When conflicts with the indigenous population break out, that instability adds to costs.
The crisis that broke out recently in Peru involved the rejection by the native population of the Amazon region of several government decrees, backed by president Alan Garcia, making it easier for companies to log, farm, explore for oil and natural gas, and develop other natural resources.
The most recent round of conflicts began in April, when the Indian population of Peru’s Amazon region rejected a series of decrees promoted by García. The decrees were drafted in 2008 within the framework of the U.S.-Peru Free Trade Agreement. They make it easier to privatize natural resources in the Amazon region, which is rich in many commodities.
The native population demanded that authorities revoke the decrees, claiming they threatened their ancestral, communal rights in the region. But the government disagreed and so the 12 largest tribes organized a series of protest demonstrations, which included shutting down roads, closing gas pipeline valves and pumping stations, and blocking river navigation. The government reacted strongly to the demonstrations, arguing that the decrees “regulated” more effectively the management of natural resources and the areas preserved exclusively for the native population. García also emphasized that Peru needs foreign capital to develop its economic potential.
The decisive moment in the conflict took place early in June, when 10 natives and 24 policemen died in an armed confrontation. More than 100 people were wounded. Ultimately, the Peruvian parliament voted to revoke two of the nine decrees handed down by the authorities [in the executive branch]. That may have quieted down the indigenous movement, but the native population is still waiting for revocation of the other statutes.
Severely criticized for the way he managed the political crisis, García now worries about the country’s international image -- perhaps with good reason. Investors are hesitant to locate companies in countries with such conflicts, says Jose Yáñez, an economics professor at the University of Chile. As a result of the high-profile conflicts, “Ultimately, there will be a reduction in domestic and foreign investment, job generation, manufacturing production, and the economic welfare of the country,” he argues.
Cristina Moyano, a history professor at the University of Santiago in Chile (USACH), thinks the crisis in Peru is best understood “in the light of a long historic conflict involving the building of the nation-state in Latin America, which excluded the indigenous population to a great extent.”
Ramiro Escobar, a communications professor at UPC, the Peruvian university of applied sciences, agrees. Because they’ve been largely excluded from decisions on development, the indigenous groups have grown on the margins of these states, Escobar says. “When large projects are created, especially those involving the extraction of natural resources, these communities feel that it is an act of aggression against their identity and territory, which are of great importance for these groups.” Moyano notes further that the native population sometimes reacts violently against the state and towards multinational companies, because the natives feel excluded from the debate “under the supposition that they oppose economic progress.”
Every time a conflict erupts between the authorities and the native population, it involves a large-scale business project that that indigenous population views as compromising their interests, Moyano says. “The government gets involved too late, and merely reacts. For this reason, most negotiations for achieving a consensus do not produce good results.” In Peru, the indigenous communities are not prepared to give up their rights to their land, and they will have to be carefully managed by the Peruvian president. “If Alan García wants to avoid a more violent outbreak that unleashes a civil war, he will have to take off his hat, lower his forehead, and listen,” one expert told Bloomberg News recently.
ISOLATION AND INTEGRATION
In some countries, native groups have kept themselves isolated, others have integrated themselves into the larger economy to varying degrees, Yáñez says. Where there is more integration, the reactions of native populations to business initiatives viewed as threatening their rights often are voiced first through legal, institutional and social channels. Sometimes, “social organizations and foreign citizens are involved … and act as advisors and even as leaders.” Only as a last resort, do they call for more violent means.
And in the more developed areas, says Luis Ortega, professor of history at USACH, the indigenous community has successfully promoted its views through the “skillful use of information technologies and networks of non-governmental organizations.” In Peru, for example, there are striking differences in how the Andean and Amazonian indigenous groups respond to challenges. The Andean indigenous groups are now known as “campesinos” – or farmers -- since the agrarian reforms of 1969. In contrast, the Amazonians have always been more isolated -- not even the Incas managed to conquer them. “That explains in part why this latest strike, in which Amazonian indigenous groups played by and large the main role, was so resistant.”
The reaction of native populations in Peru tends to be more violent than in Chile, or Argentina, Moyano says. But indigenous social movements in Chile tend to last longer. “For a long time, the opposition of the Mapuche community in Chile to initiatives involving forest product companies in the south has been emblematic, along with the rejection of the construction of hydroelectric power plants,” he notes. One example of that was a plan for hydroelectric power plants for Endesa Chile within areas that were home to the Mapuche-Pehuenche people in southern Chile. That led to a conflict that lasted several years (1997 to 2004) until the Mapuches and Pehuenches tribes were finally dislodged.
In Honduras and Ecuador, the Native American community has effectively opposed the mining industry, Escobar explains. Still, in early 2009 Ecuadorian president Rafael Correa approved a new law for the mining sector amid demonstrations by the native population -- the Quechuas. The group rejected the new mining regulation because it authorized industrial development in territories that they considered their property. The Quechuas argued, moreover, that the development was going to negatively impact their crops, water resources and the countryside.
In the Brazilian Amazon, an indigenous group won a large judgment after taking over some territory against the wishes of the authorities. This latest mobilization in the Peruvian Amazon has created the strongest backlash.
LESSONS FOR COMPANIES
While investment -- domestic or foreign -- is indispensable for any economy, investing companies require a climate of labor, economic, political and social stability to operate efficiently, Yáñez says. When conflicts with the indigenous population break out, that instability adds to costs. Given the number of conflicts that have broken out over the years, governments would do well to create institutions for mediating disputes to ensure sound economic conditions for local development. “For example, in 1993 Chile issued the Indigenous Law, and created CONADI, the National Corporation of Indigenous Development,” Yáñez adds. “The mission of that institution is to promote and execute governmental policies for the integration of the indigenous community.”
Escobar, however, believes existing laws already offer a sufficient guide to protect native communities today, but the rules are not followed, at least from the native population’s point of view. The natives are now more aware of their rights, including protections such as those offered by Word Trade Organization conventions, which require governments to consult with local communities before moving ahead with projects on land owned by the indigenous population. This fundamental disconnect makes more confrontations likely until new mediation -- or arbitration -- guidelines become accepted.
Republished with permission from http://www.knowledge.wharton.upenn.edu -- the online research and business analysis journal of the Wharton School of the University of Pennsylvania.