Key insights
- Peruvian presidential candidates' mining proposals are creating uncertainty for mining investment. Both candidates' plans are viewed as unsustainable by the mining industry leader. The left-wing candidate's proposal to raise taxes and royalties and review mining contracts could deter investment. While the right-wing candidate's proposal to distribute royalties directly to communities may not be sustainable either. This could have a slight negative impact on US equities due to reduced global growth prospects.
By Marco Aquino
LIMA, May 27 (Reuters) - The president of Peru’s National Society of Mining, Petroleum and Energy (SNMPE), on Tuesday warned that opposing mining policies from the two presidential candidates heading into the June 7 runoff vote may jeopardize billions of dollars in investment.
Julia Torreblance, SNMPE president told Reuters that neither candidate’s proposals for the mining industry are sustainable.
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Right-wing candidate Keiko Fujimori and left-wing candidate Roberto Sanchez prepare to face off in a vote that could reshape the outlook for one of Latin America’s most important resource economies.
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Torreblanca said neither candidate’s proposal "works or is sustainable in the long term."
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Fujimori proposes distributing 40% of mining royalties directly to communities near mines and creating a "fast track" for strategic mining projects with tax incentives for reinvesting profits.
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Sanchez has proposed raising taxes and royalties, reviewing large mining companies’ contracts, and seeking a referendum to draft a new constitution to expand the state’s role in the economy.
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Torreblanca said a higher tax burden could deter investment in Peruvian mining projects totaling some $63 billion, 70% of which is in copper projects in the country’s southern Andean regions.
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Total mining tax revenue reached approximately 26 billion soles ($7.59 billion) last year, a record high driven by elevated gold and copper prices, according to official data.
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Last year, the government transferred the equivalent of $2.93 billion to authorities in mining-affected regions for community development from income tax and royalties, official data showed.
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Torreblanca called instead for strengthening the state to ensure mining revenues are spent efficiently, citing more than 2,000 stalled public works projects.
($1= 3.426 soles)