EDITORIAL COMMENT: Miners losing the PR battle

Chile's large-scale miners are losing the battle against the implementation of a new mining royalty by failing adequately to communicate their contribution to the country, at least in the opinion of several mining sector public relations executives. The feeling is that the government's royalty proposal has gained unstoppable momentum, with broad support from all political parties, and recent acceptance in an amended form by the mining and energy commission of the lower house. It now has to go before the senate. A systematic failure to raise the profile of the sector and engage the public has left the industry exposed to skewed information or misinformation about the contribution it makes, particularly the tax contribution. Finance minister Nicolás Eyzaguirre returned from his summer vacation on February 18 with fiery rhetoric against the miners, claiming they will only pay US$600mn in taxes for 2004 on profits of US$4.6bn. "One mine, one [Escondida], obtained profits of almost US$1.8bn, three times the total of the taxes paid by all the miners! Frankly, they have to pay more," Eyzaguirre said. Miners were caught on the wrong foot by following a strategy of lobbying and providing information to mining lawmakers. This was a gross miscalculation in a presidential election year when mining is an easy and politically benign target to place at the top of the political agenda. Chile's Mining Council, which groups together the large-scale miners active in the country, says the tax bill this year facing the 16 largest mining companies is closer to US$1bn, 40% of all taxes paid by companies in Chile. This fact was little publicized until after Eyzaguirre raised the stakes, but its release was generally received by the public as an attempt to close the gate once the horse had bolted. "The royalty battle was lost because the mining industry has no image for the people. People do not perceive the benefits mining provides and the companies lack the capacity to transmit it because there has been a lack of PR specialization in Chile. Mining is not represented in Santiago, the center of public opinion in the country," a mining company PR manager with five years experience said. The Mining Council treads a conservative line so as not to offend any of its members. As a consequence the information it releases tends to be pared back and watered down to the point of saying little. Some PR executives think its strategy needs to be revised and that part of its function should be to build an image for the industry. "Most mining companies in Chile only speak to the press when there is a crisis. There is no steady relationship, they have not made public what they do with communities and so there is a lack of knowledge," a source from an international copper producer with 20 years experience said. Concerning the royalty, miners spoke about how unfair it is to apply a discriminatory tax against one sector of the economy and that the accelerated depreciation that legitimately reduces their tax bill was legally agreed with the government and so on. No matter how valid, these are not facts that engage the average person. Mining houses like Phelps Dodge, BHP Billiton, Rio Tinto and Anglo American use sophisticated PR machines in their home countries but have historically not transferred them to outposts such as Latin America, where there is less legal obligation to release information. Not engaging the public contributes to the perception that the mining companies and their industry are exploitative. This oversight is costly. In Chile the royalty issue has been bungled but poor PR also hinders the development of new projects. The last year has seen protests against various mining projects in Peru, Bolivia and Chile about issues as diverse as environmental concerns, water use and contamination, employment and other social aspects. New mining projects often raise the bar with regards to environmental standards, generate employment and wealth but the failure adequately to engage local populations to obtain their support can make or break new projects. "Mining has historically kept a low profile in Chile," Felipe Purcell, marketing and external relations VP of Anglo American Chile, said recently at the company's first press conference since 2003. "Now we want to open the doors." With more proactive PR, miners could have informed the public that the royalty would be a small fraction of their 2004 tax payments and not the big money spinner that people in Chile think, and that the sector will pay a forecast US$10bn in taxes from 2004-2010, according to the Mining Council. The feeling is that the royalty battle has been lost, but that the lesson has been learnt, and that after the royalty a new chapter will start.