PPK walks mining tightrope
19 June 2016
The coming weeks and months will be crucial for Peru's future. How will the new team work on the tension between, on the one hand, reassuring mining investors, securing new projects and confirming hesitant firms already half involved, while, on the other, reassuring communities affected by mining that their interests will be taken fully into account?
Much is already being made in the press of Pedro Pablo Kuczynski’s desire to speed up the permit process (and there is arguably work to be done here), but this needs to be done with more, not less respect for environmental concerns and community doubts. The pressure is already building up. Headlines such as that of a recent Bloomberg article “Superpower status awaits Peru if new leader can woo farmers” shows this. The article goes on to highlight how Peru has the opportunity to outstrip Chile in becoming China's main Latin American trading partner in copper.
Kuczynski has already announced that he will make China his first overseas trip, of particular importance as Peru will host the Asia-Pacific Economic Forum (APEC) in November. He has also promised a new mining law for 2017.
The central bank (BCRP) estimates that US$22 billion of mining projects are currently being held up, in part by local community opposition. Such opposition is entrenched in many places. There are some signs of compromise, however, such as the eventual redefinition of the terms of dialogue in the case of Las Bambas (see below).
The new team is signalling interest in dialogue with companies. Also it needs to promote as energetically possible a better approach to gaining the trust of the communities. Given the many years of aggravation and the time it takes to rebuild trust, this will be no easy task and efforts to this end will need to be maintained for years. Further, the institutional culture embedded in the mining and energy ministry (MEM), and other organs of state, will also need to change; this too will take years to achieve. The institutional and cultural pressures pushing against all these changes will be strong.