NEW FORMS OF AND RISKS IN MINING PROJECTS: THE VOLUNTARY AND EXTRAORDINARY CONTRIBUTION OF THE MINING COMPANIES IN PERU (ENGLISH AND SPANISH VERSIONS)

• Jurisdiction: Derecho Internacional

Mining and Oil and Gas Law, Development, and Investment - Book 1
(Apr 2007)
CHAPTER 4B
NEW FORMS OF AND RISKS IN MINING PROJECTS: THE VOLUNTARY AND EXTRAORDINARY CONTRIBUTION OF THE MINING COMPANIES IN PERU (ENGLISH AND SPANISH VERSIONS)
Hans A. Flury
Director Legal
Southern Peru Copper Corporation
Sucursal del Peru
Lima, Peru

Comments, Opinions and Mistakes, if any, are the sole responsibility of the Author

HANS A. FLURY

Hans A. Flury is a Peruvian Lawyer graduated from the Lima Catholic University (Pontificia Universidad Católica del Perú) in 1976. He is a member of the Professional Bar Associations of the cities of Lima, Callao, Tacna and Moquegua. He is also a member of the International Bar Association (IBA). Mr. Flury has also studies at the (i) Escuela Superior de Administración de Negocios (ESAN) in Lima, (ii) the Academy of American and International Law of the South Western Legal Foundation at the Texas University, (iii) the Darden Graduate School of Business Administration University of Virginia, in Washington, and (iv) others. Mr. Flury is an active participant of the Mining Industry activities, mainly through the Peruvian National Mining Association, the "Sociedad Nacional de Minería, Petróleo y Energía" (www.snmpe.org.pe), having being appointed as its President during the years 1997 and 1998. In July 2003, Mr. Flury was named Minister of Energy and Mines of the Peruvian Government, and was in charge of that Ministry until February 2004. Mr. Flury joined Southern Peru Copper Corporation (www.southernperu.com) in 1974. SPCC is the biggest copper company doing business in Perú. With SPCC he has acted in different positions in their Legal Division, from legal trainee to Vice President Legal. Today his position is of Director Legal. As an independent professional he has worked with the law firms of "Estudio Llosa, Abogados" (1970/1971) "Estudio Ferrero" (1972), "Estudio Ruiz Huidobro" (1978/1980) and Echevarría, Flury & Puyó, Abogados (1980/1987). At date, Mr. Flury is the Legal Director of Southern Peru Copper Corporation, Director of the Sociedad Nacional de Minería, Petróleo y Energía (www.snmpe.org.pe), the Confederación Nacional de Instituciones Empresariales Privadas (www.confiep.org.pe), and various local private companies. In relation to the Voluntary and Extraordinary contribution, Mr. Flury has acted, with other individuals, representing a vast majority of the mining companies doing business in Peru, to negotiate the corresponding agreement with the representatives of the Peruvian Government.

Hans A. Fl;ury es Abogado, graduado en Lima, por la Pontificia Universidad Católica del Perú) en 1976. Es miembro de los Colegios de Abogados de las ciudades de Lima, Callao, Tacna y Moquegua. También es miembro del "International Bar Association (IBA)". El Sr. Flury también ha realizado estudios en (i) la Escuela Superior de Administración de Negocios (ESAN) en Lima, (ii) la "Academy of American and International Law "del South Western Legal Foundation en la University de Texas (EEUU), (iii) el Darden Graduate School of Business Administration" de la Universidad de Virginia, en Washington, y (iv) otros. El Sr. Flury participa activamente en las actividades de la Industria Mineras en el Perú, principalmente a través de las "Sociedad Nacional de Minería, Petróleo y Energía" (www.snmpe.org.pe), habiendo sido designado su Presidente en los años 1997 y 1998. En Julio del 2003, el Sr. Flury fue designado Ministro de Energía y Minas del Gobiernos del Peru, y estuvo a cargo del mismo hasta Febrero del 2004. El Sr. Flury se incorporó a Southern Peru Copper Corporation (www.southernperu.com) en 1974. SPCC es la más grande empresa minera cuprífera desarrollando actividades en al República del Perú. Con SPCC he él se ha desempeñado en diferentes cargos en su División Legal, desde practicante hasta Vicepresidente Legal. Como profesional independiente él ha trabajado en los bufetes jurídicos "Estudio Llosa, Abogados" (1970/1971) "Estudio Ferrero" (1972), "Estudio Ruiz Huidobro" (1978/1980), Echevarría, Flury & Puyó, Abogados (1980/1987) y Rodrigo, Elías y Medrano Abogados (2003 / 2004). A la fecha, el Sr. Flury es Director Legal de Southern Peru Copper Corporation, Director de la Sociedad Nacional de Minería, Petróleo y Energía, la Confederación Nacional de Instituciones Empresariales Privadas (www.confiep.org.pe), and varias empresas privadas locales. En relación con el Aporte Voluntario y Extraordinario, el Sr. Flury actuó, conjuntamente con otras personas, representando a una vasta mayoría de empresas mineras desarrollando negocios en la República del Perú, para negociar el correspondiente acuerdo con los representantes del Gobierno del Perú.

FIRST PART

Introduction

The Republic of Peru

The Republic of Peru:¹

The Republic of Peru is located in the central and occidental part of South America on the coast of the Pacific Ocean and limits by the North with the Republics of Ecuador and Colombia, by the East with Brazil, by the South-East with Bolivia and by the South with Chile. It has an area of 1'285,215.6 km² and its capital is the city of Lima. The Political Constitution of 1993 expresses that the water domain of Peru extends up to 200 maritime miles to the West.

According to the National Census of 2005, Peru has 27,219,264 habitants; which gives a population density media of 21.2 inhabitants per km², with a growth rate of 1.4% per annum. The urban population equals 72.3% and the rural population to 27.7%.

The most extended language among Peruvians (80.3% as first language) is Spanish, followed by the native languages such as Quechua and Aymara, which are the most spoken in Peru.

The Republic of Peru is a presidential unitary State. The country is divided, successively, in departments (States), provinces and districts. The country is currently in a regionalization process by which regions are created, replacing the departments; therefore Peru is politically divided in 26 Regions; these in Provinces and the last in Districts.

The organization of the State is structured according to the principle of separation of powers, made up of three (3) different and independent powers, called the Executive Power (the Government), the Legislative Power (the Congress of the Republic) and the Judicial Power. These are organized as follows:

1) The Executive Power that is exercised in three levels. The National Government, exercised by the President of the Republic elected for a period of five years, who is the Chief of State. He, together with the Council of Ministers presided by the Prime Minister and 16 State Secretaries of State in charge of the different Ministries, concentrate the public administration at national level. The following strata is constituted by the new Regional Governments, in favor of whom it is sought to transfer several capacities, and that up to date work having the "departments" as jurisdiction and, that in the future must merge to act as real macro regional decentralized governments, and finally, the Local Governments, which correspond to the Municipalities of the Provinces and Districts. The political heads of each one of these 3 jurisdictions

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are the President of the Region and the Mayors, in the case of the Provinces and Districts.

2) The Legislative Power, which resides in the National Congress, which represents the citizens and, on the basis of a plural opinion of the nation and constituting a single chamber conformed by 120 members, the "Congressmen" elected by democratic vote for a period of five years in the same opportunity that the President of the Republic.

3) The Judicial Power which, according to the Constitution and laws, administrate justice.

Importance of Mining

The exploitation of the natural resources in Peru is of great importance, and greatly contributes to the economical resources of the Nation. In mining, Peru is situated as the second world producer of silver, fourth world producer of copper, zinc and lead, fifth world producer of gold, as well as counting with large mines of iron, tin, manganese; and also has petroleum and gas deposits.

Mining generates for Peru more than 60%² of the total foreign currency that the country generates annually and approximately 40% of the income from corporative income tax,³ constituting the most formal sector of the economy and with more tax review of the timely payment of its tax obligations and also continuous state control and supervision of its productive activities, and metal and mineral sales.

SECOND PART NEW FORMS IN MINING PROJECTS

The Voluntary and Extraordinary Mining Contribution in Peru

CHAPTER 2.1 Social and Political Environment

In addition to the legal considerations described in Part Three, it is very important to also describe certain temporary and political circumstances that explain the creation of the Voluntary and Extraordinary Mining Contribution and the majority acceptance of this Voluntary Contribution on the part of the mining companies that develop mining activity in Peru, and particularly by those companies that have a "Stability Contract" in force and for a long term, beyond the date of the term of the current political administration that will govern Peru until year 2011.

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The Presidential Elections of 2006

At the beginning of year 2006, the process of political elections started for the election of a new President of the Republic and the 120 members of the National Congress. The circumstances of the estrangement or abandonment in which the most distant rural zones of Lima, the Capital of the Republic, were submitted, gave opportunity to these populations to manifest their rejection and claims for not being part in the national development. These populations were seeing the enormous economical resources generated by the extractive activities, mainly from mining and that we have previously described, that never benefit them, generating their...