London School of Economics and Political Science Government Department Msc in Public Policy and...

London School of Economics and Political Science

Government Department

Msc in Public Policy and Administration

Why does size matter in mining safety regulation? The case of chilean mining and

challengues from developing world

A dissertation submitted by 35916 to the Department of Government, the London

School of Economics and Political Science, in part completion of the requirements

for the MSc in Public policy and administration

Word count: 9,802

1st September 2011

Why does size matter in mining safety regulations? Candidate n° 35916

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Abstract

The research addresses the variable of size of firms in safety regulation in mining industry,

according to frameworks that have been analyzing risks reduction during the lasts years. In

this way, it will be argued that differences in size implies heterogeneous outcomes in risk

prevention and accidents as a product of different degrees of engagement to safety and

coherence in planning and implementation of measures between medium and large-scale

mining companies. These differences often are not sufficiently accounted in the application

of regulatory standards.

Disparities in size also present challenges for regulation from developing world contexts,

which have been less attended in the literature of management regulation, opening

questions for the need of regulatory instruments capable to embrace the singularities of

smaller firms and their institutional and socio-economical contexts.

Therefore, it will be analyzed the importance of size in mining through the comparison of

two case studies from Chile, from medium and large-scale mining, identifying their main

differences regarding risks prevention and reduction, management efforts, and the

incidence of the role of workers and regulators in safety.


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Table of Contents

List of figures..................................................................................................................................5

Abbreviations .................................................................................................................................5

Introduction....................................................................................................................................6

I. Literature Review......................................................................................................................9 1.1 Management Based Regulations: Origins and purposes ............................................................... 10 1.2 Elaborating a Plan: What to mandate? .................................................................................................. 12 1.3 Management-‐based regulation choices: to what extent specific? ............................................. 12 1.4 Management-‐based regulation and flexibility ................................................................................... 13 1.5 Cultural heterogeneity and commitment............................................................................................. 15 1.6 Regulation in the Third World .................................................................................................................. 17

II. The Chilean mining context................................................................................................ 20 2.1 Segments in mining ....................................................................................................................................... 21 2.2 The regulatory entity .................................................................................................................................... 23

III. Methodology......................................................................................................................... 25

IV. Case Studies .......................................................................................................................... 26 Case 1: Mining Company San Esteban Primera S.A. ................................................................ 26

Manager’s role in safety ................................................................................................................................... 29 The Worker’s role in safety.............................................................................................................................. 30 Regulator’s role in safety ................................................................................................................................. 31

Case 2: National Copper Corporation (CODELCO) ................................................................... 32 Manager’s role in safety ................................................................................................................................... 36 Workers role in safety ........................................................................................................................................ 37 Regulator’s role in safety ................................................................................................................................. 37

V. Discussion ............................................................................................................................... 39


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5.1 Specificity of plans.......................................................................................................................................... 40 5.2 Regulation and Flexibility ......................................................................................................................... 45 5.3 Managers, workers and regulators ......................................................................................................... 46

Conclusions .................................................................................................................................. 49

References .................................................................................................................................... 51


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List of figures

Figure 1. Public organisms intervening in Chilean Mining 19

Figure 2. Fatality rate and exponential trends in mining (1980 – 2010). 20

Figure 3. Distribution of large-scale (red) and medium scale (blue) mines in Chilean

territory. 31

Figure 4. Regulation compliance tendency according to scale of mining 40

Figure 5. Accidents in mining according to firm size, expressed in total fatal accidents in

2010 41

Abbreviations

CODELCO National Copper Corporation [Corporación Nacional del Cobre]

SERNAGEOMIN National Service of Geology and Mining [Servicio Nacional de

Geología y Minería]

ENAMI National Mining Enterprise [Empresa Nacional de Minería]

MBR Management Based Regulation

MEC Mining and Energy Commission

MAC Mining and Communities

OSHAS Occupational Health and Safety Assessment Series


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“It is man, Part of man,

A heavy petal of his glory.” (Pablo Neruda, “Ode to

Copper”)

Introduction

Nowadays, the nature of risks that regulators face is far more complex in contexts of rapid

changes where governments must prove their adaptability and efficiency in facing problems

such as industrial safety, climate change, environmental pollution and health or food

quality. In governments with limited resources, how to produce high-quality regulations

without excessively increasing the public expenditure has become an important issue.

In a dangerous activity such as mining, where accidents are not numerous but serious,

different regulatory approaches have been applied worldwide to reduce hazards and

accident rates. These have been implemented from the necessity of establishing shared

goals between firms and governments, thus overlapping public and private interests and

also taking advantage of corporate knowledge to manage governmental risks. The above

allows firms to develop skills within their own regulations and also contributes to prevent

higher costs in monitoring, introducing positive behaviours that encourage better standards

from management design. Large-scale mining companies have been leading these


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innovations in countries such as USA and Australia, with variable results in safety

outcomes.

However, the incorporation of higher safety standards and risk regulations in smaller firms

has been a challenge as these present differences with regard to large-scale mining

companies. These differences are expressed in their composition, accountability systems

and learning capacity, competences for innovation and technological improvement, and

also in the different mechanisms for hazard prevention and reduction. Some scholars have

argued that it is key to regard internal organisational differences in management risk as

cultures by themselves, and is also worth taking into account the global context in which

institutions are framed (Gunningham & Sinclair, 2009).

Thus the purpose of this research is to investigate to what extent the size of the industry in

mining is significant for regulatory frameworks and greater safety outcomes in workplaces

within the context of developing countries. In this regard, this research asserts that size in

mining is important since large-scale companies have proclivity to adopt positive

behavioural changes toward safety, developing mechanisms similar to self-regulation.

These are encouraged by the market and public image, whereas medium and small-scale

mining lack the adequate commitments to safety as well as of an incentive structure that

could ultimately lead to increasing degrees of management regulation.

The study problem places the need of considering firm size variability within the

developing world. Even though mining is the foremost economic activity and the main

contribution to Chile’s GDP, limited qualitative research regarding size has been conducted


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for academic discussion and policy delivering. In this line, identifying the factors that

intervene and shape safety mechanisms is vital for the design of effective frameworks that

would lead to safer workplaces for miners.

The document is structured as follows. Firstly, the main theories in regulation, particularly

management-based approaches will be analysed in order to identify their connection with

regulatory enforcement and industrial safety. Secondly, two cases representing medium and

large-scale mining enterprises will be addressed in terms of safety compliance,

development of internal enforcement patterns, incorporation of international certificates and

capacities for innovation and risk prevention. Finally, a discussion in the light of the main

findings related to size differences and perspectives for both the academic discussion and

mining policy is conducted, acknowledging their significance for the solution of human

hazards at workplaces.


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I. Literature Review

Currently, issues on how to promote superior regulatory standards in safety and improved

social outcomes at workplaces in alignment with economical incentives for companies and

governmental policy goals have become increasingly important. Approaches and regulatory

frameworks have been analysing the different natures of regulated entities, developing

different mechanisms directed to achieve better regulatory outcomes in heterogeneous firms

and contexts.

In the case of mining, the basic causes for high injury experience are unsafe conditions and

unsafe actions at the working place. Unsafe conditions may arise due to insufficient mine

design, unanticipated geological conditions, inadequate equipment or supervision or a

combination of these factors (Paul & Maiti, 2007). The focus within this view is placed on

those habits that workers should perform or eradicate to achieve better safety outcomes.

Another perspective is addressed by Laurence (2009), who asserts that accidents in mining

are caused by problems in rules and regulations that are supposedly in place to prevent

them. Thus risks are more associated to systemic failures than to behavioural ones, and risk

management should not continue producing rules but rather connecting the existing norms

with practices in sites. Factors associated to accidents are poor communication within

companies, lack of awareness systems, lack of clear instructions and inadequate training for

workers (Laurence, 2009).


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1.1 Management-Based Regulations: Origins and purposes

In the endeavour of addressing risk regulations, new approaches focusing on a more self-

regulated private sector have emerged centring on how firms can develop their own

regulatory strategies through management efforts, in order to achieve public and social

goals.

This research in particular has taken the theory of management-based regulations

(Coglianese & Lazer, 2003), argued as the most appropriate for addressing risk prevention;

firms can develop their own risk management processes through internal planning

practices, and with the intervention of regulators in contexts of high heterogeneity and

difficulty in measuring those risks.

The main aim of this type of regulation is thus reaching consensus between private and

public goals in a manner that the management area incorporates industrial safety into its

‘bloodstream’. Management-based regulations focus rather on systemic problems than on

individual deficiencies, assessing control of risks and the creation of an in-built system of

maintenance and review (Coglianese & Lazer, 2003).

Management-based approaches intervene at the planning stages, compelling regulated

organisations to improve their internal management so as to increase the achievement of

public goals. Therefore, firms are expected to produce plans in compliance to the general

criteria in order to promote the targeted social goal, placing responsibility for decision

making with those who possess the most information about risks and potential control


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methods (Coglianese & Lazer, 2003). The latter makes this approach less costly and more

effective than traditional government-imposed regulatory standards, as managers are more

likely to view company goals and norms as reasonable, resulting in more compliance. In

governments with limited resources, this approach certainly mitigates the problem of

regulation, also enabling firms to create their own regulatory approaches and seek for better

innovative solutions (OECD: 2010).

This approach is especially suitable for problems arising from breakdowns in complex

systems, where coordination amongst an important number of interactive processes is

required to prevent or reduce social harms. Management-based regulations may aid in

overcoming the tension between public and private interests, by forcing firms to conduct

research on their potential risks and confront them in a way they may not otherwise find

beneficial enough to study without intervention (Coglianese & Lazer, 2003).

Assuming that governments understand social objectives although not capable of

measuring them, it is possible to arrange plans within general parameters for effective

management and then enforce management practices that are consistent with those

requirements and social goals. This approach, thus, places interest in the capability of

regulators to influence internal regulation making the firms more responsive than reactive

to social concerns and influence positive behaviour (Coglianese & Lazer, 2003).


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1.2 Elaborating a Plan: What to mandate?

In management-based regulations, the role of governments is key in monitoring and

enforcing reduction of harms by collaborative mechanisms in which both regulator and

regulated arrange internal planning followed by the implementation. Thus the question is

whether the government should mandate the planning itself, implementation, or both, given

the limited resources. It is about the capacity of regulators to alter a firm’s incentives

incorporating public goals into planning and implementation (Coglianese & Lazer, 2003).

In this approach the regulator must have the technical capacity to determine whether the

implementation is consistent with the plan’s purposes; the inability to monitor planning

would be compromising for the outcomes established and may yield to negative results,

where companies may choose to maximise benefits instead of reducing risks or other

positive social outcomes (OECD, 2010).

1.3 Management-based regulation choices: to what extent specific?

Aside what to mandate, regulators face other decisions when implementing management-

based regulations (Coglianese & Lazer, 2003). One of these is deciding how prescriptive

the government should be in directing firms’ management practices. It may range from

simple advice according to specific criteria for adequate planning; or firms may be required

to monitor their performance and correct their plans.


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Likewise, management-based regulation can become highly specific, showing a tension

within the design of effective regulations. By making very specific rules, the process of

adaptation to new regulatory parameters can be problematic, constructing an inflexible

normative framework. Or on the contrary, the government can prove to be very imprecise,

being troublesome for enforcers to monitor compliance. Thus it is central here to find the

optimal level of specificity that directs firms toward more optimal standards and enables

inspectors to assess whether a firms has a good management system in place (Coglianese &

Lazer, 2003).

In addition, more governmental involvement induces more engagement of firms in

meaningful planning and accurate record keeping. Nonetheless, governmental involvement

in management plans entails the issue of the extent of intervention in these plans, varying

from the revision by the regulator of all management plans and their pre-approval before

implementation to their revision ex-post (Coglianese & Lazer, 2003). In this case, the

regulator may take the role of quasi-consultant giving his/her expertise in management

improvement in the private sector. Nonetheless, it is argued that plan pre-approval does not

eradicate the need of monitoring mechanisms and continuous inspections by regulatory

agencies (Coglianese & Lazer, 2003).


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1.4 Management-based regulation and flexibility

Management-based regulation is important in the provision of flexibility to social

challenges facilitating their compliance to the rules (Gunningham & Sinclair, 2009).

The regulator will be best able to ensure effective regulation by imposing suitable detailed

record keeping systems and instituting third party audits. However, there is the question of

whether a firm will be accurate in developing records of accidents or incidents that may

lead agencies to penalise the firm (Gunningham & Sinclair, 2009). Furthermore, although a

firm may not be completely deceitful in its record keeping system, it would do little good in

promoting and including hazards in a plan that governmental inspectors are unlikely to spot

on their own, especially when these hazards are expensive to prevent.

Within this scenario, a greater grade of discretion opens a challenge for regulators in

enforcement. Indeed, management-based regulation places policy decision in private firms

to a significant degree, taking advantage of the information that the private sector holds on

the relationships between behaviours and their outputs, compelling regulated parties to

conduct their own evaluations (Coglianese & Lazer, 2003). The critical issue herein is

whether they can overcome the design challenges. Management-based regulation does not

reveal if the regulators have the capacity to regulate and evaluate planning and

implementation, nor does it directly address whether the firm carries out its plan in the

various specified contingencies that do not occur when the inspector is watching

(Coglianese & Lazer, 2003).


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It is argued that such discretion could be used by firms to deceive regulators simply by

making it look like they are managing their operations responsively. Hence for government

and third party auditors it may be difficult to determine if management plans are actually

making a significant difference in practice (OECD, 2010). Consequently, even when the

law stipulates highly specific plans, what constitutes a ‘good management effort’, it may

still be at least open ended or case specific, since management-based regulations give

discretion in how to address their own risks (OECD, 2010).

1.5 Cultural heterogeneity and commitment

The activities involved in management-based regulation are to some extent in conflict with

corporate intentions, being the state responsible in identifying these; determining the stage

and ways the intervention will be executed; and monitoring and controlling whether the

implementation of plans is more than an incentive to improve the firm’s image, thus

ensuring a more effective regulation. Hence the relationship between regulators and firms

may be thought as the principal agent theory in which one principal has multiple agents to

share information that will be used to identify risks (Snyder, 2003).

Since risks are low-probability events, firms may inadequately recognise their potential

incidence and thereby misunderstand potential responses for systemic failure (Coglianese &

Lazer, 2003). In these cases, measuring changes in risk is difficult; two plants with different

risk management plans, one having more lax regulation and the other a more rigorous one


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may both experience null incidents at any given period. However, one is more risk-prone

than the other, and these differences are not measurable as outcomes (Snyder, 2003).

Indeed, the heterogeneity in both the sources of risks that firms are asked to control and the

plan design yield to likewise heterogeneous outcomes. This reduces the probability of

success in diminishing risk to cases in which there is a strong complement between

planning and prevention (Snyder, 2003).

In this line, Snyder (2003) asserts that we typically think of heterogeneity in a cross -

section of plants, but there are also different types of firms over time, considering the rapid

change of the industry and the dynamics in new production technologies (Snyder, 2003).

The heterogeneity of firms brings the need of considering the different forms in which

companies may manifest themselves, not only in type of production, proportion, or

operations, but also in terms of diversity within each company.

The work of Gunningham & Sinclair (2009) establishes a relationship between the failures

in the incorporation of management-based approaches and the presence of mistrust in

companies. The authors studied two large-scale mining companies with different histories

and philosophies, finding a number of similarities in how they sought to address the

Occupational Health System and in the outcomes achieved. In this regard, different

companies experienced difficulties in ensuring that their various far-flung operations

behaved as corporate, making commitments at the centre. There is a large gap between

corporate intentions and behaviour at the working place and it is in no way peculiar to the

area of regulation in the USA (Gunningham & Sinclair, 2009).


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Consequently, the question for the authors is whether requiring planning alone would yield

private profit-maximising entities to engage in increased levels of risk reduction. It could be

used as a political instrument to make it appear as if the government was increasing its

stringency in risk regulation.

As can be seen, firm engagement can vary significantly amongst these and mostly across

internal sections, exhibiting varieties both between firms and within them. This variety is

translated in the outcomes and more specifically in the degrees of commitment that firms

have toward public plans, generating ‘disconnections’ between what is planned at the top

and their results (Gunningham and Sinclair 2009: 18).

1.6 Regulation in the Third World

In addition to size and heterogeneity in internal cultures, there are differences that can be

strongly influenced by the environment. Certainly, in a scenario of competitiveness and

globalisation, mining industry in the third world privileges production and profit over

welfare (Paul & Maiti, 2007). The quality of commitment from management levels is

sometimes misleading. On the one hand, risk costing is expensive especially due to the

huge compensations to pay for fatalities, whilst on the other hand, most of the training for

miners is directed toward their daily activities more than to prevent potential hazards (Paul

& Maiti, 2007).


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As management-based regulations pose the liability of risk detection and prevention in

governments, the latter must be aware that the coherence of plans and their implementation

present limitations in less developed economies. In first place, regulators are less able to

extract information from the companies; the latter in turn have fewer capacities for memory

systems and institutional learning, therefore reducing the possibilities to rely on the firm’s

own knowledge (Estache & Wren-Lewis, 2009). Regarding workers, production pressure,

lack of skills, saving time and effort, lack of awareness about the consequences of risk

behaviour, and illiteracy makes these more risk taking (Paul & Maiti, 2007).

Therefore, the regulations should be designed differently in the developing world, whether

by understanding the social context or otherwise acknowledging that the application of

traditional frameworks may not yield the expected results.

Likewise, regulators face fewer financial incentives to produce information. Signals are

seldom reported, increasing the possibilities of asymmetries in information. Paul & Mahti

(2007) assert that higher degrees of discretion amongst firms are not advisable if the

country lacks the commitment and efficiency to ensure higher levels of safety:

‘Occupational health research in developing countries should recognize the social

and political context of work relations, especially the fact that the majority of

developing countries lack the political mechanisms to translate scientific findings

into effective policies’ (Nuwayhid, 2004: 1916).


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Consequently, social risk measurement and particularly industrial safety is quite complex

since it involves monitoring risks of relatively low periodicity within a context of

heterogeneous composition of firms and different industrial behaviour and safety outcomes.

In these contexts, monitoring performance implies both the collection of information by

governments and the disclosure of private knowledge, deploying significant regulatory

efforts that are not always completed efficiently.


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II. The Chilean mining context

Chile is a mining country. Mining industry in Chile represents the 70% of the exportations

(Sernageomin 2010), of which copper is the main product of commercialisation. Mining

however does not only represent the main economic income but is also part of the history,

culture and source of identity of the country (Sable-Smith, 2010). In recent years, the

copper industry experienced a process of growth that deserved the name of ‘mining boom’

in which the production doubled from 1994 to the present. This increase has been explained

by the proliferation of big private companies, many of them multinationals, which

established due to constitutional and legal facilities oriented to attract investment during the

1990s (Folchi, 2003).

Figure 1. Public organisms intervening in Chilean Mining


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2.1 Segments in mining

The group of mining enterprises in Chile is highly heterogeneous, being possible to

distinguish between large, medium and small-scale mining enterprises. Moreover, each of

these groups contains heterogeneities in the composition of the firms, ranging from large

corporations to local associations (Folchi, 2003).

During the last decades, medium and small mining segments gained increasingly more

attention from academics and policy makers. Hence medium and smaller sectors appeared

as an opportunity for business, and the state orientated its efforts toward their development

and increasing their production rates (Chaparro, 2004).

Figure 2. Fatality rate and exponential trends in mining (1980 – 2010).


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However, the efforts oriented toward safety in mining were not as much as in policies for

production, and the issue of safety has become more serious. Even though accident rates in

mining have been decreasing over decades, in the last year the number of incidents showed

a slight increase (Figure 2).

Large-scale mining activities are regulated by safety control instruments, which demand

investment and the development of mechanisms aimed to ensure higher standards of health

and occupational safety (Cespedes, 2010). Large-scale mining enterprises are characterised

by higher skilled workers, permanent training and performance testing, together with higher

compensations and incentives for risky positions. This segment produces more than 5

million tons of copper -expressed in Metric Tons of fine copper TMF- and gives

employment to more than 28 thousand people. However in periods of high prices of metals

large companies resorts to subcontracting increasing the amount of workers to more than 80

thousands (SONAMI, 2010).

Conversely, contexts of work in small and medium-scale mining companies are

characterised by conditioned employment, lower educational background of labourers, less

expertise, lower production and consequently lower salaries (Sanchez & Enriquez, 1996).

Medium enterprises are often expressed in family groups and bigger associations with

entrepreneurship in production but with some difficulties in commercialisation and trade,

investing mainly their own capital with less access to credits and funding (Sanchez &

Enriquez, 1996). In this way, medium-scale mining is characterised by heterogeneity in the

nature of firms and associations, registering more than 30 companies that produce more


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than 250 thousand tonnes of copper per year and employs more than five thousand workers,

a 13.9% of the mining workforce (Céspedes, 2010; Sernageomin, 2010).

Medium-size enterprises face higher costs of production than large-scale ones, finding very

difficult to achieve a sufficient scale that would allow decreasing their costs. The entity

responsible for medium and small-scale mining is ENAMI (Figure 1), which takes the role

of a financial entity giving loans for exploitation and trade. Likewise, copper price

variability contributes to the instability of these segments, leading to expedite recruitment

processes without the appropriate regulation. The above leads firms to invest less in those

items that require complex technology development and innovation, and in which safety is

generally perceived as a luxury investment (MEC Report, 2010).

Lastly, small-scale mining is rather an itinerant activity, integrated mainly by young miners

seeking for greater job opportunities and enterprises with limited access to funding. They

are a group of producers that benefit directly from the exploitation and their

commercialization is principally in Chile. Small scale mining gives employment to more

than 3 thousand people and their production approaches 80 thousand of tones (SONAMI,

2010).

2.2 The regulatory entity

Within this scenario, safety regulations are executed by a non-autonomous agency, the

National Service of Geology and Mining –hereafter Sernageomin– dependent of the


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Ministry of Mining and Energy (Figure 2), which has the duty of controlling and

overseeing mine conditions and the more risky activities, investigating also labour-related

accidents.

Mining is the only activity with a specific code of rules, given the high dangers that this

industry generates (Mining and Energy Commission Report, 2010). This code consists in a

number of norms that must be complied; safety measures above all, but also indicating

sanctions and guides as to how to conduct mining activities, designating Sernageomin to

monitor the firm’s compliance.


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III. Methodology

The methodology used herein stipulated the exploration of theoretical and bibliographical

resources related to the inspection of mine deposits, evaluations and normative frameworks

in Chilean mining.

Likewise, two case studies from the Chilean context were analysed in order to account for

the differences between medium and large-scale mining companies regarding safety, both

as a mining country with a great variety in the industry and as a case from the developing

world. In this way, even though both cases represent a specific experience, they cannot be

thought as insulated from other situations surrounding mining. Thus, when using more than

one case, contrasting contexts, circumstances and their effects on each may provide a fuller

picture of the larger phenomenon as different aspects of interest (Alasuutari et al., 2008).

The purpose of this research is to demonstrate that the size of mining companies is relevant

for the design of regulatory frameworks in safety. Two cases that represent medium and

large-scale mining were analysed in respect to their differences regarding the

implementation of prevention mechanisms; the physical and social environment

surrounding workforce; and finally the role of the regulatory entity, managers and workers

in internal safety policies for prevention and risk management.


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IV. Case Studies

Case 1: Mining Company San Esteban Primera S.A.

This firm was protagonist of one of the most serious accidents Chilean mining history. In

the accident -occurred in 2010- thirty-three workers were trapped inside the ‘San José’

mineshaft, located in the Third Region of Atacama. When the miners were rescued two

months later, the mineshaft was closed permanently by the regulatory entity, responsible of

accidents in mining activities. The Parliament created a special Commission of Mining and

Energy (MEC) to investigate the causes and responsibilities, elaborating a report that

integrated the version of most actors involved in this incident.

The firm belonged to the medium mining segment, giving employment to 140 workers and

produced three thousand tonnes of copper per year. Being this mine a relatively old shaft -

140 years old- preliminary inspections before the accident reported unsafe conditions and

dangerous infrastructure to be repaired1.

The cost structure of San Esteban was above the utilities generated by the firm and previous

incidents obliged authorities to close the mine twice before its last aperture when the

accident happened. The mine first closed in 2007, due to a miner’s accident. The firm was

1 Furthermore, this site was significantly deep, reaching 800 metres underground, constituting a complicated place to extract minerals. The MEC Report (2010) asserts that the deeper the site, the costlier the extraction and consequently the implementation of safety measures.


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mandated to request an exploration and investigation by a third agency –a private enterprise

called E-mining- inside the site (MEC Report, 2010). However, the resumption of

operations was authorised later in 2008 without the implementation of the specific

recommendations made by the agency. The government partially opened the mine,

suggesting the implementation of technical improvements such as ventilation, and auxiliary

escapes were made (MEC Report, 2010).

The parliamentary report indicates that these changes were not implemented: the site was

lacking the adequate ventilation systems, evacuation paths, as well as alternative ways to

supply the shelter. Moreover, in July 2010 another worker suffered a new accident losing

one of his legs, caused by a collapse within the mine. The manager of the firm admitted to

the commission that the fortification of the shaft’s walls should have taken place

beforehand. After this accident, the firm was penalised by the regulator, which emitted the

following resolution:

‘Factors of danger were not implemented including: Roof fortification, no risks

evaluation, non-compliance of general conditions of security and no measures

implemented to protect health, life, and integrity of workers at the mine site’

(Sernageomin, inspections registry, 2010).

In fact, whilst the overall accident rate of the mining industry was 2.2%, San Esteban

registered an accident rate of 9.6%. However, the inspector did not stop the activities and


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the suggestions were not conditional to continuing operations at the mine. It is argued in the

report that given the infrastructural situation after the worker’s accident, the operations

should have been interrupted immediately (MEC Report, 2010).

Likewise, both Sernageomin and company workers pointed to the commission that the firm

disregarded safety, overexploiting the site to solve the financial problems that were

affecting the entity. The maximisation of extractive activities led workers to literally “eat”

the pillars that were sustaining the roofs and walls of the mineshaft ‘weakening in this way

the structure of the site to collapse, trapping the workers into a shelter to which the

manager in occasions was opposed to build, says the professional in charge of e-mining’

(MEC Report, 2010: 19).

Thus the situation experienced the noon of 5 August 2010 was something anticipated for

the workers of San Esteban mine. The collapse of the mine at the 355th level left 33 workers

trapped seven hundred metres underground. The rescue tasks started immediately, managed

by the Ministry of Mining, which sought for different alternatives to reach the miners,

bringing experts from USA and Australia seeking to contact the shelter located down into

the shaft (MEC Report, 2010). During twelve days the uncertainty regarding the miners and

their conditions was absolute, leading to a constant questioning on the lack of alterative

conduits as basic safety measures in case of accidents in mining sites. It was not until

seventeen days after the accident that one of the blowpipes reached the shelter and the

rescue team realised that the miners were all alive, starting the rescuing activities that

finalised successfully (MEC Report, 2010).


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Manager’s role in safety

It is argued that the economical hardship of this firm implied the non-compliance to

protocols in exploitation methods and the lack of consideration toward the fact that the

deeper the deposit, the costlier the exploitation (MEC Report, 2010). This situation

demanded the productivity increase to face the financial debt and ensure the continuity in

operations.

‘The mining enterprise must adopt the necessary measures in order to ensure the

life and integrity of its workers, both contracted and subcontracted, as well as of the

equipment, machines and infrastructure of the mine. Such measures have to be

communicated to the personnel through channels and means that ensure they are

clearly incorporated and understood’ (Article 31, Mining code).

Thus greater investment was necessary to ensure the mine’s stability. However, according

to the information collected, the commission asserted that the managers of San Esteban

preferred to slightly increase the wages as a means to ensure the availability of miners

willing to assume the higher risks the site already had, rather than investing in safety (MEC

Report, 2010).


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The Worker’s role in safety

Declarations of workers to the commission indicated that insufficient airing systems inside

the mineshaft produced temperatures above 50°C, thus increasing the possibilities of

human error. They also indicated that they were aware of the unsafe conditions of the mine

but the salaries were higher in average compared to other jobs. Also, they were allowed to

work in the mine without previous experience (MEC Report, 2010). For instance, Mr.

Herrera, one of the trapped miners, asserted that regulation services usually requested

emergency exits and other types of shelters to large-scale mining companies, however

medium-sized firms failed to adopt these standards (MEC Report, 2010). He also added:

‘The logical way is that firms operate with total transparency. That happens in

CODELCO, Escondida, or Disputada, all large-scale mining companies where

many issues are involved…also the treat with personnel is different there. Small and

medium businesses are not like larger firms…they (large-scale mining) demonstrate

compliance with the rules, they are all enrolled in the institutions and send all the

forms required to keep in operations’ (MEC Report, 2010).

Nonetheless, as there are not many job opportunities in the region, fewer workers felt

encouraged to warn public services about the safety problems in the mine. At San José,

Union Nº2 of San Esteban Mine repeatedly warned of safety hazards and once even lodged

an appeal to close the mine (MAC, 2011). The necessity of keeping their jobs demonstrated


31

for some analysts that there was joint responsibility in the accident of both the owners and

the workers, as the latter continued legitimising the precarious conditions of the mine

through their work. For many however, there was no alternative (Villarrubia G, 2011).

Regulator’s role in safety

Sernageomin is not a health and safety overseer. It plays that role, but so do bureaus inside

six Chilean ministries. Chile has overlapping safety agencies inside the six ministries that

cover all working sectors. None of these have judicial powers to enforce the few mining

regulations in place, lacking also the technical capabilities to inspect and prevent accidents

(MAC, 2011). The report pointed toward the existence of a gap between the modernisation

of mining and the public institutions, where a better coordination between agencies is

needed to exert control without overlapping or obstructing each other’s tasks (MEC Report,

2010).

As a product of the mining ‘boom’ due to the rise in copper prices, the amount of firms and

mineshafts to be revised have increased significantly, leading to delays in the regulatory

services of up to a year. It is necessary to monitor and perform frequent inspections given

the lack of compliance of firms. Nonetheless, the commission asserts that the above is not a

justification for avoiding closing the mine. One of the main critiques made in the

commission report to the regulatory entity was the non-inclusion of this mine in a priority

inspection list given its accident record. There was no consistent argument for authorising


32

the reopening of the site in conditions that the firm was not implementing the changes that

the regulating organism itself was demanding (MEC Report, 2010).

Case 2: National Copper Corporation (CODELCO)

Codelco started in 1987 with the constitutional reform that incorporated the biggest mining

companies as national patrimonies. Since then, the company became the major contributor

to the national income owning the largest copper reserve throughout its five divisions

settled across the country: Codelco Norte –grouping the sites Chiquicamata and Radomiro

Tomic-, Salvador, Andina, Ventanas and El Teniente (see Figure 3) (Codelco, 2006; 2011).

As aforementioned, Codelco constitutes the major copper producer worldwide. It is the

main enterprise in Chile and its evolution has been strongly inclined toward technological

investment, restructuration of employment, and a rigorous program of rationalisation of

management systems (Soto, 2006). Codelco focused on business development and sought

more flexibility in administrative units according to the evolution of entrepreneurial models

developed in the 1990s. This new managerial model includes a compromise toward the

worker’s wellbeing as a means to promote the sustainability of the company in the long

term (Soto, 2006).


33

Figure 3. Distribution of Codelco mining districts along Chilean territory.

Likewise, as a large-scale mining company, Codelco is mandated to comply with the

normative frameworks directed to prevent accidents in mining within the country, but is

also required to adopt international standards directed to increase levels of safety. In this

way, the company incorporated the Occupational Health and Safety Assessment Series –

henceforth OSHAS- in 2004 and was recertified later in 2008 after completing the

maintenance audits throughout its operational divisions (Codelco, 2011). The incorporation


34

of this norm relies on an increasing demand for harmonisation between a great production

and occupational safety needs.

These guidelines however, are best expressed in safety outcomes such as accident rate

decrease and technology investment in areas that present more risks for human activities.

For instance, a commission integrated by the managers of all Codelco divisions was created

in order to revise all the plans and protocols elaborated in each mine in order to mitigate the

probability of further incidents. Each division must prepare a number of documents called

Reports of Significant Incidents (RIS in Spanish) oriented to achieve a ‘zero harm’ rate by

2015 and also to develop proactive rather than reactive attitudes towards safety (Codelco,

2011). The reports were prepared with the aim of informing, disseminating and sharing

knowledge about existing harmful practices, past incidents and accidents, also proposing

solutions for low safety situations detected by integrants of each division.

The implementation of RIS has helped promoting safety values whilst also becoming a tool

for participation, whereby workers are involved in enforcement and reporting, in the

generation of ideas for training and risks detection along with increasingly promoting

awareness on the necessity of creating safer environments for this risky job (Codelco,

2011).

Such measures in security draw some differences in regard to medium-scale mining. Even

though Codelco has been expanding its underground exploration –type of exploration with

higher accident rates than open-pit mining- the outcomes generated in safety matters remain

stable over time. In fact, the global accident frequency rate, which considers workers


35

contracted directly and subcontracted, decreased from 3.82 in 2006 to 2.04 in 2010

(Sernageomin 2010). Furthermore, this rate was lower than the average accident rate of

2.14 in 2010 (Sernageomin 2010). Likewise, whereas the death toll in the 2010 mining

operations was of 45, the highest in last decade, Sonami (2010) estimated that 10 belonged

to large-scale mining and the rest to the other smaller segments (Cespedes, 2010).

Therefore, the safety mechanisms implemented by Codelco can be summarised in three key

points (Codelco, 2011):

-Monitoring systems and joint work in safety with contractors: creation of joint committees

integrated by managers of the different divisions in Codelco and subcontractors, oriented

toward dissemination of internal protocols and detection of critical activities and risks.

-Incorporation of technology and automation of processes: The high incomes obtained in

the contexts of high prices of copper and productivity increase, allowed the company to

invest in mechanisms that require more sophisticated treatment. In fact, the excavation in

some of the mines is conducted by robotised systems, and the same technology is being

applied to other processes that if performed manually may affect the upper limbs and cause

professional diseases.

-Creation of internal codes of conduct: following the law in which each company must

elaborate and enforce joint committees of hygiene and industrial safety. This internal

normative is translated in hiring plans and procedures applied to all workers, including the


36

obligation of conducting pre-occupational exams, hiring insurances and receiving adequate

training for specific tasks.

Manager’s role in safety

In this level there are two types of structures: the coordination between top managers, heads

of human resources, industrial safety and the president of the company, whose duties are

related mainly with planning, budgeting and investment coordination across the different

company’s divisions. In a second rank, managers of each division have the responsibility of

coordinating with external auditors, keeping workers informed about internal safety

policies and monitoring the incorporation of protocols at site levels (Codelco, 2010). Thus,

managers in these positions convene scheduled or extraordinary meetings to evaluate and

monitor the performance of subunits and contractors in safety, being responsible also for

the application of sanctions and corrective measures in case of non-compliance. Also, the

head of each one of the divisions has the responsibility of executing random audits across

the company’s dependences, investigating eventual accidents of workers and equipments,

and applying safety norms (Codelco, 2006; 2010).


37

Workers role in safety

Workers in Codelco are trained in the incorporation of safety to their daily activities and

procedures through prescriptive plans and internal rules, receiving also mandatory training

from mutual insurance companies and the regulatory entity (Codelco, 2010). Aside from

institutional monitoring, a number of unions within the different mining areas of the

company also exert this function, whose tasks are related to denounce incidents and

communicate risks to superiors, collectively negotiate labour conditions, activate

mechanisms for increased safety standards and practices, having also the responsibility to

control and report situations of abuse and non-compliance by the company. A significant

part of Codelco’s unions are advocates to the situation of contractors, who usually have less

tools and lower labour conditions than workers contracted directly by the firm. Some

research has been conducted regarding the identity dilemmas generated inside the company,

where the different labels at work generate divisions similar to social classes, managed by a

political unionisation that supports the channelization of benefits oriented toward levelling

up the different worker’s categories (Villalobos, 2008).

Regulator’s role in safety

The role of the regulator in this case is related rather to periodical meetings with managers

and the conformation of committees at different levels of hierarchy. Thus, as the organism

describes, the main goal is to involve these different levels in internal safety policies,


38

seeking also to strengthen the ties with the company, in which monitoring and evaluation

tasks are performed in a coordinated way. In the case of ‘North Codelco’ mining area,

which has higher incident rates and where subcontracted workers are more exposed,

technical meetings are arranged to supervise those more critical contractors (Sernageomin,

2009).

Likewise, the regulatory entity delivers courses in risk prevention and trains monitors in

safety. These monitors have later the responsibility of disseminating information at their

workplaces and ensuring a better performance, reduce problems caused by individual error

(Sernageomin, 2009). Thus the function of Sernageomin in this case is marked by a

relationship of collaboration and networking with the enterprise, in which the control over

compliance involves the construction of coordinated strategies to reduce potential hazards,

rather than conducting oversight relations. The company establishes the processes of

quality testing and normative adjustment beforehand, and the regulator is barely a support

for the company in safety issues, training, and technical advice.


39

V. Discussion

Management-based approaches place regulation within the firm, where regulators are

responsible of developing the adequate capabilities for identifying the plans needed, how to

get information, and to what extent intervene in capturing the firm’s information. Thus, risk

diagnosis in any given firm is analysed through a systemic view in which it is important to

determine coordination and breakdowns rather than particular or individual errors.

The cases described demonstrated to be suitable for risk management approaches in terms

of heterogeneity, difficulty in detection of risks and their measurability, and the uncertainty

surrounding decision-making, especially when the issue to decide is how detailed and how

rigorous the requirements should be and how the intervention has to be made. Both cases

represent examples of heterogeneity amongst firms, showing different structures and

outcomes regarding safety and hazards. However, the cases demonstrated that size

variability underlies operation systems that represent highly complex scenarios for smaller

firms, which demonstrated to be less adjustable, less able to arrange safety plans and

develop internal roles for worker’s security standards.


40

5.1 Specificity of plans

As asserted by the literature (Coglianese & Lazer, 2003) plans can range from very simple

to very specific depending on the characteristics of firms. Thus specificity may impose a

challenge for regulation in terms of finding balance; an optimal level is required to make

the rules work. It is possible to argue that the difficulty in finding the ‘appropriate

standards’ (Coglianese & Lazer, 2003) is particularly higher in medium-sized firms, where

there are fewer degrees of compliance and adjustment to the rules. In the cases described,

the medium-size firm did not respond to the prescribed plan approved by the regulator

when the mine was opened again, nor did it in past incidents. Furthermore, the regulator

lacked the abilities to adjust the regulatory plans to the optimal level for worker’s safety,

therefore compromising the outcomes in accident rates for this company. In Figure 4

(SONAMI, 2010) the degree of compliance according to company size is shown, indicating

a substantial correlation between variables.

Thus the outcomes for both types of firms are different, which if expressed in terms of fatal

accidents, are three times higher in smaller companies in comparison to bigger ones, as was

stated in the accidents’ data provided in case 2 (Figure 5).


41

Figure 4. Regulation compliance tendency according to mining firm scale (Sonami 2010)

Here, there are two main factors that explain these differences in outcomes: the incentive

structure and lax regulatory inspection. Regarding the former, it is argued in the literature

that planning alone would yield to non-uniform changes since there is a gap between what

is planned at management and the agreed goals (Gunningham & Sinclair: 2009). Indeed this

gap is better expressed in smaller industries where the compromises agreed between firms

and regulators to continue in operations are neither implemented nor monitored.


42

Figure 5. Accidents in mining according to firm size, expressed in total fatal accidents in 2010

Therefore, large-scale mining enterprises such as Codelco have improved the alignments

between internal codes and guidelines for occupational health more than the other segments

of mining. As the biggest copper mining company in Chile, Codelco has an incentive to

protect its external image, being forced to reduce its accident rates and potential hazards to

legitimise itself within the mining industry. Therefore, the degrees of commitment toward

safety increase when the legitimisation of a very visible company could be at stake

(Gunningham & Sinclair: 2009). Indeed, the great exploitation and the large quantities of

resources that large-scale mining needs in operations explain the development of

corporative social responsibility projects to mitigate social and environmental impacts such

as in Codelco..


43

On the other hand, the case of San Esteban demonstrates the lack of financial and symbolic

incentives that lead to a poor engagement with risk reduction activities. Medium-sized

firms are more profit maximising, encountering more problems to find financial solutions

to increase investment in other areas aside productivity. In this respect the commission’s

report asserted that a proper incentive structure, both for security plan improvement and

incentives toward denunciation and investigation should be created to reduce risks, together

with a public fund to finance safety initiatives for smaller firms (MEC Report, 2010).

Likewise, the overall capacity of the regulatory entity to operate is insufficient. The

association of officials of Sernageomin –AFUSER-, indicates that the number of inspectors

increased from 10 in 2007 to 18 in 2009; and to 45 in 2011, given the circumstances

described in Case 1. Also, the inspections have been increasing over years, from 1.707 in

2006 to 2.310 in 2009 (Sernageomin, 2009).

However, officials in Sernageomin are often focused in daily events rather than in long-

term planning and investigation. They travel an average of four hours a day to supervise

working places facing low availability of transport, thus affecting the duration of the visits,

which normally take between one to three hours (AFUSER, 2010). Also it is emphasised

that the entity’s overall capacity is overloaded, with more tasks and sites to regulate than

the regulatory capacity admits. This situation affects the regulator’s ability to identify and

prevent risks, applying a rather reactive strategy. The tasks are often reduced to project

approval rather than to the supervision of compliance and ex post evaluation (AFUSER,

2010).


44

Consequently and as the commission stresses, the number of inspections is still below the

required threshold for effective control in mining area, which are more than 3.000 (MEC

Report, 2010). In fact, for the Region of Antofagasta alone -which concentrates more large-

scale mining companies- has only three inspectors; and the Region of Atacama in which

Case 1 is located, has two inspectors to monitor all sites. In short, the entity lacks medium

and long-term planning, the baseline of any institutional activity (AFUSER, 2010).

Hence, what is clear in the Chilean context is that the problem relies more in enforcement

mechanisms than in rules. The normative framework sets minimum conditions for work,

determining the features that companies have to address and the safety mechanisms to be

established. The complexities arise when the regulator does not have the capacities nor the

faculty to exhort compliance and deterrence in firms, especially in conditions where the

working areas must close to favour risk reduction. The regulator also lacks the necessary

information to determine the plans or measures that best respond to the companies’ needs,

being the latter who elaborate them for evaluation. In Case 1, for instance, the maps of the

mine were obsolete, which made difficult not only conducting a good inspection but also

delayed the rescue labours since there was no appropriate information about the site (Ciper

Chile, 2010; FPM, 2011).


45

5.2 Regulation and Flexibility

The heterogeneity amongst firms supposes the need of availability of different regulatory

instruments in order to implement adequate and reliable regulations within these entities.

Firms do not always have incentives to arrange record keeping systems and to be accurate

in indentifying hazards. It is said that the discretion given could be used to favour privates

at the expense of worker’s wellbeing, and firms may implement these changes to appear as

if they were being responsible (Gunningham & Sinclair: 2009). This opens the question on

what happens when regulator is not watching. Considering the behaviour towards safety

measures shown in both cases, it can be observed that flexibility applied over firms with

different sizes yields to different outcomes both in the elaboration of plans and also in

safety implementation. In fact, the discretion given to San Esteban to complete the changes

suggested in infrastructure led to the accident of the miners, in which the regulator

permitted the partial operation of the mine, trusting in the compromise acquired with the

managers. This is dangerous when firms do not have enough resources and commitment to

implement these changes (MEC Report, 2010).

Along this line Estache & Wren-Lewis (2009) assert that higher degrees of discretion

amongst firms are not advisable if the country lacks the commitment and efficiency to

ensure higher safety standards. When state efficiency is limited, turning the responsiveness

toward firms may result in a problem for enforcement and regulation, decreasing the


46

capacity to prevent unforeseen contingencies such as accidents at workplaces (Estache &

Wren-Lewis, 2009).

5.3 Managers, workers and regulators

The main objective of management-based regulation is how to induce positive behaviour

without losing in social welfare and reducing risks at lower costs. Through the cases

described, the role of managers, workers and regulators were separately analysed, capturing

the specific activities of each one of these actors regarding safety measures. Managers for

both types of firms demonstrated to behave differently in terms of their willingness to

adjust to safety standards, being more profit-oriented in smaller scale mining and more

safety-conscious in bigger companies. The above generates a ‘disconnection’ (Gunningham

& Sinclair, 2009) between management plans and objectives and what in practice occurs in

sites where miners are working within medium firms, where the regulator performs a

double inspection –or intends to enforce monitoring. In contrast, in bigger companies the

regulator focuses more on the planning stages and monitoring is conducted by the company

itself through its subdivisions and organisations.

In this regard, large-scale mining companies are more able to implement management-

based approaches in terms of coordinating with regulatory agencies and complying with

rules, elaborating plans according to different levels of safety codes –national

(constitutional), internal and international- as well as innovating for better monitoring of


47

safety practices. Thus, management-based regulation opens questions for smaller firms

where there is not enough academic discussion and whose characteristics are restrictive for

many of the improvements intended by policies in safety issues, having less flexibility and

adaptive capabilities to enforce internal compliance. In fact, regarding penalisation, it is

asserted that there has been a tension between the Mining Ministry and the Labour Ministry

since the former has attempted to develop procedures leading toward more penalisation and

risk detection, whereas the latter advocates for more flexibility in labour and employment

protection. Therefore there are cases in which the closure of sites produces a reaction even

from workers who want to protect their jobs (MEC Report, 2010).

Another issue regarding workforce are the cultures generated within the companies and the

mining culture itself. In large-scale mining enterprises, as asserted above, unions are often

stronger and more organised than in medium and small segments where workforce is rather

itinerant and miners have less expertise and work experience in this field (Sanchez JM,

Enriquez S, 1996). Therefore, the attitudes generated toward safety inside firms are related

to the general perceptions and cultures surrounding these.

In this way, there will be higher or lesser tolerance for risks insofar the company perceives

these risks (Gunningham & Sinclair, 2009). Thus our understanding regarding

organisations must be rooted in the processes that produce systems of shared meanings, in

which the commitment with safety will be related to the environment in which the firms

develop their internal behaviour and in their social constructions about workforce wellbeing

and safer workplaces.


48

The participation of workers is considered crucial to improve the working environment;

however their participation is unlikely to be effective in the absence of constructive

dialogue between managerial staff and workers (Gunningham & Sinclair, 2009).

Hence the challenge for regulators is not just to impose control but also to activate

consciousness on those they seek to regulate, especially in the smaller firms. For this reason

the problem will persist for those not committed to safety, only undertaking safety

precautions in circumstances of being monitored. Oversight only and stronger control will

not eradicate unsafe acts by themselves; what is required is the nurturing of a safety culture

(Gunningham & Sinclair, 2010).

Therefore, finding the adequate equilibrium between flexibility and control over small and

medium-scale firms needs of strong regulatory institutions capable of influencing these in

the importance of addressing risks. It also places the dilemma of trust in those companies

with less degrees of compliance in the utilization of their information for identifying their

own risks in circumstances where the regulators exerts a double inspection in those sites

without the adequate faculties for an effective regulation.

Thus, addressing the size of firms highlights both the opportunities and weaknesses that

each type of mining represents. Size is significant not only for law enforcement in sites and

also for acknowledging the different experiences regarding mining as an activity and as a

safer place for work.


49

VI. Conclusion

Making the distinction between different types of activities within mining is considered

necessary to obtain better regulatory performance. These differences are expressed not only

in averages such as volumes of production but also in different social environments and

working conditions. Hence differences in size do not only represent different types of firms,

but also different cultures, and economic and political limitations in the working

environment. Size in fact is a key variable in obtaining more inclusive and socially

pertinent analyses in assessing safety matters.

Thus, in this research the purpose was to address the importance of size for safety

regulations, addressing the variability of firms and the different strategies they can use for

the achievement of better outcomes regarding safety at workplaces. The variability in size

in countries like Chile is often related to local cultures and internal organisation, which

generate differences toward commitment and compliance in medium and large-scale

companies, therefore opening a difficulty in the exercise of regulations in companies with

different regulatory needs.

The high degrees of discretion in the private sector and the diminished capability of

regulators to construct collaborative plans and influence the internal dynamics of firms are

some of the problems that are sometimes in conflict with risk regulation when firms are

different in size. The construction of collaborative relationships from management must


50

then to consider the variability in size in terms of internal cultures and capabilities both of

firms and regulators. Furthermore, in less developed economies, where institutional

arrangements for better safety outcomes are weaker and mistrust is rooted in the

relationships between workers, the application of international standards pose similar

challenges in terms of compliance and law enforcement, where the focus is placed on the

importance of life.


51

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