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Cablegate: Impoverished Apurimac Region: On Brink of Mining

VZCZCXYZ0007
PP RUEHWEB

DE RUEHPE #1552/01 2661503
ZNY CCCCC ZZH
P 221503Z SEP 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC PRIORITY 9358
INFO RUEHAC/AMEMBASSY ASUNCION PRIORITY 2028
RUEHBO/AMEMBASSY BOGOTA PRIORITY 5996
RUEHBR/AMEMBASSY BRASILIA PRIORITY 7933
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 3470
RUEHCV/AMEMBASSY CARACAS PRIORITY 1224
RUEHLP/AMEMBASSY LA PAZ SEP 4978
RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 9578
RUEHQT/AMEMBASSY QUITO PRIORITY 2071
RUEHSG/AMEMBASSY SANTIAGO PRIORITY 2003
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUMIAAA/USCINCSO MIAMI FL PRIORITY

C O N F I D E N T I A L LIMA 001552

SIPDIS

E.O. 12958: DECL: 09/23/2018
TAGS: PGOV SNAR EMIN PREL PINR PE
SUBJECT: IMPOVERISHED APURIMAC REGION: ON BRINK OF MINING
BOOM?

REF: A. LIMA 3075
B. LIMA 3217

Classified By: Amb. P ...

id: 170946
date: 9/22/2008 15:03
refid: 08LIMA1552
origin: Embassy Lima
classification: CONFIDENTIAL
destination: 08LIMA3075|08LIMA3217
header:
VZCZCXYZ0007
PP RUEHWEB

DE RUEHPE #1552/01 2661503
ZNY CCCCC ZZH
P 221503Z SEP 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC PRIORITY 9358
INFO RUEHAC/AMEMBASSY ASUNCION PRIORITY 2028
RUEHBO/AMEMBASSY BOGOTA PRIORITY 5996
RUEHBR/AMEMBASSY BRASILIA PRIORITY 7933
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 3470
RUEHCV/AMEMBASSY CARACAS PRIORITY 1224
RUEHLP/AMEMBASSY LA PAZ SEP 4978
RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 9578
RUEHQT/AMEMBASSY QUITO PRIORITY 2071
RUEHSG/AMEMBASSY SANTIAGO PRIORITY 2003
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUMIAAA/USCINCSO MIAMI FL PRIORITY


----------------- header ends ----------------

C O N F I D E N T I A L LIMA 001552

SIPDIS

E.O. 12958: DECL: 09/23/2018
TAGS: PGOV SNAR EMIN PREL PINR PE
SUBJECT: IMPOVERISHED APURIMAC REGION: ON BRINK OF MINING
BOOM?

REF: A. LIMA 3075
B. LIMA 3217

Classified By: Amb. P Michael McKinley for reasons 1.4b and d.

1. (C) Summary: Apurimac ranks as Peru's second most
impoverished region and is best known to the outside world
for its periodic political turbulence. Two mega-mining
projects could transform this predominantly agricultural
region with massive, multi-billion dollar investments. The
prospect of these investments in poor communities has raised
concerns about socio-economic "distortions" and future social
conflicts like those seen in other mining areas in Peru.
Regional opposition leaders have sought to stoke and exploit
these tensions to build support for future elections.
Apurimac also suffers from the presence from armed groups --
allegedly Shining Path -- linked to narcotraffickers that
transit the region en route from the Apurimac and Ene River
Valley (VRAE) coca-production zone. End Summary.

Impoverished, Politically Turbulent Region
------------------------------------------
2. (SBU) Apurimac has an official poverty rate of about
69.5% and ranks as Peru's second most impoverished region
after nearby Huancavelica. The region lacks significant
mining revenues and as a result receives one of the smallest
investment budgets per capita of any Peruvian region -- $130
million for a population of just over 400,000 people. (By
contrast, Tacna Region receives twice as much per capita for
investment thanks to plentiful mining revenues.) Apurimac's
woeful infrastructure reflects its poverty and isolation: the
region's two main cities, Abancay and Apurimac, are connected
by a rutted, dirt road that requires half a day to navigate
and features dangerous hairpin curves that overlook drops of
thousands of feet. Along the way, one passes through
isolated villages with almost no basic services.

3. (SBU) Apurimac is perhaps best known by the outside world
for the "Andahuaylazo" rebellion launched in January 2005 by
Antauro Humala, brother of opposition leader Ollanta Humala.
In the event, Antauro and some 160 of his followers captured
the police station in Andahuaylas and called for
then-President Alejandro Toledo to resign. Six died in
ensuing clashes before the rebels surrendered. Apurimac
returned to national and international headlines in December
2006 when 4,000 protestors in the regional capital Abancay
demanded the Regional President's resignation for favoring
Andahuaylas in an ongoing intra-city dispute over resources.
Police quelled the protests but left over 80 injured.
Apurimac residents have participated vigorously in various
national and local protests since 2006. The region voted
overwhelmingly for Ollanta Humala over Alan Garcia -- about
74% to 26% -- in the second round of the 2006 presidential
election.

On the Cusp of a Mining Boom
----------------------------
4. (U) Apurimac has two mega-mining projects currently under
development that could have a dramatic impact on this
predominantly agrarian region. The Las Bambas copper
project, operated by the Swiss company Xstrata Copper, is
located on remote land in southeastern Apurimac, far from
major population centers. Xstrata executives told Emboffs
that the project is in the exploration phase and that they
expect to earn some $200 million in revenue per year once
they begin production in 2010 or 2011. The second project,
controlled by the consortium Apurimac Ferrum, would focus on
mining Andahuaylas province's vast iron ore deposits.
Although the consortium is just beginning to develop
community relations and has not yet begun exploration, local
leaders expect investors to pour in $2.4 billion and
construct a railroad to the coast to ship the metals.

Looming Social Conflicts Near Mining Sites
------------------------------------------
5. (C) While the mining projects would bring sorely needed
resources to region, the prospect of massive investments in
impoverished communities is causing fear among some locals of
socioeconomic distortions -- such as village displacement,
environmental degredation, an influx of outsiders, and an
increase in alcohol consumption and prostitution -- and

threatens to provoke social conflicts like those seen in
other parts of Peru (Refs A & B). The Mayor of Andahuaylas
told Poloff that Apurimac Ferrum representatives launched its
dialogue with local communities poorly, causing local leaders
to dig in their heals. The mayor emphasized the conflictive
nature of the local populace and said the company now has
extra groundwork to do before the communities will allow them
to do business. Xstrata, by contrast, has handled community
relations effectively, according to a cross-section of local
observers, with early and frequent communication with
affected populations. A mining industry expert at the NGO
Oxfam, which is often critical of international mining
operations in Peru, cited Xstrata's work in Apurimac as an
example of positive community outreach.

Opposition Leaders Exploit Tensions
-----------------------------------
6. (C) Regional opposition leaders have sought to stoke and
exploit social tensions in Apurimac in the hopes of building
support for future elections. Soon after the 2006 regional
elections, key opposition figure and former Union for Peru
(UPP) Congressman Michel Martinez launched a campaign to
recall Regional President David Salazar. Although the recall
campaign ultimately failed, one of Salazar's advisors told
Poloff it distracted Salazar from focusing on his job for
nearly a year. (Note: Recall campaigns and other opposition
attacks have weakened Regional Presidents and localQeaders
across Peru. End Note.) Several peasant leaders and Martinez
followers in Andahuaylas told Poloff that the Mayor and
Regional President had abandoned the poor, and they
threatened to launch new protests in coming weeks. Other
observers noted that Nelson Palomino -- a prominent
coca-grower leader that reportedly coordinates with Martinez
and other leftist leaders around Peru -- has appeared
recently in Apurimac to deliver anti-mining speeches and
organize peasants. (Note: Michel Martinez is infamous for
having invited Ollanta Humala in 2006 to run for President
under the UPP banner after Humala's own party failed to
qualify. Martinez reportedly expected tQgain a Vice
Presidential nomination in return, but Humala instead blocked
him entirely from running for office. Martinez now describes
Humala as a danger to Peru. End Note.)

Presence of Armed Groups
------------------------
7. (C) Apurimac also suffers from the presence from armed
groups -- allegedly Shining Path -- linked by most observers
to narcotraffickers who transit the region en route from the
VRAE coca-production zone. Several officials said that
locals regularly spot small armed groups of two to five
fighters circulating in Andahuaylas province. The Mayor of
one small town told Poloff that a group of Shining Path came
to his town to seek a meeting, but thankfully he (the mayor)
was traveling. The town's police chief said that the Shining
Path no longer uses force to terrorize and recruit locals,
but instead relies on persuasion. Another political leader
in Andahuaylas said that he had observed a group of 32 armed
fighters based near the border with Ayacucho region that
locals told him had plans "to seize power". He did not know
who they were or who financed them.
MCKINLEY

=======================CABLE ENDS============================

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