Feb. 13 (Bloomberg) -- People streamed into the central square in Celendin, a small city in the Peruvian Andes, the morning of July 3, 2012. They were protesting the government’s support for Newmont Mining Corp.’s plan to take control of four lakes to make way for a new gold and copper mine. By midday, there were 3,000.
Some hurled rocks at police and brandished clubs. Then assailants shot two officers and an Army soldier in the leg.
Blocks away, construction worker Paulino Garcia left home on foot to buy groceries. As he approached the central square, he encountered chaos. People ran for cover as federal troops fired their weapons, Bloomberg Markets magazine will report in its March issue.
One bullet struck Garcia as he watched the mayhem. It ripped open his chest and exited through his back. The 43-year-old father of two fell to the ground and died. Another three people were shot and killed, and more than 20 were wounded.
It was the deadliest clash in 18 months of protests in Peru’s Cajamarca region, where many residents say Newmont’s $5 billion Conga mine will take water their villages and farms need to survive.
“He died in a pool of blood,” says Adelaida Tabaco, Garcia’s widow, 38, sobbing inside her half-built adobe house in Celendin. “The only thing the people want is water for families, but the mining companies want to take it. And soldiers will kill if you get in the way.”
The injured and dead in Celendin, 800 kilometers (500 miles) north of Lima, are victims in a continent-wide conflict that pits South American governments and big, often foreign-based companies against people who stand to lose their homes as water is diverted to industrial uses.
Leaders across the region, elected on promises to fuel economic growth and lift their populations out of poverty, are fast tracking water-use approvals for projects like the Conga mine. Helped by mining and agriculture exports, Brazil’s gross domestic product increased 43 percent from 2002 to 2012, after adjusting for inflation, while Chile’s economy grew 58 percent.
Peru is on target to expand 6 percent in 2013, the fastest pace in South America, driven by investments in gold, silver and copper mines.
South America has more water than any other region on earth, with 29 percent of the world’s reserves, according to the United Nations Food and Agriculture Organization. The rub is that the water isn’t always where the best mineral or agricultural resources are located.
Mines consume huge amounts of water to separate minerals from rock. It takes 28 liters (7.4 gallons) of water to make 0.5 kilogram (1 pound) of copper in Chile. After processing, the water at some mines is so toxic that it can’t be reused. Peru’s biggest mines, such as Conga, are high in the Andes, where there’s almost no rain from May to October.
In Chile, the world’s largest copper producer, vast deposits of copper, gold and silver lie under the Atacama Desert, which is so dry that rainfall has never been recorded in some places. And higher demand means there’s less water to go around.
Growing populations have pushed the amount of usable water per person down by more than one-fifth since 1992 in Brazil, Chile and Peru, according to the UN group.
National leaders in Latin America are weighing short-term economic growth against the public’s future needs for water, and the consequences can be deadly. In Chile, the nation’s drinking supply is threatened by past policies of allotting too much water to companies to spur the economy, Public Works Minister Loreto Silva says.
Water is already running out in places like Copiapo, a city of 158,438 people in the Atacama Desert, 800 kilometers north of Santiago, because of mining and agricultural expansion, she says.
“In some areas of the country, like Copiapo, we have a reduction or an exhaustion of the resource,” Silva says. “If we don’t make decisions today, we’ll be short of water in about a decade. That forces us to take a long-term, strategic view in terms of water.”
Peru faces similar long-term needs because water is in short supply in areas where mines are expanding, says Hugo Jara, head of the country’s National Water Authority. The government needs to build $394 million of reservoirs and canals by 2016 for annual water shortages in the dry season in the Andes, he says.
“The government has declared water its first priority,” Jara says. “These protests helped to spur our attention.”
Governments are making the right decision in providing water to industries that benefit the majority of their populations, even if that means displacing some people, says John Briscoe, a Harvard University professor who specializes in water policy.
“It’s of transcendental importance to the economy,” says Briscoe, a former senior water adviser at the World Bank. “The value of the water in the mining industry is very, very high.”
Drought is making water even scarcer. In Chile, precipitation was 75 percent below the historical average in 2012 in the mineral-rich Coquimbo region, while rainfall decreased 70 percent in the Atacama Desert, home to the world’s biggest copper mines, according to Chile’s General Water Agency.
In Peru, the government says rain has been below average for two years in the highland mining regions because of El Nino weather phenomena. Global warming has likely increased and prolonged droughts in some regions of the world, according to a March 2012 study by the 62-nation Intergovernmental Panel on Climate Change.
The conflicts in South America are part of an intensifying global struggle for water. Two of the mightiest rivers on earth -- the Yellow River in China and the Colorado in the U.S. and Mexico -- have been so depleted by cities, factories and farms that they rarely reach the sea, as they had for eons.
Increased mining in Chile has already cost families, farms and villages the water they need to survive. Near Caimanes, a town in a semiarid valley 250 kilometers north of Santiago, farmhand Daniel Tapia walks through a stand of withered almond trees, passing a bone-dry irrigation ditch.
He rests at a rock-strewn stretch of flat ground where the Pupio Creek once flowed. It emptied in 2008, he says, after the nation’s richest family, the Luksics, built a 500-meter-wide (1,640-foot-wide) waste dump, known as a tailings dam, for the Los Pelambres copper mine.
London-based Antofagasta Plc constructed the dam atop springs that supplied water for the town. The company is 65 percent held by the Luksics, a family with a net worth of $20.7 billion, according to the Bloomberg Billionaires Index. Iris Fontbona, heir to the fortune, is the 39th-richest person in the world.
Tapia, 40, says there’s not enough water for him, his wife and three kids to wash, drink and cook. They survive on about 180 liters a day, delivered by truck to their small home by the almond grove. That’s one-eighth of what the average U.S. family uses.
“We used that river to irrigate, but nothing is ever going to grow here again,” Tapia says. “There’s no future for us. We’re going to have to leave.”
The Los Pelambres mine ran out of space to store the ground-up, chemical-laden rock created from extracting copper ore, says Sergio Valdebenito, who runs the tailings dam. The Luksics won government approval for a second dam in 2004 and defeated legal challenges by area residents during the next four years.
Valdebenito says drought, not the mining, is drying up the valley.
“The fact that we built this doesn’t mean we took the water from the creek,” says Valdebenito, 52, pointing to water backed up behind the tailings dam.
Juan Villalobos, a construction worker who has lived in Caimanes since he was born, says that the drought explanation isn’t true as he takes a casual walk through the area with a reporter.
The water that fed the creek didn’t disappear; it’s being held behind the tailings dam and pumped back to the mine, Villalobos, 38, says. He and 10 others went on an 81-day hunger strike in 2011 to protest construction of the tailing dam.
On a late-November day, a turquoise-colored lake stretches 2 kilometers up the canyon behind the tailings dam, tapped by huge pipes pumping water to the mine’s processing plants.
In the valley below, rocks and dust cover irrigation ditches that crisscross what were once fields of alfalfa, corn, wheat and potatoes. In Caimanes, a town of 1,800 people 7 kilometers from the dam, water is rationed.
Mining companies are planning to spend $100 billion in Chile by 2025 to increase production. President Sebastian Pinera says investment in mines will drive economic growth in his nation of 16.6 million people, helping it to gain developed-nation status.
“Mining in Chile is booming, and I think it will continue growing at a very fast pace,” says Pinera, 63, who became a billionaire before entering politics by buying and selling stakes in companies.
It’s not only mining companies that need water. More than 300 corporations, including some of the biggest in the world, have converged on Paraguay, a country in the center of South America that sits above one of the world’s largest underground freshwater reserves.
They’ve registered with the Ministry of Industry and Commerce to draw water from underground aquifers. One aquifer is the Guarani, which covers an area larger than France, Germany and the U.K. combined. It sits beneath Argentina, Brazil, Paraguay and Uruguay, supplying 15 million people with water.
Many of the companies -- such as Royal Dutch Shell Plc, Europe’s biggest oil producer; Exxon Mobil Corp., the biggest U.S. oil company; and London-based drugmaker GlaxoSmithKline Plc -- have no major operations in Paraguay.
After registering, these firms just have to buy enough land to drill a well and remove water, says Silvia Spinzi, director of the water resources division of the Paraguayan Environmental Ministry.
In Peru, the conflict over water has turned deadly. Fifteen people have been killed since 2010 in protests against government decisions allowing mining companies to expand and use more water. Those firms are planning to invest $53 billion in the next decade for mines that will require water.
In San Antonio de Pachachaca, 54 kilometers south of Celendin, the lake the village depends on started to disappear four years ago. That’s when Newmont expanded its Yanacocha gold mine, says Claudio Garcia, president of the local irrigation authority.
At Little Totoracocha Lake near the town, set on a plateau 4,000 meters up in the Andes, water levels have dropped since 2009, leaving a wasteland of cracked black lake bed where there used to be frigid, azure waters. Crops have withered, 200 farm animals have died and taps at homes are running dry by early afternoon, Garcia, 32, says.
About 100 meters from the lake’s edge, on the other side of a rocky ridge, is Yanacocha, a mine that produces 1.2 million ounces (34,000 kilograms) of gold a year.
Garcia, a stocky man with thickly calloused hands from a life of farming, parcels out the lake water that remains to the families living in adobe shacks scattered across the windy plateau. He says he has restricted water flowing into a network of irrigation canals to less than 1 liter a second, a third the amount in 2010. That’s not enough for subsistence farming.
His wife and four children run out of drinking water by midday, he says.
“This has destroyed our community because everyone is fighting over water,” Garcia says.
Luis Cabrera, Newmont’s environmental specialist at Yanacocha, says the weather, not the mine, caused the lake to lose water. About 40 percent of the lake’s water naturally evaporates during the dry season, he says.
“When it rains, it will fill back up,” he says.
Peru’s environmental ministry disputed that explanation. From Jan. 31 to Feb. 2, 2011, ministry inspectors examined the lake and part of the Yanacocha mine. After the inspection, they concluded in a report that water levels in the lake had plummeted because explosions to open access to the minerals at the mine had diverted a major spring that feeds the lake.
“The increased fracturing of the surface rock due to the explosive activities is affecting the direction of underground water, causing the reduction and absence of flow,” the report says. Cabrera says Newmont disagrees with the report’s findings.
The protests in Peru began in April 2010, against Phoenix-based Southern Copper Corp.’s Tia Maria mine near Arequipa, a city of 836,000 people close to Peru’s border with Chile. A year later, two people died in protests against water use by Zug, Switzerland-based Xstrata Plc’s Tintaya mine, 240 kilometers south.
In October 2011, the anger sprang up around Cajamarca, a northern Peruvian city with 362,000 people. Crowds opposing Newmont’s Conga mine gathered in the city’s central square, where Spanish conquistador Francisco Pizarro executed Incan ruler Atahualpa in 1533 after taking a roomful of his gold.
To build Conga, Newmont will dig up two lakes to get at gold and copper ore. The other two lakes will be filled with waste from separating valuable metals from ore. Conga will produce 680,000 ounces of gold and 106,000 tons of copper a year, Newmont estimates.
Newmont’s Cabrera says Conga won’t deprive people in Celendin or anywhere of water. He says the company is building a $65 million system of reservoirs and canals for public use, which will supply ample and cleaner water for villagers.
“We believe they will have more water than they have now,” says Cabrera, sitting in an office at the Yanacocha mine.
During a tour of the Conga mine site in late October, it’s the dry season, and the four lakes Newmont plans to divert are full of fresh water. The lack of rain hasn’t depleted the lakes. One of the four, Blue Lake, sparkles as the sun breaks through thick cloud cover.
“Those lakes are full of water all year,” says Milton Sanchez, an unemployed accountant from Celendin who has helped organize protests against the Conga mine. “We don’t believe Newmont’s reservoirs will replace the lakes.”
The Conga conflict intensified in November 2011, when farmers blocked roads and stormed mine depots. They were led by Gregorio Santos, the province’s governor, who said Newmont would deplete the community of water.
A self-described environmentalist, Santos, 46, was elected governor in 2010 after more than a decade of advocating that the government shouldn’t allow towns to run dry because of mining.
Last April, Peruvian President Ollanta Humala gave a televised speech about the Conga protests. Mining expansion was critical to Peru’s economic future, and Newmont’s Conga mine should move forward, he said.
“Our government is conscious of the importance of mining investment to reach the desired goal of growth with inclusion,” Humala said.
In Celendin, starting in late May, Sanchez -- who had already been criminally charged with inciting violent protests - - helped organize a month-long round of strikes and street protests. Sanchez, 31, says he’s never done anything violent or illegal. He says he has just exercised his democratic right to protest.
The July 3 demonstration in Celendin that ended with four people dead started out peacefully, but it soon escalated. Some demonstrators threw rocks at police guarding the central square, and then someone, whom police haven’t been able to identify, fired shots that struck two officers and a soldier, according to the Ministry of the Interior.
Police responded by firing tear gas into the crowd. When officers ran out of tear gas, they withdrew, and the police commander asked the head of an army unit in town for help, according to an investigation by Human Rights Watch, a Washington-based organization.
About 90 minutes later, troops returned and began shooting into crowds.
When Adelaida Tabaco went out looking for her husband, Paulino Garcia, gunshots were still crackling in the afternoon air. She says she heard dozens of shots as she searched, and she saw bullet casings rain from the sky as soldiers blasted from a military helicopter. Troops were shooting at people running away, she says.
“They were firing at anything that moved,” she says. “It was like war.”
The barrage began just as Garcia was walking past some houses, witnesses told his wife. One person saw Garcia on the street when he was shot, Human Rights Watch investigators found.
Marco Arana, a former Catholic priest, says it’s morally -- and should be criminally -- wrong for the government to allow officers to randomly shoot and kill people.
“For this violence to stop, the deadly police actions must be ended,” he says. “The government is wrong if they think that with bullets, torture and beatings, they can repress the justifiable concerns of the people.”
A day after the shootings, Arana, who works for a Peruvian human rights organization called Grufides, helped lead a march against the Conga mine in Cajamarca’s central square, just across from the town’s 18th-century Catholic cathedral. As he rested on a bench, helmeted, shield-wielding riot police beat him and dragged him away, television images show.
Human Rights Watch blamed the Peruvian government for the deaths.
“We found evidence that strongly suggests that the use of lethal force was unwarranted and constituted a serious violation of international human rights norms,” the group said in a Sept. 20 letter to President Humala.
Three days after Garcia was killed, Humala said: “We deeply regret the loss of human lives. It hurts us as Peruvians.”
Across the developing world, governments are choosing to allot water for economic growth -- sometimes making a short-term decision at the expense of future needs.
“We have to take a long-term view with water,” Chilean Public Works Minister Silva says. “We have growth in this country, and we have growing demand.”
The decisions countries like Peru and Chile make now on water allocation may eventually help them reach developed-nation status -- although the costs, measured in human dislocation and human blood, could lead some to question whether the path to prosperity will have been worth the price.
To contact the reporter on this story: Michael Smith in Santiago at Mssmith@bloomberg.net
To contact the editor responsible for this story: Jonathan Neumann at email@example.com