Interview: Pablo Berckholtz

How can the legal framework for the mining industry be strengthened? Does this framework focus on social issues related to the industry?

PABLO BERCKHOLTZ: The country’s legal framework for the mining industry does not need substantial amending. The current framework adequately protects investors and addresses social concerns related to the industry. The current issues facing the mining industry in Peru cannot be solved solely by amending laws and regulations.

Social consciousness is key to the success of the mining industry. What is really needed is to effectively restore the principle of authority and enforce the current laws and regulations. These already provide investors with adequate protection and predictability and effectively address social concerns for every project.

What are the main legal differences between public-private partnerships (PPPs) and the Public Works for Taxes initiative ?

BERCKHOLTZ: PPPs are agreements between the government and the private sector in which both parties exploit their respective strengths and efficiencies in managing the risks involved in an infrastructure project. The main objectives of a PPP are typically to reduce the infrastructure gap, develop new ways to finance investments in infrastructure and improve the quality and efficiency of the services provided. Normally, the private operator has more experience than the government in the construction and operation of a particular service.

The Public Works for Taxes programme, now-ever, allows companies to execute public works for the national, regional and municipal governments or public universities instead of making income tax payments. The Public Works for Taxes scheme allows the private sector to improve the efficiency of corporate social responsibility programmes, improve long-term competitiveness and contribute to projects with high social impact. On the side of the government, Public Works for Taxes permits the speedy execution of projects, and transfers the management and development of projects to parties that are more experienced and better suited to developing projects of this scale and complexity.

How can the existing labour law be adjusted in order to increase the flexibility within the Peruvian labour market?

BERCKHOLTZ: Peru has a very protective labour market that needs to be modernised to ensure it is in line with current market practices. In particular, certain aspects of the Peruvian law need to be adjusted in order to permit greater mobility and flexibility in the market. For instance, in connection with the sale of a business, employees have the right to remain employed with the seller of the business regardless of whether it makes sense from a business perspective to have the employee remain.

Other examples of practices that are in dire need of flexibility relate to reinstatement of employment and vacation time. Peruvian law currently provides employees the right to be reinstated even when they may have been granted a severance package according to the law upon dismissal. This aspect of the Peruvian law diminishes efficiency and produces uncertainty in business organisations, which has a harmful effect on productivity.

In the case of vacation time, Peruvian labour law does not allow for vacation periods to last less than seven calendar days, even when the employer and employee may agree otherwise. This paternalistic regulatory approach in the labour market imposes rigid labour practices that typically encourage employers to be overly cautious when hiring employees, which may have the effect of not promoting employment and slowing down growth.