Advancing Together With Barrick Gold

Mining Poverty levels fall as economic activity surges in Barrick mining regions of Argentina and Peru

Perched high in the southern Andes Mountains of Argentina sits Barrick’s Veladero mine. The prolific gold and silver mine is located some 375 kilometers northwest of the city of San Juan. Since construction of Veladero began in 2003, the mine has fostered an economic revival of sorts. The province has seen an increase in jobs and new investment, and a marked decline in the poverty rate.

The mine’s positive impact is documented in a recent study by the Chilean consultancy firm Consultora Malthus. “Veladero has created a more stable and diversified economy in the province of San Juan,” the study noted. “Positive employment trends, sectoral activity and growth in local tax revenues are all clear signals of Veladero’s direct and indirect impact.”

Barrick’s construction of the Veladero mine came along at an ideal time. At the start of the decade, Argentina’s economy fell into a devastating recession. The country’s gross domestic product plummeted from $269 billion in 2001 to $102 billion just one year later.

Unemployment hit 21.5 per cent and direct foreign investment (DFI) slumped with the rest of the economy. Foreign companies, which had pumped $8 billion into Argentina annually from 1992 to 1999, cut their spending to just under $1.7 billion by 2003.

Largely dependent on agriculture, forestry and other primary industries, San Juan province suffered the effects of the recession, along with the rest of the country. Provincial unemployment hovered at 16 per cent in 2001. Barrick began construction of Veladero in 2003. That year, the company’s capital spending program amounted to 36 per cent of total direct foreign investment into the country. The mine created nearly 1,000 direct jobs, supporting another 5,000 indirect jobs across the province. Job opportunities and investment created by the mine helped bring the provincial unemployment rate down to 6.9 per cent by 2008.

“Veladero was a clear sign of faith in San Juan province, in the overall Argentine economy, in the policies of the national government after the crisis years of 2002 to 2003,” the Consultora Malthus report concluded.

The report estimates that Veladero, alone, accounts for 23 per cent of the province’s economy and has led to a 38 per cent increase in regional employment.

“One of the most significant effects of the mine is that is has diversified the economy,” the study stated. “It has generated new demands and contributed to stable, long-term growth.”

Social conditions throughout the province have also improved. The number of people living in poverty declined from 53 per cent in 2003 to 17 per cent in 2008. The infant mortality rate also fell from 20 deaths per 1,000 children to 13.

Further signs of a robust and growing economy are also reflected in the emergence of thriving new businesses. Alejandro Montes Graffigna is one of many local success stories. He operated a small TV and video production company in the city of San Juan prior to the construction of the mine. Today, he is producing safety and training material for Barrick and has been able to grow his business. “We are a direct supplier to Barrick,” Montes Graffigna said. “We have grown from three employees to seven, and we intend to keep growing.”

Similar success stories abound across the province. Noelia Munoz is a 34-year old single mother of five. She lives in Tudcum in the district of Iglesia, about 180 kilometers from the mine. Prior to the opening of the mine, she sold eggs and bread in the local market, which supplies her village of 700 people. When the mine began operating, Munoz and three other local women formed a company called Sabor a Mi (My Taste) and now provides boxed lunches for mine workers. Their company employs four other people. “Our company was born because of Barrick,” Munoz said. She says the entire community has benefitted from the presence of the mine, and points to infrastructure, as one example. “Thanks to the company, today there are roads in this town.”

Other local residents who run businesses from sign painting shops to audio-visual production houses say they have also been helped by having a thriving mining operation in the region. “Our company was created and started up because of Barrick,” says Pedro Ponte, a 33-year old entrepreneur. He lives with his wife and two children in the city of San Juan. “We provide transportation to the workers going up to the mine,” he said. “We now have approximately 220 employees.”

Argentina isn’t the only South American country getting an economic boost from Barrick’s mines. A second Consultora Malthus report also assessed the economic impact of Barrick’s Pierina mine, which is located on the Peruvian side of the Andes.

The study concluded that by almost any yardstick — be it literacy rates, levels of poverty, households with potable drinking water, or even colour TV — life has markedly improved for residents of the surrounding districts of Independencia and Jangas since the Pierina mine opened.

Pierina is situated about 10 kilometres northwest of the city of Huaraz in the Ancash region of north-central Peru. The open-pit mine began producing in 1998, with output peaking at approximately 900,000 ounces of gold per year from 2001 to 2003.

According to the Consultora Malthus report, Barrick invested approximately $850 million between 1996 and 2009 to build and operate Pierina, which directly employs 500 people and another 1,900 indirectly through the purchase of locally produced goods and services. These are significant numbers in an area where large portions of the population get by through subsistence farming.

The district of Jangas is located closest to Pierina and is home to about 4,000 people. The study noted a dramatic decline in the community’s poverty rate from 80 per cent to 31 per cent between 1993 and 2007. Illiteracy rates also declined, dropping from a startling 56 per cent in 1993 to 31 per cent by 2007. Even the rate of higher education improved. A mere one per cent of people in Jangas had completed education beyond high school in 1993, but the figure had risen to six per cent in 2007.

While more urbanized than its neighbours, the people of Independencia also saw a marked improvement in living conditions during this same period. Urbanization increased from 67 per cent to 89 per cent and the poverty rate fell from 57 to 31 per cent. Illiteracy rates also dropped in the district from 36 per cent to 24 per cent. The number of those pursuing a higher education nearly doubled, going from nine to 17 per cent — well above the national average of 13 per cent.

The improvement in living conditions was in sharp contrast to the rest of the country. By 2007, 40 per cent of Peruvians fell below the poverty line.