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Harper visit to Peru targets better use of mining royalties to alleviate poverty

LIMA, Peru – Canadian mining companies hope that Stephen Harper’s visit to Peru will lead to better use of the billions in royalties and taxes that are sitting idle in a country where poverty is still a large problem.

Harper met mining executives Wednesday before a lengthy tete-a-tete with Peruvian President Ollanta Humala Tasso.

The executives stressed the need for regional governments to invest the royalties and taxes in local initiatives that will help alleviate poverty that affects more than half the rural population of Peru.

Humala, too, said he wants to see better social inclusion as a result of the mining activity that dominates his country’s economy.

Regional governments are sitting on up to $4 billion in unspent royalties, money lying idle in government bank accounts.

The pressure to “publish what you pay” in Peru is part of a push from mining companies and G8 governments that is gaining momentum around the world, said Glenn Nolan, president of the Prospectors and Developers Association of Canada. Nolan was in Lima to meet Harper.

“We want to see good laws and transparency so that our (royalties) go back into the community,” Nolan said in an interview.

Many of the communities near mining sites are in remote locations, are often indigenous, and are far poorer than the rest of the country. About 75 Canadian mining companies are active in Peru, mainly in exploration for gold, silver and copper.

Harper announced a $53-million aid package that includes money to help local and regional governments better target their royalties to mining communities. The money had already been set aside in previous budgets but had not been allocated to specific projects.

“Peru, like Canada, has abundant natural resources. And like Canada, the responsible development of those resources is vitally important to job creation and economic growth in Peru,” Harper said after his meetings.

The two leaders announced an agreement to expand air transport between Canada and Peru that will mean more flights to more places in each country.

They sang the praises of natural resources, free trade and education. And the Peruvian president condemned the illicit trafficking of Peruvian cultural property.

The natural resource focus on Canada’s aid policy has raised eyebrows in the development agency community.

There is a global push to have mining and energy companies be more transparent in the royalties and payments they make to governments in developing and emerging countries, and Canada’s new policy plays into this dynamic.

At the same time, aid activists worry that Canadian profits will trump poverty alleviation when it comes to Canada’s foreign policy and aid.

“The prime minister’s visit to Peru provides an opportunity for him to speak out on the importance of putting human rights, including the right of indigenous communities to manage their lands, and respect for the environment at the heart of any policy to promote resource extraction as an avenue for economic development,” Oxfam Canada’s executive director, Robert Fox, said in an email.

“It also provides a platform for him to announce unequivocal Canadian support for increased transparency by Canadian mining companies abroad.”

The new “extractive industries” approach was rolled out last fall, and aims to align Canada’s aid spending more closely with its commercial interests.

At the same time, the policy is meant to ensure Canadian investors uphold high standards for labour and environment in developing countries.

Peru is one of Canada’s key recipients of foreign aid, and Canadian mining companies have a large presence in parts of the country known for social unrest. So Peru — as well as Tanzania — is a key testing ground for the extractive industries orientation of foreign policy.

“It’s still very conceptual,” said Ottawa-based trade analyst Laura Dawson.

Canadian direct investment in Peru was $6.9 billion in 2012, much of it in the natural resources sector.

And while many Canadian aid activists want to see mining companies treat their foreign labour fairly, they are leery about how Harper will use the new approach.

“From my perspective, Harper is pursuing the wrong policy in Latin America,” said Jen Moore of MiningWatch Canada.

The Canadian government is now seen as a representative of Canadian mining companies in the region, she said, “aimed at maximizing profits and investor protections for mining companies at the expense of people and the environment.”

While in Peru, Harper also discussed whether Canada should be participating in the Pacific Alliance free-trade talks.

Peru has been a strong advocate to get Canada at the table, and Canada now has observer status. But neither the alliance — Mexico, Colombia, Chile and Peru — nor Canada is sure whether Canada should actually take the plunge.

Harper will spend all day Thursday in Colombia at a Pacific Alliance summit, checking out the talks to see what Canada would gain from joining them.

Canada already has free-trade agreements with all four Pacific Alliance countries, but the new pact aims to go beyond trade in goods to include free movement of labour, capital and investment as well.