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Economy

China’s Hand in the Morococha Mines: Morococha & Chinalco

Feb 22 , 2019
  • Teresa Kennedy

    Master's student at Peking University's Yenching Academy in Beijing

China’s overseas investments have come into the spotlight since President Xi Jinping announced China’s Belt and Road Initiative (BRI) in 2013. With dozens of infrastructure and energy projects scattered across the globe, it is important to carefully look at how this relatively new player has shaken up previous frameworks for investment and development.

A Chinese mine in Peru brings into relief some of the challenges that have come with China’s expansion of its global investments. In November, dialogues resumed between the mining company, Chinalco, and community members from the town of Morococha where the mine is located, reopening discussion of an especially contentious Chinese project. Chinalco is a State-Owned Enterprise (SOE) that has traditionally focused on aluminum mining. According to then-president of the company Huang Shanfu in a 2016 interview with CCTV Español, its massive Peruvian copper mining project represents the manifestation of the Chinese Dream, as well as a source of development for Peru.

“Development” often comes up when employees of Chinalco’s Toromocho mine discuss improvements the company has brought to the community of Morococha. The town of 5,000 is perched high in the Peruvian Andes at nearly 4,800 meters above sea level, and living conditions are harsh—temperatures often sink below freezing and the area is damp throughout the year. Adobe houses that keep out the harsh weather and retain warmth have allowed locals to live and work in the town until recently, in 2012, when Chinalco began to relocate the population to its newly-constructed town of “New Morococha” as part of the deal it inherited from Peru Copper for constructing the massive copper mine. As China has rapidly developed over the past several decades, so have its needs for copper, which is used at high rates in construction, infrastructure and green energy development, and eclectic vehicle production.

Chinalco has invested over $50 million in guaranteeing the relocation’s success. Former Chinalco president Huang Shanfu hoped the Toromocho mine would serve as an example for future mining projects because of its success in carrying out Peru’s first voluntary relocation. Where the old town of Morococha had few indoor toilets and no potable water, all New Morococha residents have access to these services 24/7 within their own homes. The company made great efforts to ensure that houses were well insulated, with double-paned glass windows (unheard of in most of Peru), and carefully planned the new town to have a high proportion of green space. None of these details were required, but as one executive stated, “It was the more difficult option, but we wanted to do it right.” Another Chinalco official stated, however, that he would never again choose to undertake such a project because of the degree of conflict between locals and the company.

When the Morococha relocation began, Chinalco gave residents the option to either accept a house in the new town or to take a voucher to seek their fortune elsewhere. Those moving to the new town were initially excited about increased job prospects and the high quality of their new homes. They became disillusioned, as they realized that uprooting the old town without the same mine-associated employment guarantees would stall economic movement within the community. They have been further frustrated by the fact that Chinalco chose a relocation site different from the ones they recommended. The Chinalco-chosen site lies in a geographically dangerous area, beneath a tailings dam and on top of a former wetlands.

Some community members have become so frustrated with the company that they have refused to leave their homes in Old Morococha. Those remaining in Old Morococha eagerly share grievances with international media and tend to be the only ones interviewed, resulting in the oversimplification of Morococha as yet another example of Chinese irresponsibility overseas. Such examples abound throughout the world—such as the $19 billion Ecuadorian dam recently featured on the front page of the New York Times, and countless others. However, the conflict in Morococha cannot simply be boiled down to a narrative of Chinese negligence. Many locals’ complaints are legitimate, but the multitude of perspectives on the project’s results, even among locals, make Morococha a more nuanced case.

For example, a number of people living in New Morococha have characterized Chinalco as a middle-of-the-road mining company; it is not the best, as Chinalco claims, but it is also not the worst, as many of the residents remaining in Old Morococha believe. I spoke with two young men who have started successful transportation businesses based around the needs of the growing Toromocho mine. Each acknowledged Chinalco’s many mistakes along the way, but both mentioned that they are grateful for the business opportunities Chinalco has given them. Over a longer timeline, they said, labor conditions in the new town will continue to improve.

Chinalco desperately wants Toromocho to be a success; it would boost the image of Chinese overseas projects and would create a blueprint for similar future projects. This desire is readily apparent through the lengths to which the company has gone in order to provide sturdy new homes, job training opportunities, and increased healthcare to community members. Despite its good intentions, Chinalco has failed in two significant ways.

The first issue is that Chinalco never should have attempted to recreate the town of Morococha. It would have been better both for the company’s budget and locals’ satisfaction if locals were only given the voucher option to find themselves new homes elsewhere. This would have been challenging for the community, but with a higher degree of choice and fewer company-determined benefits, the timeline would likely not have dragged out the 13 years that it has until now. Though China may have some of the deepest experience in relocating populations for megaproject construction, even its domestic success record has been rather dismal. Most infamously the Three Gorges Dam, the largest infrastructure-based forced relocation ever, forced the relocation of over 1.3 million people and resulted in poorer economic conditions and substandard housing arrangements for many.

Despite the relocation challenges, from Chinalco officials’ perspective, the copper mineral from the project is all but guaranteed because they say at some point it is inevitable that all locals will have to move out of Old Morococha. The Toromocho mine has been functioning since 2013 and recently began an expansion project to broaden its capacities. This confidence is the basis of Chinalco’s second major failing. By assuming a stance that it has already contributed more to locals than was required and shifting the blame to them for being intransigent, Chinalco has made a clear statement that it is unwilling to make a real effort to negotiate. Despite the existence of systems to liaise with locals and cooperation with social relations firm Social Capital Group, the lack of willingness to acknowledge that many locals are still dissatisfied with the result of the project is a non-starter for dialogue on the project. It is most certainly not grounds to claim unequivocal success, as Chinalco has publicly admitted.

Unless cooperation increases, there is a possibility that everyone will lose; the people of Morococha will remain dissatisfied, the Peruvian government’s ability to negotiate future Chinese investments in mining will be diminished, and Chinalco’s emblematic project will represent the stereotypes of Chinese negligence that the company has sought to avoid. Failure to negotiate a successful conclusion to the relocation also raises questions of what future mining projects would attempt in local development. Why should other companies see any incentive to invest heavily in community relations, as Chinalco has, if failure is still the result? It also leaves the Peruvian government in a bind because, torn between Chinese investors and defending the rights of its citizens, efforts to satisfy the latter group tend to be passive at best.

In order for the Toromocho project to be the success Chinalco claims it to be, the company needs to make a more genuine effort to listen to locals and accommodate their needs, starting with the Framework Agreement that the parties are currently formulating to delineate Chinalco’s responsibilities in Morococha. If the Agreement is negotiated well—that is, if it incorporates locals’ opinions on how Chinalco can remedy its previous mistakes—everyone with a stake in the project would be better off as the relocation part of the Toromocho project concludes.

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