Camisea kidnapping highlights resource sector security concerns

Wednesday, April 11, 2012

The recent kidnapping of contractors working on the Camisea natural gas project in central Peru underlines outstanding challenges for the Lima government in guaranteeing security for companies investing in the country's considerable resource wealth, according to James Lockhart-Smith, chief Latin American analyst at global risk analysis group Maplecroft.

"The incident is a troubling indicator of the security challenges now facing the Humala government. The fact that oil workers have been kidnapped is of particular concern given the importance of ongoing high levels of investment in the extractive sector to [President Ollanta] Humala's program of government and in particular his social spending plans," Lockhart-Smith told BNamericas.

Members of the Shining Path guerilla group have been blamed for the kidnapping of 30 workers from Argentine-Italian company Techint under contract with the Camisea consortium in the town of Kepashiato in Cuzco region on Monday.

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While most of the workers have subsequently been released, press reports suggest that at least seven of the hostages remain in captivity.

Humala has sought to encourage increased hydrocarbons and mining investments in the country since taking office last July. New policies affecting activities in the resources sector, such as the indigenous consultation law, have been generally welcomed by the private sector and international interest in doing business in the country continues to grow.

Some industry watchers have expressed fears that the kidnapping may affect interest in the hydrocarbons sector in particular, with much of the country's oil reserves lying in remote, undeveloped regions.

Lockhart-Smith, however, cautions against overreaction, pointing out that the recent kidnapping remains an isolated incident within the recent history of Peru's oil industry.

"The incident should be seen in perspective. The activity of the Shining Path is confined to specific areas of the country - one of these being close to the site of the kidnapping. The Shining Path lacks the capability to carry out multiple operations of this kind. Overall security risks in Peru for extractive investors are lower than in other countries," the analyst said.

The Shining Path movement has been active in Peru since the early 1980's. At one point the movement controlled much of the country, threatening to usurp the power of the democratic government in Lima.

However, in recent years the movement has been confined to only small areas of concentrated activity. Membership has fallen dramatically while the group's operations have been severely harmed by the capture of several high profile leaders.