REPORT-Shifting Dynamics in Social License: Why Community Is King in Latin America’s Mining Sector

Mining companies in Latin America face a litany of risks ranging from political changes and shifting regulations to tax reforms and volatile metals prices. But arguably chief among them is social license to operate; securing and maintaining support from local stakeholders is hugely challenging.

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Failure is not an option, as illustrated by the array of delayed and suspended mining projects around the region shut down for lack of community backing. The problem is not confined to trouble hotspots, such as parts of the Peruvian highlands or anti-mining provinces of Argentina, though these no-go zones serve as a further warning of what can go wrong when community relations efforts fall short.

Mining projects from Chile to Chihuahua, Guatemala to Uruguay, have faced local opposition. Size offers little protection. Protests and community-led legal challenges threaten the future of megaprojects as large as China Minmetals’ US$8bn Las Bambas expansion in Peru.

“A mining company can obtain all necessary permits and licences, but if the project does not have the acceptance of the local community the project will be delayed or suspended,” says Jordi Ventura, a Latin America mining attorney at US-based law firm Jeffer Mangels Butler & Mitchell (JMBM). “Getting a social licence to operate from the local community will save the company time and money in the long run.”

Credit: Agencia Andina

A RISING CHALLENGE

While already one of the biggest challenges facing the mining industry, maintaining a social license is getting harder. Part of the reason is growing community empowerment. Local residents are increasingly willing – and able – to demand a say on mining projects and a bigger share of the spoils, drawing support from legal and social media-savvy NGOs and local politicians.

The recent wave of anti-government protests in Latin American countries such as Chile, Ecuador and Colombia is another sign of this process of empowerment, with citizens confronting the keepers of power to insist on greater equality and social justice.

“We are seeing it [community relations] becoming more difficult. The reported incidence of community-company conflict is on the rise,” says Nicky Black, director of the International Council on Mining and Metals’ (ICMM) social and economic development program.

Against this challenging backdrop, mining companies are stepping up community relations programs. Seemingly simple steps, such as an early start to community engagement, establishing trust and mutual respect and dealing effectively with grievances, can go a long way to securing local support.

But mining companies – and particularly large global corporations – face pitfalls when they seek to rely on standardized, one-size-fits-all approaches to community relations. 

“One of the trickiest aspects of social work has to do precisely with the fact that mining companies have to accommodate and adapt to very different sets of circumstances in dealing with communities that behave very differently and expect very different things from this type of project,” says Nicolás Urrutia, senior analyst at London-based Control Risks.

Cover photo credit: Codelco