First, I cannot figure out the problems with the formatting of my blog, please deal with it and continue reading. On my previous post about our survey on La Oroya, "Alice" posted very valid questions on the situation with the company. I started to reply, but realized that in order to truly and acuately reply, I needed the capabilities of links that making a new post altogether allow. So, I will first post "Alice"´s thoughts and then my replies and I encourage you to become involved in this discussion. Please post and I will be happy to try my best to respond.
Hi, Joe!
The "fill out THIS SURVEY" link near the bottom is broken, but the others seem to work.
Also, though it's pretty clear that the company doesn't DESERVE any extensions, waiving of fines, etc., it still might be in the best interest of La Oroya to keep cutting them a little slack. What would happen if the State dug in its heels, refused all the contract changes and extensions requested by the company, and then it turned out that the "financial crisis" wasn't a fake excuse so they could escape responsibility? What if it turned out that the company was truly unable to meet the demands put forth by the various laws and contracts? Would the company go under, and if so, what would that mean for their workers and for the cleanup effort? Would the government receive enough collateral/compensation from Doe Run to take the plant over and modernize it? Probably not, if Doe Run didn't have the cash to do it themselves. If the plant closed indefinitely because no one had the money to modernize it, would that be enough to fix the environment in La Oroya, or would additional cleanup be needed? Would simply closing the plany be an improvement at all?
Obviously, the State can't grant extension after extension indefinitely and expect to get anywhere, and obviously Doe Run doesn't deserve any favors. But fixing the situation may not be possible without the company being involved and continuing to be profitable. And that might not be possible unless they are cut some more slack.
I answered the survey assuming that Doe Run can bear the burden of sticking to the original agreements. But my actual advice to the State would be, give Doe Run the minimum amount of slack you can. Get someone in there to verify the financial situation, and then hold the company to as many of its contracts and responsibilities as you can without sending it under - unless you're willing to see it go under.
Now - as someone who knows way, way more about this than I do - let me have it. What are the problems with my reasoning? But please remember that I in no way think that the company deserves to be cut any slack. If justice alone was the only question, I'd be all for the State digging in its heels and, if need be, squeezing Doe Run for every cent they can legally get, to atone for the damage the company's done. I'm just not convinced that this approach would be enough to actually fix the problem.
And my response:
First you do make a valid point in emphasizing the importance of having the Doe Run smelter open in La Oroya. There are approximately 3,500 people who work at the plant and in a town of a little under 20,000 residents, that is a very important population (espicially when you take into account that the 20,000 includes families). We do NOT want the plant closed. We want it open.
Your next question was whether the company would actually go under. I do not believe so. Doe Run Peru (DRP) is a subsidiary of the RENCO group who, according to bnet.com had $3.5 billion in sales last fiscal year. Click this link for another assessment of RENCO during a point in which they were interested in purchasing SAAB On Doe Run Peru´s website, the boast that in 2007, they were Peru´s fourth largest exporter with net sales of nearly $1.5 billion. The owner is a man named Ira Rennert who, according to a Forbes 3/2010 report, named him the 144th most wealthy person in the world with a net worth of $5.9 billion. I understand that Mr. Rennert would not want to put his own money into the company, and there would be no legal framework that would make him put his personal fortune out to fix the problem (though that would really make life nicer). DRP operates by purchasing the unrefined materials, mostly from peruvian mining operations, then refining and reselling the refined material on the open market. The company claims that the current situation is blamed upon the fall of world wide zinc prices (the prices is the blue line). That is true, the prices fell (as did prices for lead, copper, alluminum and other metals) and in 2009, they hit their lows (after having been at all time highs in 2007). But these prices have gone back up. DRP has a deal with another mining operation, the Swiss Glencore. News of this came out in march, but little has been published since then.
So when it comes down to it, Doe Run Peru did take a hit financially during the world financial crisis, but the numbers do not suggest that it is a hit that should cripple the company nor be something that their previous gains should be able to sustain. A business should not be allowed to reap the gains when they are winning and then throw up their arms in defeat as soon as hard times come by. There is still money in the pipeline but DRP is using this time to try and eliminate their responsibilities. This is the letter sent by DRP to the Minister of Energy and Mines about their "requests." Please click this link and read the letter before continuing
1) Indemnification - I don´t know the framework of what this means. I wish I did (and if anyone out there does, please respond)
2) tax - DRP is asking to pay their massive tax debt back over time instead of at once. They owe over $760 in taxes. It is understandable that this company cannot pay them back at the moment. They have recieved some economic hits and it would be unreasonable to ask for it all at once, but according to ministers, the company is asking for a schedule to pay it back in unreasonable amounts of time. Also, how did this even happen? How did the Peruvian government fail at getting these taxes? I wish I had an answer to these questions.
3) Environmental Standards - the company is asking to not be placed under environmental laws that exist for post-PAMA companies, something that they should have attained in 2004 ( please read my blog on the history of Doe Run to understand this). The letter is very unspecific about this. I don´t know to which rules they are referring.
4) This is the most troubling. I read that the government is asking for the company to follow its timeline that the company received in Oct 2009, but it is not and the government is levying fines. The company´s argument is that these fines can only be levied at the end of the new 30 month PAMA period that was approved in Oct 2009. This is asking the government to leave the company alone to do what they wish until the end of that period. That is not acceptable.
First you do make a valid point in emphasizing the importance of having the Doe Run smelter open in La Oroya. There are approximately 3,500 people who work at the plant and in a town of a little under 20,000 residents, that is a very important population (espicially when you take into account that the 20,000 includes families). We do NOT want the plant closed. We want it open.
Your next question was whether the company would actually go under. I do not believe so. Doe Run Peru (DRP) is a subsidiary of the RENCO group who, according to bnet.com had $3.5 billion in sales last fiscal year. Click this link for another assessment of RENCO during a point in which they were interested in purchasing SAAB On Doe Run Peru´s website, the boast that in 2007, they were Peru´s fourth largest exporter with net sales of nearly $1.5 billion. The owner is a man named Ira Rennert who, according to a Forbes 3/2010 report, named him the 144th most wealthy person in the world with a net worth of $5.9 billion. I understand that Mr. Rennert would not want to put his own money into the company, and there would be no legal framework that would make him put his personal fortune out to fix the problem (though that would really make life nicer). DRP operates by purchasing the unrefined materials, mostly from peruvian mining operations, then refining and reselling the refined material on the open market. The company claims that the current situation is blamed upon the fall of world wide zinc prices (the prices is the blue line). That is true, the prices fell (as did prices for lead, copper, alluminum and other metals) and in 2009, they hit their lows (after having been at all time highs in 2007). But these prices have gone back up. DRP has a deal with another mining operation, the Swiss Glencore. News of this came out in march, but little has been published since then.
So when it comes down to it, Doe Run Peru did take a hit financially during the world financial crisis, but the numbers do not suggest that it is a hit that should cripple the company nor be something that their previous gains should be able to sustain. A business should not be allowed to reap the gains when they are winning and then throw up their arms in defeat as soon as hard times come by. There is still money in the pipeline but DRP is using this time to try and eliminate their responsibilities. This is the letter sent by DRP to the Minister of Energy and Mines about their "requests." Please click this link and read the letter before continuing
1) Indemnification - I don´t know the framework of what this means. I wish I did (and if anyone out there does, please respond)
2) tax - DRP is asking to pay their massive tax debt back over time instead of at once. They owe over $760 in taxes. It is understandable that this company cannot pay them back at the moment. They have recieved some economic hits and it would be unreasonable to ask for it all at once, but according to ministers, the company is asking for a schedule to pay it back in unreasonable amounts of time. Also, how did this even happen? How did the Peruvian government fail at getting these taxes? I wish I had an answer to these questions.
3) Environmental Standards - the company is asking to not be placed under environmental laws that exist for post-PAMA companies, something that they should have attained in 2004 ( please read my blog on the history of Doe Run to understand this). The letter is very unspecific about this. I don´t know to which rules they are referring.
4) This is the most troubling. I read that the government is asking for the company to follow its timeline that the company received in Oct 2009, but it is not and the government is levying fines. The company´s argument is that these fines can only be levied at the end of the new 30 month PAMA period that was approved in Oct 2009. This is asking the government to leave the company alone to do what they wish until the end of that period. That is not acceptable.
I do agree that it would be against the state and country´s interest to have the state "squeezing Doe Run for every cent they can legally get" but it would not be prudent for the state to bend again and allow for the company to evade paying what they owe and completing promises that they made 13 years ago.
I hope that this helps, but even more opens the conversation. Please comment. Also, scroll down and take the survey! Thank you.
I hope that this helps, but even more opens the conversation. Please comment. Also, scroll down and take the survey! Thank you.
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