Peru's double whammy of red tape and social conflicts battering the mining sector

The Peruvian government urgently needs to reduce the number of permits required for new mining projects and unblock its US$53.1bn investment portfolio that has not shown significant progress recently, according to a think tank.

Mining regulation is one of the most complex in the region, and there are around 230 administrative processes needed for projects, making procedures take 6-7 years.

A report produced by Peru’s economics institute IPE details that, of the mining portfolio promoted by the energy and mines ministry (Minem), projects involving some US$30bn do not have a start date and/or have been delayed due to external problems. 

BNamericas reviews the impact.

PORTFOLIO

According to the IPE, there are 23 projects involving US$30bn that are delayed for external reasons – permits, political uncertainty, social conflict, among others – and another 11 involving US$16.6bn that are delayed due to business decisions. 

Of the 23 projects with external delays, 16 do not have an estimated start date (see graph below).

Source: IPE

According to the think tank, not having started the planned projects – some of which have been in the pipeline for more than a decade, such as Conga – has cost Peruvian GDP some 700bn soles (US$187bn) in the last 15 years.

In the case of copper, if the delayed projects had started up, annual output would have increased 84% and about 1.97Mt would have been added per year in the period 2018-2022.

PERMITS

Permitting procedures continue to be one of the great limitations for the development of new projects. The problem is exacerbated by the constant changes of ministers and officials who participate in awarding permits, certifications and key procedures such as prior consultation with communities.

According to local consultancy firm Apoyo, 100 of the 232 permits require the participation of 19 public entities throughout the entire mining operation. The main processes and entities involved are seen in the table below. 

Source: IPE

According to mining companies consulted for the report, the processes to obtain the detailed environmental impact study and the prior consultation take up to five times the legal period established by Peruvian regulations. In the case of the EIS, the process takes around three years.

CONFLICTS

Finally, social conflicts are the other major problem in the sector; and until now there is no national strategy on how to prevent new clashes.

According to the investigation, 11 mining units stopped operations between 2021 and early 2023, which caused around 185,000t of copper to stop being extracted.

If mining stoppages had been avoided, Peru’s GDP could have grown 13.8% instead of 13.3% in 2021, and 3.24% instead of 2.68% in 2022, according to the report.