The Amazonian port of Mazán, in Loreto, Peru, features a makeshift pier with corroded ramps seemingly on the verge of collapse. Visitors are greeted by a shore littered with plastic debris, where children and teenagers play barefoot.

The town sits on the Napo River, an Amazon: The largest river in the world by water volume, the Amazon flows through the rainforest and connects Peru, Colombia, and Brazil. tributary. Boat traffic begins at 6am, when Aldo Alexis Tuesta Fung, 18, starts unloading goods for local businesses, crossing narrow, unstable wooden walkways. He works until noon, then takes a dip in the river.

“Mazán is growing, but nothing is improving. There’s poverty and the mayor does nothing,” he said, gesturing at his surroundings. “We need a decent market, a proper town square, and a functional port. Just look at this place.”

There is no indication of such investment. The only project set for inauguration is a sculpture of a man holding a pirarucu, a fish native to the Amazonian rivers that sustains many communities. It will be accompanied by vibrant, capitalized letters spelling: MAZÁN.

Young Tuesta Fung’s pessimism about living conditions for the 14,000 residents of Mazán is ed by official statistics. More than half of the population, who work primarily in agriculture and fishing, cannot afford a basic food basket each month, according to data from the National Institute of Statistics and Informatics (INEI).

Most of the homes, constructed from wood or brick, have electricity only for a few hours each morning and evening. Drinking water is supplied just two or three times a week. Furthermore, 57 percent of these households lack a toilet, according to INEI data.

The state of the municipality reflects widespread neglect: numerous public buildings stand unfinished, streets remain unpaved, and the garbage dump, just a ten-minute drive from the city center, emits a putrid odor from afar, creating a desolate impression.

The deficiencies stand in contrast to the over 14 million soles ($3.8 million) allocated for 2025 for Mazán, the region through which oil extracted: Oil extraction is the process of removing crude oil from underground for commercial use. It can take place onshore or at offshore. in Loreto is transported. This amount s for 64 percent of the municipal budget for the year, as reported by the Economic Transparency portal, which details the allocation of Peru’s public resources.

Despite no direct oil operations within its territory, the municipality receives a portion of the funds that oil companies pay to Peru. These funds are intended to foster local development. However, an analysis of public data indicates that these transfers have not effectively alleviated the state’s poverty conditions.

To better understand this contradiction, a team from the Peruvian outlet OjoPúblico visited Loreto in October 2024. This investigation is part of the project Every Last Drop, which examines the impacts of oil production in the Amazon.

Oil activity in the Peruvian Amazon began more than 50 years ago. In 1971, state-owned Petroperú found the first reserves in the Corrientes River basin in Loreto. This discovery launched a race for exploration: Exploration is the initial phase following the awarding of an oil block to a company or consortium. It involves studies to locate viable reserves, including seismic surveys and exploratory drilling. Unlike the production phase, this stage does not yet involve the continuous extraction of oil or gas for commercial purposes., with as many as 14 national and foreign companies subsequently operating in the area.

Since then, debates and pressures have arisen over how to divide the funds generated by the exploitation of natural resources. In the 1970s and 1980s, each state independently established its own redistribution system.

In 1976, the first regulation targeted Loreto, where residents had endured decades of logging, rubber exploitation, and violence against Indigenous people linked to extractive industries. In response, the community demanded compensation: This is a financial guarantee provided by a company, setting an amount to be paid as compensation in case of environmental damage, such as an oil spill. by requesting a 10 percent tax on oil production, which was approved.

Decades later, in 2001, a national law was enacted, extending its reach to other extractive sectors including mining, gas, hydro-energy, fishing, and logging. In the case of oil in the Loreto region, from its introduction until 2011, a 10 percent tax on production was levied, with the funds designated for “regional impact works” and incorporated into local government budgets. Starting in 2012, this rate was increased to 15 percent.

In practice, collection occurs in two distinct forms. Firstly, there is the regalía, a direct payment made by companies to the state for exploration rights—essentially a tax on extraction akin to royalties. Secondly, there is the canon, a transfer that the national government distributes to regional and municipal governments from the income tax collected from oil companies.

Under Peruvian law, canon investments must be exclusively allocated to public works intended to enhance the quality of life for residents. In some municipalities, these funds comprise over 40 percent of their total budget, according to Peruvian government data.

Amid these regulatory measures, traditional and Indigenous communities have, for decades, sought compensation for the ecological damage inflicted by oil operations in their habitats. In 2006, fervent protests in Loreto culminated in a landmark agreement between the national government and local leaders, ensuring actions to address the environmental degradation in Amazonian regions.

Since then, regional and local governments where oil is extracted have been mandated to invest five percent of their oil revenue in projects for the affected communities. However, the execution of this mandate has been a “fiasco,” according to economist Roger Grández Ríos, director of Peru’s Socioeconomic Development Institute.

Ríos’ analysis reveals that out of the 131 million soles (approximately $35.8 million) intended for community allocation between 2007 and 2021, only 33 million soles (around $8.9 million) were invested in Loreto. During this timeframe, just 13 of the 117 planned projects were completed, totaling 4.4 million soles (about $1.2 million).

Meanwhile, environmental damage has accumulated over the years. A survey by the National Human Rights Coordination revealed that between 1997 and May 2023, the Peruvian government recorded 1,460 emergencies due to oil spills. Of these incidents, 831—or 57 percent—occurred in Amazonian territory.

Since taking office in 2022, Dina Boluarte’s istration has expressed a keen interest in advancing oil exploration in the Amazon, despite strong opposition from Indigenous groups and the significant environmental consequences in a biome that is vital for controlling global warming.

Many drilling activities in Peru occur in this region, which hosts 77 blocks designated for oil exploration. Nearly half of these, 42 blocks, are located in the Amazon, according to data from the Arayara International Institute. Of the 44 blocks already awarded: Awarded blocks are areas auctioned by companies, granting them rights for research and production. to companies for research or production, 15 are in the Amazon.

In February, Peruvian oil production reached approximately 1.3 million barrels, averaging 46,000 barrels per day. Almost half came from Block 95, operated by Canada’s PetroTal, which has activities in Loreto.

This is the main region of the Peruvian Amazon dedicated to oil exploration, and ranks as the country’s second-largest producer, trailing only the coastal region of Piura. In the first half of 2024, crude oil production in Loreto increased by 16 percent compared to the same period last year. Additionally, the sector contributed to 97 percent of the state’s exports, according to data from the Ministry of Foreign Trade and Tourism.

The national government’s interest in the sector, however, comes as contracts with oil companies decline. Of the 82 agreements in force in 2011, only 31 remained active in 2023, according to a recent report by the Natural Resources Governance Institute (NRGI). Only one contract was signed that year.

NRGI concludes that several economic obstacles—stagnant investment, high extraction costs, the global outlook for falling oil prices, and environmental damage and liabilities from oil spills—have caused the decline in current contracts.

While beneficial for the environment, the decline in activity could financially impact many municipalities. Five oil blocks are currently active in the Peruvian Amazon, and these municipalities rely heavily on regalías and canon.

In Mazán, the reliance on funding has intensified, with canon funding ing for 50 percent of the municipal budget in 2024, and rising to 60 percent this year, according to an analysis of official data. Despite nearly 20 years of receiving these funds, there is no evidence of improved social indicators in the municipality. Furthermore, the analysis shows no advancement in other towns within the Loreto region.

This reality was apparent during our visit to the town. What once was a forest is now a makeshift dump that receives all of Mazán’s discarded materials. Chickens scavenge among the decomposed food scraps and other organic waste, which emit a foul odor.

Twice a day, at five in the morning and four in the afternoon, 50-year-old Rony Machacuri López and a colleague transport the waste collected from Mazán by van. His job with the town hall, which began in 2022 to his three children, pays minimum wage. He is not on the payroll and receives no benefits.

“The authorities don’t care and don’t say anything. We need a new machine [to transport the waste] and a new landfill,” said Machacuri López. Currently, they have to navigate slabs to reach the location where “a concrete ramp could be built.”

These enhancements at the Mazán dump should already be in place. In 2023, the Ministry of Economy and Finance approved a project to modernize the municipality’s solid waste management, allocating funds of 150,000 soles ($43,630) from canon.

The project never materialized, and when questioned about it in October 2024, Mazán’s mayor, Mauro Díaz Góngora, explained that it had not proceeded because it was planned by the prior istration, which concluded at the end of 2022.

Díaz Góngora explained that the town hall purchased a three-hectare plot of land for the installation of a new waste collection center. Speaking from a large office with fans running to mitigate the intense heat of a severe drought in Loreto, the mayor added that this work is expected to be completed this year.

Since 2015, few projects—aside from that proposed garbage collection center renovation—have used revenue from canon funds to improve basic services such as drinking water and public lighting, according to data from Economic Transparency.

Most of these funds remain unused. In 2023, Mazán utilized 62 percent of nearly four million soles ($1.15 million) from the canon, based on data from the Ministry of Economy and Finance. In 2024, the municipality spent 52 percent of over nine million soles ($2.62 million) for the same purpose.

Mayor Díaz Góngora stated in October 2024 that data on low execution rates and spending would be updated by “mid-December” at the latest, when outstanding payments for the projects would be disbursed. However, as of mid-March 2025, the MEF platform continued to show a completion rate of 52 percent.

What was the canon spent on? Between 2023 and 2024, most of the fund was allocated to constructing urban roads and renovating a sports court, with a combined budget of  1.3 million soles ($384,117). Completed in October 2024, the sports court is widely regarded as the most significant legacy of the current istration.

The mayor hesitated to answer questions about municipal priorities, health sector projects, or the allocation of unspent funds. He insisted the funds were used for planning documents for future projects, assuring that “the works will come” this year.

These technical files that outline public projects with deadlines, feasibility assessments, risk evaluations, and budgets, are submitted annually to the Ministry of Economy and Finance. It determines the funds to be allocated to each municipality based on criteria such as population, basic needs, and infrastructure deficits.

Mazán is just one example of the underutilization of oil revenues in Loreto. In 2023, the regional government managed a budget of over 482 million soles ($131.8 million) from oil, but failed to execute more than 20 percent of that amount.

We visited government offices in Loreto to interview officials responsible for public works funded by the canon, but no official or press officer responded to our inquiries.

We analyzed the canon revenue received in 2023 by 13 Amazonian municipalities in Loreto with oil blocks in their jurisdictions. These municipalities received over 78.9 million soles ($21.5 million) but spent an average of 45 percent of that amount. In some cases, they spent less than 12 percent of their received funds.


In other Amazonian countries, royalty distribution faces numerous challenges.

Guyana, for example, faces difficulties with its contract with Esso, a subsidiary of ExxonMobil, which dominates oil exploration there. The agreement sets royalties at just two percent—well below those in other countries, such as Brazil, where the rate is as high as 15 percent.

In Brazil, a study by the Federal University of Sergipe found that municipalities most reliant on oil royalties have paradoxically reduced spending on sectors like education, despite legal requirements to earmark a portion of the revenue to such areas.

In Colombia, a report by the Pontificia Universidad Javeriana found that royalty application has resulted in “low-impact projects, failures in initiative formulation, approval, and execution, as well as a proliferation of serious corruption cases.”

So why do cities like Mazán and others fail to utilize oil revenue to improve their residents’ often precarious living conditions? The answer, according to experts, is complex.

Karla Gaviño Masías, a professor at the University of the Pacific’s School of Public Management, explains that the use of resources faces several obstacles, partly due to a lack of trained professionals to plan investments in the projects.

Another criticism is the system concentrates exclusively on infrastructure, neglecting pressing issues. According to the expert, the issue lies not in the necessity of investing in public works, but rather in the risk of diverting its purpose from reducing inequalities.

Epifanio Baca Tupayachi, an economist and project coordinator for the Citizen Proposal Group, suggests “making the use of the canon more flexible” to finance essential goods and services like health and education. Unlike in Peru, countries such as Brazil and Colombia do not restrict the use of royalties solely to infrastructure.

Even if the conditions were relaxed, prioritization remains problematic. How should one project be ranked above another? Which demands more immediate attention? Which improves services the most or benefits the higher number of residents? Experts say these are discretionary decisions, often based on economic and political calculations.

Other factors can complicate applying a general rule. Baca Tupayachi suggests that the value of the funds municipalities receive should consider factors like location. Implementing water and sanitation projects can be challenging due to the Amazon’s geographical complexity.

Another challenge beyond the government failures experts cite is public disinterest in a technical issue—albeit one, paradoxically, that they previously championed.