Mining canon raises US$274mn in 2004

Peru's mining canon is estimated to have generated 900mn soles (US$274mn) in 2004, up from 532mn soles the previous year, the country's national society of mining, oil and energy SNMPE said in a bulletin. The levy, amounting to 50% of income tax payments paid by mining companies, is distributed to Peru's regional, departmental, district, provincial and municipal governments, supposedly to finance local infrastructure projects. However, the SNMPE notes that this does not occur in practice. In 2003, 68% was used to contract services, 21% to purchase goods for distribution, 5% on various expenses and 1% on personal expenses, according to data from Peru's ministry of economy and finance (MEF). Only 5% was used on capital projects, said the SNMPE. "This reveals that the canon resources are not being utilized adequately," the report said. The SNMPE highlights the example of good practice by the Pataz district government in northern Peru's Libertad department that co-financed the small Hidro Pataz hydroelectric plant for 551,400 soles (US$168,000) from the canon along with the municipal fund Foncomún. The Lima-based association of private mining and energy companies criticizes the canon for being a volatile form of income for local governments as the amount generated varies according to miners' profits. To create more stability, all forms of mining taxes should be included in the levy, including income tax paid by mine employees, tariffs and the country's "selective sales tax," suggests the SNMPE. The proportion of the canon distributed to each of Peru's regions depends on a combination of the level of mining and poverty in the area. Important mining districts and areas that lack basic infrastructure are given higher priority. In 2004, the government had distributed 409mn soles (US$124mn) in funds from the canon by end-November. Cajamarca department, the home of Peru's largest gold mine Yanacocha, received the lion's share with 40% of the total. Puno, where tin miner Minsur operates, came second with 15.2% and Ancash, host to Canadian company Barrick Gold's Pierina gold mine, got 14.3%. The annual canon is distributed in 12 equal monthly quotas from June of the following year. This means local governments will receive the 2004 canon from June 2005-May 2006.