Yanacocha Mine Case Study

In 1993, the World Bank together with the IFC invested in a gold mine project at Yanacocha in the mountains of Northern Peru a few miles from the ancient Inca city of Cajamarca and the actual village of La Pajuela. The mine is owned at 51% by US-based Newmont Mining corporation and by Buenaventura of Peru for the remaining shares together with the World Bank which has a 5% ownership stake.
It is an economical success for this venture has provided 2,300 direct jobs and more than 10,000 indirect jobs in the poorest region of Peru. The mine itself has become the most important gold mine in South America by generating billions of dollars of revenues.
However, the impact on environment was disastrous. In September 2013, peasants complained that
Also, I’ve noticed in the example mentioned above that having a US based mining company handling 51% of the stakes might easily been seen as a conflict of interest between the latter and the World Bank with a powerful American voting power. I don’t think the decision to invest in the Yanacocha gold mine was unbiased.
The way they provide assistance is also, I believe, highly irresponsible for they don’t get in the bottom of things. Their main purpose is to develop the undeveloped and in that sense they really don’t assess properly and thoroughly the impact on population and culture. For example, in the 70’s, they had to relocate 70,000 people for the construction of a dam in Brazil and they miscalculated the affected population as well as the financial, social and cultural impact of such relocation.
IFIs cannot provide help in a perfectly unbiased way because they are mainly driven by a financial objective and they consider collateral damages as a less considerable factor. For IFIs, the need of the many outweigh the needs of the
Every decision should be contingent upon an “in case of plan” as well as a compensation plan for the affected community
5. External contractors shouldn’t be allowed to disrupt the culture and a way to enforce this should be given to local authorities.
6. IFIs should be held responsible in the long term if damages are caused to the environment, population or culture.
7. World Bank must make sure that the revenues really benefit the local population beyond the economical opportunity provided by a project. As a conclusion, I would say that IFIs and the World Bank in general shouldn’t base their decisions only on the will and expertise of people sitting in offices in Washington but also on the expertise and knowledge of local and unbiased experts who can prevent unnecessary damages. The panel’s report shouldn’t be seen as just an advice but as an unavoidable step toward the final decision. I believe that more and more, IFIs, by being consistently criticized and analyzed, will review their policies and will finally help in developing countries in a “do no harm” way ensuring that projects as the one in Peru don’t cause collateral and irreversible damages.
This discussion on Financial Institutions reminds me of an