SPENCER RAoRus, Ai, CHAIRMAN imnmd pigmmg uf BARNEV FRANK, MA, RANKING MEMBER Gnmmittu un jiinancial ,,%m1iuz ZDSIS January 26, 2011 The Honorable Timothy F. Geithner Secretary Department of the Treasury 1500 Avenue NW Washixigton, D.C. 20220 Dear Secretary Geithner: I am writing to bring to your attention the claims of a U.S.--based company of inappropriate treatment by the Government of Peru--treatment which, the company claims, has the potential to chill foreign investment into Peru and imperil U.S. jobs involved with exporting to Peru. The company is Doe Run Peru owned by the Renco Group, a based holding company. Their claims are as follows: DRP owns a smelter, in La Oroya, which had been operated since the 1920s, although the original plant was seized from an American company in the 1970s by the Government of Peru on the grounds that the company had not protected the environment. Despite taking ownership on this basis, the state-owned company Centromin did nothing to address needed environmental cleanup nor did it upgrade the smelter to prevent further environmental damage. In the 1990s, the smelter was privatized and sold to Doe Run Peru, which was acquired by Renco in 1997, As part of the privatization purchase, DRP agreed to comply with a "Programa de Adecuacion Medio Ambiental," or PAMA, which set targets in eight areas, including air, soil and water quality. At that time, the work was estimated by the government and DRP to cost a little more than $100 million. As a part ofthe agreement, the Government of Peru agreed to undertake soil cleanup in order to protect the residents of La Oroya. By 2006, DRP had expended $244 million on meeting the PAMA standards, and the company negotiated a three- year extension of the PAIVLA. At the end of September 2008, DRP had inaugurated a new sulphuric acid plant, a major element of its meeting the terms of the PAMA. By July 2009, DRP had invested $315 million in meeting the terms of the PAM.A. Under the terms of the 1997 contract, the state--owned firm, Centromin, was required to spend $24 million to complete soil remediation programs for which DRP did not assume responsibility; however, the Government of Peru released the firm from these obligations. The deadline for completing the project was 2010, and to date the Government of Peru has spent no money on these environmental obligations. The Honorable Timothy Geithner Page 2 January 26, 2011 One year ago, when world commodity prices declined sharply as the global economic crisis developed, DRP was forced to curtail operations in La Oroya and consequently fell behind in obligations to about 60 creditors--~some of them suppliers, some part of its in tax payments. Involuntary bankruptcy proceedings were initiated by a minority shareholder. However, under Peruvian bankruptcy proceedings, each creditor has an equal vote in the outcome, At a meeting of the bankruptcy panel that will take place in the next few weeks, that panel could place the operation in the hands of one of the creditors rather than considering returning control of the plant to DRP-especially as world commodity prices have rebounded. DRP has proposed retaining control, paying its creditors off at 100 cents on the dollar plus interest over four years, and completing its environmental cleanup including some efforts that were not in its original scope of work contract. However, DRP believes the Government of Peru is ignoring this proposal. Mr. Secretary, while there clearly are differences in the legal systems of different nations, in a global economy, legal systems must be used to fairly adjudicate differences in a way that does not disadvantage individuals or entities from foreign countries. While my office does not have the resources to investigate these claims, DRP raises serious issues, particularly since the U.S. and Peru are parties to a trade promotion agreement. Please give due consideration to the request of DRP for an examination through the Inter- American Development Bank and under the authorities of the U.S. Peru Trade Promotion Agreement of the issues raised by DRP. rely, SP NCER ACHUS Chairman Cc: The Hon. Luis Alberto Moreno, President, Inter--American Development Bank The Hon. Luis Valdivieso, Ambassador, Government of Peru The Hon. lleana Ros--Lehtinen, U.S. House of Representatives