Interview: Fernán Altuve-Febres Lores
To what extent is the existing tax framework attractive to potential investors?
FERNAN ALTUVE-FEBRES LORES: The normative fiscal framework that Peru has in place is adequate to attract investment. The challenges that investors find have less to do with the framework itself, but more to do with administrative hurdles. There are too many requisites to constitute and operate a business, or for foreign companies present in Peru to participate in mining or hydrocarbons projects, among other types of developments. Furthermore, the process of finding an office or a representative for a foreign investor is often delayed due to bureaucracy in municipal administrations. These obstacles result in delays and an increase in costs for the investor, along with a loss of competitiveness for the country.
In what way will the new reconstruction law help finance infrastructure projects and minimise the impact of natural disasters in the future?
ALTUVE-FEBRES: A fast and efficient reconstruction is essential. In order to avoid irregularities associated with the process and to assist those affected, it is important that the rebuilding of damaged infrastructure begins as soon as possible. The new law is a bold one, and will significantly enhance investments by reducing red tape around the administrative processes involved in the approval and development of projects.
How can new labour laws ease hiring processes and enhance labour market competitiveness?
ALTUVE-FEBRES: The Peruvian labour regime is, from a legal standpoint, too strict in comparison to that of most countries in the region. This limits Peru’s competitiveness, but most importantly, it has contributed to the creation of a very large informal labour market that lacks the protection granted by labour rights. The excess of protection has ironically created a parallel market that is not protected. Therefore, the new framework must incorporate mechanisms that simplify and enhance hiring and protecting workers. Any legal measure must be carried out with the purpose of harmonising the framework for those who are part of the formal labour market, as well as for those who are not. Not only must the framework be universalised, but it must also contemplate the extension of the try-out period for new employees, which is currently set at three months. By extending it, formal workers would earn their employment benefits gradually, thus making the market significantly more flexible.
What can be done from a legal standpoint to manage social and environmental concerns associated with the development of mining projects?
ALTUVE-FEBRES: There are currently no large-scale mining projects in the short to medium term. This could result in a further contraction in mining investment in the coming years. The priority should be to identify social and environmental challenges in a short period of time and answer those challenges accordingly. This should be done by highlighting the social benefits offered to communities involved, demonstrating how these communities will be integrated into projects, while also providing people with information about the environmental impacts. If this is not possible, then we risk missing the opportunity of remaining one of the top recipients of private investment in mining in Latin America. For a country such as Peru, where mining is the backbone of the economy and its development, this would be a disaster. Mining concessions are overseen by the Ministry of Energy and Mines, environmental matters are handled by the Ministry of Environment and social conflicts by the Cabinet of Ministers. This structure hampers the development of projects. Instead, the framework should provide the legal grounding for the integration of a concession where environmental and social matters are included in one formula, which would benefit all parties involved and increase the chances of projects being approved and successfully completed.
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