An Assessment of the Environmental and Social Impacts of Chinese Trade and FDI in Bolivia Pt 2

  3. The  Bolivian  Mining  Sector Division  between  Private  and  Public2 Sector   The  mining  industry  in  Bolivia  is  structured  by  two  sectors:  state-­‐owned  and   private.     State  Sector   COMIBOL  was  one  of  the  most  important  state-­‐owned  enterprises  in  the  mining   sector  supply  chain  before  the  reforms  introduced  in  1985,  which  decentralized  it   and  restricted  its  functions  to  managing  joint  venture  contracts,  leases  and  services   with  mining  companies  or  cooperatives  (Espinoza,  2010).  Since  2006,  Bolivia  has   taken  the  first  steps  to  recover  natural  resources.  With  S.D.  28901,  COMIBOL   assumed  total  control  of  the  mining  deposits  of  the  Empresa  Minera  Huanuni,   canceling  the  contract  with  the  private  company  RBG  Minera  S.A.     In  2007,  through  Law  3720,  COMIBOL  was  empowered  to  participate  directly  in  the   productive  chain  through  prospecting,  exploration,  mining,  concentration,  smelting,   refining,  commercialization  of  minerals  and  metals,  as  well  as  managing  areas   declared  to  be  fiscal  reserves,  in  order  to  increase  the  State  presence  in  the  mining   sector  (Sanabria,  2009).  Currently,  the  company  performs  extractive  mining   operations,  producing  600  to  700  tons  per  month  of  tin  concentrates  whose  value  is   about  $620  million  USD,  and  supporting  4,560  jobs.   However,  despite  COMIBOL’s  expansion,  the  institution  has  presented  several  cases   of  corruption,  among  the  most  well  known  being  the  case  of  the  Mutún  Steel   Company,  where  COMIBOL  had  hidden  information  about  the  price  premium  on  the   purchase  of  land  for  the  concessionary  Indian  company  Jindal,  with  a  cost  to  the   State  of  more  than  $2  million  USD  (http://www.noticiasfides.net).     Private  sector   The  structure  of  the  private  sector  within  the  Bolivian  mining  industry  consists  of   two  subsectors:  medium  and  small-­‐scale  mining.   Medium-­‐sized  mining  is  organized  through  the  National  Association  of  Medium-­‐ Scale  Mining  (ANMM)  involving  14  active  companies.  The  goal  of  ANMM  is  to  ensure   the  development  of  the  mining  industry  and  uphold  its  interests.  This  sector,  unlike   small  industry,  has  ample  access  to  financing  from  the  banking  system,  allowing   better  technology  and  other  aspects  that  are  critical  to  minerals  operations.   Small-­‐scale  mining  is  divided  into  two  categories:  small  miners  and  mining   cooperatives.  Cooperatives  are  self-­‐managed  units  that  operate  in  private  areas  and   leased  sites  (originally  owned  and  managed  by  COMIBOL).  They  are  grouped  into   regional  and  departmental  associations,  which  make  up  the  National  Federation  of   Mining  Cooperatives  (FENCOMIN).  FENCOMIN  includes  about  635  mining   cooperatives  that  bring  together  approximately  65,890  members.  An  important   subsector  includes  producers  in  arid  places,  riverbeds  and  producers  of  boron  in  the   Salar  de  Uyuni,  which  are  grouped  into  Regional  Chambers  and  Department  of   Mining,  which  make  up  the  National  Mining  Chamber  (CANALMIN).   Workers  of  both  medium-­‐scale  mining  and  small-­‐scale  mining  are  organized   through  42  unions  in  the  Federation  of  Mine  Workers  of  Bolivia  (FSTMB).   Institutional  structure   The  Ministry  of  Mining  and  Metallurgy  is  primarily  responsible  for  the  definition   and  implementation  of  policies  and  standards  that  form  the  framework  for  the   metallurgical  mining  activities  in  Bolivia.       The  Mining  Code  establishes  the  Superintendent  of  Mine  as  the  highest  authority  of   the  administrative  jurisdiction  mining.  The  superintendent’s  powers  are:  a)  To  hear   and  resolve  appeals  filed  against  decisions  of  the  regional  superintendents,  who  are   responsible  for  granting  mining  concessions  on  behalf  of  the  state  and  resolving   administrative  case  opposition  under  invalidity,  expropriation,  bondage,  resignation   and  resource  recalls;  b)  To  ensure  proper  implementation  of  mining  jurisdiction;   and  c)  To  appoint  or  remove  officials  of  the  general  superintendence  and  regional   superintendent  offices.   Legal  Framework  for  Mining   Mining  activities  in  Bolivia  are  regulated  by  two  sets  of  rules:  general  and   complementary.   Among  the  general  rules,  until  May  2014  the  basic  regulation  was  the  Mining  Code,   established  in  1997  (Law  1777).  In  May  2014,  the  Bolivian  government  established   the  new  Law  of  Mining  and  Metallurgy  535  with  the  goal  of  diversifying  investments   and  supporting  the  entire  supply  chain  of  mining  industrialization.   The  main  changes  in  the  Law  535  from  the  previous  law  (1777)  are  as  follows:   • Historically,   mining   law   in   Bolivia   was   developed   by   foreign   consultants   and established   by   political   imposition,   but   according   to   the   Bolivian   government, the   new   law   is,   for   the   first   time,   the   result   of   consensus   among   the representatives   of   the   small,   cooperative,   private   and   state-­‐owned   mining sectors.  On  May  28,  2014    at  a  roll-­‐out  event  for  the  new  law  in  the  Department of  Oruro,  Acting  President  Álvaro  García  Linera  said  that  this  law  had  the  “smell” of   the   Bolivian   worker,   after   three   years   of   building   consensuses   between   the representatives   of   the   operators   of   the   small,   cooperative,   private   and   state mining  (ABI,  May  28,  2014). • Law  535  prioritizes  mining  expansion  through  greater  logistical  and  tax  facilities (exemption  from  payment  of  all  taxes,  except  royalties)  for  cooperatives. • It   expands   the   authority   of   the   Ministry   of   Mining   and   Metallurgy   over   mining and   the   resolution   of   mining-­‐related   conflicts,   and   gives  the   Ministry   of   Mining authority  for  issuing  Environmental  Licenses. • In   order   of   hierarchy,   the   State   mining   sector   (COMIBOL)   is   given   priority, followed  by  local  private  operators  and  finally  foreign  operators. • Unlike   the   previous   law,   under   the   new   law   mining   concessions   are   not transferable. • It   establishes   that   mining   activities   must   fulfill   a   socio-­‐economic   function   and comply  with  principles  of  sustainability. Turning  to  complementary  regulations,  the  most  important  is  Environmental  Law   1333,  issued  in  1992,  which  states  that  mining  and  extractive  operations  should  be   developed  with  a  consideration  for  the  comprehensive  utilization  of  raw  materials,   waste  treatment,  and  the  safe  disposal  of  tails,  tailings  and  connectors.  In  addition,   during  and  after  operations,  firms  must  plan  for  the  recovery  of  affected  areas  in   order  to  reduce  and  control  erosion,  stabilize  the  land,  and  protect  water  sources.  It   also  sets  out  that  "in  each  of  its  operations  or  mining  concessions,  dealers  or  mine   operators  must  have  an  environmental  license  for  their  mining  activities"  (Art.  2).   The  new  Constitution  of  the  Plurinational  State  of  Bolivia,  established  in  2009,  is   another  important  aspect  of  the  legal  framework.  Among  its  most  relevant   statements,  it  provides  that:   • "Natural  resources  are  directly  owned  by,  and  within  the  indivisible  and essential  domain  of,  the  Bolivian  people  and  will  be  for  the  State  to  administer  in the  service  of  the  collective  interest."  (Art.  349,  No.  1,  authors’  translation). • "The  State  will  assume  oversight  and  management  over  exploration,  extraction, processing,  transportation  and  marketing  of  strategic  natural  resources  through public,  cooperative,  or  community  bodies,  which  may  in  turn  contract  with   private  companies  and  form  joint  ventures."  (Art.  351,  No.  1,  authors’   translation).   • "The   State   may   enter   into   partnership   with   legal   entities,   be   they   Bolivian   or foreign,   for   the   use   of   natural   resources.   It   must   ensure   the   reinvestment   of profits  in  the  country"  (Art.  351,  No.  2,  authors’  translation). • "The  use  of  natural  resources  in  a  given  territory  will  be  subject  to  a  consultation process  with  the  affected  population,  called  by  the  State,  which  will  be  free,  prior and  informed.  Citizen  participation  is  guaranteed  in  the  process  of environmental  management  and  conservation  of  ecosystems,  in  agreement  with the  Constitution  and  the  law.  Within  peasant  nations  and  peoples,  shall  take place  in  accordance  with  their  own  rules  and  procedures"  (Art.  352,  authors’ translation). Tax  policy  framework   The  mining  sector  tax  system  is  established  in  the  Mining  Code,  and  consists  of  three   items:  Mining  Royalties  (MR),  the  Profit  Taxes  on  Company  Profits  (IUE)  and  the   windfall  tax  in  addition  to  IUE  (AA-­‐IUE).  Another  group  of  taxes  includes  the  Value   Added  Tax  (IVA),  Transactions  Tax  (IT),  and  the  Specific  Consumption  Tax  (ICE).   Characteristics  of  the  tax  law  include:   • Mining   royalties   (MR)   are   defined   according   to   the   type   of   mineral   and   prices, and   are   on   average   5%   on   gross   sale   value.   However,   for   the   cooperative   mining sector   it   is   reduced   to   3%   (in   keeping   with   the   new,   more   favorable   legal framework   given   to   the   cooperative   sector   by   the   new   political   Constitution   of the  State,  in  light  of  its  socio-­‐economic  function)  (ERBOL,  May  2014) • 85%  of  MR  revenue  goes  to  Departmental  governments,  who  must  invest  at  least 10%   in   miningp related   industrialization,   prospecting,   exploration,   and environmental  monitoring.  The  remaining  15%  goes  to   municipal  governments. • The  cooperative  mining  sector  is  exempt  from  IUE,  IVA,  ICE  and  IT  taxes. • The  annual  cost  per  grid  for  concessions  less  than  6  years  old  is  $25  USD. • The   IUE   is   25%   of   annual   net   profit   and   is   applicable   to   all   companies   that extract,  produce,  benefit,  refined,  and/or  commercialize  minerals  and/or  metals. • The  AAp IUE  is  12.5%  of  annual  net  profit.  The  AAIUE  must  be  paid  for  the   mining companies  that  have  had  windfall  profits  from  price  spikes  above  a   certain  level, such  as  $400  USD  per  troy  ounce  of  gold,  $5.55  USD  per  troy   ounce  of  silver,  or$2.90  USD  per  pound  of  tin. MR  revenue  has  grown  in  recent  years,  from  its  2000  level  of  about  $8  million  USD   (0.1%  of  GDP)  to  $168  million  USD  in  2011  (0.7%  of  GDP).   Environmental  Management   Environmental  issues  in  Bolivia  are  closely  related  to  mining,  which  contributes  to   the  continued  deterioration  of  ecosystems,  which  in  turn  negatively  impacts   socioeconomic  activities  (Gutierrez,  2009).  According  to  Morales  (2010),  pollution   from  refineries  or  steel  plants  around  the  discharge  becomes  contaminated  with   sulfur,  chemical  reagents,  and  other  organics  materials,  whose  negative  effects   directly  and  indirectly  impact  society  and  the  surrounding  ecosystem.   In  spite  of  the  legal  environmental  protections  listed  above  (including   Environmental  Law  No.  1333,  which  dictates  that  mining  projects  must  consider   treatment  factors  and  possible  pollution  sources,  and  plan  for  remediation,  and  the   Mining  Code  and  Mining  Law  535,  which  state  that  mining  activities  should  adhere   to  principles  of  sustainable  development),  evidence  indicates  that  mining  pollution   is  still  rampant.  In  recent  years  there  have  been  several  studies  from  many   disciplines  regarding  the  environment  impacts  of  mining  in  Bolivia.  The  results   show  significant  environmental  liabilities.  Some  medium-­‐scale  mining  companies   have  improved  their  practices,  but  not  all  of  them.  The  cooperatives,  which  have  an   overwhelming  number  of  members  and  exploit  thousands  of  camps,  do  not  practice   environmental  remediation.  Also,  according  to  recent  data  in  El  Potosí  (July  2014),   there  are  450  cooperative  mining  companies,  but  of  those  80%  do  not  have  an   environmental  license  and  are  operating  illegally.  For  its  part,  the  public  COMIBOL   has  not  set  a  strong  example  in  its  operation  of  Huanuni,  which  had  net  income  of   $70.4  million  USD  through  2009;  it  has  not  yet  built  a  tailings  dam  to  address  major   contamination  affecting  about  40  communities.  (Sanabria,  2009;  MIchard  J.,  2008;   CEDIB,  2012)   One  of  the  merits  attributed  to  royalties  from  the  environmental  point  of  view  is   that  royalties  are  in  fact  an  “ad  valorem”  tax  on  production.  Under  the  assumption   that  extraction  costs  increase  with  the  amount  that  has  already  been  extracted,  this   type  of  tax  reduces  the  rate  of  mineral  extraction  and  its  associated  pollution   externalities.  However,  the  IUE  does  not  have  a  depletion  allowance  and  so  it  does   not  alter  the  rate  of  extraction  or  associated  externalities  (Muzondo,  1993).     The  importance  of  the  mining  sector  in  Bolivia   Bolivia  is  one  of  the  least  developed  and  poorest  countries  in  Latin  America:  45%  of   its  population  lives  below  the  national  poverty  line,  with  21%  living  in  extreme   poverty  (INE,  2011).  The  numbers  are  even  worse  for  rural  areas,  with  61%  in   poverty  and  41%  living  in  extreme  poverty.   Historically,  Bolivia  has  seen  a  series  of  resource  booms  exploited  by  foreigner   interests  and  by  a  tiny  Bolivian  elite:  silver,  then  tin,  then  oil  and  gas.  The  real   benefits  of  the  wealth  taken  from  the  ground  went  not  to  the  Bolivian  people  as  a   whole,  but  to  others.  For  example,  the  rise  of  the  silver  at  the  end  of  the  19th   century  left  Bolivia  an  average  of  just  4%  of  the  value  of  what  was  exported  from  the   country.  The  present  case  appears  to  be  an  extension  of  this  historical  trend.  State   MR  and  IUE  revenues  from  1990  to  2005  reached  just  2.3%  of  the  value  of  mineral   exports.  From  2006  to  2010  it  rose,  but  to  just  8%;  from  $8.686  billion  USD   exported,  the  State  received  just  $729.4  million  USD  (Diaz,  V.  2011).  Moreover,   according  to  ECLAC  (2012),  in  Bolivia,  every  million  dollars  invested  from  FDI   supports  just  one  position  of    direct  employment,  less  than  the  2.5  supported  in   South  America  overall  and  the  6.4  supported  in  the  Caribbean.  Thus,  the  adverse   effects  of  FDI  concentrated  in  natural  resources  exploitation  outweigh  the  benefits   in  revenue  and  employment.    Such  a  curious  outcome  for  a  country  extremely  rich  in   natural  resources  but  poor  in  terms  of  the  benefits  received  from  them  is  referred  to   as  the  “Resource  Curse”  in  the  literature.  The  Resource  Curse  also  implies  economic,   social  and  political  damage,  which  is  soon  joined  by  environmental  destruction,   depending  on  the  source  of  the  natural  resource,  and  negative  multiplier  effects   from  that  destruction.     The  mining  sector’s  share  of  GDP  is  crucial  to  the  Bolivian  economy,  as  illustrated  by   Figure  8.  From  1995  to  2005,  the  mining  sector  has  contributed  between  3.0%  and   4.8%  of  Bolivia’s  GDP,  but  from  2006  to  2009  it  began  growing  thanks  to  higher   international  prices  (INE,  2009).  The  sector  shows  a  declining  trend  during  recent   years,  dropping  from  9.6%  in  2011  to  6.3%  in  2013.  This  decline  reflects  a  collapse   in  prices  and  production  due  to  the  global  financial  crisis.  This  boom  in  prices  and   production  is  mainly  due  to  the  demand  of  raw  materials  by  emerging  economies   such  as  China.   FIGURE  8:  Bolivia,  Mining  As  A  Share  Of  GDP,  2000  -­‐  2013   9.6%   10%   8.6%   7.9%   8%   Percent  of  GDP   6.3%   6%   5.2%   4.8%   4%   3.0%   3.5%   3.2%   2%   0%   Source:  Authors’  calculations  using  INE  data.   As  shown  in  Table  1,  mining  revenues  in  the  1990s  were  very  low.  However,   starting  in  of  2005  this  changed,  with  royalty  revenue  reaching  $168.0  million  USD   and  tax  revenue  reaching  $338.3  million  USD  in  2011,  due  to  a  favorable  trends  in   mineral  international  prices.   TABLE  1:  Bolivian  Mining  Royalties  And  Taxes  1990-­‐2011   1990   1991   1992   1993   1994   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010  p   2011  p   In  Millions  of  USD   Royalties   IUE,  Other  Taxes    9.5    7.5    8.1    3.5    4.6    0.1    4.9    1.3    6.2    1.1    11.0    0.6    8.5    3.3    7.4    5.8    8.0    10.7    6.7    11.8    6.3    12.5    6.2    20.5    9.9    23.5    14.3    44.2    48.0    57.2    68.7    96.5    94.1    132.5    82.6    112.9    120.7    239.4    168.0    338.3   Total    9.5    7.5    8.1    3.5    4.8    6.2    7.3    11.7    11.8    13.2    18.7    18.5    18.9    26.8    33.4    58.5   105.2   165.2   226.7   195.5   360.1   506.3   In  Percent  of  GDP   Royalties   IUE,  Other  Taxes   0.2%   0.1%   0.1%   0.1%   0.1%   0.0%   0.1%   0.0%   0.1%   0.0%   0.1%   0.0%   0.1%   0.0%   0.1%   0.1%   0.1%   0.1%   0.1%   0.1%   0.1%   0.2%   0.1%   0.3%   0.1%   0.3%   0.1%   0.5%   0.4%   0.5%   0.5%   0.7%   0.6%   0.8%   0.5%   0.6%   0.6%   1.2%   0.7%   1.4%   Total   0.2%   0.1%   0.1%   0.1%   0.1%   0.1%   0.1%   0.1%   0.1%   0.2%   0.2%   0.2%   0.2%   0.3%   0.4%   0.6%   0.9%   1.3%   1.3%   1.1%   1.8%   2.1%   P:  Preliminary  estimate.  Source:  Statistics  of  the  Ministry  of  Mining  and  Metallurgy,  IMF  WEO  database.   Mineral  exports,  shown  in  Figure  8,  have  been  growing  rapidly.  Zinc,  tin  and  silver   have  grown  most  quickly,  in  response  to  higher  European  demand  as  well  as  higher   international  prices,  while  gold,  copper,  lead  and  antimony  recorded  major  declines.   The  highest  value  of  exports  came  in  2011  (14.4%  of  GDP)  as  a  result  of  a  global   boom  in  raw  materials,  starting  in  2004.     FIGURE  9:  Exports  of  Bolivian  Minerals   14.4   15   11.3   Percent  of  GDP   10.3   10   12.1   10.9   8.7   5.4   4.4   5   4.6   4.7   5.4   5.7   0   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   Source:  Authors  ‘calculations  based  on  INE  data.   4. Environmental  and  social  impacts  assessment  of  Chinese  funding  in  the Bolivian  mining  industry   This  section  evaluates  two  case  studies  with  Chinese  participation,  following  the  net   benefits  framework  developed  by  Zarsky  and  Stanley  (2013).  Both  cases  are  located   in  the  country’s  southwestern  department  of  Potosí,  which  has  the  highest  poverty   rate  (around  85%,  UDAPE  2013)  and  the  highest  proportionate  indigenous   population  in  Bolivia.  Potosí  is  representative  of  how  the  resource  booms  of  the  past   (in  silver  and  tin)  did  not  bring  sustained  economic  development  to  the  local   population.     Case  Study  1:  Canutillos  Mine  and  Processing  Plant   The  northeastern  area  of  the  department  of  Potosi  is  primarily  a  mining  area.   The   region   has   an   important   number   of   mining   companies,   mostly   in   the   cooperative  sector.    Given  the  significant  increase  in  international  prices  of  minerals   discussed   above,   the   mining   sector   is   growing   and   with   it,   new   mining   companies   are  emerging.   As  mentioned  above,  under  the  Government  of  President  Evo  Morales  cooperative   mining  companies  receive  preferential  treatment.  Chinese  entrepreneurs  have   reacted  to  this  situation  by  undertaking  agreements  with  local  mining  cooperatives.   In  this  context,  on  February  3,  2010  a  joint  venture  agreement  was  signed  between   the  Jungie  Mining  Industry  SRL.  (which  is  Chinese-­‐owned  although  currently   Bolivian-­‐managed)  and  the  mining  cooperative  Alto  Canutillos,  under  Resolution   4295TH  /2010,  with  the  support  of  the  COMIBOL,  with  the  objective  of  exploring   and  developing  diverse  minerals,  but  particularly  tin  in  the  Canutillos  mine.    The   Alto  Canutillos  cooperative,  consisting  of  22  members,  submitted  a  bid  to  Jungie   SRL,  seeking  a  partner  that  could  bring  technology  and  financing  for  their   development  of  the  Canutillos  mine.  Daniel  Morales  Muruchi,  former  leader  of  the   Cooperative  Minera  Alto  Canutillos,  became  Jungie  SRL’s  legal  representative,  and   the  company  started  operations  in  late  December  2012.   The  Canutillos  mine  is  located  48  kilometers  northeast  of  Potosí  city,  in  Tacobamba   Municipality.  Around  the  mine  are  located  towns  of  Tacobamba,  Colavi,  Rodeo,   Hahuacari  and  Ancoma,  belonging  to  Tacobamba  municipality,  with  a  total   population  of  13,205  inhabitants;  61.38%  of  the  population  is  living  on  the  margins   of  poverty,  while  32.89%  live  in  extreme  poverty  and  just  0.06%  have  their  basic   needs  met  (INE  2001).    Communities  have  found  their  source  of  income  around  the   mine,  and  also  from  agricultural  products,  such  as  potatoes,  wheat  and  corn;  raising   sheep,  goats  and  camelids.    Mining  in  the  town  of  Tacobamba  is  developed  by   private  companies  including  Jungie  Mining  Industry  SRL.     Picture  1:  Canutillos  Town,  Potosí-­‐Bolivia   Source:  Author´s  fieldwork  2014.   Public  Consultation   The  net  benefits  approach  places  paramount  importance  on  individual  and   collective  public  consultation  with  the  affected  population  before  the  development   of  a  natural  resource  begins.  Furthermore,  according  to  the  New  Constitution,   communities  own  the  territory  around  where  they  live.  In  the  case  of  Jungie  SRL,   this  process  appears  to  have  served  its  purpose,  resulting  in  Jungie  SRL  changing  its   plans  to  locate  its  refining  plant  and  tailings  dam  near  a  more  receptive  community.   Accordingly,  once  the  Jungie-­‐Alto  Canutillos  joint  entity  was  constituted,  it   conducted  surveys  in  the  surrounding  communities  belonging  to  the  Municipality  of   Tacobamba  before  beginning  construction  of  its  processing  plant  and  tailings  dam   necessary  for  mining.  The  surveys  indicated  that  the  community  was  not  willing  to   accept  the  construction  of  a  mineral  processing  plant  and  tailings  dam,  arguing  that   the  construction  of  this  facility  would  generate  pollution.   Picture  2:  Offices,  Jungie  Mining  Industry  Canutillos,  Potosí-­‐Bolivia   Therefore,  based  on  the  majority  decision  by  the  communities  living  around  the   mine,  neither  plant  nor  the  tailings  dam  was  built  there.  Instead,  Jungie  SRL.  built   the  minerals  processing  plant  and  tailings  dam  in  the  Agua  Dulce  community  5  Km   from  the  city  of  Potosí.    The  land  was  donated  by  the  COMIBOL  under  consultation   with  the  municipality  of  Villa  de  Yocalla  (specifically,  the  community  of  Agua  Dulce),   which  has  a  population  of  10,012  (INE,  2001).  It  has  a  very  low  human  development,   with  an  average  living  standard  below  the  departmental  average,  a  poverty  rate  of   63%,  and  a  subsistence-­‐level  economy  of  the  inhabitants.  The  source  of  income  of   the  population  of  the  Municipality  of  Yocalla  village  is  based  on  agriculture  and   livestock  farming,  so  land  is  the  fundamental  basis  of  the  livelihood  of  the  family   unit.   Picture  3:  Offices,  Jungie  Mining  Industry  Agua  Dulce,  Potosí  -­‐  Bolivia   According  to  the  leaders  of  the  community  of  Agua  Dulce,  a  public  consultation  was   carried  out  to  determine  if  the  population  was  willing  to  accept  the  building  of  the   processing  plant  in  their  community.  The  response  was  favorable,  given  that  the   community  had  high  expectations  for  job  creation  and  income  for  the  community.   Economic  Benefits  Of  Mine  Bookbinding  Treatment  Plant  In  Agua  Dulce   Jungie  SRL  has  been  working  on  the  site  since  2010.    But  according  to  interviews   with  officials  from  Jungie  SRL,  the  company  is  still  in  the  testing  phase  and  will  begin   producing  in  2015,  so  it  has  not  yet  generated  revenue  to  pay  royalties  and  taxes  to   the  State.    Its  investment  budget  includes  plans  to  invest  around  $20  million  USD,  of   which  $5.5  million  USD  is  to  be  invested  in  mining  equipment,  $6.5  million  USD  in   the  processing  plant,  $4.3  million  USD  in  processing  equipment  and  nearly  $2.1   million  USD  in  the  tailings  dam.   The  company  has  a  20-­‐year  concession,  with  an  expected  annual  production   capacity  of  300,000  tons;  the  plant  has  a  production  capacity  of  2,500  tons  per  day.   One  of  the  benefits  being  generated  by  the  company  is  employment  for  members  of   the  cooperative  and  the  community,  where  according  to  the  INE  (2001)  about  50   families  live,  of  which  30  work  in  the  mine.  Workers  at  the  mine  have  monthly   salaries  between  $250  and  $900  USD,  with  health  insurance  (but  not  life  insurance),   and  appropriate  work  clothing  (which  is  given  every  three  months),  according  to   workers.  However,  the  local  newspaper  El  Potosí  has  printed  complaints  accusing   Jungie  Mining  Industry  of  abuse  and  workers'  rights  violations,  such  as  disregarding   rules  regarding  overtime  and  nursing  breaks  (El  Potosí,  2012).   In  sum,  the  community  allowed  the  company  to  operate  in  its  territory  under   certain  conditions,  including:  hiring  people  living  around  the  plant,  primarily  in  the   community  of  Agua  Dulce,  building  hospitals  and  schools,  and  other  infrastructure   to  attract  commerce  to  the  community.  Such  an  arrangement  has  local  precedent.   According  to  the  Civic  Committee  of  Potosí,  the  large  majority  of  foreign  mining   companies  build  roads,  schools,  hospitals  and  basic  services  to  gain  the  community   approval  required  under  the  New  Constitution.   Royalty  Revenue   Under  the  joint  venture  agreement,  7.5%  of  profits  go  to  the  cooperative,  12.5%  go   COMIBOL,  and  80%  go  to  Jungie.  The  joint  entity  must  also  pay  mining  royalties   (MR)  of  which  85%  goes  to  the  departmental  government  and  15%  goes  to  the   municipal  governments;  the  provincial  government  is  minimally  required  to  invest   10%  in  exploration  and  prospecting;  and  the  Profit  Taxes  on  Company  Profits  (IUE)   of  25%  of  annual  net  profit.   Environmental  Hazards   Even  though  Jungie  Mining  SRL  started  activities  in  2010,  the  company  did  not  get   its  environmental  license  until  April  2014.  This  is  an  explicit  violation  of  article  218   in  the  new  mining  law,  which  requires  environmental  licenses  for  for  all  mining   activities  and  projects.     As  the  company  has  not  entered  the  operational  phase,  its  environmental  impacts   are  not  yet  observable.  However,  it  is  expected  to  have  considerable  size  and  impact,   comparable  to  the  publicly  run  COMIBOL  Huanuni  mine.  Huanuni  is  one  of  the  most   important  in  the  region,  with  a  net  income  of  $70.4  million  USD  between  2006  and   2009.    However,  it  neglected  to  build  a  tailings  dam  to  prevent  from  pollution   entering  the  Huanuni  River,  which  serves  40  communities.  This  neglect  provides  a   troublesome  precedent  for  mines’  water  management  in  the  area,  and  for  the   government  to  enforce  its  own  standards.     Though  Jungie  SRL  plans  currently  do  include  a  tailings  dam,  the  company  has  not   thus  far  demonstrated  adherence  to  environmental  standards,  as  evidenced  by  its   delay  in  acquiring  its  environmental  license.  Furthermore,  though  Jungie  SRL  is  still   in  the  testing  phase,  complaints  about  pollution  are  already  emerging.  In  July  2014   the  residents  of  Agua  Dulce  complained  to  Potosí  authorities  about  leakage  of  acidic   water  from  the  tailings  from  the  Jungie  SRL  into  the  Jayaj  Mayu  River,  which  is   essential  for  farming,  ranching,  and  local  community  members.     In  addition  to  pollution,  one  of  the  biggest  impacts  will  be  on  water  consumption;   the  company  estimates  a  monthly  consumption  of  2,465  cubic  meters  (651,184   gallons)  of  water.   PICTURE  4:  AGUA  DULCE  WATER  SUPPLY  SYSTEM,  POTOSÍ  -­‐  BOLIVIA Though  it  is  still  in  its  testing  phase,  Jungie  SRL’s  water  use  has  already  damaged   local  harvests.  Felipa  Aguirre,  one  of  the  affected  people  in  the  town  explains  that   during  this  period,  agricultural  production  in  the  area  was  almost  zero,  due  to  a  lack   of  water  for  irrigation  or  consumption.  Agriculture  had  to  rely  on  rainwater,  and   most  of  the  crops  were  dry.  As  of  this  writing,  the  company  faces  trial  and  its   operations  are  suspended  until  remediation  is  completed.