Peru: new regional governors confront mining's problems

Peru's New Regional Governments May Make Mine Projects Harder

Sophie Kevany

Dow Jones

7 October 2010

LIMA - Peru's private sector is concerned that a list of multi- billion-dollar mining, hydrocarbon and other private-sector projects could become "difficult" in certain parts of the resource-rich Andean nation following Sunday's regional elections.

The new regional governors--some of whom may yet face a second-round vote--are due to take office in January 2011.

In the southeastern region of Junin, home to the Toromocho copper project owned by Aluminum Corp. of China Ltd., the new governor-elect, Vladimir Cerron, is reported as being keen to raise mining royalties to 3% from 0.51%, and is described as being "anti" Toromocho.

Other regions due to be taken over by governors seen as against private- investment projects include Cajamarca, home to the Yanacocha gold mine and other important mining projects.

Gregorio Santos, elected as regional governor there, is a member of the Peruvian communist group known as Patria Roja. Attempts to reach Cerron and Santos for direct comment weren't immediately successful.

Two other regions have also elected governors that could complicate life for companies in the resource-extraction business, analysts say.

Cusco is where Peru's main Camisea natural-gas fields are located, while Arequipa is home to Southern Copper Corp.'s currently stalled Tia Maria mine development, as well as a copper mine owned by Sociedad Minera Cerro Verde SAA's.

"Cajamarca, Junin, Cusco and Arequipa are regions where the elected governors have openly protested against the mining industry," Ricardo Briceno, president of private-sector business group Confiep, told Dow Jones Newswires.

Briceno said the new leaders could make life difficult for investors, but attributed much of the current anti-private sector sentiments to poor private- sector representation.

"We [the private sector] are well equipped to deal with central government but we are practically nonexistent in the regions," he said, adding that the aim wasn't to fight but to create better working conditions.

Briceno said current plans include developing a new network of entrepreneurial federations that will represent the private sector at regional and community levels. The four new federations, whose planned implementation has been underway for over a year, will be opened in the northern, southern, central and jungle regions over the coming months.

Meanwhile, a speech to be delivered later Tuesday by the president of Peru's oil, mining and energy society, Hans Flury, will urge regional authorities to " forge a strategic partnership" with the private sector.

"The common enemy of Peruvians is poverty, and not private investment," Flury will say in his speech, a copy of which was emailed to Dow Jones. In the speech, Flury estimates investments by mining and energy companies will total $53 billion in the years 2011 to 2020.

Conflicts over mining and hydrocarbon developments have been rife this year in Peru. In July, protests in southern Peru over natural-gas exports led the Andean nation's pro-business government to pass new laws aimed at limiting exports and raising royalties.

In April, the government was also forced to intervene in conflicts over Southern Copper's Tia Maria project, but its attempt to set up a multisectoral working group to try to solve community protests against the project has run into difficulties.

A lawyer working with non-governmental agency Cooper Accion, Emma Gomez, said one of the problems was that pro-industry groups often misunderstood the complex reasons for protests.

"Mining projects are one of the main causes of conflict in the country," she said, and simply saying they are a rich source of local taxes isn't the answer.

"They [the new regional governors] are not trying to stop investments, but to improve conditions," Gomez said, including protecting basic rights to clean water and a clean environment, as well as ensuring a better understanding of community needs.

Peru is a leading producer of copper, gold and silver, and also produces a number of other base metals.