Conflict over Natural Resources

Important Supplier of Raw Materials

Peru's importance to the Federal Republic of Germany, as a supplier of natural resources is hardly acknowledged in public discourse, which is usually focused on energy resources, such as oil and natural gas. Peru has the world's largest silver reserves, is third in copper and zinc deposits, is fourth in lead and is fifth in the world's tin reserves. For Germany, which is desperately in need of all these resources to nourish its prosperity-bringing industry, Peru is its most important source of silver and copper, accounting respectively for 60 and 24 percent of Germany's imports. According to a recent analysis published jointly by the German government's Germany Trade and Invest (gtai), the Federal Agency for Geological Studies and Natural Resources (BGR) and the German-Peruvian Chamber of Industry and Commerce, Peru accounts also for a significant portion of German imports of tin (24%), zinc oxide and zinc peroxide (19%) as well as lead (14%).[1] Its considerable supply and its enormous reserves for the future, makes Peru very important in the eyes of German industry.

China as a Rival

Germany now feels it must take more initiative, particularly because a booming China is strongly intensifying its business connections to Peru and has considerably strengthened its position in the country's raw materials sector. The People's Republic of China concluded a free trade agreement with Peru in 2009, and trade and investments have been rapidly growing ever since. Already in 2011, China rose to the status of Peru's most important trading partner. Its investments, experts estimate, have grown to about US $2 billion in 2012, and the same experts are predicting that within 6 - 7 years, it could grow tenfold.[2] In light of the rapid growth of the Chinese economy, this estimate seems realistic. The People's Republic of China is particularly expanding its trade in raw materials. Last April, a Chinese corporation bought out the Peruvian Glencore Xtrata Copper Mining Company for US $6 billion. In May, the China National Petroleum Corporation (CNPC) announced that subsequent to the takeover of the Peruvian subsidiary of the Brazilian oil giant (Petrobras), it intends to invest at least 2 billion Euros in the country's raw materials sector for the next few years.

Germany's "Raw Materials Strategy"

In October 2010, the German government passed a "Raw Materials Strategy" (german-foreign-policy.com reported [3]) aimed at insuring German industry's long-term top position on the world market in global competition for raw materials - especially in relationship to China. That strategy also calls for the conclusion of so-called raw material partnerships with important suppliers - contractual accords, to be reached, because they may no longer be relied upon solely through business relations. These agreements have currently been reached with Mongolia and Kazakhstan. They explicitly call for "cooperation between companies of both countries for development, exploitation, processing and use of mineral resources." Berlin has also concluded a treaty with Chile on cooperation in the exploitation of natural resources, which is also referred to as a "Raw Materials Partnership," even though it is not quite as extensive.

Supply of Raw Materials

Last Monday, the "Raw Materials Partnership" accord, which is explicitly oriented on the terms of the wide-ranging accords with Kazakhstan and Mongolia, was reached with Peru. It stipulates that a "German-Peruvian government working group on the cooperation in raw materials, industrial and the technological sectors" will be created, with whose help "the supply of raw materials will be assured for the German economy." It further states that "through the cooperative efforts of enterprises and research institutions, potentials shall be developed for Germany's sustainable access to raw materials." The German government also has assured for itself the right to "support" - not nearer stipulated - Lima in any "improvements of legal regulations for the mining sector."[4]

Export Business

Parallel to this partnership accord, Berlin seeks to also create export possibilities for German enterprises to Peru's mining sector and its associated branches. The mining boom has "since 2009, significantly" reinforced the country's need for machines, writes the newest gtai study on Peru. In 2013, the "sale of construction and mining equipment," alone, has meant business in the triple-digit millions for German companies, which could "grow over the next few years at an average of 10%." In addition, the mining boom requires "the corresponding development of the infrastructure in transport, energy and water, to avoid being hampered by intermediate and long-term infrastructural bottlenecks." This also "offers business opportunities for German enterprises." The gtai also senses "business opportunities" because mine operators, "in answer to demands from the population and the government," must often "invest heavily in the infrastructure of the surrounding area," which also opens the door for possible contracts for German firms.[5] German exports to Peru have risen to nearly a billion Euros in 2013 - nothing spectacular, when compared to other German exports, but still useful for being able to import Peru's raw materials, while nearly avoiding a minus on the foreign trade balance sheet.

Social Conflicts

While German industry is praising the new "raw materials partnership," the catholic relief organization Misereor is voicing sharp criticism. "In Peru, human rights violations and social conflicts have skyrocketed" in recent years "with the large open pit mines", reports Misereor: "The harsh police crack down on peaceful protests against the mining projects" repeatedly leads to "deaths and injuries." The mining also seriously damages the ecology. The "raw materials partnership" has been signed right at the time, when the "Peruvian government was initiating a law package to water down the already deficient regulations on the resource sectors." This is sharply criticized by Misereor's Peruvian partner organizations, because it is further lowering the "already inadequate environmental standards in the mining sector." The "raw materials partnership" is signaling the Peruvian government that the expansion of the raw materials sector takes priority over the urgently needed regulations." Misereor warns, "we fear an aggravation of social conflicts around the mining projects" - also thanks to Berlin's "raw materials partnership."[6]

[1] Germany Trade and Invest: Peru. Herausforderungen und Chancen für eine nachhaltige Entwicklung im Rohstoffsektor. Juni 2014.
[2] China Investment in Peru to Jump 10-Fold by 2018, Castilla Says. www.bloomberg.com 11.07.2012.
[3] See Struggle for Natural Resources (II).
[4] Deutsch-Peruanische Rohstoffpartnerschaft. www.bmwi.de 11.07.2014.
[5] Germany Trade and Invest: Peru. Herausforderungen und Chancen für eine nachhaltige Entwicklung im Rohstoffsektor. Juni 2014.
[6] MISEREOR kritisiert Rohstoffabkommen mit Peru. www.misereor.de 14.07.2014.