Peru Mine Conflict: Problem for China Commodity Strategy

Chinese-owned mine in S Peru desert site of major continuing violent clashes w local workers They claim Shougang Co repeatedly reneged on key promises re wages, housing & pollution Bad sign 4 C policy securing commodities directly from 3rdW govts
 
Sept. 1, 2010 - PRLog -- By David Caploe PhD, Chief Political Economist, EconomyWatch.com

As most readers of this site are aware, China has taken an unusually direct approach in insuring a steady supply of raw materials, at what it considers an appropriate price,

in order to feed its ever growing manufacturing capacity, at BOTH upper and lower ends of the value-added scale.

In most cases, this has meant either a direct, state-to-state agreement with the governments of commodity-producing states, or buying into state-owned commodity companies.

In rare cases – where they have no choice BUT to go “indirect” – they will contract with global multi-nationals to insure they receive commodities,

the most important and famous at the moment, of course, being the iron ore relationship they have with the Anglo-Australian giant Rio Tinto.

From the point of view of commodity-producing countries,

China is generally considered an excellent partner to work with,

basically because, unlike Western countries / companies,

who often feel compelled to interfere in other countries’ internal affairs, for reasons both good and bad,

they basically keep out of the domestic situations of their partners –

they simply want to make sure whatever deals have been made are going to be honored.

As long as “contracts remain sacrosanct” – somewhat ironically, given an allegedly Communist country –

the Chinese generally tend to keep their noses out of other people’s internal affairs.

So it’s a bit shocking to discover that they have been having a decades-long conflict

with the workers in a mine in Peru that they themselves own directly –

and it is a struggle with continent-wide effects.

In its worldwide quest for commodities, China has scoured South America

for everything from Brazilian soybeans to Guyanese timber and Venezuelan oil.

But long before it made any of those forays, China put down stakes

in the desolate mining town of San Juan de Marcona in Peru’s southern desert.

The year was 1992.

Chinese companies had begun to look abroad.

One steelmaker, the Shougang Corporation of Beijing, set its sights on an iron ore mine here,

which looks like this from a satellite,

and bought it in a move that seemed particularly bold,

since, at the time, Peru was still plagued by attacks by the Maoist guerrillas of the Shining Path.

But the hero’s welcome for Shougang soon faded.

Workers at the mine, which was founded by Americans in the 1950s,

and nationalized by leftist generals in the 1970s,

began fomenting the unexpected:

a revolt that has endured to this day, marked by repeated strikes, clashes with the police

and even arson attacks against their nominally Communist bosses from China.

“We quickly realized that we were being exploited to help build the new China,

but without seeing any of the rewards for doing so,”

said Honorato Quispe, 63, a longtime union official at the mine,

where workers have held three strikes this year alone,

including an 11-day stoppage last month.

The long-festering conflict with Shougang over wages, environmental pollution,

and Shougang’s treatment of residents of this company town

does not square well with China’s celebratory vision of its rising profile in Latin America,

in which everyone benefits and a “win-win” is “the consensus.”

Latin America, as this idea of so-called South-South cooperation goes,

sells China raw materials like copper, oil or iron;

in return, the region buys goods like cellphones, cars and cheap plastic toys.

Pardon me for saying so, but this sounds JUST like the dynamic of the 19th century British Empire.

The tension in Marcona, one of the most conflict-ridden towns in a country

increasingly prone to conflict over mining and energy projects,

suggests that China’s engagement in the region —

like that of the United States, Britain and other powers that preceded it in Latin America —

is not without pitfalls.

While not the dominant theme in the region’s relations with China,

a wariness is crystallizing in some countries over the booming trade with China.

Reactions to this surge largely focus on cheap Chinese imports

or on China’s assertive efforts to win access to energy reserves.

In both Brazil and Argentina, for instance, manufacturers accused

Chinese companies of unfairly dumping Chinese products in their markets,

prompting new tariffs against some Chinese imports.

But perhaps nowhere in the region has

wariness and regret over Chinese investment coalesced as much as in Marcona.

With about 15,000 residents, it still has the look of a mining town in the American Southwest,

a legacy of its construction in the 1950s by engineers from the United States.

The Americans are long gone, but the Chinese managers now live in the same ranch-style houses

built for their US predecessors in a district called Playa Hermosa, or Beautiful Beach.

They drive sport utility vehicles and talk to subordinates through translators.

They eat meals at their own cafeteria, avoiding mixing with Peruvians in town.

Workers here said the problems with Shougang began in the 1990s,

when the company slashed the mine’s work force to 1,700 from 3,000

and brought in some Chinese workers.

Resistance in the form of strikes soon convinced the managers to return their workers to China.

Resentment also emerged when

Shougang did not invest a promised $150 million in the mine and the town’s infrastructure,

opting instead to pay a $14 million fine for failing to do so,

and left blocks of housing once occupied by workers vacant

in a town with an acute housing shortage.

At a union building, workers spoke of low wages

and company resistance to enacting government-mandated raises,

and they claimed that Shougang had dumped chemical waste into the nearby sea.

On the other side of Marcona from Playa Hermosa, some workers at the mine live in bleak company housing.

Others rent squalid rooms in the town.

A lower class of squatters subsists on Marcona’s edge in a driftwood shantytown, Ruta del Sol.

“The Chinese see us as little more than slaves" ...

said Hermilia Zamudio, 58, a resident of Ruta del Sol,

whose husband was fired from the mine after working there for almost 30 years.

“They deem it beneath them to talk to us, and when they need to address problems here, they do so with their thugs" ...

To read more at http://www.economywatch.com’, go to: http://www.economywatch.com/economy-business-and-finance-...

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