Mining opposition risks $57bn projected investment in Peru
Close to $57 billion of projected mining investment for the year in Peru may not materialize, as continued social unrest triggered by opposition to extractive projects continues to cast a shadow over the country’s sector.
According to UK-based risk consultancy Maplecroft, President Ollanta Humala has failed to adequately reconcile investor-friendly mining policies with the demands of his largely rural support base.
The experts say that despite the government’s pro-mining policies, universal approval is a goal Humala is unlikely to reach anytime soon. Last year alone there were 149 conflicts involving mines in the country, one of the world's largest copper and zinc producers.
The report adds that the remainder of Humala’s term in office is likely to see persistent opposition to extractive projects, as well as frustration with his perceived lack of progress in tackling other issues, such as crime and corruption.
What is worse, say the analysts, as the government takes increasingly repressive measures against indigenous activists and local anti-mining protestors, companies reputation is likely to suffer further damage.
“Aside from mining-related unrest, security risks to mining operations are limited. While the Shining Path guerrilla group retains an active presence in parts of the country, it does not threaten security in the main mining regions,” the report says.
What companies should expect, say the experts, is significant delays associated with both the import by sea of capital goods and the export of commodities over the medium term, particularly when using major terminals.
“Given the large number of smaller export-oriented ports along the Peruvian coastline, however, companies with the capability to construct and using their own port infrastructure may benefit from doing so, thus reducing the risks of unforeseen bottlenecks,” according to Maplecroft.
The consultancy also notes that, despite the challenges, the presidential election in 2016 will see a peaceful transition to a similarly investor-friendly government.
And there is plenty for everyone to get a descent piece of the resources pie. Peru holds13% of the world's copper reserves, 4% of gold, 22% of silver, 7.6% of zinc, 9% of lead and 6% of tin reserves, according to official figures (in Spanish).
Image: Protests against Newmont's (NYSE:NEM) Conga mine, Jan. 2014. Courtesy of Mines and Communities.