UPDATE 1-Peru enforces emergency decree to end mining protest

Mon Dec 5, 2011 9:48am EST

* First emergency of Humala's term over social conflict

* Gov't says protesters intransigent after mediation fails

* $4.8 bln gold mine plan by U.S. firm Peru's biggest ever

By Terry Wade and Omar Mariluz

LIMA, Dec 5 (Reuters) - Security forces fanned out across Peru's Cajamarca region on Monday to enforce emergency measures decreed by President Ollanta Humala to put an end to 11 days of protests against a $4.8 billion gold mine project.

Humala, a former army officer, called leaders of the environmental protest "intransigent" after weeks of mediation efforts failed again late on Sunday - prompting him to give the military and police extraordinary powers to end rallies that have shut roads, schools and hospitals in Cajamarca.

Protesters say U.S.-based Newmont Mining's Conga mine would hurt local water supplies and demand that it be canceled. But the government says the largest mining investment in Peruvian history would generate thousands of jobs and huge tax revenue.

The conflict has tested populist Humala's resolve to govern as a moderate who can simultaneously help Peru's poor and keep big business happy. Critics had urged the president to take a firmer hand in breaking up the strike, saying left-wing groups had infiltrated the protest marches by local residents.

"Normal activities are resuming. People are returning to work, going to school and reopening stores," Interior Minister Oscar Valdes said in Cajamarca, nearly 620 miles (1000 km) north of the capital Lima.

"The problems of water and the mine need to be resolved. The government doors are open to dialogue. This constitutional decree shouldn't alarm anybody," he said on RPP radio.

The decree marked the first time Humala, a former army officer, has used special powers to defuse a social conflict over mining in Peru, where disputes in some 200 communities across the country threaten to delay billions of dollars in planned mine and oil projects.

Humala won the presidency in June on promises to steer more social spending to rural towns to help calm social conflicts over natural resources while assuring companies their investments would be safe in Peru's surging economy.

He has said the project by Newmont would benefit all of Peru. It has gold deposits worth about $15 billion at current prices.

The impasse has highlighted Humala's struggle to neutralize Peru's polarized political environment. He has urged dialogue to solve the dispute, but a week ago the government was forced to ask Newmont to temporarily halt work on the Conga mine after the protests turned violent.

Since then protesters have continued to march and demand the government scrap the project altogether.

Gregorio Santos, the governor of Cajamarca region who has led the protests, said residents would return to their normal life on Monday but continue to peacefully oppose the mine.

"The president lacks the power of persuasion so he has had to resort to the power of guns. When you can't convince with words you rely on gun barrels," an angry Santos told Reuters.

Prime Minister Salomon Lerner negotiated on Sunday for hours with leaders of the protest but could not reach an accord, leading Humala to invoke a tool his predecessor, former President Alan Garcia, frequently used to quash protests by suspending freedom of assembly.

CANETE CLASH

The state of emergency decree came after a protest against a prison expansion project spiraled out of control on Friday in the coastal city of Canete, killing one protester in a clash with police that appeared to catch the government off guard.

Though the death was unrelated to hundreds of environmental disputes nationwide that Humala has promised to end, it was the first stemming from a protest since he took office in July.

A local environmental group, regional mayors and Santos say the Conga mine would displace a string of alpine lakes with reservoirs and hurt farmers. Other protesters worry about pollution or not getting what they say is their share of direct economic benefits from the mine in a rural area where poverty is widespread.

While protesters criticize Humala for moving too far to the right and embracing foreign investment, his government has urged Newmont to set up funds for social and environmental programs in a bid to win support for the mine.

Newmont has said its environment plan for the mine, which was approved a year ago by the government, meets the highest standards in the mining industry. It also runs extensive community outreach programs out of its nearby Yanacocha gold mine, some of which were developed after a mercury spill in 2000 that angered local residents.

The Conga project, which Newmont owns with Peruvian precious metals miner Buenaventura , would produce 580,000 to 680,000 ounces of gold a year and open in 2014. It sits 13,800 feet (4,200 metres) high in the Andes.(Reporting by Terry Wade and Omar Mariluz; editing by Anthony Boadle)