This Southern Copper Strike Leaves Garcia Walking a Tightrope

This morning workers at Southern Copper walked out on indefinite strike demanding better pay. Of course, this is not the place for company analysis, but as a bare minimum of background on the company and the present situation. Southern (as it is known locally), part of the Mexican company Grupo Mexico, is one of the largest copper producers in the world. Due to the record-setting price for copper and other metals, profits at the company have been excellent in the last few years. In the last 12 months alone, Southern’s share price has nearly tripled. In this same period, workers at Southern have been negotiating a wage increase so that they can also benefit from the windfall profits. The 7 months of talks with management have continued despite seemingly breaking down on several occasions and resulting in short-lived walkouts.

More details of the strike can be found here:

But it would seem that the workers’ patience has finally run out and the strike just started is more than just a negotiation tactic.

The Peruvian government finds itself walking a tightrope. It is keen to be seen as mining friendly, and is doing its utmost to promote the country as the place for foreign mining to invest. At the same time, it has promised its people that they will also share in the bonanza. The government is presently calling the strike “improcedente”, a diplomatic middle ground term that means not legal but at the same time stopping short of calling the strike illegal, thus placing the strikers under threat of summary dismissal. It is also worth noting that since the nationwide strike actions of earlier this year;

The Garcia administration has been far more proactive in its mission to seek wealth for all strata of Peruvian society.

The present dispute at Southern Copper is, therefore, something of a test case. So far the government has tried to stay clear of the dispute at Southern, but there are plans by other mining unions to extend the strike to other companies as from November 5th. Garcia will be keen to see an end to the Southern Copper dispute long before that date comes around.

So, which way will Garcia jump? Will he follow the path taken by Peru in the last 5 years and protect above all the interests of mining companies? Or will he side with the workers and counsel for an improved deal for those on strike? With over $9Bn slated to be invested in new Peruvian mining projects by foreign companies in the next 5 years, there’s a whole lot of growth tied into the sector going forward. At the same time, he will be watched with a critical eye by those who have been promised the as-yet unrealized improvements in living standards. With both management and workforce at Southern Copper calling on the government to mediate this dispute, Garcia’s next moves may well set the tone for the rest of his time in office.

3 Responses to "This Southern Copper Strike Leaves Garcia Walking a Tightrope"

  1. Vitoria Saddi   October 3, 2007 at 7:39 am

    Mark, Any former Peruvian president has defended the miners? If yes, in what ways? Given that the mining are private concessions can the government intervene? Do you think it is the best way? Does Peru have any regulatory agency to deal with mining concessions (or this is not feasible)?  Like you said in a previous piece of yours, raising Peru’s rating is helping to hide Peru’s deeper problems. Great piece.  Vitoria

  2. Guest   October 3, 2007 at 7:41 am

    Mr. Turner, if you were a miner yourself, what would you do?

  3. mark turner   October 3, 2007 at 10:58 pm

    Vitoria, Am I allowed to say “no comment” and get away with it here?  Guest, Whether you referred to mine worker or mine company, my answer would be the same; mining’s too tough a life for me so i’d keep writing my trivia for cyberspace :-)