[ On the 5th, local time, the United States and 11 other countries reached a basic agreement at the TPP ministerial meeting, bringing to a close more than five years of TPP negotiations. Immediately, discussions surged about how China should respond. At present, it remains difficult to quantify precisely the specific impacts the TPP will have on China. What’s even more critical right now is for China to navigate confidently and steadily within the global economic landscape that it itself is helping to shape. On the eve of National Day, a conflict at a copper mine in Peru highlighted the many challenges Chinese enterprises face when investing overseas. 】

On September 28 (Peruvian time), protests targeting local mining operations broke out in the Apurímac region of Peru, leading to violent clashes between local police and protesters. According to a BBC report, local police fired shots at the protesting crowd, resulting in four deaths and 17 injuries, including eight police officers.

It's Peru again, and it's the mining industry.

Approximately 15,000 people took part in this protest, demanding that MMG—a subsidiary of China Minmetals Corporation—revise its environmental protection plan by retrofitting the copper-molybdenum processing facility located within a three-kilometer radius of the three mine openings. The revised plan stipulates that mined ore should be transported overland—by trucks and trains—to the Pacific coast, rather than via pipeline as originally planned. Meanwhile, as construction projects have led to a reduction in job opportunities, protesters are also calling on the company to hire more local residents. Currently, the Peruvian government has dispatched 1,500 police officers and 150 military personnel to the site.

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It’s not the first time that mining companies have encountered friction and faced obstacles in their investments in Peru.

Mining has long been the driving force behind Peru’s economic prosperity. However, disagreements among companies, the government, and local communities over large-scale mining projects in the Andes Mountains have been growing increasingly severe. In 2009, Zijin Mining’s Rio Blanco copper mine project was forced to halt operations due to conflicts.

On March 30 last year, a copper mine operated by Chinalco in Peru was shut down. Peruvian authorities claimed that the Chinese company had damaged the local environment during its construction and production activities. Chinalco controls the Tintaya copper mine in central Peru, a world-class mega-copper deposit with reserves estimated at tens of millions of tons. However, the mine’s development has been mired in controversy due to concerns over environmental protection and other issues. An investigation conducted by local government authorities revealed that Chinalco had illegally discharged wastewater into two lakes—Huacrococha and Huascacocha. Previously, Chinalco had also faced a hefty lawsuit demanding $300 million in compensation over the relocation of residents from the Tintaya mining area.

In the 1990s, Shougang Group acquired the Hierro iron ore mine in Peru, becoming the first Chinese mining company to enter the Peruvian market. However, over the following two decades, Shougang was fined four times for violating local environmental regulations—including discharging wastewater into the sea. In 2006, the regional government of Ica declared the mine area to be in a “state of environmental emergency.”

The recent protests and clashes over the copper mine were also triggered by environmental concerns. On Tuesday (the 29th), Peruvian President Humala declared a 30-day state of emergency in the southern Andean highlands, where military patrols have begun. The state of emergency will be enforced in six provinces across the Apurímac region and the neighboring Cuzco region.

The copper mine at the center of this recent conflict is located in Bumbas, in the Apurímac Region of the Peruvian Andes. The mine covers an area of 35,000 hectares, and currently less than 10% of it has been explored. Last August, it was acquired by a Chinese mining company for US$7.4 billion. The acquiring consortium consists of MMG (Mongolia Mining Corporation Limited), a subsidiary of China Minmetals Corporation, along with Guoxin International Investment Co., Ltd. and Central Metals Co., Ltd. The target of the acquisition was Glencore, the world’s largest energy company based in Switzerland, which has recently been mired in massive losses and a severe debt crisis.

The acquisition of the Bongas project represents the largest overseas acquisition to date in China’s history of metal mining. According to information on the website of China’s Ministry of Natural Resources, the Bongas project—invested in by China Minmetals—is scheduled to begin production in 2016. It is expected to process 140,000 tons of ore per day, with an annual output of 450,000 tons of copper, 5,000 tons of molybdenum, 90,000 ounces of gold, and 450,000 ounces of silver. The project also has an ore storage capacity of 10 million tons.

The numerous difficulties faced by Chinese mining enterprises

Peru is a medium-sized country in South America and ranks third globally in copper production, behind only Chile and China. As a country endowed with abundant natural mineral resources, Peru has long relied on resource development as the primary driver of its economic growth; mining accounts for roughly half of Peru’s total exports. The Peruvian government also aims to increase copper production by 1.2 million tons by 2016, which would enable Peru to surpass China and become the world’s second-largest copper producer. However, due to widespread local opposition to numerous projects, progress in mining operations has consistently been hampered.

Peruvian President Humala called on the protesting public to remain calm, noting that this copper mine will become the country’s largest mining operation. He also stated that the government is committed to providing social services to local residents, but did not address the environmental concerns that the public has been raising.

Ollanta Humala was elected President of Peru in 2011. Also in 2011, the $5 billion gold mining project Minas Conga was forced to halt production due to the conflict in Cajamarca, triggered by local residents' concerns over water resources. Before taking office, Humala had pledged to address the many thorny issues surrounding the mining region—but so far, it appears that his efforts have not yielded significant results.

Peru is the birthplace of the Inca civilization. Indigenous peoples, who embrace the philosophy of “good living,” make up roughly half of Peru’s national population and primarily reside in underdeveloped regions rich in natural resources. Influenced by colonial historical memories, Peruvians—who have endured colonial exploitation by European powers such as Spain—continue to carry deep historical pain in their perception of mining development. In the indigenous worldview, mining is often closely associated with exploitation and plunder.

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Li Jiameng, a researcher with the China-Latin America Young Scholars Academic Community (CECLA), published an article in the August 2015 issue of Global Finance, arguing that resource development has become the primary pillar driving Peru’s economic growth—a reliance that has been particularly pronounced over the past two to three decades. After Fujimori took office as president in 1990, he launched a reform program characterized by a free-market approach, the core of which was reducing the government’s administrative intervention in the economy and implementing comprehensive privatization. In addition, the government actively amended laws to encourage foreign investment in energy sectors such as oil, natural gas, and mining, hoping thereby to boost national fiscal revenues.

The survey shows that China’s overseas mining investments have consistently brought substantial benefits to host countries, boosting employment and economic growth. Between 2002 and May 2013, the direct revenue generated by the Epon mine in Laos, operated by Minmetals MMG, reached US$1 billion. China Aluminum Corporation and Rio Tinto Group plan to jointly develop an iron ore mine in Guinea, build a railway and a port, thereby doubling the country’s GDP.

However, Peru is a country with distinctly Latin American characteristics and a strong tradition of American culture—this is Peru’s second major national trait. In countries such as Peru, Ecuador, and Bolivia, the proportion of indigenous populations is relatively high, and Peru itself serves as a prime example. This demographic structure means that, on the one hand, historical legacies and indigenous imprints will not be easily erased; on the other hand, the rich indigenous culture will exert varying degrees of influence on the nation’s development process.

Abundant mineral resources have provided Peru’s economy with a continuous source of momentum. However, the benefits of economic growth have rarely reached the indigenous peoples living in resource-rich areas. Among Peru’s 15% of people living in extreme poverty, 71% are indigenous residents living in rural communities—most of whom have played a largely passive role in the resource-extraction process. This not only affects Peru’s domestic politics but also significantly impacts overseas companies investing in Peru, with Chinese mining firms—which hold one-third of Peru’s total mineral investments—being among the first to feel the brunt of these challenges.

Following the outbreak of the conflict, China Minmetals Corporation swiftly established an emergency response team to assign responsibilities and immediately dispatched senior executives in charge of overseas operations to lead a team to the site in Peru to address the situation. China Minmetals stated that it still hopes to engage in dialogue with the protesters. However, in its released statement, the company also noted that the protest was instigated by communities outside the immediate vicinity, rather than by the community directly adjacent to the Las Bambas project. The reported reasons for the protests include issues related to the already approved environmental impact assessment, as well as several political and social concerns affecting the broader region.

The Bongamas project, in which Minmetals Resources invested last year, was originally expected to begin formal production in 2015. However, this year’s announcement revealed that the project has now been postponed to 2016 for official commissioning. Recently, a conflict has erupted, casting further doubt on whether the project will be able to meet its scheduled production timeline. In an interview with the media, the company stated that during the early stages of the acquisition negotiations, it had already recognized that the project’s timetable and costs faced significant risks. At the time, one major concern was that the relocation and resettlement costs for residents living on the original site of the copper mine could exceed expectations. Indeed, issues related to resident relocation and resettlement had previously led to the project being put on hold and resulted in increased capital expenditures.

For China, which is today actively pursuing its Belt and Road strategic layout, the obstacles encountered by Chinese mining companies in Peru over the past several years represent not only challenges but also opportunities. Resolving the current conflicts in Peru goes beyond simply ensuring the smooth commissioning of the Minmetals Group’s operations there.

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