Unlocking Peru's mining potential can boost GDP growth by 2pp, says expert

Peru's mining industry has the potential to boost the growth of the national economy by up to 2 percentage points if most of the registered development initiatives go into operation, according to Luis Miguel Castilla, former economy and finance minister and executive director of consultancy Videnza. 

If half of the mining projects in the country’s portfolio, involving total investments of more than US$54 billion, are brought online in the next five to seven years, annual GDP growth could rise from the current 3% to at least 5%, he said in an interview with the Peruvian institute of mining engineers (IIMP).

According to Castilla, it is feasible to bring expansion projects and brownfield investments online, but the bottlenecks holding them up must be resolved quickly, bearing in mind that presidential and congressional elections are just two years away and the political process could well stymie any national strategy to advance new initiatives.

“It is possible to move forward with expansion and replacement projects as long as there is no social opposition. However, as we get closer to the next electoral process, this might become less feasible. Nonetheless, it will still be possible if there's support from the various stakeholders involved,” Castilla said.

PROJECTS AND PENDING ISSUES

The former minister underscored that, alongside the projects the government aims to bring online – such as the Quellaveco expansion, Corani, Raura expansion, Chalcobamba and Romina – developments like Zafranal and Yanacocha Sulfuros are also capable of moving forward without significant delays.

Additionally, as national strategies are defined to better utilize water resources, there could be increased activity and investment decisions made in the Cajamarca region in Peru's northern highlands, which has large gold and copper deposits.

Regarding the southern mining corridor – an area where Las Bambas, Antapaccay and Hudbay operate – Castilla noted that there are important projects in the pipeline, but better infrastructure and agreements are needed to ensure that metals can be transported to Matarani port on the coast of Arequipa region.

SECURITY

One major unresolved issue is security.

According to Castilla, the government allocates a budget of 15bn soles (US$4bn) per year to security, but the private sector is spending a similar amount to protect itself, as they are not seeing tangible action to control crime and violence, which ranges from petty theft to attacks on mining operations.

“That's 15bn soles that is ‘lost’ in safeguarding the integrity of operations and personnel instead of being invested in productive improvements,” he said.