crops toward higher value products for the agribusiness firms. Direct employment in processing plants as well as indirect employment among contractors and service industries has also been substantial. In comparison to traditional agriculture, agribusiness employs 40 times the number of workers per hectare. However, some of IFC’s agribusiness clients have established integrated operations, with limited backward and forward linkages, with outside parties. They produce raw materials on their own land, process, package, and then export directly. Among IFC’s clients, two firms have such integrated operations.
Several of the largest mining operations in the world, such as the Yanacocha gold mine and the Antamina copper mine, were established in Peru. Some environmental issues are apparent. For example, one sugar company is still open-burning plastic pesticide containers 10 years after IFC’s investment. In the case of an asparagus exporter, the company has persistently failed to improve industrial wastewater treatment, potable water for employees, or occupational health programs. Moreover, its use of local groundwater led to violent local protests and complaints to the Compliance Advisor/Ombudsman Office. There are also questions about the sustainable use of water in Peru, and IFC did not include a shadow price of water in its economic appraisals. In the case of Alicorp, however, the company’s adoption of IFC’s recommended Cleaner Production Program led to an industry best practice. Outcome Rating. IEG rates of the outcome of WBG support of growth of the agriculture and agribusiness sectors as Satisfactory.
Supporting the Development of the Extractive Industries Sector Country Developments The extractive industries sector has been a key driver of growth in Peru. The extractive industries sector was the first sector to respond following macroeconomic stabilization and liberalization in the 1990s. Mining, in particular, had high levels of private investment. Several of the largest mining operations in the world, such as the Yanacocha gold mine and the Antamina copper mine, were established in Peru. Although the sector had emerged as a key driver of growth by 2003, a range of issues remained to be addressed. These included the need to: (i) sustain mining growth by reducing perceptions of regulatory risk; (ii) strengthen public regulatory and 32
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oversight institutions; (iii) stimulate investment in hydrocarbons; and (iv) mitigate adverse social and environmental impacts of development in the sector.
Although extractive industries activities account for 8 percent of GDP, they employ just 1 percent of the labor force. Since 2003, the government has undertaken several measures to sustain private investment in the extractive industry sectors including: provisions for legal stability; reduced royalty payments; establishment of productionbased royalty schemes; and an easing of the laws on local consumption of natural gas. Combined with favorable external conditions, including sharp rises in mineral and hydrocarbon prices, free trade agreements, and liquid international markets, these efforts helped promote sustainable investment in mining and encourage investment in the oil and gas sector. The extractive industries sector grew 5 percent a year, and in 2008 accounted for 8 percent of GDP and 58 percent of exports. The government also passed legislation covering environmental management in the extractive industries sector, established a Ministry of Environment, and subscribed to the Extractive Industries Transparency Initiative to help promote sustainable development of the sector.16 Although the sector yielded a substantial increase in government revenues, issues remain in ensuring adequate environmental and social standards and a broadening of benefits. Growth in the extractive industries sector along with the rise in mineral prices after 2005 raised the sector’s contribution to 18 percent of government tax revenues, largely accounting for the fiscal surplus realized from 2006–08. However, the sector has generated very limited employment. Although extractive industries activities account for 8 percent of GDP, they employ just 1 percent of the labor force. Moreover, extractive industries operations have had weak backward and forward linkages with the rest of the economy, particularly after major construction works are completed.
There is an inadequate environmental and social regulatory framework and enforcement capacity covering the extensive small and medium scale “artisanal” mining operations, resulting in high levels of pollution and environmental degradation and poor worker conditions in these enterprises. The main benefit to the economy has been in increased government revenues, which in turn, has depended on how well the increased public revenues have been used.
Peru: Country Program Evaluation for the World Bank Group, 2003–09