments see Dodd et al. (2015).

  25. Despite widespread claims by the industry that companies have adopted corporate social responsibility (CSR) as a ‘core competence’, Kemp and Owen (2013) argue that the industry has yet to incorporate the sustainable development function as part of ‘core business’ at the level of practice.

  26. That is the case of Indigenous Land Use Agreements (ILUAs) in Australia, and Impact Benefit Agreements (IBAs) in Canada, for example.

  27. As noted by Bebbington (2015), because of the tension between investment, legislated at the central level, and territorial management as practiced at the regional and municipal levels, the national–subnational relationship needs to be at the center of sustainable mining development.

  28. An interesting and innovative initiative is the Africa Mining Vision, adopted in February 2009 by the African Union Assembly of Heads of State and Government as a framework to promote mineral resource-based development on the entire continent, and the guidebook to help member States to adapt it at the national level into Country Mining Visions through a multi-stakeholder consultative process. See AMDC (2015).

  29. For a comprehensive analysis of conflict in several mining projects in Peru see De Echave et al. (2009).

  30. An interesting analysis of the political economy of decentralization applied to mining in Peru is provided by Eaton (2008).

  31. For a detailed description of the politics of mining in Peru see Panfichi (2011).

  32. For an analysis of social mobilization as a political force in Peru see Bebbington (2015).

  33. On a similar note, Nigeria’s 13% derivation principle, a formula which was designed to facilitate a fair sharing of oil wealth between the country’s producing and non-producing regions has led instead to new sources of tension and conflict. For a detailed analysis see Akinola and Ayo (2011).

  34. The term is used by Arellano-Yanguas (2011) in his analysis of the causes of mining conflicts in Peru.

  35. For a detailed description of alternatives to smooth transfers of extractive industries revenues to subnational governments see Jiménez and Ter-Minassian (2016).

  36. Maldonado and Ardanaz (2016) assessed the impact in the efficiency of subnational public spending of the allocation of Peru’s mining canon. They found that the net effect is positive only for municipalities in the top 1% of mining canon transfers distribution. For subnational governments with mining canon transfers close to the mean, the impact of the transfers on public spending efficiency appears to be negative. For most subnational governments, the increase in mining transfers seems to be related to larger levels of inefficiency. In a similar vein, Caselli and Michaels (2013) find that significantly higher revenues and spending in oil-rich municipalities in Brazil translated into little to no benefit to the wider population, suggesting corruption by municipal officials.

  37. See Loayza et al. (2013).

  38. This argument is developed in a recent article by Bastida and Bustos (2017).

  39. Article 37 of the Mining Law states that “no regional, sectional or local authority may establish areas of territory that are permanently or temporarily excluded from mining. This prohibition includes the territorial planning plans”.

  40. See Bastida and Bustos (2017).

  41. For a review of the implementation of Free, Prior, Informed Consent in Latin America see DPLf (2015).

  42. For a description of legal frameworks, practices and conflicts regarding the implementation of prior consultation in Latin America see GIZ (2013).

  43. For a discussion on using landscape planning to arbitrate disputes between different land use alternatives, and supporting the formulation of integrated solutions and informed decisions see WEF (2016).

  44. See Bebbington (2015).

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  1. Bethesda, USA

    Paulo De Sa

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  1. Paulo De Sa
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De Sa, P. Mining and sustainable development: territorializing the mining industry. Miner Econ 32, 131–143 (2019). https://doi.org/10.1007/s13563-018-0149-8

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