Although Peru’s Yanachocha gold mine is one of the largest and most profitable gold mines in the world, the mine owners have been repeatedly stymied by local residents in their efforts to expand production.  In response to environmental problems associated with the mine, protesters (pictured above) have blockaded mine facilities and clashed with security forces on several occasions, costing the mine owners millions of dollars along the way.  So, how can mine owners elsewhere in the developing world avoid such costly conflicts with the communities that host their operations?  This is the question addressed by my colleague Lisa Laplante in a fascinating new article just posted on SSRN, “Out of the Conflict Zone: The Case for Community Consent Processes in the Extractive Sector.”  (The article can also be found at 11 Yale Human Rights & Development L.J. 69 (2008).)

In essence, Lisa and her co-author Suzanne Spears argue that the “extractive industries” should embrace the principle of free prior and informed consent (FPIC): before initiating new projects (and on an on-going basis thereafter) companies should obtain consent for their activities from the communities that will be most affected by them. 

FPIC goes beyond conventional models of corporate social responsibility by giving affected communities some real control over decisionmaking.  As Lisa and Suzanne recognize, there are a number of important difficulties with FPIC, including how one identifies the affected communities and determines with whom to negotiate.  To borrow from the language of law and economics, I would see FPIC as prone to collective action problems and rent-seeking behavior, as local residents try to extract as much as they can from the extractive industries.  On the other hand, other models of industry-community relationships can also be quite dysfunctional in their own ways, as Lisa and Suzanne document through a series of case studies of different development projects in Peru (including the Yanachocha mine).  Moreover, the sort of industry-community dialogue that Lisa and Suzanne envision may be capable of building relationships of trust that diminish rent-seeking tendencies.  I am reminded of Dan Kahan’s work on the benefits of fostering greater trust and collaboration between urban police departments and inner-city residents.  Much more needs to be done to address the many practical and theoretical problems with FPIC that Lisa and Suzanne themselves identify, but it seems to me that they are off to a promising start.