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PERU: Adios, Doe Run

Milagros Salazar

LIMA, Jul 28 2010 (IPS) - Peruvian President Alan García confirmed Wednesday that the permit of the U.S. mining and metallurgical company Doe Run to operate a major smelter complex was being cancelled because the firm missed the deadline for proving that it had the necessary financing to restart operations and complete an environmental cleanup.

La Oroya, where the smelter operates in Peru’s highlands region, is one of the most polluted cities in the world.

In a message to the nation delivered in Congress, García said the deadline had expired, the law was being enforced “to the letter,” and the permit for the Doe Run Peru multi-metal smelter had been cancelled.

“A company cannot be allowed to abuse or blackmail our country, as Doe Run has been doing,” he added.

The Missouri-based Doe Run “is subject to national legislation, specifically the law on the closure of mines…and will be subject to the relevant administrative, civil and penal responsibility,” says a Ministry of Energy and Mines statement issued Tuesday.

Tuesday was the deadline set by the government for the company to finish an environmental cleanup and restart the smelter, which was idle for a year after Doe Run Peru filed for bankruptcy.

Doe Run Peru’s vice president of environmental affairs José Mogrovejo said the company would study the government’s decision.

He also said that just before the deadline, the firm had presented a new proposal to the suppliers of raw materials to which it owes money, and that one of the companies had accepted the proposed arrangement.

Meanwhile, in La Oroya, located at 3,300 metres above sea level in the Andes mountains in the central province of Junín, the smelter’s workers continue to protest the loss of their jobs while other residents of the town of 35,000 people are protesting the health damages caused by the toxic fumes from the complex’s smokestacks, which spew out sulphur dioxide, lead and cadmium.

In September 2009, Congress had granted the company another 10 months to line up financing to overcome its economic troubles while complying with an environmental cleanup programme, which has been delayed for years.

That was to involve an environmental upgrade to a sulphuric acid plant for the copper circuit, which experts say is a key step in reducing pollution.

The plant forms part of the Environmental Improvement and Management Programme (PAMA) with which Doe Run has systematically failed to comply and for which it has received four extensions since 1997, when it obtained the concession for the smelter in La Oroya.

Under PAMA, the company was to invest between 140 and 150 million dollars. The company also has unpaid bills to suppliers of 120 million dollars.

Sources at the mining investment regulator Osinergmin, which recently transferred its environmental oversight duties to Peru’s new environmental regulatory agency OEFA, told IPS that Doe Run Peru was in breach of eight of the nine requisites it was to live up to by Tuesday’s deadline.

In a last-minute statement issued Monday night, the company said it had made “significant advances” and that it would continue to work towards restarting operations at the smelter, which was closed down when bank loans were cut off and it was no longer able to pay for metal concentrates.

The firm said that on Jul. 14 it presented a business plan to its creditors, which had a “positive” reception.

The agreement was frustrated, however, because one of the companies holding unpaid bills, Cormin, sought action by Indecopi, the regulatory agency that handles bankruptcies, which could decide on the restructuring or liquidation of the company.

In a proposal to the government, Doe Run has said it could keep paying its workers 70 percent of their wages.

“What should be guaranteed first and foremost is the source of jobs,” the head of the Doe Run workers union, Royberto Guzmán, told IPS.

“The government must understand this. We want operations to restart as soon as possible, we cannot wait any longer,” he added, pointing out that the workers had been out of work for 13 months, since the complex was shuttered.

Labour Minister Manuela García said the government has a plan that would provide alternative employment for the workers.

But Guzmán rejected the idea as an “11th hour reaction.”

According to the labour minister, the company employs more than 3,000 workers, including 2,500 in the smelter complex and the rest in the Cobriza copper mine.

“The government has to keep in mind the economic viability of La Oroya as a whole, not only of the workers but also of the local residents who depend on the other activities generated by the complex,” José De Echave, an economist with CooperAcción, a local social development organisation, told IPS.

De Echave said Doe Run might bring action against the Peruvian government before the International Centre for Settlement of Investment Disputes (ICSID), under the free trade agreement signed by Peru and the United States.

Former mining official Marita Chappuis told IPS that “it would be ideal for construction of the sulphuric acid plant to be completed” if the smelter is reopened and run by another company, in order to protect the health of the local population.