Mining industry keeps a close eye on Peru’s presidential election

June 17, 2021

The mining sector in Peru was holding its breath while awaiting the final outcome of its presidential election that saw a slim lead for socialist candidate Pedro Castillo.

On June 11, with 99.6 percent of the votes counted, Castillo held a slim lead of about 60,300 votes or 50.2 percent of the vote. Castillo, the former teacher and union leader, has pledged to rewrite Peru’s decade’s old constitution and take up to 70 percent of profits from mining firms operating in the copper-rich country.

His opponent Keiko Fujimori, a market-friendly conservative has contested the early results of the election and has alleged fraud.

Reuters reported that Peru’s market and mining watchers are wary of a presidential election victory for Castillo, but see a potential silver lining: a sharply split vote could hinder his plans for dramatic reforms.

A final tally may take days to arrive and there could be challenges to the results.

“The only positive factor - even if Castillo wins - is that the result of the election shows you that the country is very divided,” said Guillaume Tresca, senior emerging market strategist at Generali Asset Management.

“And with a divided congress it will be very hard for him to implement structural and disruptive reforms.”

Whoever wins the presidential vote, Peru will have a deeply fragmented legislature with ten diverse political parties, none of whom hold a majority. Castillo's Free Peru socialists will have the largest bloc, followed by Fujimori's conservatives.

Peru's congress has relished clashing with the presidency in the past. Last year, it pushed through a controversial impeachment process against then-President Martin Vizcarra that forced him to step down and sparked deadly protests.

Roque Benavides, chief executive of local miner Buenaventura, told Reuters that miners could agree to things like voluntary contributions to finance local infrastructure projects but more drastic measures like nationalizations would derail investments.

“I think that neither of the two candidates can impose their position and therefore I think that the idea of them making dramatic, drastic changes is very debatable,” he said.

Francisco Acuña, a Santiago-based analyst at mining consultancy CRU, said it was quite likely the new government would need to negotiate and reach consensus with companies.

 

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