Bruce Neil, CEO of The Doe Run Company, recently encouraged the international business community to work alongside local communities and government to provide positive change in developing nations. His remarks were made to the 2006 Latin American Cities Conference on Peru Investment and Development with Social Equity and particularly apposite for Peru, where Doe Run Peru operates one of the world’s only multi-metal processing facilities.
He commented that it is “exciting to see how our modern industry is improving people’s lives in very real and dramatic ways.The mining sector in Peru is no exception.In 2005, mining exports were $9.7 billion, which represents 56% of Peru’s total exports.Doe Run Peru represents 4% of the country’s total $17 billion exports – making it one of the largest exporters in the country.
“The mining sector as a whole is growing at a rate faster than the Peruvian economy and current planned, extractive natural resource projects represent $10 billion of new investment. Many of these projects are directed by companies such as Newmont, Phelps Dodge, Anglo American, Xstrata, Cia Vale do Rio Doce, and Rio Tinto, to name a few.While numbers are impressive, they pale beside the life-changing opportunities that the energy and mining sector brings to Peruvians.
“Therefore, what I am most passionate about for Peru is our response to this question: How do we leverage the opportunities and promise of Peru’s rich natural resources to bring positive change to the people of Peru? The short answer is ‘caminemos juntos’ – walking together.
“Together, we can bring positive change to our families and neighbours through sustainable business investment.
“But how will we get there and what will be our course? I ask you to consider the example of La Oroya, high in the Andes.
“La Oroya is a multi-metal processing facility built in 1922. The facility was owned and operated by Cerro de Pasco Copper and later by Centromin.In 1997, The Doe Run Company purchased the 75-year-old facility and inherited decades of unchecked environmental liabilities.
“I came here in 2003 to lead Doe Run Peru. I was struck by the extraordinary diversity of the geography, climate and people. As I travelled for the first time toward La Oroya, I found the long climb both challenging and enlightening. The road was steep, the turns were tight, and we were pleased when we reached Ticlio.
“Along the way, I saw small, adobe homes clinging to steep inclines. These modest homes located in inhospitable areas were full of determined families persevering toward a brighter future.
“Looking back, I now realize the drive was an indication of what the company has, and continues to experience. Bringing sustainable, profitable development to La Oroya required a steep climb. Our progress along the way was filled with challenges in infrastructure, safety, and community health.We inherited an environmental remediation and facilities improvement agreement, known as the PAMA.
“The original PAMA programme did not adequately consider the health impacts of the smelter. Further, the original cost estimate to complete projects identified in the PAMA was underestimated. We now expect to spend double the original amount of $107 million and prioritize health-related matters.
“But even more than the facility challenges, I was most struck by the needs of the community. Shortages of clean water, scant vegetation, dilapidated schools and few training opportunities translated into a cycle of poverty. It became evident that to reach our destination of creating sustainable business, it would become necessary to also address the issues faced by our community.
“How did we begin to address the needs of our neighbours?
“Today, facility and community improvements are continuous, and together we’re making considerable progress in this journey. From a facility standpoint, Doe Run Peru is on track to spend, by year’s end, $108 million on PAMA-related projects, exceeding our original commitment.
The improvements to date have generated measurable results: We have reduced lead emissions by 28% and cadmium by 70%. Discharges into the Mantaro and Yauli rivers have been virtually eliminated. Blood lead levels in exposed workers are down 30%, and continue to improve. Joint efforts with the Ministry of Health to address health-related issues in the community of La Oroya are also yielding positive results.
“In Yauli – La Oroya, as in many poverty-stricken areas around the world, communities need both immediate assistance and long-term planning to help overcome poverty. We believe it is important to do both.
“Each day we feed 200 of the city’s poorest children and provide them with a place to shower. We renovated and fund the government-run soup kitchen that feeds 800 people. Of equal importance, we provide infrastructure, such as refurbished schools, public parks, laundry and bathroom facilities, and co-operative community programmes in vocation, nutrition and hygiene.”
This raises a point that IM has long considered – how many children, worldwide, are educated with money from the mining industry? Maybe more than are educated with money from NGOs?
Neil presentation continued with Doe Run’s work in providing collateral employment. “We have supported a ‘chain of production’ concept that takes a full product-cycle approach, from development to marketplace.For example, we introduced improved grass varieties and hardier sheep and alpaca breeds to improve agriculture. We provided small business training programmes for women, and recently helped develop a community market to complete the distribution channel. The list goes on– and benefits more than 100,000 of our neighbours.
“So, if our destination is truly leveraging the opportunities and promise of Peru’s rich natural resources to bring positive change, then our journey is only beginning. We know where to go. But how do we get there?
“Competing on a global scale requires continued and greater foreign investment. Understanding what will attract and retain foreign investment will provide us with direction. There are three things that I believe can most impact the ability of the Peruvian mining sector to remain competitive and thereby add value. They are: stability, stakeholder engagement and managed expectations.
“Stability: By this I mean political, social, legal and economic. It’s no secret that uncertainty is perhaps the greatest concern of investors. As nations compete with one another in a global economy, those nations that have established and adhered to the rule of law, that are addressing the basic needs of their society, and that support an educated and flexible workforce will have a competitive advantage.
“Secondly, we need stakeholder engagement.True stakeholder engagement and ongoing dialogue can create a future for the company and community that neither could envision alone.In La Oroya, we have worked hard to share information, listen to diverse groups and demonstrate our commitment to sustainable business that provides both added value and growth opportunities. By working together, we have built alliances with government, educational institutions and our communities.
“In June, the Ministry of Health, the regional government of Junin and Doe Run agreed to expand a programme aimed to improve the health of people living near the facility.This programme is considered a model for the sector. In 2005, we partnered with the Peruvian government and local farming groups to remove more than 60 years of accumulated mud and debris from the irrigation channel in the left margin of the Mantaro River.This channel, built during the first administration of President Manuel Prado, provides irrigation to 15,000 farmers living in the region. In each of these examples, and there are many more, stakeholder engagement created the opportunity for us to add value to the local and regional community.
“Thirdly, we need managed expectations: I believe we all share a desire for freedom, health and prosperity.It is the “getting there” that sometimes creates disagreement.For the nation, as well as for businesses, the challenge is ‘how fast and at what price.’How do we encourage business investment that drives our progress toward greater freedom, health and prosperity without demanding so much in return that we create a competitive disadvantage?
“Expectations must be based on where we are now and what results we can accomplish over a given period of time. Expectations should not be determined by outside organizations, but rather, established through stakeholder engagement by those closest to the situation – local and regional communities, government, business and unbiased, technical experts.
“Recently, Doe Run Peru and The Ministry of Energy and Mines, along with local and regional governments, practiced stakeholder engagement. Together we hosted nearly 20,000 people in local and regional community meetings, gathered scientific studies from international experts, and identified ways to address immediate health needs of the La Oroya communities.
Progress will require ensuring greater stability, encouraging stakeholder engagement, and promoting managed expectations. The future of the mining sector is promising. But we still need to ask ourselves: How do we leverage the opportunities and promise of Peru to bring positive change to its people?
“We do so by having the courage to ‘stay the course’ by building the infrastructure, relationships, policies and standards that encourage greater stability, stakeholder engagement and managed expectations.”