Sharing the Benefits of Mining Projects in Peru

Community leaders are trained to discuss priorities with local governments. © IFC

In the remote municipality of Coyllurqui, Peru, citizens understand what it’s like to go without—without basic services, without access to resources that might help them advance. In this Quechua-speaking region, rural poverty exceeds 50 percent, and illiteracy and malnutrition rates are more than double the national average. These are conditions that generations have come to expect.

But Coyllurqui’s 8,550 residents are now facing an unprecedented challenge: a surge in public revenue. Such a dramatic shift in fortune is possible because mining projects being developed in the region will soon begin generating royalties.

For local officials in Coyllurqui, the responsibility to build for a future that has never before been possible—with new local schools, roads, and hospitals—was daunting. After all, leaders lacked experience managing large budgets or supervising the construction of major public works. They had never had access to the institutional knowledge, tools, and training available to those from more affluent areas.

After training, citizens can participate in the
decision-making process. © IFC

The Revenue Management Program, implemented by IFC in collaboration with the Government of Canada, is providing that access. The program strengthens the capacity of community leaders to help governments manage mining-generated resources in a responsive and accountable way.

More than 100 local leaders from Coyllurqui and surrounding areas have engaged in rigorous training and preparation. “It was the first time we have been trained and enabled to participate in the municipal decision-making process,” says Miguelina Arriola, a local organizer.

These participants put their knowledge to work almost immediately, hosting an open and informed dialogue with authorities to discuss their main needs and medium-term investment priorities. As a result, authorities and local leaders have recently reached full agreement on the use of resources for the next three years. Selected projects include water and sanitation, education, and irrigation.


Long-lasting impact

IFC’s approach in Peru—and with similar projects in Colombia—centers on the principle of “fair sharing” of the costs and benefits of natural resource development across society. We believe this is important to ensuring that projects and their positive impacts are durable and resilient to change over time. Investors, governments, communities, and other stakeholders all share a strong interest in a reasonable distribution of benefits.

The “fair sharing” mindset has emerged out of lessons learned from decades of work in the field. Now, most private-sector investors realize that projects that are good for the host country and communities, and whose benefits are perceived to be distributed reasonably, are less likely to face disruption, renegotiation, or even expropriation. This rewards investors over the long run for the capital and skills deployed and the risks taken.

As developers better understand this connection and experience stakeholder challenges and even social conflict, their interest in a dialogue to create shared benefits and value is growing.

This change in perspective has served Coyllurqui well. As it transitions from poverty to greater self-sufficiency, its leaders are better positioned to make decisions that will have a lasting, positive benefit on its people, institutions, and infrastructure. It may be an unprecedented challenge, but it’s a welcome one.

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Published in August 2016


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