Interview: Rosa Maria Ortiz
How will lower demand and commodity prices impact investment in the Peruvian mining sector?
ROSA MARIA ORTIZ: Though the national debate often associates the fall in mining investments with government policies, the truth is that international circumstances are the cause for this decline; this is a reality that we share with all mining countries. For the country to avoid social conflicts and damage to the environment, we need to maintain an attractive investment climate while continuing to enforce current regulations. Peru has the advantage of having multiple metal resources. This places us in a stronger position than other mining countries, which face uncertainties associated with the performance of the Chinese economy and the normalisation of global financial conditions. It is important to add that even in the current context of falling global investment, Latin America remains the main destination for investments in mineral exploration. Four countries – Mexico, Chile, Peru and Brazil – remain in the top 10 and account for more than 80% of investment in the region.
Given the current reduction in mining exploration, what can be done in terms of public policy to avoid a medium-term stagnation in output?
ORTIZ: Junior mining companies are typically responsible for more than half of mining discoveries. However, over the last two and half years, the activity of these companies has been reduced due to a lack of interest from their investors, who are their primary source of financing. The dilemma faced by junior mining companies has left the producers solely responsible for exploration activity.
Peru is a safe country for investment and offers great opportunities in mining and energy. The cost for a mining investor in Peru is still low compared to other mining countries. The country’s legal framework is investor-friendly, while also respecting the environment and social inclusion, and is based on a new policy and relationship with mining. This policy prioritises water through a partnership arrangement between the investor, the local community and the state. Additionally, the state accompanies the investment process from the beginning of the project in order to ensure that sustainable development is a priority. In this context, mining will continue to remain the engine of the national economy.
The enormous mining potential of the country prevents us from talking about stagnation of mining production in the short or medium term. Copper production has begun to increase due to the implementation of large-scale projects such as Toromocho, and soon, Las Bambas. There is no turning back on these projects. We cannot forget that this situation of unstable prices is cyclical and mining investors know that mining has never been risk-free.
What can the industry do to increase public trust in mining, especially amongst local communities that are based around mining projects?
ORTIZ: The mining industry must not be seen as an enemy but as a strategic partner. The resources generated by mining should be the driving force for the rest of the economic activities in the region. We must break the myths. Peru’s formal mining sector has some of the highest environmental standards in the world. The people who are against the mining industry refer to old mining practices, which were contaminating and did not respect communities.
The new communication policy is geared towards making these differences clear. The “Tables of Development” project seeks to create a dialogue whereby the mining companies can approach the communities and find mutual support while seeking the common good. The mining companies have a key role in this regard: their plans for social relations must be realistic, their behaviour should be ethical and their contribution should go beyond merely paying taxes.
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