Companies still drawn to Peru, despite obstacles

By Ding Qingfen (China Daily) Updated: 2012-12-11 09:49

Enterprises are learning to adjust to various new obstacles to doing business, including environmental rules, strikes and local laws, as they explore opportunities in the country, Ding Qingfen reports in Lima

It's half heaven and half hell.

That's how many Chinese investors say they more or less feel about their work to tap mining and energy resources in Peru.

Kong Aimin, director of the mining company Shougang Hierro Peru SAA, has been in Peru ever since Shougang Group bought an iron ore company there in 1992.

Shougang was the first Chinese company to make a foray into the mining industry abroad. The company has the permanent right to exploit the Marcona iron ore mine, which occupies 670 square kilometers in Peru's Ica region.

The iron ore pulled out of the ground there is of a very high grade. The local transport system is convenient. And the city sees scarcely any rain at all during the year, making the climate advantageous for mining.

All these conditions may sound admirable, but Kong's life in Peru has by no means been easy. His time in the country has seen him beset by labor and safety issues.

"Since the first day I was in Peru, strikes have been breaking out almost continuously," Kong said. "We knew they would never end, and we'd just have to get used to it.

"More than 90 percent of my work and time has been spent on issues related to workers, the community and the local government."

During October, Kong found himself bending over backwards to deal with a strike organized by Shougang Hierro employees demanding higher wages and greater benefits.

It was the second strike Shougang had to deal with this year. The previous one lasted more than 20 days. This time it was even longer - almost a month.

Kong responded by going back and forth among the labor union involved in the conflict, the Peruvian government and legal institutions, trying to negotiate a deal.

He said he knew he could only hope to bring the dispute to a close as quickly as possible.

"We never expected that the strikes would end if we didn't concede anything," said Kong.

This time, as happened in many of the previous disputes, Shougang agreed to pay higher wages.

Kong and Shougang's experiences illustrate some of the difficulties confronting Chinese enterprises that are exploring for mining and energy resources in Peru.

"For those that want to come to Peru, Shougang's case is really worth learning about," said Gao Jinbao, Chinese commercial counselor to Peru. "They have to get fully prepared for it before they take any action."

Wu Jian, vice-president of Junefield Mineral Resources Holdings Ltd, a Lima-based mining developer, said "many Chinese companies didn't become acquainted with the market and culture before they came here."

"They had no idea that this Latin American country is really quite different from China in many ways: in its language, the government's role in the economy and its laws, regulations and culture."

Peru is one of the world's top 12 mining countries, possessing rich reserves of copper, zinc, silver, iron ore and oil. Estimates suggest that 80 percent of Peruvian territory contains abundant mining resources. The country is the world's second-largest producer of copper, and its output of the metal is expected to increase by 75 percent by 2015. It also contains large amounts of oil, natural gas and valuable metals.

This has proved attractive to a number of companies from around the world.

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