The Transformation of Cerro de Pasco

PASCO CERRO DE The greatest investment of the XX th century

Mario Sifuentes Briceño

Cerro De Pasco The greatest investment of the XX th century Mario Sifuentes Briceño

Published by: © Corporacion Ludens Comunicaciones S.A.C. for its Editorial Ludens seal. Calle Alcanfores 1246, Of. 402 – Miraflores. Lima – Peru.

INDEX

First edition: September 2017 First edition: 300 copies

06 Mining:

General edition: Ludens Comunicaciones Coordination and mentoring: Ing. Celso Sotomarino Author: Mario Sifuentes Briceño

Our Best Calling Card

Historical research: Mario Sifuentes and Daniel Goya Edition and photographic research: Cecilia Durand Photographic enhancement: Julio Basilio Design and layout: Ludens Comunicaciones · Maye Leon / Fiorella Rivero Computer graphics: Martin Arias

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08 The Silver Mountain 10 God’s Country

108 The Great Depression 110 An Imported Crisis

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32 Moving Forward 34 Closed Circuit

136 The Explosion 138 Crisis and Heyday

Translated by Richard Stoddart

Dust jacket photo: Archivo Fotografico Walter O. Runcie/AFWOR. Cover photo: Pontificia Universidad Catolica del Peru/Sistema de Bibliotecas.

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58 The Expansion 60 Time to Grow

172 Populist Avalanche 174 Harassment and Response

This book has been published thanks to the support of the Peruvian Mining Engineering Institute – IIMP, and was presented at the 33 rd Perumin Mining Convention chaired by Mrs. Eva Arias Vargas.

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82 La Oroya 84

The Key to the Business

Copy having being deposited in the National Library of Peru N o . 2017–11700 pursuant to existing norms.

204 Bibliography 206 Photo Credits 208 Acknowledgements

Published September 2017 at: Prepress and printing Grafica Biblos S.A. Jiron Morococha 152, Surquillo. Lima – Peru.

All rights reserved. The contents may not be copied either partially or in their entirety without the written authorisation of the author.

introduction

MINING OUR BEST CALLING CARD

When in 1902 the Cerro de Pasco Corporation was established in the central mountain range, it brought with it the seeds for what would be the greatest investment in Peru in the XX th century, on a scale never seen in South America and becoming the most important for U.S. mining outside of the United States. The company arrived with its electrical motors and mechanical equipment in a centralised, semi-feudal country, where peasants had no property rights, there were no labour laws nor environmental awareness and in regions where the presence of the state was as precarious as the roads connecting to them. Until that moment, the wounds inflicted on Peru by the War of the Pacific had not yet healed. In the 72 years of its presence in Peru, the growth of Cerro de Pasco was closely linked to the development of the mining corridor of the central Andes and the country. For decades, this was the company that was the biggest investor, taxpayer, and employer after the Peruvian state itself. Furthermore, it contributed to the mining and metallurgical sectors a work model based on four fundamental principles: discipline, research, efficiency and meritocracy. The most outstanding engineers, geologists and metallurgists in the world arrived at this remote location in the highlands, establishing the bases for a sterling reputation among Peruvian professionals linked to mining: “Cerro was a real school”. Within this framework, where there was no access to industrial scale services and inputs, the corporation acted under a basic guideline, that of autonomy. It accessed power on its own, building more than half a dozen hydroelectric plants; for transportation, it developed hundreds of kilometres of railway tracks and roads; for inputs, it invested seed capital in industrial plants that could guarantee quality products, and fed its employees by planting

pastures and raising cattle; it obtained optimum returns by training its most talented personnel at the best universities in the world and providing access to top quality schools and medical facilities. Cerro has been subjected to investigations of different kinds, generally linked to contamination, work-related issues and by social scientists. Quite a few of them, it has to be acknowledged, have been fuelled by Ideological and confrontational passions dating back to earlier times. However, it is not the purpose of this publication to confirmor deny these events. We would rather contribute a complementary point of view, as valuable as any other, seen from an entrepreneurial perspective, and on the positive impacts that an investment on this scale had on Peru. We’ve accessed documentation, first-hand accounts, and a top quality photo archive that allows us to tell this extraordinary story which we hope will contribute to understanding this Peru that continues to grow dramatically in spite of its unresolved conflicts. Fifty years after the nationalisation of the company, when we have finally grasped the importance of these investments on Peru’s development, we have gained enough perspective to be able to look back, learn and propose a better future for ourselves. Currently, Peru is the world’s second largest copper producer, and is among the countries with the largest reserves. It can double its production within the next decades, in light of the constant demand for the most helpful electricity conductor. This is all due to the revitalisation of the renewables industry and the electric car sector. This amenable, malleable, and resistant mineral, which has been intrinsically linked to our culture since times predating the Incas, today becomes in our best option for defeating poverty. We have learned our lessons.We cannot squander a new opportunity.We now have to fulfill our dream of full development. �

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Cerro de Pasco was a quiet and cosmopolitan town at the beginning of the XX th century, where mining and livestock raising coexisted. First decade of the XX th century.

THE SILVER MOUNTAIN o · n · e

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GOD’S

COUNTRY

and geography, was known for its rich deposits of silver, copper, zinc and lead. This wealth led to the beginnings of a mining town at the end of the XVI th century. According to Cerro de Pasco Corporation’s publication, known as El Serrano, this region was renowned for its mineral potential since the times of Peru’s fifth viceroy, don Juan Antonio de Mendoza, Marquess of Villagarcia. In 1736, Cerro de Pasco was famous for its silver lodes, which were leached and transported to all the agricultural estates after being converted to “plata piña” (a term used to denote pure, .999 silver) reflecting that this was a mineral wealth comparable to the mines in Mexico and Potosi, Bolivia. Even though in the years following Independence, Peru concentrated on the extraction of guano, a formof artisanal small mining developed throughout different parts of the country. By then, Cerro de Pasco produced 65% of Peru’s silver. For example, in that area there were known to be 120 estates and 316 metal milling plants that sprang up in succession all around the city within a 15 kilometre perimeter, as the El Serrano publication pointed out. With all this mining activity, one of the most important investments in the zone was the Cerro de PascoMinerals Railroad, incorporated on the 17 th of December, 1864, during the presidency of Juan Antonio Pezet. As is mentioned by Cerro de Pasco’s writer and historian, Cesar Perez Arauco, the first officially recognised Andean railway was built by the Cerro de Pasco Railway Co. whose inaugural voyage was in 1869. This railway connected our city with the mining estates of Occoroyoc, Quiulacocha, Tambillo and Sacra Familia. All the machinery and tools for the railway were brought on mules and in carts along the Canta route and were assembled at the site. The total journey was of 13 kilometres along a trail 1076 metres high. Almosttheonly reminder of that firstrailway investment is acommemorative medal issued on the day of its inauguration, according towhat theCerro de Pasco publicationmentioned on the celebration of its centennial: “A silvermedal minted

Cerro de Pasco had always attracted local and foreign fortune-hunting miners, but the arrival of the Cerro de Pasco Corporation established a momentum and a scale that had never been experienced in any part of the nation.

F rom remote times it was known that the Tinyahuarco –a Pre-Inca people that gave its name to one of the three districts of Pasco– were industrious and skilled in the working of silver, ancient and superb silversmiths whose historical development and lifestyle were interrupted by the abrupt arrival of the Spaniards. The chief settlement of the Tinyahuarcowas the town of Colquijirca, which derives from the Quechua words “ qolque ” (silver) and “ jirca ” (mountain). Silver mountain. Aname that aptly described this region of geological volcanics. There are chronicles of the first Spaniards to these new lands that underscore the abundance of minerals in the area, such as the one written byMiguel Astete, who in 1533, while on a trip to prospect for minerals, encountered a group of Indians transporting hundreds of “arrobas (old Spanish measure of weight roughly equivalent to 32 pounds) of fine silver and gold to pay for the ransom of the Inca Atahualpa, who was being held captive in Cajamarca. Some time later, Cerro de Pasco became the capital of the province of Pasco, located on the Bombon plateau, one of the Highland regions of the Andes at an elevation of 4,380metres above sea level in the zone of Yanacancha. From times predating colonial rule, this region, with its unrelenting climate

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“Cerro de Pasco Mining Company is the name of the Yankee syndicate represented in this town by Mr. James MacFarlane who will shortly begin operations in this traditional emporium of mineral wealth. Several U.S. employees have arrived who have made the journey via mule wagons. Yesterday the first convoy of

wagons arrived bringing luggage and timber”. El Minero Ilustrado, February 1, 1902

Silver commemorative medals struck to celebrate the inauguration and start of operations of the Cerro de Pasco railway.

from its own mines three and a half centimetres in diametre portraying in high relief a locomotive at the foot of some snow-cappedmountainswith a surrounding inscription: PascoMinerals Railway -Wymer andHarrison Contractors and on the reverse: “Inaugurated on June 19, 1869, under the presidency of the President of the Republic His Excellency Colonel Mr. Jose Balta and the Prefect of the Department of Junin, Colonel Bernardo Bermudez”. At this time, the dwellings were already leaning close to the mine pitheads and were built around or above the mine shafts which accessed the silver veins located at the bottom of the city centre. The works were undertaken in such a ramshackle manner that accidents, landslides and land subsidence were everyday occurrences. Practically no preventive measures were taken. Even at the mining estates, as the mills were called, the method was to process the rock by mixing it with mercury in order to obtain the silver. During its years of operation, the Cerro de PascoMineral Railway had its main offices at La Esperanza estate, where the silver and the few passengers moving between mines would gather, since the cargo being pulled byManning Wardle locomotives was devoted almost exclusively to this product. Since this railroad was never connected to the coast, Mr. Henry Meiggs, a controversial railway entrepreneur, who had already completed and made delivery of the Arequipa to Mollendo railroad and advanced 140 kilometres (out of the 224 agreed on) on the stretch that would unite El Callao and La Oroya, it seemed an interesting prospect to connect it to the line coming from Callao. But Meiggs was never able to achieve this dream, since he passed away. Thus the concession reverted to the state, which in turn ceded it to the British-owned Peruvian Corporation as part of a deal which included the exploitation of the guano and concessions for all of the country’s railways in exchange for payment of the substantial Peruvian foreign debt. The Peruvian Corporation had been founded having as its main partners the bondholders for the national foreign

debt deriving from the so-called Grace Contract, which got its name from the leadership and representation of the youngest of the siblings, Michael Grace. The war with Chile had become a tipping point. It was a watershed event that left the country practically in a state of anarchy after four years of conflict and occupation. Beyond the loss of life and talents, Peru’s population was in a deep depressive rut, broken spiritually and emotionally, including its ruling classes. The Chileans seized the territories of Tarapaca in Peru andAntofagasta in Bolivia, both extremely valuable due to the potential of saltpetre as fertilizer in other parts of the world. Actually, the possession of these territories and their wealth had been the original motivations behind the war. The subsequent occupation of almost the entirety of Peru’s territory brought with it the looting of scientific artifacts, works of art, and extremely valuable books, seized as war booty by the invaders. After the withdrawal of the southern contingent, Peru had been left adrift, like a ship without its spars caught in stormy seas, virtually drowning in a sea of debt, forced to pay taxes and reparations to Chile, with a devalued currency and a scarcity of hard currency so extreme that financial ruin closed all access to foreign loans. Added to this, the destruction of estates, ports, naval and merchant fleet, the razing of the sugar and cotton plantations, the dynamiting of industries and of all the railways. To top things off, guano was replaced as the main fertiliser for European agriculture (its old regular customers) by new chemical fertilisers and a by-product of saltpetre itself. Even in Cerro de Pasco the minerals railway was completely destroyed, which profoundly affected mining output in the region.

National Reconstruction

After this paralysation, one of the first strategies of Mr. Remigio Morales Bermudez’s government three months after gaining power was to stimulate

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One of the first properties acquired by the corporation was the La Esperanza estate, where it established its original centre for operations.

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Left– Until the arrival of Cerro, mining works were executed in an artisanal manner, and frequently on the surface. Right– Engineer in work clothes and equipment of the time during the company’s first years in the country.

mining by creating a legal framework that would promote the exploitation of our resources.With this purpose inmind, onNovember 8, 1890, legislation was enacted exempting the mining industry from all taxes and duties for a period of 25 years, with the exception of the tax applicable to mining rights, which had been in force since January 12, 1877 and constituted the fees paid for the concession. In this manner, the government took a stance on stimulating the sector and providing an important boost to the country’s economic recovery. Since then, mining has historically played an important leading role in projects aimed at national recovery, economic health and development. It was along the same line, it was of fundamental importance that in 1893 the Central Andean Railway began operations, connecting El Callao, Lima and La Oroya, an uninhabited crossroads 222 kilometres from the sea and practically at equal distance between Huancayo and Cerro de Pasco. The construction and commissioning of this long-awaited railway brought to these highlands the promises of modernity and development bymeans of a remarkable engineering feat for the time. Considering the rugged geography that the railway had to overcome, this train was considered a feat from the start. The stretch betweenMatucana and Ticlio alone has 61 bridges, switchbacks, turntables and 65 tunnels, among them the Galera tunnel, 1170metres long. This bridge crosses Mount Meiggs at the height of Huarochiri, barely passing Ticlio and a height of 4762 metres inside, which for decades rendered it the highest railway tunnel in the world. Even today, the work seems to have been carried out by titans. However, other events would contribute to the future consolidation of the mining sector. One example was the founding of the Engineering School. Originally, the name of this flagship universitywas the “Lima School of Civil and Mining Builders” and was founded by the Polish engineer Eduardo de Habich in 1876. Back then, most of Peru outside of Lima was made up of towns and the times called for the construction of bridges, roads, railways, as well as new

methods and techniques to enhance mineral extraction in order to modernise and industrialise the country. Obviously, the promoter of all these efforts was a state that was accustomed to hire foreign companies and engineers for the construction of major infrastructureworks, and occasionally, local engineers who had studied abroad. In spite of having commenced classes some days earlier, the School was officially opened on July 23 in the San Marcos mansion. Almost 80 years later, the school that produced first class professionals during the XXth century, and still does, would come to be known as the National Engineering University, called the UNI today. Another of the events that would serve to launch mining before the end of the century was the creation in March 22, 1896 of the National Mining Society, which received official recognition on that date through an official decree of the government of Nicolas de Pierola. The association was the result of a split of the former Society of Agriculture and Mining into three different associations: the Mining Society, the Agricultural Society and the Industrial

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THE START OF OPERATIONS FOR THIS LONG-AWAITED RAILWAY EXTENDED THE PROMISE OF MODERNITY AND DEVELOPMENT IN A WONDROUS MANNER FOR THE ENGINEERING OF THAT TIME.

Society. At the first board meeting, the chairman Elias Malpartida (Cerro de Pasco) was accompanied by Mr. Federico Gildemeister (Huancavelica), Jacobo Backus (Casapalca - Lima), Herman Gaffron (Huaraz), with Alejandro Garland as coordinator for government relations and Eduardo de Habich as director of the Engineering School. That same year saw the creation of the Ministry of Development and Public Works, headed by the liberal Eduardo Lopez de Romaña, an engineer specialising in the construction of railway bridges, a discipline he had studied in England. The purpose of this ministry was to restart investments inmining, agriculture, industry and other production sectors. One of the first assignments given by this newministry to the National Mining Society was the drafting of aMining Code to bring order and structure to the regulations of this sector that at the time seemed dispersed. Less than a year later, in January 1897, the Society formally submitted the project which after being submitted to a series of reviews, would be approved in 1900 and be enacted the following year. To summarise, theMining Code established in a clear and simple manner, that a mining property that had been legally acquired could not be revoked and was to be held in perpetuity, as was with any other property. The only tax payable was one of thirty soles a year to ensure ownership rights. This new legal framework was promoted throughout different parts of the country and especially Cerro de Pasco. This resulted in greater foreign investment and unleashed a frenzied search for new veins and concessions in the face of the imminent arrival of foreign capital, which was seen as an unequivocal harbinger of modern mining and the progressive denationalisation of the activity. Another technical detail was critical for stimulating the rebound of mining activities in Cerro de Pasco. Since 1865, many of the region’s mines had flooded, making their exploitation impossible. This is why in 1900, Eduardo Lopez de Romaña, then president of the country signed an agreement with

Top– The Lima-La Oroya-Cerro de Pasco railways were key to the newmining revival in the Central Andes. Right– View of Casapalca from the railway during the second decade of the last century.

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Left– One of the first

concentrators installed in Cerro de Pasco, a short time after the arrival of the corporation.

Right– Trusted personnel of

Mr.Eulogio Fernandini in Colquijirca, in front of the administrative offices of the business concern that had his name.

the Empresa Socavonera del Cerro de Pasco (Cerro de Pasco Mineshaft Company), which undertook to dewater these mining properties by means of building a tunnel. On the Board of the company were prominent local miners of the time, such as Messrs. Baldomero and Ramon Aspillaga, Juan and Isaac Alzamora, Jose Payan, Roberto Pflucker, Ismael de la Quintana and Manuel Ortiz de Zevallos, among others. This was the last local bastion resisting the corporation’s attempts to gain control over all that region, since the government recognised their rights over those properties. It was a tough negotiation and Cerro finally agreed to purchase all the properties and mining assets of La Socavonera in exchange for three million dollars’ worth of shares in its company, three times what the locals had invested.

Casapalca, then owned by the Backus & Johnston concern. In the company of his close friend, Antenor Rizo Patron he installed two electrical plants that derived their power from the reservoir built at Punrun lake. However, his interests were not restricted to mining. He was also successful in livestock farming and agriculture, with 200.000 sheep and several properties for sugar and cotton growing in the coastal valleys, especially the Comas and Pro plantations in the valley of Lima. At this point, Cerro de Pasco was already one of the most cosmopolitan cities in the country. In 1872 an office of the Bank of Peru and London had been opened, along with the twelve vice-consulates installed in the city’s narrow streets. Among themwere those of the Austro-Hungarian Empire, the Consular Agency of the Kingdom of Italy, Spain, United Kingdom, France and the Consulate of Sardinia, representing the Kingdomof Sardinia, which now forms part of Italy. All of these were the zealous guardians and promoters of small investments made by Italians, Germans, Britons, Spaniards, Serbs, French, and Greeks, among others, all lured by the historical mining wealth of the region. The Spanish of Colonial times were followed by other European entrepreneurs, withBritish investment occupying a prominent place. It was only at the end of the century, with the arrival of the Cerro de Pasco Corporation, of the International Petroleum Company and the consequences of the First World War that British predominance was to end in Peru. In the early part of the XXth century, the El Minero daily newspaper for the Central Andes noted: “The arrival of great industrial mining can be seen with the presence of numerous U.S. engineers. This only serves to confirm that the “Yankees” have taken over the city, since out of 522 registered mines, the 360 most important ones have been sold”. Some time later, in its edition of October 3, 1901, the same paper published: “James McFarland of United States citizenship, has laid claim before the court presided by Dr. Estanislao Solis, the local judge, to

The Fate of Colquijirca

After successive exploration and mining works dating back to Colonial times, the Colquijirca mine had ended up being owned by Manuel Clotet, a Spanish citizen, who in 1884 would transfer it to his son-in-law, Mr. Eulogio Fernandini, who was well known throughout all of Pasco and the central Andes. Mr. Eulogio worked with a Germanic discipline, which he had acquired in Germany and Austria, where he had been sent as a teen-ager to treat a serious intestinal infection. At the age of 22 he returned to Peru and found employment at the Gallo brothers’ mines and was able to save a small amount of capital. Some years later he wouldmarry Isolina Clotet, daughter of Mr. Manuel. From that moment onwards, he took charge of the Colquijirca mines, which under his tenacity and drive, would reach their heyday. The mining works began in 1886, but it would take him thirteen years to find the famous silver, lead and zinc vein that would make the area famous. Subsequently in 1889 he built the Huaracaca smelter, the second most important one in the country after

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Individuals from all parts of the world, attracted by the mineral wealth, adapted to the harsh conditions of Cerro de Pasco without abandoning the habits of their native countries.

WHEN ALFRED MCCUNE AND JAMES ALI HAGGIN BROUGHT TOGETHER THE MOST POWERFUL BUSINESSMEN OF THE EAST AND WEST COASTS OF THE UNITED STATES THEY WERE CONVINCED THIS WOULD BE THE ENDEAVOUR OF THEIR LIVES.

some empty lots of land on the outskirts of the city and on the pasture lands of the Paria hacienda (estate) for an extension of 640,000 square metres, with the following boundaries: to the north, the meadows of San Judas and Pampaseca; to the south, the road that leads to the hamlet of Quiulacocha; to the east, the railway station and to the west, Quiulacocha Lake”.

The foundation of the Cerro Corporation

When Alfred McCune and James Ben Ali Haggin convoked the most powerful businessmen of the United States’ East and West coasts, they had already collected a great amount of information and designed such a detailed project that they were convinced that Cerro de Pasco would be the endeavour of their lives. At the introduction dinner in New York for the presentation of the proposal, prominent figures attended, such as John Pierpont (JP) Morgan, Henry Clay Frick, Darius Ogden Mills, Michael P. Grace, Hamilton McKown Twombly, who represented the interests of the Vanderbilt family and the widow of a former partner, Phoebe Hearst. Haggin was a lawyer who has become a landowner and descended from Ottoman Turks and an aristocratic Kentucky family. He became famous when hewas givenRancho del Paso as payment by a client. This was a superb property that specialised in breeding racehorses and was located near Sacramento, the capital of California, which by the mid XIXth century had become a sought- after destination for adventurers and fortune hunters attracted by the gold rush. In fact, Sacramento had been founded by John Sutter, a Swiss immigrant on whose property the precious metal had been found after the first appearance of gold nuggets on the American River in Coloma. Prominent miner George Hearst was one of the few to make a great fortune after arriving in Sutter’s Mill in 1849. He had made the long voyage

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The California gold fever unleashed a torrent of migration and provided the initial momentum behind fortunes such as those of George Hearst, whose reputation was that of being the greatest expert in mineral prospection on the Pacific Coast.

IN 1887 HAGGIN AND M C CUNE DECIDED TO SET UP A CORPORATION; THEY AGREED ON A PARTNERSHIP WITH HEARST TO EXPLORE THE POSSIBILITY OF EXPLOITING THE MINERALS OF A LAND AS DISTANT AS PERU. HEARST WOULD PASS AWAY FOUR YEARS LATER WITHOUT SEEING THE PROJECT COME TO FRUITION.

to California after his father’s death and shared Higgins’ love for raising thoroughbreds at his Rancho Piedra Blanca property, located in San Simeon. He added more ranches to Piedra Blanca, and built Hearst Castle which served as a reference for the famous filmCitizenKane. The film has as the lead character Charles Foster Kane, based on Hearst’s son, William Randolph, whom years later would found his family’s media empire beginning with the San Francisco Examiner newspaper. Orson Welles played the role of this character superbly. The friendship between these two tycoons naturally resulted in the creation of the Hearst, Haggin, Tevis and Co. company, where the third partner was an old associate of James B. Ali, Lloyd Tevis. At the time, Hearst had already earned the reputation of being the best-known prospecting expert of the West Coast and a great innovator in the mining of quartz and other minerals.Within a short time, this company would become the greatestmining concern in the United States. On the other hand, Alfred McCune had been born in India to British parents, was a railway builder, owner of retail businesses with investments in mining, and like a good Mormon, had established himself in Salt Lake City, Utah, becoming the first multimillionaire of the young state. In 1887 he partnered with Haggin to explore the possibility of exploiting the minerals in a land as far away in Peru. Four years later, Hearst would pass away without having the chance of seeing the project come to fruition. The year prior to the New York dinner, in July of 1901, McCune had travelled with his family to Peru, spending several months there to familiarise himself with the territory and with the intention of purchasing the mainmining estates and prospects in Cerro de Pasco. All of the basic information had been provided by James McFarlane, a mining engineer who had acted as a scout on several opportunities during fourteen years, evaluating the mining potential of

the Central Andes and waiting for the right moment to make the investment. However, on his visit in 1901, to confirm the initial reports, it would be essential to convince these great investors. To do so required studies on the geography and the mining potential that had been carried out by other researchers such as Mariano Eduardo Rivero and British engineer Richard Trevithick, both in 1828; Alejandro Babinski in 1876, Maurice du Chatenet in 1879, Antonio Raimondi in 1885 and the U.S. engineer A.D. Hodges in 1888, Ricardo Garcia Rosell in 1892 and Pedro C. Venturo in 1898. Even though this had been historically renowned as a region that was very rich in silver, these monographs showed that there were also vast quantities of copper and coal. This is why Haggin and McCune felt that their patience had been rewarded. From the beginning of their exploration work, the best conditions for getting involved in this business became increasingly evident. The Callao-La Oroya Railway had been completed, with only a few kilometres remaining for it to access the mining territory. On the other hand, in the United States andEurope there was an increasingly widespread use of electricity, public and private transmission lines, tramways, manufacture of generators and circuits and construction of power plants, among others, all of which would increase the demand for copper for decades. The impact was so great that the price per tonne, which was GBP 40 in 1893, shot up to GBP 73 in only six years. McCune and Haggin, who were savvy businessmen understood clearly that with a precious metal such as silver they could cover operating costs and that copper extraction would represent pure profit once its demand began to grow. The political moment was also ideal. In 1899 Eduardo Lopez de Romaña had been elected president. He was a liberal who had been educated inLondon, specialising in railway bridge construction and who had a very favourable view of foreign investment. He intended to provide an important stimulus to the productive sectors of the country, especially agriculture, industry, and mining.

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Right– Pay day for the workers at the La Esperanza estate in the early part of the last century in Cerro de Pasco.

In order to promote the latter, a Mining Code, known as the 1900, was being prepared, but that only would only be enacted the following year. Among the innovations, the new norm established that that ownership of mining properties which had been legally acquired was final and in perpetuity, with the only condition that the mining contribution (canon) be paid. In the same fashion, tools, machinery and inputs for the development of the activity were exempt from the payment of import duties. In addition, ten years before, the government of Remigio Morales Bermudez had made mining activity tax- exempt for 25 years. It was unlikely that things could go wrong at that dinner with a good part of the most powerful men in the United States in attendance. During that single evening, Haggin and McCune were able to raise the impressive sum of ten million dollars of that time to put the project in motion. Three million were contributed by Haggin himself, McKown Twombly pledged two million, and the rest of the guests came in with a million dollars apiece, thus confirming the required amount. Throughout the rest of his life, Haggin would control the company with a 34% share. He would be considered the brains behind this unusual and enormous enterprise which would be the largest in South America by far and until that moment the greatest U.S. investment outside of that country. However, the most noteworthy aspect of Haggin and McCune’s design was not that it had brought together the most powerful men of the mighty nation of the north, but that their participation ensured the strategic coverage of the most complex needs requiring solutions. Haggin and McCune were the experts in exploration, operation and development of mining technology; McCune, McKown and Twombly and J P Morgan owned the main railway lines in that country; Henry Clay Frick, partner of Andrew Carnegie had the largest and most efficient steelworks and coal-fired engines in the country;

JP Morgan was a notable financier and key player in different parts of the world, as was Darius Ogden Mills, then the wealthiest banker in California and who from an early age acquired an in-depth knowledge of the mining business. It was a practically invincible group which from inception established within this business the bases for a philosophy that would guide the destiny of Cerro de Pasco Investment Company to the very end: self-reliance and autonomy. The birth certificate of this enterprise would be sealed with its official registration on June 6, 1902, although construction and exploitation would begin in February of that same year in our central highlands. In this way, suddenly and at a late date, Peru would fully enter the industrial age, during a period characterised by the swift expansion of world capitalism. �

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THE FOUNDERS

Hamilton McKown Twombly

Phoebe Hearst

AlfredW. McCune

James B. Ali Haggin

Jean Pieremont “JP” Morgan

Darius OdgenMills

Henry Clay Frick

Michel P. Grace

(1849–1927)

(1822 – 1914)

(1842–1919)

(1837–1913)

(1825–1910)

(1849–1919)

(1842–1920)

(1849–1910)

Born in India and by the end of his days he had become a railway builder, mining operator and U.S. politician. He owned mining properties in Canada, Montana and Utah. Since 1887, he began to investigate the potential of the Pasco region, in a partnership with James Ali Haggin, and during the last three decades of his life he focussed on this part of Peru. In 1902, he took the initiative of founding the Cerro de Pasco Investment Company, and that same year the Peruvian government granted him the concession to build the Huacho-Cerro de Pasco railway.

U.S. lawyer, rancher, and investor, he made a huge fortune at the end of the gold rush in his country. Together with his partner, the attorney Lloyd Tevis, he acquired the Rancho del Paso in Sacramento and created the Hearst, Haggin, Tevis and Co. investment fund, which would go on to become the largest mining corporation in the United States and owner of the Anaconda Copper Mine in Montana, the Ontario Silver Mine in Utah and Homestake Mine in South Dakota.

He was a businessman who had graduated fromHarvard. He first became a financial adviser toWilliam Henry Vanderbilt, an entrepreneur who owned some twenty railway companies (New York, Chicago, New Jersey, etc.). He subsequently became Vanderbilt’s son-in-law on marrying his daughter, Florence Vanderbilt Twombly. When his father-in-law passed away he was appointed director of the companies of the railway empire and representative for the many business interests of the Vanderbilt clan. He died “of a broken heart” after the demise of his son, Hamilton, Jr. in an accident.

A prominent figure in the steel and coal sectors in the heyday of the industrial era. He founded Frick and Co., a leading producer of coke, a key component in the steel industry, where he was a partner of Andrew Carnegie. He was chairman

At the age of 19 she married mining and finance tycoon George Hearst, known as the greatest expert in mining prospection on the Pacific coast and a promoter of the Hearst, Haggin, Tevin and Co. fund. Phoebe was the benefactor of many educational institutions, especially the University of California at Berkeley and is also remembered as one of the first women activists in U.S. politics. Along with other courageous women she led the suffragettes’ movement, which in the end would achieve female voting rights in the United States.

A successful U.S. banker and financier who drove its industrial consolidation in the second half of the XIX th century. Thanks to his devotion to efficiency, he contributed to the modernisation and transformation in the way of doing business in the United States. By the end of his life he had shares in fifteen great industrial corporations in different sectors: mining, electrical, telephone, trade, steel, naval, etc. and in 25 railway lines throughout the United States.

He was a prominent U.S. banker and

British entrepreneur who resided in Peru, chairman of W. R. Grace and Company and Founder of Grace Brothers and Co. After the War with Chile he created a consortium that would finance the reconstruction and stabilisation of Peru. He crafted the controversial Grace Contract which, among other things, paid off Peru’s international debt in exchange for the cession for a period of 66 years of the railways and the exploitation of the mineral resources and the guano. Grace’s business concerns would extend southwards to Chile where he created Grace & Co. to exploit the saltpetre there.

philanthropist, born in New York. In 1849 he went to California along with two of his brothers, attracted by the gold rush. In Sacramento he founded his own bank, the Gold Bank of D.O. Mills and Co., chiefly financing railway construction and mining companies. Some time later, along with other investors he founded the Bank of California, and acted as its president for two terms. While he lived, he became the richest man in California.

of the Carnegie Steel Company

and became a very controversial figure among the union members due to his attachment to safety standards, the reduction in the labour force and his obsession with efficiency.

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The greatest investment of the XX th century

Timeline 1876/

1901

1890

1876

1897

1901

Mining is granted exemption from all additional taxes excepting the property tax for national reconstruction.

1883

[ July 23 ] Eduardo de Habich founds the Lima Engineering School in the San Marcos Mansion.

The Mining Society presents the proposal for a new Mining Code requested by the Ministry of Development and Public Works.

The new Mining Code is enacted, creating a favourable environment for investments.

The War with Chile leaves the entire national production capacity destroyed and the economy in ruins.

1877

1889

1893

1896

1900

Ben Ali Haggin, Alfred McCune and George Hearst set up a partnership in the Cerro de Pasco Syndicate to explore the possibility of developing the deposits in the Peruvian highlands.

Mr.Eulogio Fernandini builds the Huaracaca smelter near Colquijirca.

The Lima - La Oroya Railway is inaugurated. It functioned under the administration of the Peruvian Corporation.

[ May 22 ]

President Lopez de Romaña, acting on behalf of the State, hires Empresa Socavonera de Cerro de Pasco to build a mining drainage tunnel.

The Agricultural and Mining Society is created to promote the development of both production activities.

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The greatest investment of the XX th century

THE COMMISSIONING t · w · o

Work team at the concentrator plant of La Esperanza

estate. A good number of the

workers are youths between the ages of 15 and 24.

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cerro de pasco

The greatest investment of the XX th century

CIRCUIT CLOSED

Many houses in the small city were still made of stone, with thatched roofs and prone to fires. This is why corrugated metal roofs began to be used.

Alania brothers, the Arrieta brothers, Tomas Chamorro, Juan Azalia, the Proaño family, Mr. ElíasMalpartida himself, Toribio Lopez, Alfredo Palacios, Mr. Agustín Arias Carracedo and Antonio Xammar, among others, almost all of whom combined agricultural, commercial and mining interests. The U.S. investors also shared the area with Compagnie des Mines de Huaron, a majority French-owned mining complex located in the district of Huallay, and with the Backus & Johnston Company, which would divest its small mines in Cerro de Pasco and remain with Casapalca, located in the Lima highlands. Within a decade the Cerro de Pasco Corporation would rapidly acquire 80% of the mining estates in the area, equivalent to some 70,000 hectares. The early migration of people of different nationalities, attracted by the mineral wealth of these highlands, would already contrast the cultural and educational gaps between them and the communities inhabiting the Andes since ancient times. Because of this, the immigrants wouldmore fully assimilate the great changes that were about to take place in the region, since in those days Cerro de Pasco resembled more a small village than a city. Before the arrival of the company, the thatched houses extended their way to the heavens and often fell victim to fires caused by bolts of lightning or improvised electrical connections that were becoming popular in the town. Slowly the roofs thatched with ichu grass were replaced by galvanised iron roofing also referred to as corrugated iron. The streets were narrow, shiny and cobblestoned, with a cement gutter in the centre for the water from the frequent rains to drain across and the pack animals to avoid with their tired gait. However, this rustic setting contrasted with other, cosmopolitan features. In the superb work by Neydo Hidalgo, a historian specialising in Peru’s electrical heritage, who published on the occasion of the 100 th anniversary of the La Oroya Hydroelectric plant, he mentions the presence in 1910 of Frank Carpenter, a journalist invited to visit the region and the company installations

The operation of the Cerro de Pasco Mining Co. demanded the connection of the mines via railways, the availability of reliable power sources and labour. However, they never thought the culture shock would be so great.

O nce the deal had been sealed and money changed hands, there was no going back. McCune himself, as operator of the mining syndicate, returned to Peru to deliver on the offer he hadmade to the landowners a year earlier. The first one to willingly accept the offer was the British miner George Edward Steel. He was followed by Elias Malpartida (who had been elected to Congress on several occasions, was a former mayor of Lima, Minister of Finance under president Candamo and Prime Minister under president Billinghurst). After him, the agreement was signed by Felipe Salomon Tello –a pioneer of the electrical power generation industry in Peru– who sold the Toril and Tajo Santa Catalina mines. The Languasco family, of Italian origin, followed suit, as did Ignacio Alania, Matilde Push de Villaran, Herminio Perez, the Gallo brothers, Romualdo Palomino and the Ortiz family, among others. The highest priced property to be sold on that first visit was the one belonging to Miguel Gallo Diaz, for which 100,000 pounds sterling were paid. However, not everyone agreed to sell. Among those who kept part or all of their properties were Mr. Eulogio Fernandini de la Quintana, owner of Colquijirca, who was already operating the Huaracaca smelter, the Lercari brothers, the

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cerro de pasco

The greatest investment of the XX th century

Left– The work of the smelter’s laboratory was vital to for the research observations on the complexity of the minerals ad making decisions with regard to their refining. Right– A group of workers poses with its tools at the bases of the new shaft in Cerro de Pasco.

carried out by the company itself. This journalist published several articles on his voyage in various U.S. publications, including the Omaha Daily Bee . Among other things, he wrote that the town had 15,000 inhabitants and that in the stores on the main streets he saw “California fruit preserves, Oregon salmon, Massachussetts cotton cloths and various well-known brands of U.S. sewing machines. There were also many articles of native manufacture, such as ponchos made from sheep and llama wool, crude sandals worn by the Indians and roughly made shoes”. That image alone portrays the difference between these twoworlds, whose habits and mindsets would clash over decades, but whose persistent roots are still to be found in our society long before the arrival of the multinational, even dating back to Colonial times. To this social reality with its semi-feudal traits, accompanied by a series of fractures, inequalities and prejudices, arrived this monumental investment with the forms and trappings of the developed world. By then, in Peru, the landowner was an all-powerful being, endowed with all sorts of economic and political advantages, while the indigenous for the most part, illiterate, lacked access to education, a decent meal, and even the right to vote. We have abundant evidence of the presence on the estates on the coast and in the highlands of forms of serfdom, the use of the stocks and other kinds of slavery concealed under the guise of paternalism. In the case of mining, prior to the company’s arrival there was the “enganche”, a form of indentured servitude applied only to indigenous peasants hired as mine workers. It consisted of the advance of money, food and other goods in exchange for working off the debt under inhumane conditions and often against their will. These practices not only underscored the inequalities, but they also planted inside the weakest the seeds of a simmering resentment which in the future became the basis for intractable social conflicts. The “enganche”

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cerro de pasco

The greatest investment of the XX th century

THE EIGHT NEWSPAPERS THAT CIRCULATED IN CERRO DE PASCO HAILED THE ARRIVAL OF THE MINING SYNDICATE. THE ECO DE JUNIN PUBLISHED “OUR CITY WILL THUS ADVANCE ALONG THE PROSPEROUS ROAD TO OPULENCE”.

Gradually, the tents that the “gringo” engineers used for their explorations would become a familiar sight.

issue has historically and systematically been attributed to the Cerro de Pasco company as a scheme incorporated by the latter. The truth is it wasn’t so. If initially the systemwas adopted by the company (which it subsequently publicly admitted to be a mistake), it was already prevalent in Peruvian mines. The U.S. corporation was the first mining company in the country to abolish this system, as it considered it to be inefficient. In his 1917 book titled “Travelling through the Republic, Impressions and Facts about Cerro de Pasco”, Marcial Helguero Paz Soldan, the words of Paul Sidney Couldrey are quoted: “Much has been said about the “enganche” system. They have tried to slander us because we used this scheme with the Indians. But are we actually guilty? We didn’t introduce this custom. In Peru it has existed since time immemorial. In the beginning, we made use of it. Nowadays, no longer, since it has produced poor results. The company has lostmore than twelve thousand pounds because the workers employed did not live up to their commitments and left with the money they had received as an advance”.

and the service areas. But the main source of amazement for the Cerro community was the concentration of these tireless men on their tasks and the precision of their movements. Doubtless it was a carefully choreographed sight very much resembling the movements of a machine. The eight papers circulating in Cerro de Pasco greeted the arrival of the mining syndicate, as the local writer and historian Cesar Perez Arauco noted in his Pueblo Martir blog. In its edition of February 1 st , 1902, the Eco de Junin notes “A ray of hope shines for our mining, and consequently for our city, that will thus follow the trail of opulence. We have no doubt that not only ourselves, but also neighbouring towns such as those in the Mantaro and Huanuco valleys will have greater opportunities to trade with Cerro de Pasco, which will additionally provide the opportunities for wealth and bounty for those who wish to provide service to the new company”. For its part, El Industrial, in its edition of that same day, underscored the future possibilities for the region: “We are at the threshold of a new takeoff of the economy and jobs, the two pillars of our land. From the plans they have disclosed, we can be certain that this U.S. company will establish a mining monopoly in our city. This is a scheme not known until now, since formerly it was a group of different owners, and thus the competition among them, that determined that our progress would be slow. Now, with the capital and new technology they bring, we have no doubt that we will see good results for our land”. Buoyed by enthusiasm, the Bank of Peru and London offered its good offices so that the foreign newcomers could conduct their operations with ease. But the “gringos” would not allow themselves any distractions. According to reports from El Comercio newspaper of that period, that was closely following the activities of that new economic player on the national stage, on February 2, two days after their arrival, the company began drilling on the Noruega

A caravan of modernity

The arrival in Cerro de Pasco of the first contingents of people, machinery, and tools associated with the company was an event comparable to the parade of a great circus. A long caravan of wagons and carts drawn by mules and other four-legged beasts of burden camped on the outskirts of an astonished town. Notwithstanding the weariness resulting from a five-day trek from Callao along the Yangas, San Buenaventura, Canta, Obrajillo, Huaros and Huallay, these bearded, blue-eyed “gringos” dressed in overalls set up a camp that had been designed in every detail with a swiftness and practical sense alien to the rhythm of highland towns. In the midst of the installations one could clearly make out a headquarters or work office, the tents of the workers’ detachment

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The greatest investment of the XX th century

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