In 1998, the historian James C. Scott published his classic book on successful and failed examples of state-building, Seeing Like a State. In it, he argued that top-down efforts that ignored local traditions and voices to impose order and modernity not only often fail, but can lead to authoritarian overreach and human suffering. In contrast, citing the examples of homogenization of last names in the UK and the establishment of standard measures of land ownership across Europe, Scott showed that building on local knowledge and tradition led to more effective state-building, democracy and social cohesion. Given the centrality of mining to the Peruvian economy, but also the country’s endemic state weakness and modern political fragmentation, the establishment of inclusive, broad discussions and trust between government, investors and citizens over resource extraction and commitments on matters of inclusion of communities in building and respecting local processes into a broader social contract can offer a similar path in Peru.
Past efforts at dialogue have often been fragmented, irregular and impermanent – often only being created or resurrected when social conflict erupts.
One of the principal obstacles is the capacity of the Peruvian state not only to engage in and support meaningful, consistent dialogue with affected communities and domestic and international investors, but also to monitor and follow up on guarantees made. A 2021 World Bank report on Peru’s mining sector concluded that ‘the main weaknesses of the [government’s] mining management framework are found in the incipient ‘Sector Dialogue’ … and the problematic ‘Intergovernmental Coordination’ that often results in inter-ministerial disputes on how mining regulation should be conducted’. This is particularly true of the interim government currently in office. As this paper highlights, past efforts at dialogue have often been fragmented, irregular and impermanent – often only being created or resurrected when social conflict erupts.
At the same time, difficulties in coordination among national-level ministries and between the national government and regional and local administrations have created institutional lacunae that have left communities and investors isolated. Similarly, administrative overstretch and turnover at all levels of government – including ministerial changes at national level – have complicated efforts to ensure that commitments agreed to early on are enforced and monitored, with lack of capacity at times leaving commitments unmet.
These gaps and inconsistencies in state capacity have also led to uneven investment conditions, poorly drafted community–company contracts and fractious relations between mining areas and regions of Peru.
The complex distribution of taxes and royalties accrued from mining is another obstacle. As multiple studies by think-tanks such as the Instituto de Estudios Peruanos and multilateral development banks such as the Inter-American Development Bank have argued, the tax and royalty revenue generated by mining often fails to align strategically with local communities’ needs. In part, this failure is due to inadequate local government capacity, the national government’s difficulties in ensuring accountability for the impact of those funds, and the fragmented coordination in the allocation and investment of resources. It also partly stems from a narrow understanding of what constitutes ‘communities affected by mining’, a term that should include not just the population immediately surrounding a mining site, but entire regions affected directly and indirectly by mining and the transport and processing of mining products.
A further challenge is the growth and persistence of both illegal mining and informal, artisanal mining. While the two practices are different, the line between the two is often blurred. Informal or artisanal mining, while often existing outside the law, is not always explicitly illegal. A 2014 report placed the number of workers employed in small-scale and artisanal mining at around 100,000. That number is thought to have increased during the COVID-19 pandemic, with one expert at a February 2024 Chatham House roundtable in Lima claiming that approximately 300,000 Peruvians are now directly employed in the sector. Attempts have been made to bring these informal enterprises under the law, but the process is complicated by the remoteness of their operations and the price – in terms of logistics, bureaucracy and revenue lost to taxation – of joining the formal economy.
Policies since 2002 to convert informal operations have failed to meet expectations, and deadlines intended to expedite formalization are often postponed. Consistent, long-term government programmes aimed at increasing the rate of conversion are therefore essential. Specifically, these programmes must aim to: reduce inconsistency in the application of state environment and labour regulations across both informal operations and legal, regulated enterprises; improve the environmental and legal conditions for mining across the country; provide opportunities for many small operations to achieve greater economy of scale and scope; and increase the Peruvian state’s tax base.
According to the International Crisis Group, illegal mining ‘has emerged as the most profitable illicit business, spreading fast across the country, particularly in the regions such as Puno, Arequipa, Ayacucho, Apurímac, Madre de Dios and La Libertad’. These operations often pay little regard to environmental or labour standards. A report by the Peruvian NGO Ojo Público notes that between 2021 and 2022 alone, Peru lost 95,750 hectares of forest in a single region, Madre de Dios – equivalent to 20 per cent of the total number of hectares lost in the same region from 1985 to 2017. Groups involved in illegal mining are often also engaged in other illicit activities such as extortion – with mining providing them with both a source of revenue and a way to launder the proceeds from other illegal enterprises. There are also credible reports that these activities and the groups engaged in them have found political representation at the national level to defend their interests.
