A thoroughly modern resource curse? : the new natural resource policy agenda and the mining revival in Peru

The reality of the so-called ‘resource curse’ is now widely accepted. The populations of countries that possess significant natural resources often suffer when these resources are extracted and exported. Attention is turning to ways of mitigating the adverse effects of the ‘curse’. Responsible fiscal policies are required but are in themselves insufficient for overcoming it. International institutions have recently advanced what I term the ‘new natural resource policy agenda’ to deal with the problem. Its core features are (a) decentralisation of government (b) a greater role for direct citizen participation in the allocation of mining revenue; and (c) more cooperation between state agencies and commercial organisations (public-private partnerships). However, the recent history of Peru poses major questions about the effectiveness of this new policy agenda. The government has adopted both conservative fiscal policies and the new policy agenda. Over the last five years the mineral price boom has increased mining revenues markedly, but it has had little impact on poverty. More important, local level conflicts around mining operations have increased, and appear to threaten political instability even more. The problem is that, in a context of weak central state and even weaker local governments, the ‘new natural resource policy agenda’ has partially re-located the resource curse to sub-national levels. Local governments, mining companies and a variety of activist movements are locked into complex relationships that are not easy to negotiate and into conflicts that are not easily resolved. Like its predecessors, this very contemporary manifestation of the resource curse results in poor quality public expenditure and the waste of much of the new resource revenue. Keywords: mining, resource curse, decentralisation, participation, local government, social movement, conflict

Local politics, conflict and development in Peruvian mining regions

This thesis examines the effects of a collection of policies that determine the mandatory distribution of mining, gas and oil revenues between national and subnational governments, and the greater involvement of mining companies in local development. I have labelled this set of policies, which aims to reduce social conflict and promote local development, the New Extractive Industry Strategy (NEIS). Chapter 1 describes the implementation of these policies in Peru and highlights their significance to the mining industry worldwide. Chapter 2 describes the methodology of the thesis and introduces the three field research regions. Chapter 3 outlines the national socio-political context for the implementation of the NEIS. Chapters 4–6 deal with the effects of the NEIS on social conflict. I argue that the implementation of the NEIS has not only failed to reduce conflict but has actually exacerbated it. After reviewing the debates linking extraction and conflict (Chapter 4), Chapter 5 demonstrates that conflict is strongly associated with the volume of mining revenue received by sub-national governments. Chapter 6 presents a typology of conflicts that helps to explain the correlation between mining revenue and unrest. In addition to well-known conflicts that are related to the adverse impact of mining on livelihoods and the environment, the study identifies two other types. In the first, peasant communities employ social conflict to increase their bargaining power with the mining companies for material compensation. In the second, the large volume of mining revenue generates disputes over access to or use of these financial transfers. Chapters 7–8 show that the NEIS has not delivered its development promises. Chapter 7 illustrates how regional and municipal governments in receipt of high per capita volumes of mining revenue transfers did not improve their economic and welfare indicators any more than the rest of the country. Chapter 8 proposes that a combination of obstructive political factors trapped regional and municipal authorities and local populations in a myopic political game that prioritised quick short-term spending over any long-term benefits to be gained from better planned expenditure. Finally, Chapter 9 draws some conclusions and makes some suggestions

Distributing the Wealth from the Earth

This article explains different criteria and mechanisms for distributing extractive industries (EI) revenues between central and local governments across countries and territories. It reveals that institutional or systemic predictors of distribution are not enough to explain different shares of revenue sharing. The proportion of EI revenues effectively transferred to sub?national governments is neither related to the level of fiscal decentralisation of the countries nor to their federal or unitary nature. We suggest that the relative strength of the sub?national governments vis-à?vis the central government as well as the relative alignment of preferences between local and national governments have a significant impact on transferring EI revenues. We conclude that administrative or fiscal decentralisation alone are not sufficient to ensure an effective distribution of natural resource revenues. Effective political decentralisation can reduce vertical asymmetries and ensure a more equitable distribution of wealth across all jurisdictions

Extractive Industries, Revenue Allocation and Local Politics

The success of a developmental strategy based on the extraction of non-renewable resources is largely dependent on the share of revenues captured by the state from the extractive sector and the modalities that governments adopt to use and distribute those revenues. In the last two decades, local populations and subnational governments have demanded a greater decentralisation of extractive industry (EI) related revenues but the modalities and mechanisms adopted varied widely across cases. This paper looks at the existing criteria and reform modalities adopted to allocate and use EI revenues, and examines the political bargains that enabled such distribution. The paper focuses on four specific questions: a) How do central governments share (or distribute) the revenues from extractive industries with different levels of subnational government (vertical distribution)?; b) How do governments distribute EI revenues across extractive and non-extractive jurisdictions at subnational level (horizontal distribution)?; c) Which are the mechanisms and rules adopted by governments to allocate these resources?; and d) What is the bargaining potential of subnational territories to demand a more proportionate share of revenues?UNRISD and SD