Peru’s Castillo expects mining firms to accept ‘prudent’ tax changes, adviser says

Pedro Castillo. (Image from Castillo’s Twitter profile)

Peru’s socialist president-in-waiting expects mining firms enjoying high metals prices to be won over to “prudent” plans to hike taxes on mineral resources, a top adviser told Reuters on Tuesday.

In a sign that the gap between the business sector in the world’s no. 2 copper producer and the incoming leftist government is closing, Pedro Francke, Castillo’s economic adviser, said he expected firms would not oppose a planned review of tax rules after dozens of meetings with businesses.

Castillo is set to be confirmed president after a review of ballots from the June 6 vote. The political novice and former teacher has rattled Peru’s elite with plans to redraft the constitution and sharply hike taxes on miners he once said had “plundered” the country’s wealth.

But as he has approached power Castillo has moderated his rhetoric, and Francke has also sought to calm market concerns. He told Reuters he had held dozens of virtual meetings in recent weeks with domestic and foreign investors and some business leaders from the mining sector.

“In general, a good dialogue has been established, in which a significant part of the concerns they had have been eliminated, and I think there is a lot of openness,” he said by telephone.

Castillo has rattled Peru’s elite with plans to redraft the constitution and sharply hike taxes on miners he once said had “plundered” the country’s wealth

“The mining sector isn’t close-minded to new revisions of the taxation system, if done with prudence,” said Francke, adding those he had talked with saw the plans as “reasonable” given high global metal prices.

Peru’s mining chamber was not immediately available to comment.

Francke added that he believed it was important to take care to not “kill” incentives for mining and ensure funds raised were well spent. Castillo has previously talked about hiking taxes as high as 70% on mining profits.

Castillo has also proposed to review contracts with mining companies that lock in tax rates in the longer term. Francke said talks were planned with the firms and any agreement would “strictly depend on the acceptance of these companies.”

Peru has such agreements with six mining companies, among them China’s MMG Ltd, Aluminum Corp of China, and Anglo American, which has a Peru copper project set to come online from 2022.

Francke said that Castillo was open to dialogue with business leaders and would respect pledges he had made, including protecting private property and private investment.

Castillo has a lead of some 44,000 votes ahead of right-wing Keiko Fujimori, though the run-off election result has yet to be officially confirmed, with electoral authorities reviewing disputed ballots after challenges by Fujimori.

(By Marco Aquino; Editing by Adam Jourdan and Rosalba O’Brien)


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