As the new minister of energy and mines took off for Toronto last week to encourage mining companies to invest in Peru, one of the country’s largest mining companies threatened to take a tax controversy to the World Bank’s arbitration office, the International Centre for Settlement of Investment Disputes (ICSID).
Freeport McMoRan, Cerro Verde’s parent company, proposes to take Peru to arbitration over disagreement with the tax authority over royalty payments. Cerro Verde, located just outside the city of Arequipa, is one of Peru’s largest copper producers.
The SUNAT wants Cerro Verde to pay up on royalties under the 2004 mining royalties legislation. It alleges that Cerro Verde owes 1.2 billion soles (US$348 million) from between 2006 and 2011. Cerro Verde is arguing that it is covered by tax stability contracts that were signed in the 1990s with the then Fujimori government. SUNAT argues that royalties are not taxes.
Addressing the annual meeting of the Prospectors and Developers Association of Canada (PDAC) in Toronto, Mining Minister Susana Vilca outlined some of the changes that Peru proposes to introduce to expedite investment in mining, including changes to environmental protection rules and the simplification of administrative procedures. She said that the details of proposed changes would be made public “in forthcoming days”.