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Allocation of Funds to Local Communities

Antonio Pinilla Cisneros, International Mining and Oil & Gas Law, Development and Investment (2009)

In this paper, we will analyze the mechanisms currently available to allocate funds to communities and populations located in the areas surrounding mining properties in Peru. We will first discuss why we believe that these allocation mechanisms have been developed to benefit some specific stakeholders, both by the State, as entity in charge of redistributing State revenues, as well as by mining companies, which share their revenues, briefly discussing the existing fund allocation mechanisms. We will also assess the impact of these mechanisms and determine whether or not we can conclude that it has been a successful experience.

2. WHY ARE FUNDS ALLOCATED TO COMMUNITIES?

Economic resource allocation mechanisms are aimed at having people living close to the mine benefit from the positive economic impact of mining operations in surrounding areas. Accordingly, they are intended to have the benefits of mining activities reach nearby communities quicker and more efficiently, thereby facilitating mining operations while contributing to the sustainable development of local populations.

As far as the State is concerned, we should bear in mind that the State is not obliged to allocate funds to these specific populations because, according to the Constitution of Peru, natural resources belong to the nation and, therefore, the revenue obtained from their exploitat