Natural Resources and Development Forum, Peru

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Natural Resources and Development Forum, Peru

• John Groom, ICMM
• Canning House
• Monday 21 July 2008

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Outline

• Mineral wealth can bring powerful benefits --- if
  well managed
• Government of Peru high priority to poverty
  reduction
• Partnerships -- companies, government, civil
  society and donors must work together to help
  fill governance gaps, particularly at local levels

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Synthesis report - An Overview

• Each study reviewed in depth the economic and
• social impact of one large mine
• Ghana Anglo-Gold Ashanti Obuasi Mine
• Tanzania Placer Dome North Mara
• Peru Compania Minera Antamina
• Chile Escondida
• Each study also examined the national economic
• impact and poverty/social impacts at national
  and local levels
• GDP growth (total and non-mineral), Exports, FDI,
  Employment, Government Revenue
• Poverty impacts - using household surveys and
  Millennium Development Goals (MDGs)
• Governance effects

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Significance of mining in the 4 countries
Hierarchy effect

• FDI Inflows to the mining sector are large in
  absolute terms, particularly in Chile and Peru
• Exports Mining makes large contributions to
  exports
• Government Revenues Mining is a large,
  sometimes the largest tax paying sectors
• GDP mining is a capital-intensive industry and
  is typically only 3-5 of the national total
• Employment mining is typically providing
  directly only 1-2 of total employment

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Macroeconomic outcomes Higher and more stable
GDP growth

• The substantial recovery in mining investment has
  contributed to improved growth performance
• If the counterfactual is the perpetuation of the
  pre-reform economic performance, then the
  post-mining period demonstrates an improved
  record in all cases
• This most evident is Ghana (since 1987) and
  Tanzania (since 1997), but a similar connection
  is found in Chile and Peru
• Non-mineral GDP growth has been positive in all
  four cases

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Social Development/Poverty Reduction Outcome
varies by country

• Reduction in poverty levels significant at both
  the national and the local level in Chile and
  Ghana
• In Chile, proportion of people living below the
  poverty line decreased from nearly 40 in 1990
  to about 20 in 2002. Largely driven by
  increasing employment opportunities
• In contrast in Peru, poverty appears not to have
  changed significantly. More than half the
  population continues to live in poverty, nearly a
  quarter lives in extreme poverty. More than 7
  million people have no access to drinking water,
  5 million have no access to sewage and around 7
  million have no access to electricity
• Conclusion A mining resurgence can be associated
  with significant poverty reduction. But this is
  by no means an automatic outcome

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There are powerful benefits mineral wealth can
bring if well managed ....
Already well known factors
Ensuring mineral wealth is a blessing not a curse
depends on
Focus of ICMM findings
E.g. how to manage gt1 billion new revenues flow
to mining regions in Peru?

• Sound national macro-economic management
• Revenue transparency
• Standards of national governance (to a degree)
• Responsible behaviour by companies
• Implementation of key international initiatives
  EITI, Voluntary Principles, Kimberley Process,
  etc

• Standards of governance at regional and local
  levels
• More collaboration and partnerships between
  governments, firms, donors NGOs to tackle key
  challenges, including
• Dispute resolution
• Social development
• Local inputs
• Regional development planning
• Poverty reduction
• Revenue management

E.g. collaboration supports successful local
mining cluster in Chile
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Also.. Note Some Implications of the way in which
the benefits and costs accrue

• Most of the big financial benefits of mining
  accrue nationally but the physical and human
  impacts are mostly very localized
• It follows that
• Minings Impact will depend a great deal on how
  well or badly the (large) Central Government
  Revenues are used
• Minings employment Impact will be mainly at the
  local level
• Procurement arrangements of companies can have
  significant additional indirect effects on total
  employment (large variations in impact across the
  four cases were found).
• Government of Peru accepted findings of the ICMM
  report and volunteered to work with companies and
  others to enhance minings contribution to
  poverty reduction.

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The Way Forward into Phase 3 Lessons from four
countries

• Collaborative action is needed to capture the
  full potential benefits of mineral wealth and
  achieve enhanced and lasting outcomes
• This requires partnership approaches between
  companies, governments, social representatives
  (including NGOs) and donor agencies
• Individual partners have specific
  responsibilities, comparative advantages, and
  contributions to make but collaboration is
  fundamental
• PHASE 3 of the Resource Endowment Initiative is
  seeking to encourage uptake of the Phase 2
  recommendations and enhance the contribution of
  mining to social and economic development

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SNMPE Natural Resources and Development Forum
and Partnerships Fair...
OUTCOMES
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ICMM
ICMM 6th Floor North 35/38 Portman Square
London W1H 6LR United Kingdom Telephone 44
(0) 20 7467 5070 Fax [phone] Email
info_at_icmm.com
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Peru GDP Growth 1950-2003