Across the Andean region, foreign companies interested in natural resource extraction are clashing with indigenous communities. The main problem is inadequate government legislation concerning appropriate consultation processes; which, in turn, threatens to hamper investment, and creates risk for governments dependent on resource revenues.
Andean governments have long looked to natural resource extraction projects as major economic drivers. From 2002 to 2013, the Peruvian economy nearly doubled, which experts attribute to an influx in foreign investment in the mining industry, with the mining sector accounting for nearly 60% of Peru’s exports by 2011.
In the Peruvian highlands alone, $50 billion in mining investments are at stake. Likewise, in Ecuador, President Rafael Correa has encouraged oil extraction in the far reaches of the Amazon, and Colombian President Juan Manuel Santos has declared mining as one of the locomotives of the Colombian economy (oil accounts for 42% of exports). Furthermore, Bolivian President Evo Morales has made moves to nationalize the gas and mining sectors in order to extract higher revenues.
Andean indigenous peoples key regional stakeholders
But as oil extraction, mining, and infrastructure projects in the region escalate, so does the potential for social conflict with the region’s indigenous communities.
There are millions of indigenous peoples living in the Andes and they own significant chunks of land: e.g. 30% land in Colombia. These indigenous communities technically have significant protections under both international law and national constitutions. Despite this, a lack of guidance from Andean governments on what exactly those rights mean in relation to extraction projects has left companies scrambling, threatening to hamper investment.
Under ILO Convention 169, indigenous communities have the right to consulta previa, or previous consultation about projects that may affect their communities. Governments and companies are required to discuss the potential environmental and societal effects of projects with indigenous communities. The latter is very important, as projects can severely damage the social fabric of indigenous communities, as their identities are frequently strongly tied to the land.
Unfortunately, this international legal standard has a mixed implementation record throughout the Andes region.
For instance, in Peru and Ecuador, while the right to consulta previa exists, the government can override the outcome of any such consultation. In Colombia, the government has only recently begun carrying out consultations on a vast scale, and there is no statutory law, only a presidential directive about the necessity for such consultation, leaving the protection of indigenous rights very much in the hands of the Constitutional Court.
Furthermore, there have been many complaints, and subsequent court cases, across the Andean region. Such complaints are even reaching the Inter-American Court of Human Rights, with indigenous groups arguing that consultations are not being carried out properly: either without prior notification, not in a language the indigenous people speak, or only with a few members of the community present, thus leading to corruption.
The result has been a mix of directives and court orders, which do not lay out a clear guide on how to conduct a consulta previa, but solely refer to overriding norms of a free, fair, and informed consultation. No true legislative framework exists in any country that upholds indigenous rights under international law.
Lack of consultation standards a massive deterrent to investment
The effects of such a dearth of clear, universal legislation is harmful not only to Andean indigenous communities, but also for companies seeking to do business in the region.
Without knowing what steps they must take to properly consult an indigenous community, companies put themselves at risk of having to make massive reparations payments. And even if the consultation yields no negative results, there is uncertainty around planning and budgeting consultations, which can result in high costs and act as a deterrent.
There is also a greater potential for social conflict, which could turn violent and result in lost revenue, work stoppages, lost opportunities for expansion, and work time lost on conflict resolution. Additionally, without proper legislation, courts can halt projects already underway that companies had previously thought were above board, creating a further risk for companies. These concerns are not without validity and have already resulted in a halting of mining and infrastructure projects in Colombia.
Since Andean economic growth is closely tied to natural resource extraction and foreign investment, it is vital that regional governments ensure that credible regulatory regimes are in place, which includes mitigating the risk of social conflict with indigenous communities. This risk threatens to exacerbate the Colombian crisis, where the peso is in freefall and net foreign investment in the first quarter of 2015 is down 25% from the same period in 2014 due to a dramatic drop in investment into the oil and financial sectors.
Peru’s economy is also struggling, and problems with investment in the mining sector could have significant effects. The current lack of proper legislative frameworks surrounding consulta previa is damaging to all parties: the indigenous people, the companies, and the governments whose economies are dependent upon foreign investment in the petroleum and mining sectors.
It is therefore imperative for Andean governments to create better legislation to safeguard both their people and themselves.