December 2016

Country snapshot: Peru

  • By AusIMM
Plaza de Armas, Lima, Peru

Peru is an increasingly attractive mining destination due to its considerable mineral reserves and favourable regulatory environment.

The country has a well-established mining industry and is one of the world’s largest producers of base and precious metals.

Strengths

As of 2013, Peru was the:

  • second-largest producer of silver (accounting for approximately 17 per cent of world supply)
  • third-largest producer of copper
    (~7 per cent), tin (~10 per cent) and zinc (~10 per cent)
  • fourth-largest producer of molybdenum (~8 per cent)
  • fifth-largest producer of gold
    (~4 per cent).

The Peruvian government is politically and macroeconomically stable and is committed to pursuing an investor-friendly policy climate. Over 100 mining companies currently operate mines in the country, including Rio Tinto, Anglo American and Newmont, and a further US$59.9 billion worth of major projects are waiting to be developed. In the current environment of low commodity prices, the Peruvian government has stated that it is not considering new taxes and royalties, and that it may even introduce new initiatives to attract mining investment.

Weaknesses

Peru is highly dependent on its mining industry, which accounts for approximately 24 per cent of the country’s direct foreign investment and 12 per cent of its GDP. This strong reliance on the minerals industry means that Peru’s economic position is vulnerable to fluctuations in world commodity prices. This is evidenced by the fact that economic growth slowed in Peru in 2014 and 2015 as a result of the fall in commodity prices.

Social inequality is a serious issue in Peru, with 24.5 per cent of the population living below the poverty line in 2013. While this is a significant improvement compared to a decade earlier, when 48.5 per cent of the population were living below the poverty line, it is still a concern for miners looking to establish operations in the country. In recent years, a number of high-profile mega-projects have been postponed in Peru due to environmental or community concerns, strikes or anti-mining protests, including the Conga project, Tia Maria, Rio Blanco and Canarco.

Opportunities

Peru has a wealth of proven mineral reserves, ranking second in the world for silver, third for copper and zinc, fourth for lead and molybdenum and ninth for gold. In addition, much of the country’s area has yet to be explored. This means that Peru has the greatest untapped potential for new discoveries and production in South America, and it has the capacity to double or triple its current level of output.

The Peruvian government has actively promoted the country’s potential as a mining destination through investor-friendly policies and environmental regulatory reforms, giving Peru one of the most open investment regimes in the world.

Threats

As in most other jurisdictions, gaining a social licence to operate is an important consideration for miners looking to commence operations in Peru. Significant income and regional inequality means that some parts of the country require significant infrastructure investment, particularly in transport, electricity, water and communications.

Illegal mining is also a significant concern in Peru, with 53 000 hectares of the Amazon rainforest destroyed due to illegal gold mining. Illegal gold mining accounts for 20 per cent of Peru’s total gold production, which equates to approximately US$3 billion. However, the Peruvian government has recently made efforts to curb illegal mining by requiring illegal miners to formalise their mining concessions.

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All information in this profile came from the following sources:

Central Intelligence Agency, 2016. The World Factbook: Peru [online]. Available from: www.cia.gov/library/publications/the-world-factbook/geos/pe.html

EY, 2014. Peru’s mining & metals investment guide: 2014/2015 [online]. Available from: www.ey.com/Publication/vwLUAssets/EY-Peru-mining-metals-investment-guide-14-15/$FILE/EY-Peru-mining-and-metals-investment-guide-2014-2015.pdf

US Geological Survey, 2015. 2013 Minerals Yearbook: Peru [online]. Available from: minerals.usgs.gov/minerals/pubs/country/2013/myb3-2013-pe.pdf

 

Cover image: Lima, Peru by David Stanley via Creative Commons.

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