BY ENRIQUE GHERSI
In recent weeks, Peru has seen violent protests on the part of local communities against foreign investors involved in mining. Some people advocate raising taxes on the mining companies, while others have promoted voluntary cash donations on the part of foreign investors to placate the protestors. But the social crisis that affects mining in Peru will not be resolved with taxes or alms, because it is the consequence not of the lack of state intervention but of its excess.
The crux of that crisis is the fact that the peasants who own the surface of the land do not own the subsoil, which holds the vast mineral riches of our country.
Because of legal artifice arising from a false interpretation of Spanish law prevalent in Peru, the owner of the subsoil is the State, which confers it, in concession, to the mining companies interested in exploiting it.
This leads to the revenue from mining being appropriated by the State and by the mining companies. Mute witnesses to this are the poorest peasants in our country—the same ones who, if they owned the subsoil, would be among the richest people in the continent.
The laws on mining have expropriated the subsoil from the poor, who, while being the owners of the soil, must content themselves with watching the enrichment of others. This expropriation necessarily provokes violence and resentment, conditions which create an ideal environment for the most diverse political interests to do their proselytizing in the open.
From the days of the Roman Empire, a principle of universal law has been that the owner of the soil extends his dominion up to the skies and down to the subsoil, limited only by his convenience and other people’s rights.
If this simple principle were applied to our mining legislation, the peasants and the indigenous communities would not have to resort to violence to obtain crumbs of false charity from bureaucrats and businessmen, but instead would be the legitimate titleholders of the property containing the mineral deposits, and therefore would be the principal beneficiaries of their production.
Once they have become property owners, it would be their decision whether to sit on the mineral—something they hardly would do if they want to profit from it—or whether to enter into partnership with a mining company, or whether to turn over the deposits to third parties for exploitation, or whether to sell or lease them to whomever they think best.
A question I’ve asked my students for the past 20 years is: what is the difference between finding crude oil in your garden in Talara, or in Houston? The answer: if you find it in Houston, you’re rich, because the oil is yours; if you find it in Talara, you’re poor, because it belongs to the government.
Since resources are scarce, the allocation of property rights on the deposits has not only economic consequences, but also political and social ones.
Thus, an inefficient allocation of rights provokes social violence and confrontation. History is full of such examples: urban invasion by squatters, seizure of land by peasants, and today, the mining crisis.
The solution, then, is to privatize the subsoil and turn it over to the legitimate owners of the soil, the peasants and the Andean communities.
Let them benefit from the enormous profits of mining, without the corrupt hypocrisy of social aid or the disdain of charity.
The miners will know how to do business with the new owners. The State will collect its taxes. And, in a short time, emerging among the humblest Peruvians will be a new bourgeoisie, free of manipulation and the owner of its own destiny.
Enrique Ghersi is an adjunct fellow with the Independent Institute and President of the CITEL think–tank. Republished with permission from the Independent Institute.