Cajamarca Bargain: Peruvian Gold Controversy Rages On

The Cajamarca Bargain between Atahualpa and Pizarro launched the epic flow of gold and silver to Spain, funding the Spanish Empire of Charles V and Phillip II for nearly a century. Such monumental treasure flow has continued to present times. One such gold mining operation, a massive one, is located in Yanacucha which is adjacent to Cajamarca. Operated to-day by the mining giant, Newmont Mining, an American corporation, it had produced 19 million ounces of gold between the mid-1990′s and 2005, worth more than $7 billion dollars in 2005, $2 billion dollars of investment, billions in tax payments to Peru and 2200 local jobs.

There is a fascinating story about how Newmont Mining secured the rights which can be viewed at PBS:

Peru: The Curse of Inca Gold

The PBS investigation in 2005 conveys a high stakes battle between Newmont and a French company for the development rights for the Yanacucha gold deposits. The gist of the report is that both Newmont and the french company paid bribes to then President Fujimori ( now in prison in Peru) through his intelligence chief (also in a Peruvian jail today) to a judge on the Peruvian Supreme Court to influence their decision in the case. The report also implicates the US and French Departments of State as an influence player in the dispute, which was ultimately resolved in Newmont’s favor.

Moving forward to 2007-2011, Newmont has been accused, properly by their own admission in 2010, of numerous unsafe mining practices that include the deadly release on cyanide (used in refining gold) and mercury (a byproduct of mining) that has endangered the people of the Cajamarca area. The Yanacucha mine is a massive, open-pit operation. It requires approximately 30 tons of soil to produce a single ounce of gold! As one might expect, violent protests, over water safety in particular, broke out in the area until Newmont corrected their processes, though deep-seated mistrust has become embedded in the Peruvian local population.

In 2007-2009, Newmont applied to expand the mining to the adjacent Cerro Quilish site, which is well within the concession granted by former President Alan Garcia. The Quechua-speaking natives claim the Cerro Quilish mountain is not only a critical source of clean water but also a sacred apu. The protests were so intense that Newmont abandoned the effort until early 2011, when Newmont pressed the government to allow development since Newmont has agreed to build fresh water reservoirs to supply high Andean clean water to all the local communities. This time, the protests were so violent that President Humala in July and December had to declare a state emergency in the area. Newmont suspended, yet again, development. In April, 2012, A report by an independent panel commissioned by the Peruvian government stated that the proposed mining safeguards for Cerro Quilish (also known as the Conga Project) met all Peruvian and International standards. In addition, Newmont agreed to increase the storage capacity of the proposed reservoirs. The first new reservoir was completed in May, 2013.

Peru faces a classic, weighty economic decision that is so common in resource rich, developing countries. Newmont projects that this mine will pay $680 million in royalties, $2 billion dollars of income tax to the central Peruvian government ($1billion of that will go directly to the Cajamarca region), up to 7,000 local jobs during construction and up to 1,600 permanent jobs.

(See for Newmont’s position)

Or, will the local population cling, perhaps justifiably, to their suspicions and distrust of foreigners based on recent transgressions of Newmont, their Inca traditional apu and the failed bargain of Atahualpa?

If one were cynical about this, one could say that Peru and the Cajamarca region population is holding out for more and Newmont will ultimately secure the right to proceed at some additional cost. A question remains, based on the PBS video above: What is Huamala’s government up to behind the scenes?



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