[1999] PASCO-FONT, Alberto. «Economic and environmental viability of small and medium mines in Peru». En: MCMAHON, Gary; EVIA, José Luis; PASCO-FONT, Alberto; SANCHEZ, José Miguel. An environmental study of artisanal, small, and medium mining in Bolivia, Chile and Peru. Washington, D.C.: World Bank. p. 49-61.

Mining is an important source of foreign exchange in Peru. During the past five years, the country has experienced an investment boom in this sector. At the same time, Peru has built up a legal body aimed at preventing any negative environmental effects resulting from mining activity. This legislation is also intended to provide foreign investors with a clear and stable set of rules. Using the command-and-control approach, the mining authorities have set the standards that firms will have to comply with within the next five years in order to avoid paying fines.

Firms have had to present and follow an Environmental Improvement Plan (PAMA is the Spanish acronym). The law also requires firms to make an annual investment in environmental improvements of a minimum of one percent of total annual sales. They are run by domestic entrepreneurs that do not always have access to the appropriate technology or the financial resources needed to convert their operations into cleaner ones.

In this new framework, there is uncertainty whether some medium and small scale operations will be able to simultaneously achieve profitability and behave in an environmentally soun manner. In such cases, it could be socially beneficial to shut them down. This paper aims to propose strategies so that most small -and medium- scale mining operations can be both profitable and environmentally sound.