‘Prudent’ tax changes expected to be accepted by miners in Peru

July 7, 2021

An advisor to Peru’s incoming president, Pedro Castillo, told Reuters that the socialist administration expected mining firms in the world’s No. 2 copper producing nation to be won over to prudent plans to raise takes on mineral resources.

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 narrowly won in Peru’s June 6th presidential election and is expected to be confirmed president after a review of ballots. He has vowed to rewrite the country’s constitution and to raise taxes on miners. The former teacher once said mining companies had "plundered" the country's wealth.

Reuters reported that 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,” Francke said.

“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.

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 percent 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.

 

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