Peru Miners on Strike

Peru's miners are on indefinite strike as of Monday, June 30th. That's the message from the syndicate leaders, and the whole thing is about better pay, conditions etc etc. Those with holdings in Southern Copper Corp (PCU), Compania de Minas Buenaventura (BVN) and other miners with Peru exposure such as Freeport-McMoRan (FCX) need to know how the land lies on this issue.

The threat of this strike has been rumbling for quite a few weeks, and up until the recent Moquegua protests I was a little cynical about the whole deal. For one thing miners (in general) in Peru get paid very well for their labours compared to the national average salary, with much of that pay is locked up in the profit sharing laws (which hand out 8% of gross profits to employees, with some ceilings to the program). Basically, they make this anything more than a gesture strike and they get hit hard in the back pocket.

But since Moquegua (this is the way the government treated protestors before the little guys won through) the feeling has changed in Peru. There is now real force behind the move to share the impressive profits coming from the mining industry amongst the people, and that will certainly start with the mineworkers themselves.

(As a side thought, paying extra to the miners will be a great way of stimulating the trickledown economics favoured by this mediocre government, so it's hard to see what a nominally socialist party such as the ruling APRA has against sharing wealth this way....unless of course it's gone all neolib on its founder and prefers to suck up to the remittance companies.)

But back to the strike, and we may see real resolve unfold. Peru is heavily dependent on metals in its trade mix, with around 62% of exports coming from metals, particularly copper and gold. With imports growing fast (see the charts I put together on this post recently), the trade surplus could easily go negative with any prolonged industrial action, thus putting pressure on the whole government economic model.

But post-Moquegua, this may turn out to be a more general protest about government macroeconomic policy and not just about the mining. The feeling of ill-will towards the Garcia government is growing. His approval ratings are dropping once again. The general population of Peru, and especially the two-thirds that live outside Lima, has not felt the benefit of the last six years of national GDP growth and is fed up with promises of a brighter future just around the corner that never happens. Post-Moquegua, these same people see that by standing up to this government they get results.

A lot depends on how the approximately 85,000 individual miners due to stop work and their union bosses react to the prospect of a prolonged strike. As much of their salary is made up of performance bonuses, they'll really feel the difference if they stay out for more than a few days. So the scene is set not only for a battle of miners versus companies, but perhaps for the wider battle of government policy versus people power, and it'll be worth keeping a very close eye on how things develop.

PS: I forgot to mention that Alan Garcia's favourite attack dog, Jorge del Castillo, has been meeting with national union bosses to try and avert the national general strike slated for 9th July (Spanish link). Y'see, it's not just the miners that are at their wits end with this government....

Disclosure: Long PCU.

Comments

[ArtfulDodger]

Mr. Rock:

Everybody invested in BVN, FCX, & PCU is already keeping a close eye on the situation.

Do you have a conclusion to the article other than that?