Tag Archives: newmining

New mining: Recognizing the premium on comparative advantage

Recently, I sat in on a presentation about an initiative, which Joining Hands supports, to create a more regulated or “new” mining system.

Joining Hands’ director, Conrado, offered the presentation to a group representing Joining Hands partner, the Giddings-Lovejoy Presbytery. The plan privileges agriculture and water systems over mining. It also sets up a monitoring agency separate from that which grants mining concessions to investors. Overall, it creates a more sustainable system that will increase the expenses of owning and operating mining operations.

And so what?

The mountainside of La Oroya is scarred white from acid rain. Just one sign of the larger contamination in the area.
The mountainside of La Oroya is scarred white from acid rain. Just one sign of the larger contamination in the area.

That might seem a bit crass or lacking in nuance, but it’s where I’ve arrived after a considerable amount of thought. Of course, as this blog is my privileged space to spew my less than adequately researched thoughts and reflections, I’ll continue on with that practice.

First of all, the current system has created far too many La Oroyas, Lake Agrios, and Herculaneums. Evidently we need to change the issue.

Second, new mining uses Peru’s resources of precious metals to continue development through job creation and investment. Additionally, it recognizes Peruvian sovereignty over its environment, which is an integral, but non-economic part of development that many Peruvians seek.

Third, it helps internalize the social costs of mining into the market. New regulations will increase the costs of mining, which will then increase the prices for precious metals on the industrial and consumer market, which will reduce the quantity demanded. The amount of shift depends on the elasticity of demand, which I will not explore here, but the reduction in quantity demanded and overall sales reflects consumers taking on additional social costs. An imperfect mechanism regulations and taxes squeeze positive results out of greed.

Many argue that greed will instead shift jobs out of Peru to more investor-friendly environments. Low wages and lower health and safety regulations led to the outsourcing of manufacturing and telecommunications jobs to south and southeastern Asia.

That is real, except you cannot outsource minerals. As Conrado put it, minerals are in Peruvian soil and are not going anywhere until somebody sets up shop to take them out. Of course, companies may shift away to mineral-rich countries with lesser regulations, but it’s a finite resource. Plus, Peru will hopefully serve as a leader among mineral-rich nations to enforce new regulations.

Even if Peru goes ignored, the stock of minerals in less regulated countries will run out and soon. Then the options would be synthesis or Peru. Maybe the moon will be an option?

Admittedly, that’s not exactly realistic. More than likely, companies will continue to operate in Peru and find some way to meet the new regulations because they can.

It will be a bumpy ride for a bit, but that is better than the train wreck that is La Oroya or protests within Tia Maria. Plus, I pull knowledge of this movement from Peruvians working in the NGO-sector and from these areas. In spite of the stock they have in growing Peru’s economy, they have prioritized mining reform. I stand with them to push companies based in the Western world to comply.