Critical Sociology

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Social Struggle and the Political Economy of Natural Resource Extraction in Peru
Jan Lust, Mr.
Crit Sociol published online 28 January 2014
DOI: 10.1177/0896920513501354

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CRS0010.1177/0896920513501354LustCritical SociologyLust

Article

Critical Sociology

Social Struggle and the Political

1­–16
© The Author(s) 2014
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DOI: 10.1177/0896920513501354
Extraction in Peru crs.sagepub.com

Jan Lust
Autonomous University of Zacatecas, Mexico

Abstract
In the period 2002–12, the Peruvian economy almost doubled in size. This growth was mainly the
consequence of the commodity boom in these years. The importance of the mining sector for the
Peruvian Treasury is politically translated in the immense difficulties Peruvian Governments have
in closing the doors to transnational mining corporations. The government of Ollanta Humala
actually inserted the fiscal contribution of extractive industries into the cornerstone of its social
policies. In Peru, a growing body of literature is emerging regarding mining issues. However, it
lacks an analysis of the development of the mining sector in relation to the general workings of
capitalism. In this article we analyze the development of mining in Peru from a critical political
economy perspective as this enables us to identify the forces that are advancing the capitalist
development process as well as the forces of resistance to this development.

Keywords
Peru, Humala, political economy, commodities boom, natural resource extraction, transnational
mining corporations, imperialism, neoliberalism

Introduction
The first decade of the 21st century unveiled a major offensive of the Peruvian indigenous com-
munities against the interests of transnational mining capital. This struggle, however, cannot sim-
ply be regarded as a continuation of the battles of the 1980s and 1990s. The actual Peruvian political
and social context is completely different. In recent years, the fight of the indigenous communities
has literally become bloody. The capitalist state has shed its smiling demeanor and is showing its
real character.
The presidency of Alberto Fujimori in the 1990s and the spread of neoliberal ideology in the
society impacted heavily upon Peruvian social movements. By following the dictates of the

Corresponding author:
Jan Lust, Doctoral Program in Development Studies at the Autonomous University of Zacatecas (UAZ), Avenida
Preparatoria s/n. Col. Hidráulica, Zacatecas, Zac. C.P. 98065, Mexico.
Email: janlust@ymail.com

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2 Critical Sociology 

Washington Consensus and implementing state terror, the government was able to repress what-
ever remained of the anti-capitalist popular resistance. The government’s ‘policies’ in this regard
were combined with an ideological attack on any ideas concerning state intervention in the econ-
omy and regulation of foreign investment and of the ‘private sector’ (code for transnational capital-
ist enterprises).
Since the return of ‘democracy’ in 2001, social struggles have shown an upward trend. The fight
against transnational extractive capital, initiated in the middle of the first decade of the new millen-
nium, created a political platform for ‘new’ social actors: the indigenous communities. It seems
that the class struggle has ‘returned’ to the countryside.
In 2011, the nationalist and former Army captain Ollanta Humala was elected President of Peru.
Humala was supported by a variety of progressive and left-wing organizations, groups and intel-
lectuals. He was also able to count on a large popular base in the countryside. There is no question
that his election gave rise to many expectations. It was thought that the new government would put
an end to neoliberal policies and that it would direct the use of water for agricultural and consumer
purposes over mining. As was written in Humala’s election program, La gran transformación (The
Great Transformation), the state would recuperate (not renationalize) its natural resources, such as
water and land, forests and biodiversity, gas and minerals. Their exploitation by foreign economic
minorities could not continue (Gana Peru, 2010: 8). Once in power, however, Humala was soon to
reverse his program and embrace extractive capital as the panacea for Peruvian development.
The Peruvian Government actually inserted the fiscal contribution of extractive industries into
the cornerstone of its social policies. Even before his inauguration as President, Humala succeeded
in closing a deal with the mining corporations. Their contribution to the Treasury was to increase
considerably and thanks to these funds a number of social and infrastructural projects would be
financed.
The first 23 months of the Humala government were characterized by the struggle of the indig-
enous communities to protect their livelihoods and habitats against the invasion of extractive capi-
tal (‘resource-seeking’ foreign direct investments). During these months, 19 people died as a
consequence of the repression of the social protest movements generated by the operations of
extractive (particularly mining) capital. The regime viewed and continues to view mining, gas and
petroleum extraction as essential for the development of the country.
Over the last 10 years we have witnessed a growing body of literature in Peru on issues related
to extractive industries, particularly mining. In general it points to the introduction of new environ-
mental regulations and the strengthening of the Ministry of Environmental Affairs in a project
ostensibly to democratize decision-making regarding mining, gas and petroleum concessions.
Although the information and ideas provided in the literature are interesting and abundant, there is
a lack of in-depth analysis of the development of the mining sector in Peru. The workings of the
capitalist system and the actual policies of the government in political practice differ substantively
from the governmental rhetoric and public discourse.
In this article we elaborate on the political economy of mining in Peru. We consider it essential
to analyze the economics and politics of natural resource extraction (mining, to be precise) from a
critical political economy perspective. This enables us to identify both the forces of capitalist
development and the forces of resistance to this development. Furthermore it might enable us to
bring into focus proposals that structurally address economic and social issues related to the
destructive operations of extractive capital in the form of open pit and other types of mining.
The article is organized as follows. After having explained the form taken by capitalist develop-
ment in Peru, the context of changes in the global economy and the resulting primary commodities
boom, we present relevant data and facts regarding the upswing in the demand for, and production
of, minerals and metals. Subsequently, we delve into the mining interests of imperialism in Peru.

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Lust 3

We present data regarding the profitability of mining investments and examine the ‘nature’ of cor-
porate social responsibility programs. In the last two parts of our argument we show how the
Peruvian Governments of Fujimori (1990–2000), Toledo (2001–6) and Garcia (2006–11) favored
mining capital and we review the policies of the current Peruvian Government under Ollanta
Humala.

The Nature of Capitalism

It is undoubtedly the case that the current primary commodities boom reinforces the importance of
Peru’s role as exporter of natural resources in primary commodity form, and consolidates as well
as intensifies the historical role it has played in the international division of labor. Development
strategies based on the extraction of natural resources deepen the dependency of governments and
economies of resource-rich countries that are on the periphery of the system of global capital and
the imperial state at its center (Veltmeyer and Petras, forthcoming). These strategies are actually
conditioned and determined by the demand of China and other ‘emerging markets’ for energy,
minerals and agrofood products – primary commodities – and the response to this demand by
global extractive capital in the search for private profit and a capital accumulation process.
The prices of primary commodities are determined both by international markets and by the
machinations of transnational capital in the imperialist countries. As such, Latin America’s ‘devel-
opment’ is constrained by the visible hand of economic shocks, fluctuations and speculative capital
flows. The consulting company PricewaterhouseCoopers (2007: 50) indicated in its 2007 review
of global trends in the mining industry that hedge funds have ‘a significant impact on the mining
industry given their involvement in metal trading activities and the volatility this creates in com-
modity prices’.
The commodities boom and more specifically the commodification of nature (the global com-
mons of land, water and natural resources) have been intrinsically related to the dynamics of a capi-
tal accumulation process. The tendency of capital to expand and to produce surplus value on an
extended scale is embodied in its search to extend its reach into the pores of peripheral societies. In
fact, what currently is being denominated as globalization results from the continuous hunt of capi-
tal for higher rates of profit, facilitated by the neoliberal prescription of abolishing capital controls,
the opening of markets and favorable tax regimes for capital (Veltmeyer and Petras, forthcoming).
Even the trading of greenhouse gas emissions through a so-called carbon market is not a surprising
development, being as it is the logical consequence of the laws that govern capitalist development.
The necessity of capital to expand increases the demand placed upon nature. According to Löwy
(2004), capitalism has two general contradictions. The first, as pointed out by Marx, is between the
productive forces and the relations of production. In other words, the development and the sociali-
zation of the productive forces contradict the private ownership of the means of production. The
second contradiction, however, is between the productive forces and the conditions of production
(including the workforce, urban space and nature). As capital is ‘obliged’ to develop its productive
forces in order to be able to compete in the world market, by increasing productivity by all means,
it tends to destroy the conditions for its own reproduction. For instance, by increasing the exploita-
tion of the workforce, capital might ‘kill’ labor and by using more and more energy it contributes
to the depletion of the very natural reserves that it desperately needs.

The Commodities Boom in Peru

In the last 20 years, South America, and in particular Peru, has been the object of large investments
by transnational mining capital. According to the World Bank (2005: 20), in the period 1990–97

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4 Critical Sociology 

Table 1.  Peruvian export structure 2000–2012.

2000 2004 2008 2012
Traditional products Fishing 13.7% 8.6% 5.8% 5%
  Agriculture 3.6% 2.5% 2.2% 2.4%
  Mining 46.3% 55.6% 58.4% 56.8%
  Petroleum and 5.5% 5% 8.6% 10.9%
derivatives
Non-traditional products 29.4% 27.2% 24.4% 24.2%
Others 1.5% 1% 0.6% 0.8%

Source: Peruvian Central Bank. Available (consulted 1 April 2013) at: http://www.bcrp.gob.pe/estadisticas/cuadros-
anuales-historicos.html

worldwide investment in mining exploration and exploitation grew by 90 percent. However, for
Latin America this percentage was 400 percent and for Peru 2000 percent. In 2010, of all Latin-
American countries, Peru received the most investments in mining exploration and was third
worldwide, after Canada and Australia (Coronel and Panfichi, 2011: 395).1
In 2006, Peru occupied second place in Latin America in the production of copper (fifth in the
world) and first in the production of gold and zinc, occupying respectively the sixth and third
places in the world (De Echave, 2008: 323). The Department of Foreign Affairs and International
Trade Canada (2012: 5) indicated that in 2012 Peru led the worldwide production of silver; it was
second in the production of zinc and copper, third for tin and fourth for lead, mercury and molyb-
denum. According to the pro-business magazine Mining Journal (2012), currently Peru is the larg-
est producer of gold, zinc, tin and lead in Latin America.
Over the last two decades, the significance of mining for the Peruvian economy has increased
considerably. The National Institute for Statistics and Informatics (Instituto Nacional de Estadisticas
e Informatica, INEI) informs that since 1991 the participation of the mining sector in the gross
domestic product (GDP) has shown a rising trend (INEI, 2010). While in 1991 in current prices it
contributed 4.1 percent to GDP, in 2010 this grew to 10.6 percent. The extractive sector as a whole,
composed of the subsectors mining, hydrocarbon, agriculture, forestry and fishing, in 2010 con-
tributed 16.8 percent to GDP. Based on GDP growth figures the effect of mining on GDP is very
clear. According to the International Monetary Fund (2013: 5), over the period 2002−12 the
Peruvian economy almost doubled in size and real GDP grew at an average annual rate of 6.34
percent (the highest 10-year average growth in Peru’s history).
The exports of the mining sector in the period 1990 to 2004 increased by 490 percent; from
US$1.4b to US$6.9b (De Echave, 2008: 79; Glave and Kuramoto, 2007: 139). In 2010, the value
of mining exports rose to US$21.7b (Alayza and Gudynas, 2012: 199). According to De Echave
(2012: 66), while these accounted for 48 percent of total exports in 1995, in the years 2006–9 they
contributed to around 60 percent.
Table 1 shows the development of mining exports in relation to the exports of other products in
the period 2000–2012. Rounding differences means that the percentages do not add up to 100 per-
cent or exceed 100 percent.
The real significance of the mining sector for Peru, apart from its positive impact on the stock
of international reserves, can be found in its fiscal contribution. Governmental income, or fiscal
revenues, from the activities of extractive industries is of crucial importance to the government in
order to finance its social and infrastructural programs. Governmental social programs help to cre-
ate political stability by weakening the objective conditions for protest to spread and deepen against
the presence and activities of extractive industries. For instance, social benefits that arise from tax

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Lust 5

Table 2.  Basic social expenditures at current prices: 2002–2011.

Year Basic social expenditures in millions US$
2002 1291.9
2003 1361.3
2004 6881.7
2005 5775.6
2006 4274.8
2007 2603.1
2008 2882.1
2009 4062.1
2010 4718.4
2011 5236.7

Source: The National Institute for Statistics and Informatics. Available (consulted April 20 2013) at: http://www.inei.gob.
pe/Sisd/index.asp.
Note: The expenditures in millions of US dollars are based on the yearly average exchange rate published by the
Peruvian Central Bank. Available (consulted 20 April 2013) at: http://www.bcrp.gob.pe/estadisticas/cuadros-anuales-
historicos.html

income generated by mining operations (scholarships for students or pensions for retired people,
for example) help to maintain the popular balance in favor of mining capital. Infrastructural pro-
jects might enable extractive capital to broaden the scope of resource exploitation and to create the
proper conditions to efficiently transport the resources to the countries of the ‘North’. The con-
struction and the improvement of roads, airports and waterways help this capital to cover a larger
territory for its activities and facilitate getting the minerals quickly out of the country.
In this context it is interesting to note that Peruvian Governments, starting with the one led by
Alejandro Toledo, stepped up their basic social expenditures as the mining boom started to unfold.
In Table 2 we present the basic social expenditures for the period 2002–11, composed of expendi-
tures on education, culture, protection and social care, and health and sanitation. The figures show
considerable volatility and the trend is uneven, with a rise between 2004–5 followed by a sharp
decline between 2006–8 and recovery.

The Interests of Imperialism in Peru

The baseline of the politics of imperialism has not changed in the contemporary period of the new
extractivism.2 The interests of transnational extractive capital are politically and militarily defended
by US and Canadian imperialism, under the flag of multilateral institutions such as the World
Bank, the International Monetary Fund, the World Trade Organization, the United Nations and the
North Atlantic Treaty Organization. In this context it is interesting to refer to two US Embassy
cables published by Wikileaks and the 2008 visit of the then Canadian Minister of International
Cooperation, Bev Oda, to Peru.
In August 2005, in the light of resurging protests in the department of Cajamarca against trans-
national mining corporations, the US Embassy (2005a) increased its efforts to improve coordina-
tion with the embassies of Canada, Great Britain, Australia, Switzerland and South Africa, as well
as with major foreign mining investors, in order to try to reduce the ‘anti-mining violence’. A cable
dated 19 August (US Embassy, 2005b) describes a meeting hosted by the Ambassadors of the USA
and Canada with representatives of the mining corporations Antamina, Newmont, Minera
Quellaveco, Barrick and BHP Billiton. The Swiss Chargé d’Affaires, the Australian Consul

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6 Critical Sociology 

General, and the British Embassy Trade and Investment official also participated. The meeting’s
objective was ‘to review their operating difficulties in Peru and to coordinate efforts to improve the
investment climate’. In the meeting, US Ambassador James Curtis Struble

encouraged the companies to bring to his and the other Ambassadors attention NGO-funded groups or
individuals that advocate violence. He requested, for example, public statements, newspaper reports or
radio spots that encourage violence. Armed with this information, Ambassadors would be able to confront
any NGOs for their respective countries about such dangerous activities.

In the cable it was furthermore announced that representatives of the USA, Canada, UK, Australia,
Switzerland and South Africa would meet with the Peruvian Government, the Catholic Church and
political party leaders ‘to tackle the lawlessness issue in mining communities’.
In January 2008, as was reported by the Canadian magazine Embassy, the former Canadian
Minister of International Cooperation, Bev Oda, visited Peru to talk with the Peruvian Minister of
Energy and Mining, Canadian and Peruvian mining corporations and with certain non-governmental
organizations (NGOs) about reforms in the mining sector. However, this was not a visit to bring
ideas to enhance the well-being of all those affected by transnational extractive capital but, rather,
to assure and defend Canadian imperial interests.3 At present, according to a special report of the
Mining Journal in February 2013, of the 308 Canadian mining companies exploring in South
America, 92 have a presence in Peru. Peru leads Argentina which has 70 companies, followed by
Chile with 55, Brazil 50, Colombia 35, and the other eight South American countries with a com-
bined total lower than 20 (Mining Journal, 2013).
The World Bank plays a key role in the strategy of imperialism to appropriate Latin America’s
natural resources. In the 1990s, it stimulated changes in the legal framework – products of a broader
set of neoliberal policies (Bebbington et al., 2008: 6) – that favored most of all the transnational
corporations; it supported the privatization of state-owned mining companies; and it helped to
finance important mining projects. In the period 1993–2001, the mining sector was one of the main
investment objects of the Bank (De Echave, 2009: 1–2). Through the International Finance
Corporation (IFC) it has a direct stake in certain mining companies, such as Yanacocha in Peru. In
2011, IFC held an extractive industry portfolio of around US$2.1b: 75 percent in oil and gas and
25 percent in mining. The interests of the corporation expand to 40 countries, of which those in
Peru – valued at US$387m – occupy a second place (World Bank, 2011: 19).

Profits and Corporate Social Responsibility

In the first decade of the 21st century, investment in mining has been extremely profitable for com-
panies in Peru. According to the financial statements of the five most important mining corpora-
tions, in the period 2005–9 they obtained profits of around US$20b (Alayza and Gudynas, 2012:
198). The Ministry of Energy and Mining (2012: 16–17) stated that in the years 2009 and 2010 the
net profits of the main mining corporations increased from approximately US$4.2b to US$5.7b
(Ministerio de Energía y Minas, 2012). The consortium of NGOs, Grupo Propuesta Ciudadana
(2012: 16), calculated that the profits of the mining corporations listed at the Lima stock market
augmented from US$5.7b in 2008 to around US$10b in 2011.4
Mining in Peru is principally a foreign business. Production of the main minerals that determine
the dynamics of the sector, copper and gold, is in the hands of just a few companies. For example,
80 percent of the production of copper is concentrated in the mining units Antamina (owned by
BHP Billiton, Xstrata, Teck and Mitsubishi Corporation), Southern (a majority-owned, indirect
subsidiary of Grupo Mexico S.A.B.) and Cerro Verde (property of Freeport-McMoRan Copper &

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Lust 7

Gold Inc., SMM Cerro Verde Netherlands B.V.), a subsidiary of Sumitomo Metal Mining Company
Ltd., Compañia de Minas Buenaventura S.A.A.). Similarly, Minera Yanacocha and Barrick control
about 60 percent of domestic gold production (Grupo Propuesta Ciudadana, 2012: 10).
The major players in the Peruvian mining business in 2012 (data for June 2012), measured by
investments, were China, USA, Canada, Switzerland and Australia. Investments by Peruvian com-
panies only made up 2.5 percent of total mining investments (Department of Foreign Affairs and
International Trade Canada, 2012: 9). It is interesting to note that, while before 1990 there was not
one Canadian company operating in Peru, in 1997, 70 percent of total Canadian investments were
directed towards mining and 50 percent of all new mining projects in development were controlled
by Canadian companies (De Echave, 2005, 2008).
The mining business has not been unaffected by the protests of the indigenous communities. As
a response, the corporations started to develop ‘social responsibility programs’ to try to remove
some objective conditions for the struggle of the communities and to undermine its popular base.
For instance, the Peruvian National Mining, Petroleum and Gas Association (Sociedad Nacional de
Minería, Petroleo y Energia, SNMP) created a Committee for Social Affairs in order to deal with
conflicts which were imminent and as a response to the formation – in 1999 – of the indigenous
organization National Confederation of Peruvian Communities Affected by Mining (Confederación
Nacional de Comunidades del Perú Afectadas por la Minería, CONACAMI) (De Echave, 2009: 8).
The emphasis on the social responsibility of corporations obscures the real issues at stake. It
forms part of all those mechanisms that are designed to install and legitimize the extractivist model
(Svampa, 2009: 48), to disarticulate the conflicts that the presence and activities of extractive capi-
tal cause, and ‘to close down public debate’ (Bebbington, 2010: 8–9). As a matter of fact, private
corporations are more willing to introduce, voluntarily, self-regulative mechanisms like codes of
conduct, instead of breaking the legal framework introduced in the 1990s.
The main objective of the social responsibility programs of transnational mining capital is to
break the unity of the communities or unity between the communities within a particular region.
By benefiting certain groups within a community or dividing different communities within the area
of operations of the company through avoiding negotiations with the official representatives of the
communities, mining capital is able to advance its interests by converting some of their opponents
into defenders of the mine. In addition, as Bebbington (2010: 9) argues, social responsibility initia-
tives can also have the effect of ‘narrow[ing] debates on development options’ by financing foun-
dations that ‘contribute’ to local development. Examples are the Associación los Andes de
Cajamarca (Yanacocha mine) and the Fundación Ancash (Antamina).
Notwithstanding possible positive effects of social responsibility programs, these programs
coexist with intimidation against activists and other persons who may obstruct mining activities,
the bribing of the leaders of the resistance (Bebbington, 2009a: 133, 140–141; 2010: 8) and by try-
ing to sabotage local referenda. The activities of paramilitary organizations such as Forza in the
department of Cajamarca, the center of current resistance against transnational mining capital, are
a case in point.

Peruvian Governmental Policies and Mining Capital

Over the last decade, the significance of mining for Peru has increased considerably. The Peruvian
Government not only defends its own interests (tax income), but also those of transnational mining
capital. In 2004, the narrow cooperation between the Peruvian police and Forza was documented
in the case of the mining company Majaz in the department of Piura (Kamphuis, 2012: 543–547).
Three years later, cooperation agreements were signed between the mining companies Barrick
Misquilchilca S.A., Poderoso S.A., Minera Aurífera Retamas S.A., Minera Yanacocha S.R.L. and

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8 Critical Sociology 

the Peruvian national police (Policia Nacional del Perú, 2013). Agreements also exist between
mining companies and the Peruvian army, for instance between the Sixth Jungle Brigade of the
Army and the mining company Afrodita (No a la Mina, 2012).
The increased demand for Peruvian minerals and the rise in the prices of commodities were the
prime reasons for investment growth in the last decade. However, the Peruvian ‘(under)develop-
ment’ model installed in the 1990s was a prerequisite for this to happen. This model, backed by the
Washington Consensus, could be considered as a pure form of neoliberalism designed primarily to
serve the imperialist agenda.
The changes in the legal and regulatory framework, which were introduced at the beginning of
the 1990s, established the objective conditions for the growth of mining investments in Peru. The
complete package of economic and anti-regulation measures taken by the first Fujimori govern-
ment (1990–92) included legal stability agreements with transnational corporations. And also such
preferential legal mechanisms as accelerated depreciation; possibilities to deduct investments in
public infrastructure from tax payments due; the exoneration of tax payments until the initial
investment was recuperated or until income generated was used to do reinvestments to increase
production more than 10 percent; and the deduction of the costs for research and mining explora-
tion tax payments (Campodónico Sánchez, 1999: 17–24). For the next 10 to 15 years, it became
prohibited to change any laws that protected the interests of transnational extractive capital. Legal
regulations needed to safeguard the natural environment were subjugated to economic policies and
were to be implemented by a non-defined office within the Ministry of Energy and Mining (Pinto,
2009: 93–95). Mining concessions were being granted for an indefinite period and capital only had
to pay US$2 a year to maintain their rights (Campodónico Sánchez, 1999: 57, note 10). The General
Mining Law of 1992 made the forced reallocation or displacement of communities and populations
for mining purposes possible (Dominguez, 2010: 24). The Land Law of 1995, on the other hand,
liberalized the ‘land market’ (Castillo, 2009: 72). In 2013, the Ministry of Energy and Mining,
instead of the Ministry of Environmental Affairs, is the determining authority regarding the
approval of environmental impact studies. In addition, to maintain their concession, the companies
are currently obliged to pay only US$3 per hectare a year.
This neoliberal attack on the state by the state itself has been accompanied by the privatization
of state-owned companies and the selling of state participation in private companies. In the period
1992–2000, more than 200 mining operations were privatized (Bury, 2011: 90). According to
Campodónico (1999: 25, 27), practically all state-owned mining companies were transferred into
private foreign hands, predominantly to US, Chinese, Canadian and Australian capital (Ruiz, 2002:
70). As a consequence, whereas in 1990 private companies produced 55 percent of all minerals in
Peru, in 1999 this had increased to 95 percent (Bury, 2011: 90).
The governments that succeeded Fujimori continued with the neoliberal policies. President
Alejandro Toledo reinserted the country within the ‘family of democratic nations’. As a matter of
fact, it was his government that formally established the Peruvian Agency to Promote Private
Investments (Proinversión) that was assigned the task to systematically sell off the wealth and
assets of the nation. In addition, his regime enacted a Supreme Decree Law to reduce the import
duties paid on capital goods from 20 percent to 7 percent and 12 percent on capital goods to be used
in exploration and production of certain minerals, such as oil and gas in the Amazon region. And it
enacted a law that eliminated the 18 percent sales tax on capital goods and services for mineral
exploration (Gurmendi, 2012: 17.3).
The government of Alan Garcia (2006–11) tried to speed up the process to parcel up indigenous
land (and consequently the water rights) and to provide individual ownership titles of this land. In
this way, it would be easier to sell it to (transnational) mining capital with the backing of interna-
tional multilateral institutions, as it would appear less to have been ‘robbed’ from the communities.

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Lust 9

Table 3.  Contribution of the mining sector in total income tax revenue.

Year in millions of US$ % participation in total income tax

2005 657,6 30
2006 1761 44
2007 2781,4 50.9
2008 2304,6 39.3
2009 1002,1 23.4
2010 1985,2 32.1
2011 2823,4 33.3
2012 2445,6 25.7

Source: Cooperacción (2013).

Note. The contribution in millions of US$ is based on the yearly average exchange rate published by the Central Bank of
Peru. Available (consulted 20 April 2013) at: http://www.bcrp.gob.pe/estadisticas/cuadros-anuales-historicos.html

While in 2004 13 percent of indigenous communities’ territory was given in concession to gas and
petroleum companies, by the end of 2008 this had been increased to 70 percent (Bebbington,
2009b: 14; Pinto, 2009: 86). In 2010, more than 70 percent of the Amazon region was parceled out
(Huertas, 2011: 217) and approximately 16 percent of the national territory was given in conces-
sion (De Echave, 2012: 72; Urteaga, 2011: 40).

Ollanta Humala: Neoliberalism with State Intervention

The regime of Ollanta Humala can be regarded as a government attempting to overcome the fail-
ures of the neoliberal experiences of the last two decades by increasing its social expenditures. The
development model introduced by the regime could be defined as a socially inclusive form of
neoliberalism.
Extractive industries are of major importance to the Peruvian state. This sector is essential for
the financing of social programs and infrastructural projects. In addition, these funds help provide
overall economic stability by increasing the country’s exports and international reserves. In the
period 2007–10, extractive industries contributed about 22 percent of total tax revenue. The par-
ticipation of these industries in the corporate tax revenue was approximately 42 percent (Francke
and Sotelo, 2012: 109). In 2011, the mining sector contributed 17 percent of all domestic taxes and
accounted for 33 percent of total income tax collection (Grupo Propuesta Ciudadana, 2012: 18–
19). In Table 3 below, we show the contribution of the mining sector to total income tax revenue in
the period 2005–12.
The first Humala cabinet (June-December 2011) tried to build a cooperative relationship
between the indigenous communities and the corporations dedicated to extractive activities, in
order to differentiate from the previous government of Alan Garcia. Just before the beginning of
his presidency, Humala closed a deal with the mining corporations that, supposedly, permitted the
government to obtain more resources. These funds would enable it to finance the proposed ‘great
transformation’ of Peruvian society.
The agreement with the corporations was acclaimed by broad sectors of society, as Humala had
been able to ‘extract’ more taxes than his predecessor Alan García, who had been able to persuade
the corporations to donate only a small portion of their super profits to a private fund, one in large
part managed by the corporations themselves. The Garcia ‘mining tax’ determined that those cor-
porations that signed a ‘tax contract’ with the government had to pay, after income tax and before
dividend payments, 2 percent of their profits (De Echave, 2008: 373–374).

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10 Critical Sociology 

The Humala agreement envisions a new tax regime for mining corporations that should struc-
turally increase the state budget. However, because these tax payments can be considered as costs,
they are deductible from the taxes the corporations pay on income generated by their economic
activities. Therefore, although the government claims the new tax regime would yearly collect
approximately US$1b, total tax revenues will not increase with the same figure.5
It can be imagined that the mining corporations did not sign a treaty without obtaining some
political benefits for themselves, apart from getting the new tax payments considered as costs.6 The
government of Alan Garcia had also struck a deal with mining capital, and as a consequence it tried
to break the communities by making use of legislative powers that were granted to implement the
Free Trade Agreement with the USA. About 100 Decree Laws were proposed by the Garcia admin-
istration. These included laws that had as an objective to increase possibilities to parcel up the land
of the communities; to appropriate supposedly uncultivated land (tierras eriazadas), mainly
belonging to the communities; to break the democratic decision-making in the communities; and
to broaden the legal possibilities for the police to repress social protests against these laws. The
resistance of the indigenous population in the Amazon region helped to revoke these laws, but
ended sadly in the Bagua massacre of 2010.
The global mining corporations have applauded the tax agreements and the continuation of poli-
cies that favor capital. In its 2011–12 survey of mining corporations, the right-wing Canadian
based Fraser Institute evaluated the policies of the regime and the country’s attractiveness for min-
ing investments as being most favorable (Fraser Institute, 2012). In addition, according to Forbes
Magazine, in 2012, just as in the previous year, Peru was considered the second best country for
business in Latin America.
It cannot be overlooked that the Peruvian Government has augmented the budget of ministries
that favor the well-being of the population. In the period 2010-12, the part of the budget of the
public sector reserved for organisms of national government was increased by 10 percent.7 The
apportionment for the Ministry of Education in this budget was raised from 6.3 to 7.4 percent and
the Ministry of Health saw an increase from 4.7 to 6.3 percent.8 However, as might be expected due
to the government’s preference for transnational extractive capital, the Ministry of Agriculture saw
its apportionment of the budget decreased (from 1.5% to 1%). Regarding the Ministry of
Environmental Affairs, things are worse: it maintained its weight at 0.1 percent. In other words, the
ministry that should, somehow, control the mining corporations, does not really have a budget and
is not able to properly perform its functions. For ministries such as the Ministry of Defense and the
Ministry of Internal Affairs, which are responsible for the ‘repressive function of the state’, their
weights in the budget also changed. While Defense saw this diminished from 9.3 to 8.3 percent,
Interior increased from 7.9 to 8.1 percent. Although we cannot conclude from these figures that the
Humala government has a fixed preference for the repressive apparatus, it is clear that it has not
changed the status quo within the budget. Defense is more highly prioritized than education, health
and the environment.9
The operations of the mining companies have increased the gross departmental income of the
regions. According to figures of the Business Research Center of Perucámaras, an organization
dedicated to improving the workings of the Chambers of Commerce in the country, in the period
2005–13 the central government transferred around US$4b to the regions. These financial trans-
fers, called canon minero, are derived from the income tax paid by the mining corporations.
According to Law 27506 enacted in 2001, 50 percent of the income tax generated by these compa-
nies is relegated to the regions with mining activities.10
The surge in the gross departmental income of the regions does not provide evidence, however,
that the quality of life has been improved (Bebbington et al., 2011: 225) or that poverty has been
reduced significantly (Alayza, 2009: 164). In addition, because mining complexes are often shaped

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Lust 11

Table 4.  Peruvian poverty rates according to department: 2004–2010.

2004 2005 2006 2007 2008 2009 2010

Áncash 53.3 48.4 42 42.6 38.4 31.5 29
Arequipa 34.2 24.9 26.2 23.8 19.5 21 19.6
Cajamarca 66.2 68.8 63.8 64.5 53.4 56 49.1
Ica 27.3 23.9 23.8 15.1 17.3 13.7 11.6
Junín 49.6 56 49.9 43 38.9 34.3 32.5
La Libertad 48.5 43 46.5 37.3 36.7 38.9 32.6
Lima 32.2 32.9 25.1 19.4 18.3 15.3 13.5
Moquegua 38.7 30.3 27.3 25.8 30.2 19.3 15.7
Pasco 65.7 72.9 71.2 63.4 64.3 55.4 43.6
Puno 78.3 75.2 76.3 67.2 62.8 60.8 56
Tacna 24.7 30.3 19.8 20.4 16.5 17.5 14

Source: National Institute for Statistics and Informatics. Available (consulted 20 April 2013) at: http://www.inei.gob.pe/
Sisd/index.asp

like enclave economies with relative few links to local suppliers, it can be argued that multiplier
effects in the local and regional economy are weak (Bebbington et al., 2008: 6). Although in the
2001–9 period the number of persons working in the mining sector grew considerably, as a per-
centage of the total economically active population (EAP), the contribution of the mining sector
was low. While in 2001 it employed 0.5 percent of total EAP, in 2009 it grew to 1 percent (INEI,
2010: 80).
In Table 4 we present data regarding the development of the poverty rates in what are denomi-
nated Peruvian mining departments. We have selected these departments on the basis of the defini-
tion used by the former Vice-Minister of Environmental Affairs, José De Echave (2008: 344). His
strict classification of a mining region is one in which its mining GDP contributes 4 percent or
more to the national mining GDP. Using this definition, in 2006 the following departments would
be considered mining departments: Ancash, Arequipa, Cajamarca, Ica, Junín, La Libertad, Lima,
Moquega, Pasco, Puno and Tacna.
It is evident that poverty was reduced in the period 2004–10. However, it cannot be demon-
strated that the mining sector is directly responsible for this development. At best, we might estab-
lish these links indirectly. As a matter of fact, the downward trend of poverty rates shows similarities
with the upward trend of the basic social expenditures and the contribution of the mining sector to
total income tax revenue. The canon minero has certainly contributed to declining poverty rates in
the mining districts. In addition, the definition of poverty has been and still is subject to political
manipulation. For example, during the second government of Alan Garcia the methodology used
to determine the poverty rates was changed.

Conclusion
The operations of mining capital are crucial for Peruvian economic growth. Tax income derived
from mining activities helps to finance the country’s social and infrastructural necessities. The
importance of the mining sector for the Peruvian Treasury politically translates into immense dif-
ficulties for a government wishing to close any doors to transnational mining capital. This makes
it understandable why successive governments are so eager to strike deals with these globally
functioning companies. On the other hand, when we compare the net profits of the principal mining
corporations to the corporate tax payments, it can be understood why this capital is very willing to

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12 Critical Sociology 

‘cooperate’ with Peruvian Governments. Their huge net profits are not in the least comparable to
the taxes they pay.
A radical change in the development model based on the extraction of natural resources within
the capitalist system of production and distribution should be considered to be impossible.
Capitalism is naturally not able to solve its own contradictions and it is very unlikely that the capi-
talist state will put brakes on the laws and logic that govern capitalist development. In addition, it
merits further discussion whether the imperial countries would sit idly by and do nothing if their
interests were to be adversely affected by the restrictions set by the nations on the periphery.
In the particular case of Peru, radical modifications of the development model seem to be espe-
cially complicated as the Peruvian bourgeoisie is absolutely hegemonic in society and its integra-
tion into the international ruling class is overt. In the last two decades, it was not only capable of
implementing a large-scale privatization process, but it was also the major political force behind
the free trade agreements that Peru signed with a variety of countries. Currently, it is the principal
defender of the interests of transnational extractive capital, having succeeded in avoiding any
placements of extra tax on the super profits of the mining corporations. It is encouraging infrastruc-
tural projects that facilitate the activities of extractive capital, considered by Gudynas (2011: 399)
to be state-subsidies just like tax exonerations. In addition, the neoliberal policies that were intro-
duced in the 1990s have dehumanized Peruvian society as human relations tend to be reduced to
mere expressions of consumerism.
Another important factor that makes any radical change in Peru difficult is the weakness of the
major left-wing organizations and political parties. At present, they have surrendered completely to the
project of the Peruvian bourgeoisie; i.e. instead of fighting or arguing against the model or questioning
its foundations, they propose changes within the model and, as such, consider it possible to humanize
the capitalist system. While in the 1990s their space of action was diminished by state repression and
they lost ground due to the popularity of the implemented neoliberal measures, now, amidst ongoing
social protests, it seems they have fallen to ground zero. As a matter of fact, in September 2012 some
major left-wing organizations and progressive intellectuals that were forced out of government in
December 2011 decided to unite in preparation for the regional elections in 2014 and the presidential
elections in 2016. In June 2013, this platform of the reformist left was broadened to incorporate the
political parties of the President of the Cajamarca region and the Mayor of Lima.
The dominance of neoliberal ideology in Peruvian society and the absolute hegemony of the
Peruvian bourgeoisie, together with the complicity of the reformist left in the political arena and
the state, make the implementation of an alternative development strategy limited by restrictions
set by capital almost impossible. Peru’s dependency on the export of raw materials, principally
extracted by foreign capital, condemns it to designate any structural transformation of the economy
as a project for the indeterminable future.
In the current political and economic Peruvian context, the epic struggle of the indigenous com-
munities in Peru against transnational extractive capital assumes an extraordinary importance. Its
capacity to bring the internal contradictions of capitalism into the open forges the kind of class
consciousness needed to bring the Peruvian population onto the side of transformative struggle,
both for substantive change and for the possible supersession or overthrow of capitalism that may
lie ahead. This struggle points to the social transformation of Peruvian society, defined as ‘an irre-
versible change of the production relations, which can be deconstructed in relations of ownership,
functionality and exploitation; who produces what, for whom and how’ (Carchedi, 1987: 95). This
revolutionary change can make a more efficient, socially conscious and ecologically responsible
use of the means of production possible. And by doing so this historic struggle may enable collec-
tive society to change the course of the means of production that Löwy and González (2011) argue
are ‘technical carriers of the dynamic of ecological devastation’.

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Lust 13

Funding
This research received no specific grant from any funding agency in the public, commercial, or not-for-profit
sectors.

Notes
  1. Coronel and Panfichi refer for these data to a 2010 document of the Metals Economics Group, titled
World Exploration Trends: A special report from Metals Economics Group for the PDAC International
Convention 2010.
  2. Veltmeyer (2013: 82) describes the new extractivism as ‘a reliance on foreign direct investment in the
natural resource sector and the export of natural resources in primary commodity form’.
  3. See No a la Mina (2011) La minería en Perú. ¿el nuevo territorio de Canadá? Available (consulted 19
November 2012) at: http://www.noalamina.org/mineria-latinoamerica/mineria-peru/la-mineria-en-peru-
iel-nuevo-territorio-de-canada. It is interesting to note that when in March 2013 Peru was promoting
investments in the mining sector in Canada, it also signed a military cooperation agreement. Likewise,
the Peruvian Minister of Defense had meetings with the Canadian Commercial Corporation (CCC) to
materialize corporation support in matters of defense and security. According to its website, CCC facili-
tates trade on behalf of Canadian industry.
  4. The profits in US$ are based on the yearly average exchange rate published by the Central Bank of
Peru. Available (consulted 20 April 20 2013) at: http://www.bcrp.gob.pe/estadisticas/cuadros-anuales-
historicos.html
  5. In its first year, the ‘Humala Law’ succeeded in collecting more than US$1b (El Comercio, 2013a)
  6. In April 2013, the government announced that it had changed its definition of indigenous communities.
Quechua-speaking communities are no longer considered indigenous. As a consequence of the changed
definition, these communities do not need to be consulted, as is established by the International Labour
Organisation’s Convention 169, when the government decides to put their land into concession.
  7. The budget of the public sector is divided into: national government, regional governments and local
governments.
  8. It was not possible to compare the data of the Ministry for Women and Social Development for the period
2010–12, as this ministry was completely restructured in 2012. This state organism was central in the
development and implementation of Peru’s social programs. Nowadays, this ministry is called Ministry
for Women and Vulnerable Populations. Programs related to social development are concentrated in
the newly created Ministry of Social Inclusion. Although it could be argued that by adding the budgets
of both ministries we would have ‘recreated’ the budget of the former Ministry for Women and Social
Development, this is, however, not possible because many functions within the new ministries are not
comparable with those of the former ministry.
  9. The presented data are based on statistics provided by the Ministry of Economics and Finance. These can
be found at the following websites (all consulted 23 November 2012). For 2010: http://www.mef.gob.pe/
contenidos/presu_publ/sectr_publ/presu_2010/anexos/Anexo7.pdf
For 2011: http://www.mef.gob.pe/contenidos/presu_publ/sectr_publ/presu_2011/anexos/Anexo7.pdf
For 2012: http://www.mef.gob.pe/contenidos/presu_publ/sectr_publ/presu_2012/Anexos/Anexo4.pdf
10. See El Comercio (2013b) The US$4b are calculated on the basis of the average exchange rate for the
period January-March 2013, published by the Central Bank of Peru. Available (consulted 20 April 2013)
at: http://www.bcrp.gob.pe/estadisticas/cuadros-anuales-historicos.html

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