LARGE MINING ENTERPRISES AND THEIR SOCIAL IMPACT

Available online at:

http://pt.scribd.com/doc/170148588/large-mining-enterprises-and-their-social-impact

Paulo Cesar Vicente de Lima 1 Vitor Vieira Vasconcelos 2

1

Justice Prosecutor of the Public Ministry of the State of Minas Gerais, Coordinator of CIMOS Coordination of Social Inclusion and Mobilization, and General-Coordinator of the Prosecutors Offices responsible for Watersheds in the State of Minas Gerais, Master in Social Development

Legislative Consultant of Environment and Sustainable Management at the Legislative Power of Minas Gerais State, Brazil. PhD. student in Geology. Master of Arts in Geography. Specialist in Soil and Environment. Bachelor in Philosophy. Environmental Technician. Computer Science Technician.

Paper originally published in Portuguese, at:

LIMA, P.C.V.; VASCONCELOS, V.V. Grandes Empreendimentos Minerrios e seus Impactos Sociais. De Jure, v. 12, n. 20, jan.-jul. 2013, p. 209-226. Available at: http://pt.scribd.com/doc/170147551/grandes-empreendimentos-minerarios-e-seus-impactos-sociais

COLLECTIVE RIGHTS PAPER

LARGE MINING ENTERPRISES AND THEIR SOCIAL IMPACT GRANDES EMPREENDIMENTOS MINERRIOS E SEUS IMPACTOS SOCIAIS
PAULO CESAR VICENTE DE LIMA
Justice Prosecutor Public Ministry of the State of Minas Gerais pcvl@mp.mg.gov.br

VITOR VIEIRA DE VASCONCELOS

Legislative Consultant on Environment and Sustainable Development Legislative Assembly of the State of Minas Gerais vitor.v.v@gmail.com

ABSTRACT: Brazil is facing the installation of several large enterprises with significant social impact. The type and magnitude of these impact are discussed, highlighting the difficulties in their resolution along environmental permitting processes. Mining enterprises are particularly emphasized, as well as their similarities due to the impact of hydropower plants. Proposals are presented for a better mitigation of this impact, involving the education of local communities, the elaboration of Social Assistance Plans and the incorporation of the denominated Social License to Operate SLO , as a tool for mediation between the entrepreneur and the affected communities. We understand that the empowerment of communities through education and confidence in their social capital is a way of

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leading to the harmonious implantation of large enterprises, benefiting all involved. KEY WORDS: large enterprises; social impact; mining; social license to operate; environmental law. RESUMO: O Brasil tem presenciado a instalao de diversos empreendimentos de grande porte, com impactos sociais significativos. Este artigo apresenta uma discusso sobre a forma e magnitude desses impactos, ressaltando as dificuldades para sua resoluo nos processos de licenciamento ambiental. Focam-se os grandes empreendimentos minerrios, bem como suas similaridades com os impactos de empreendimentos hidreltricos. So apresentadas propostas para uma melhor mitigao desses impactos, envolvendo a educao das comunidades locais, a elaborao de Planos de Assistncia Social - PAS - e a incorporao do instrumento da Licena Social para Operar com fins mediao entre o empreendedor e a populao afetada. Entendemos que o empoderamento das comunidades, por meio da educao e da confiana em seu capital social um caminho para conduzir harmonicamente a implantao de grandes empreendimentos, trazendo benefcios para todos os envolvidos. PALAVRAS-CHAVE: grandes empreendimentos, impactos sociais, minerao, licena social para operar, direito ambiental.

SUMMARY: 1. Introduction. 2. Concept of large enterprise. 3. Large enterprises in Brazil and their social impact. 4. Mitigation and compensation of social impact in the environmental permitting process. 5. Environmental permitting process, social impact and education. 6. The entrepreneur and the social license to operate. 7. Conclusion. 8. References. 1. Introduction In a world marked by complexity, immediacy, the end of borders and of certainties, themes such as deterritorialization due to large enterprises with their consequent social impact have become progressively more present, challenging us to build a new approach
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to environmental assessment. This is particularly related to enterprises that cause population relocation, either because of the need to appropriate lands formerly occupied by local peoples, or whether because of the large number of workers migrating there in a short period of time. Minas Gerais is the state with the major mining extraction in Brazil. Due to the locational rigidness of the mineral deposits, mining activities make the state planning difficult in its task to conciliate this wealth with the development needs of each region. Mineral deposits, which remained in the subsoil for ages, are then explored with all their positive and negative externalities. The big challenge of the Environmental Law and Mining Law is seeking the middle way, i.e., sustainability of natural resources exploitation in its multiple facets, whether social, environmental or economic. In a dehumanized capitalist society based on technicist and Cartesian archetypes and on the particularly flexible accumulation of postmodernity, cultural and social values of trust, built with effort along the centuries, are taken for granted in this context of domination and inequality. This context may lead to serious social impact, with consequences that are far beyond the investors losses. Since money has neither smell nor color and, nowadays, not even nationality, there is certainly a risk of losing social values that are fundamental to foment virtuous cycles of development. Something similar already happened in the discovering and dilapidation of the natural heritage and social values of the peoples who lived in the Americas before the European colonization. In this study, based on bibliography review and on the personal experience of the authors, we intend to highlight the strategies and alternatives that could contribute to the pursuit of the so dreamed sustainable development. A sustainable development that, in our proposal, has to be built through popular participation and through the perspective of who is really being impacted by the large mining enterprises.

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In this approach, an enterprise is sustainable to the extent that it takes into account the social, environmental and economic aspects, and that this is recognized by the local community. 2. The concept of large enterprise The identification of what is a large enterprise is a crucial topic. The size (footprint and productive potential), the polluting potential and the value of investments in the enterprise are usually taken as reference for its classification. However, we propose that the classification of a large enterprise should take into consideration mainly the structure of the affected community. For instance, a community of 5,000 people could consider an enterprise as large, while this perception would not be the same for a similar enterprise in a metropolis with millions of inhabitants. Vainer (2011), analyzing the large enterprises in a relational approach (community and enterprise), describes the characteristics of large enterprises, summarized as follows: Changes in the lives of the local population; External intervention in the social space where the enterprise will be installed; Concentration of capital and decision-making power; Concentrated and significant social-environmental impact.

3. Large enterprises in Brazil and their social impact Over the past 10 years, developing countries, which belong to the BRIC group (Brazil, Russia, India, China1) have received many investments allocated to the installation of large enterprises. Such capital receptivity in these countries is partly due to the increasing political and social stability, the considerable internal market potential and the abundance of natural resources. These sequential investments have led to a cycle of GNP growth in these countries (PAULINO, 2008).
1 In some analyzes also South Africa then denominated as BRICS.

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In the environmental permitting processes, two kinds of large enterprises demand greater attention: hydropower plants and mining. Both have a large footprint, displace inhabitants and affect the lives of the population by a range of social-environmental impact and risks. The main planned mining investments in Brazil from 2011 to 2015 are directed to the states of Par (24 billion dollars) and Minas Gerais (21 billion dollars), concentrated in large enterprises (INVESTIMENTOS, 2011, p. 11). In 2011, Minas Gerais was responsible for 49% of the mining production in Brazil, with the biggest number of authorized mining areas by the National Department of Mineral Production (Departamento Nacional de Produo Mineral DNPM). On the other hand, Par has the greatest potential for discovering new deposits, with a growing production that has already encompassed 27% of the national production2. Regarding the installation of hydropower plants, the greatest attention is paid to Northern Brazil, because of the river flows, and to the state of Minas Gerais, because of the ruggedness of the relief, more suitable for the installation of dams (best ratio between flooded area vs. flow of the reservoir). With the acceleration of GNP growth in Brazil, there is more demand for the installation of new hydropower plants. In this context, over 55% of the resources of the Brazilian Growth Acceleration Plan (Plano de Acelerao do Crescimento PAC) is directed to the building of hydropower plants (VAINER, 2011). The most significant social impact for the local population occur during the installation of the enterprise, both due to the resettlement local inhabitants and also due to the fast and significant migration of workers to build the enterprise infrastructure. This population input disarrays the local economies and the social relationships, as the county does not have time to gradually adjust to these changes. Immediately after the conclusion of the building activities, workers leave the region and the economy of the counties slows again,
2

Survey data from the DNPM database system, in 2012.

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because of the loss of the consumer market. This phenomenon has been called Boom-Bust Cycle (MILANEZ et al., 2010). Sousa (2000) and Souza (2005) present detailed studies on the social impact of reservoirs for hydropower, showing how this impact disrupt the local economy and the social and cultural structure of the local population. We would like to highlight that many of these impacts also occur due to large mining enterprises, particularly because of the resettlement of the people who live in the areas of the proposed mining area and the tailings dam. Among the several impacts presented by these two studies, we selected the following:

a) regarding economic disruption: pressure on the use of natural resources; real estate speculation; losses from farming systems; losses of potential or current tourism resources; losses of techniques and raw material for domestic economy (manufacturing and selling handmade products); imbalance between the supply and the demand for goods and services; increased cost of living; changes in the labor market, causing unemployment and social exclusion; emerging marginal/informal economy; indebtedness. b) Regarding social and cultural disruption Increasing tension and conflicts;

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Social insecurity caused by spreading rumors; Population displacement from the flooded or mined area; Loss of social identity and communitarian feeling; Loss of historical landmarks; Loss of values and feelings to places; Changes in the everyday social interactions; Migratory movements; Pressure on the infrastructure for education, preservation, leisure, health, sanitation and public security; Prostitution, teenage pregnancy, alcoholism, etc. The social and cultural disruption, previously discussed in general terms, gains complex and subtle outlines when applied cases are examined. Machado Jnior (2010) presents some examples, among which we highlight: The routines of families, stores and churches that once were close have been changed because of the distances that emerge after the installation of the enterprise. The people that are displaced by the reservoirs and have to rebuild everything that they and even their ancestors had built during their lives. In some cases, resettlement takes place on non-productive lands and people wait for a long time for the indemnification. Displaced people have to enroll in new schools, attend service at other churches and seek new social relationships. Native tribes have to find a new place to live their beliefs and traditions, or begin to suffer from living in the cities due to the process of acculturation. Possamai (2011) analyzed the social impact of hydropower plants in Santo Antnio and Jirau, in the state of Rondnia, Brazil, due to the
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immigration to build the infrastructure of these enterprises. According to that author, these two enterprises recruited about 37,000 workers from other states of Brazil. The population of the municipality of Porto Velho increased 12.5% from 2008 to 2010, while its murder rate increased 44%. The rape rate in Jaci-Paran, district of Porto Velho, which is the closest to the construction sites, increased 76.8% along the same period. Milanez et al. (2010) conducted a similar study on the immigration impact of large mining enterprises in the state of Par, in Brazil. In the municipality of Parauapebas, an example of population boom, the population grew 66% in seven years (from 2000 to 2007), with a predictable increase from 150,000 inhabitants (2010) to 300,000 inhabitants in 2014, while about 250 new inhabitants come to the municipality every day. The municipality of Rio Maria, despite the increase of 88% in its GDP (from 2000 to 2007), the records of underweight children increased 250%. The population of the municipality of Cana dos Carajs, in its turn, increased 68% from 2000 to 2007, while the rate of deaths caused by aggressions increased 449%. 4. Environmental permitting compensation of social impact process, mitigation and

The social impact of large enterprises has been bringing many challenges to the environmental permitting processes. In general, during these processes, the major conflicts and impasses, which delay the release of the permits are not in the mitigation and compensation of the environmental impact (such as deforestation and loss of biodiversity), but in the direct social impact, which is the main reasons why the local population fight against the enterprise. The procedural format of the environmental permitting, based on the conventional administrative law, is not always the most suitable for conflict resolution, which demands a negotiation approach. Among the main problems in environmental permitting processes identified through the experience of the authors, we highlight:

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The population finds it difficult to participate in the permitting processes and to understand the real impact of the enterprises; The socio-economic part of the environmental study is mainly based on secondary survey data (census), and thus it does not appropriately focus on the social and economic impacts of the enterprise. There are methodological difficulties in economically quantifying the social/cultural impact; There are few or no participations of representatives from the social area in the environmental councils and in the technical staff of the environmental agencies. There is a discourse that the social policies (education, health and security) are the responsibility of the government, and not of the entrepreneur. Regarding the hydropower enterprises, in the state of Minas Gerais (Brazil), there is a legal provision that the entrepreneur has to elaborate and execute a Social Assistance Plan (Plano de Assistncia Social PAS), as a requirement during the environmental permitting process. PAS is regulated by the State Law n. 12,812, of 1998, which states the minimum obligations of the entrepreneur: [1] registration of the affected people; [2] survey of the area and the economic valuable assets of the affected properties; [3] warranty of replacement or indemnification for the expropriated assets, by money or equivalent goods; and [4] resettlement. The Resolutions of the State Council of Social Welfare (Conselho Estadual de Assistncia Social CEAS-MG) guarantee, for the PAS: Socio-economic diagnostic study; Mitigation Programs and actions of social impact; Social Service Post, with social assistants and psychologists; Prioritization of local labor; Guarantee employment to disabled people.

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According to the mentioned law, CEAS-MG has the competence to approve the PAS of each enterprise. The Municipal Councils of Social Welfare (Conselhos Municipais de Assistncia Social CMAS ) cooperate for the surveillance of the PAS execution. In 2011, the Agriculture Workers Federation of the State of Minas Gerais (Federao dos Trabalhadores da Agricultura do Estado de Minas Gerais Fetaemg) proposed an amendment to the mentioned law, in order to require that every enterprise that displace rural population, such as mining and road building, should present and execute a PAS (PROPOSTAS , 2011). As to mining enterprises, a significant percentage (65%) of the Financial Compensation for Exploiting Mineral Resources (Compensao Mineral por Explorao de Recursos Minerais CFEM) is transferred to the municipality where the mining area is. However, the social and environmental impact often occurs in the neighboring municipalities, which do not receive CFEM. Typical examples are the municipalities where the tailings dams are located, as well as the municipalities that function as dormitory cities for the workers of large enterprises. With the purpose of amending the Mining Code (Federal Law-Decree n. 227, of February 28th, 1967), there is the possibility of correcting the CFEM distribution, in a way that it shares the financial compensation in a more adequate way among the affected municipalities. 5. Environmental permitting process, social impact and education Education, both formal and non-formal, is an essential condition for building the social capital. Throughout the environmental permitting process, the social capital is, inherently, the differential that leads a community to mobilize and claim for their rights and aspirations. The environmental permitting process starts from an unequal confrontation between the entrepreneur and the local population, regarding the technical knowledge on the enterprise impact. Thus, as a strategy for a better reception of a large enterprise, we deem essential to technically qualify the community leaders, as well as the

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members of the regional and local deliberative councils of the environmental permitting process. Moreover, in cases when the community is supported by academic extension groups, there is a significant social empowerment throughout the process, as well as a greater transparency, decreasing the possibility of conflicts. We deem that qualifying the local technical bodies of the government (not only the environmental agencies) is crucial because of the big pressure of immigration on the public services (education, health, sanitation, security) of the municipalities. This qualification must occur, as much as possible, before the installation of the enterprise (i.e., before the Installation Permission3) and must be directed to face the changes that will take place in the municipality, as a way to soften the Boom-Bust cycle. For that reason, we propose that qualifying and structuring the municipal departments should be one of the focuses of the mitigation conditions through the environmental permitting process, when expediting the Previous Permission. Another useful action, as a prior obligation, is to give technical education for the local population to hire them for the enterprise, instead of the migrant workforce. In the state of Minas Gerais (Brazil), the Normative Resolution n. 110, of July 18th, 2007, of the State Council of Environment (Conselho Estadual de Meio Ambiente COPAM) ratifies the Term of Reference for Environmental Education Plans (Termo de Referncia para Plano de Educao Ambiental). According to this resolution, the enterprises classified in class 5 or 6 (i.e., enterprises with large size and high pollution potential, as defined in the Normative Resolution COPAM n. 74 of 2004) and that deal with mining, steel mill, dams for hydropower and irrigation, subdivisions, forestry, alcohol/sugar sector, biofuels and land reform settlements. The term of reference specifies the minimal activities that must be

In Brazil, the environmental permitting processes encompass three subsequent permissions: (a) the Previous Permission, where the decision is made about the best placement alternative, facing also with the option of not approving the enterprise; (b) the Installation Permission, which allows them to build the infrastructure; and (c) the Operation Permission, which allows the operation of the enterprise. Each permission can be accompanied by conditions and obligations, to be accomplished in a specified period of time.

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performed in that plan. The target audience of the plan should include: Internal public, i.e., the direct employees in all departments, including the subcontracted ones External public, i.e., the communities in the area under direct influence of the enterprise, as delimited in the environmental impact study. GTM Cerrado workgroup, in COPAM, in its works from 2009 to 2010, argued that, in the case of large enterprises, these actions of the Environmental Education Plan should be extended to all the production chain in which the enterprise participates. This choice would bring an additional efficiency to mitigate the environmental impact, acting with a systemic approach on the impacts throughout the life cycle of the product. 6. The entrepreneur and the social license to operate The socio-environmental conflicts destroy the public image of the entrepreneurs, significantly increase the time to obtain the environmental licenses and promote an undesirable social fragmentation. As a way to search for a better relationship with the local populations, the entrepreneurs have started to dedicate part of their internal policy and structure to what is denominated Management of Social Impact (RIBEIRO et al., 2011). One of the first steps in managing social impact is to maintain communication channels with the population. Among these channels, the corporate ombudsman, the public hearings and the opinion surveys should be highlighted. The Social License to Operate SLO is internationally consolidated, but still little discussed in Brazil, and it may be defined as the level of acceptance or approval of the local community for the installation of an enterprise or project (NELSEN & SCOBLE, 2006). Maintaining the LSO was chosen worldwide as the 4th greatest concern of the mining and metallurgical companies in the period of 2011-2012 (ERNST & YOUNG, 2011).

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The SLO was created in the mining business milieu, recognizing the local population as a parallel power to the government environmental license. Thus, it is not a proper government license, but a factor, which brings risks or opportunities for the business investments. One exception is the case of mining on indigenous lands, which in many countries requires a formal authorization from these communities (SOSA, 2011). The concept of SLO is quickly spreading through other economic sectors besides mining, particularly the ones with a greater potential for facing conflicts with the local population. In order to monitor and improve the SLO, several methodologies with quantitative and/or qualitative approaches have been developed. As to the quantitative approach, the SLO consists of a system of indicators, based on structured surveys, allowing a continuous monitoring (THOMSOM & BOUTILIER, 2011). Figure 1 shows an example of quantitative monitoring through the stages of mineral prospection, installation and operation of the mining enterprise of San Cristobal, in Bolivia. In this example, the system of indicators is structured in a hierarchical approach, comprising the levels of legitimacy, credibility and trust. As to the qualitative methodologies, one of the main methodological approaches has been the Situational Analysis (CLARKE, 2005), by the use of SWOT and PEST methodologies (NELSEN & SCOBLE, 2006). In both methodologies, it is tried to analyze social, economic, environmental and political factors in an integrated manner, focusing on risks and opportunities for the enterprise. Shepard (2008, p. 21) warns that, for a qualitative methodology that aims to analyze and improve an enterprise SLO, it is crucial to include participatory methods, which promote the interaction between the entrepreneur and the communities. We propose, as an innovation in the Brazilian context, that monitoring and maintaining the SLO should be incorporated by the large enterprises, as a condition in the environmental permitting process or also as a clause in the Terms of Adjustment of Conduct TACs agreed between the entrepreneurs and the Public Prosecutors.

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The articulation between a quantitative and a qualitative method should be a strong possibility of incorporating the SLO. With the quantitative method, preferably employed by an independent institution, it is possible to monitor the acceptance and legitimacy of the enterprise, with two target audiences: [1] directly affected population and [2] total population of the affected municipalities. In parallel, the entrepreneur would use a qualitative participatory method, having regular meetings with the community to discuss and enter into agreement on the appropriate actions to maintain and improve the SLO that is being continuously monitored by the quantitative method. At this stage, we deem that resorting to an independent conflict mediation team may be the turning point towards establishing transparency and strengthening the bonds of trust.

Figure 1 Monitoring LSO for the mining enterprise of San Cristobal Bolivia, from 1994 to 2006 (WEST, 2011, p. 16)

Furthermore, the environmental permitting process or TAC may foresee that the full reports from the qualitative and quantitative

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approaches must be publicized through a hyperlink in the homepage of the company. Thus, the entrepreneur would start to focus more on the results of SLO, which therefore would become a more effective tool to interact with the community. 7. Conclusion We support the conception that an enterprise should be considered large based on the perspective of the local community. The environmental permitting processes should considerate the social impact of the mining enterprises during a negotiation. Institutions with credibility with the local populations, such as the Public Ministry and the Academy, have a fundamental role in strengthening the symbolic social bonds and potentials. These institutions are essential to the development, inasmuch as they may bring about local potentialities and improve reliability to the negotiated agreements through their trustworthiness and transparency. The requirement of Social Assistance Plans for all large mining enterprises, similar to what already happens with the hydropower plants, is justifiable and may work as a tool for social pacification. It is critical to restructure the conventional permitting processes incorporating particular professionals in the technical teams in order to analyze the social impact of the large mining enterprises in its wide spectrum. The Social License to Operate may become an important tool for sustainable development, as it brings safety for the investors regarding the consequences of their ventures, while considering the local population as a participatory subject seeking for its empowerment through sustainability. Popular empowerment is an essential element to build trust and pursue transparency in the context of large mining enterprises. 8. References CLARKE, Adele. Situational analysis: grounded theory after the postmodern turn. Thousand Oaks: Sage Publications, 2005. 408 p. ERNST & YOUNG. Business Risks Facing Mining and Metals 2011 2012, World Finance Review, Sept. 2011.

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2011, Rio de Janeiro. Anais Eletrnicos... Rio de Janeiro: UFF, 2011. Available at: <http://www.excelenciaemgestao.org/Portals/2/documents/cneg7/ana is/T11_0374_1525.pdf>. Access on: 19 jul. 2012. SHEPARD, R. B. Gaining a Social License to Mine. [S. l.], 2008. Available at: <http://www.appl-ecosys.com/publications/sociallicense.pdf>. Access on: 20 may 2013. SOSA, I. Licence to Operate: Indigenous Relations and Free Prior and Informed Consent in the Mining Industry. Mining.com Magazine. Sustainalytics, oct. 2011. 17 p. Available at: <http://www.sustainalytics.com/sites/default/files/indigenouspeople_ fpic_final.pdf>. Access on: 19 jul. 2012. SOUSA, W. L. Impacto Ambiental de Hidreltricas: uma anlise comparativa de duas abordagens. Tese de Doutorado. 2000 154p. Rio de Janeiro: COPPE/UFRJ, 2000. SOUZA, E. A. Reordenamento scio-econmico e cultural das famlias atingidas pela UHE Engenheiro Srgio Motta: reassentamentos Pedra Bonita e Santa Emlia/Santana em Brasilndia-MS. Dissertao de Mestrado (Geografia), 2005. 166f. Presidente Prudente: UNESP, 2005. THOMSON, I.; BOUTILIER, R. G. Modelling And Measuring The Social License To Operate: fruits of a dialogue between theory and practice. [S. l.], 2011. 10 p. Available at: <http://socialicense.com/publications/Modelling%20and%20Measuri ng%20the%20SLO.pdf>. Access on: 19 jul. 2012. VAINER, C. B. O que o Grande Projeto?: caractersticas econmicas, territoriais, polticas e sociais. In: SEMINRIO GRANDES OBRAS E MIGRAES, 2011, So Paulo. Anais... So Paulo: Servio Pastoral dos Migrantes, 2011. p. 33- 45. WEST, A. Championing British Agriculture. Nuffield Farming Scholarships Trust, July 2011. 27 p. Available at: <http://www.nuffieldinternational.org/rep_pdf/1323597810Adam_W est_EDITED_report_in_Columns.pdf>. Access on: 19 jul. 2012.

Paper submitted on 7/9/2012 Paper approved on 10/5/2012

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