[miningmx.com] — PERU’S new mine and energy minister said on Monday the government would attract private investment to the vast sector while requiring it to bring more social benefits to the fast-growing economy.
The minister’s first comments were another strong signal that Peru’s free-market economic model will remain despite the replacement of 10 out of 19 ministers on Sunday.
President Ollanta Humala shuffled his cabinet over the weekend in part to calm widespread disputes over natural resource projects, like Newmont’s proposed $4.8bn Conga gold mine in the northern region of Cajamarca.
“We will be globally competitive and attract first-class mining,” Jorge Merino, an engineer who spent years working for the government agency that promotes foreign investment before being picked by Humala, told reporters.
“My commitment is to decide how the country can bring investment, but investment that helps develop social programs,” said Merino, who was also once head of social affairs at the agency, Pro-Inversion.
Humala kept Finance Minister Luis Miguel Castilla, who is well-regarded by Wall Street. Trade Minister Jose Luis Silva, who has pushed an ambitious free-trade agenda for the Andean country also stayed in his post.
New Prime Minister Oscar Valdes, a former army officer who had been interior minister, said the government will ask international experts to audit the disputed environmental plan for Conga before making a decision on what would be Peru’s most expensive mining project ever.
“We think this is a good way to defend investment in Peru,” Valdes, speaking on local television, said of the audit. He said protesters had “reasonable doubts” that should be addressed.
Peru has $50bn in mining and oil investment lined up for the next decade, but the government is worried some 200 social and environmental conflicts nationwide could prevent that from taking off.
Humala has struggled to assuage the environmental concerns over water supplies from local communities opposed to the Conga project, many of which voted for him in the June election.
He declared a state of emergency last week to break up protests against Conga, a joint venture between US-based Newmont and Peru’s Buenaventura .
It was the first sign his government may be willing to take a firmer stance to ensure the giant project goes forward.
SIGNS OF A CRACKDOWN
Critics said the appointment of Valdes showed a more authoritarian bent from Humala, who is a retired military man himself, and could mean more crackdowns on protests. Valdes went into business after leaving the military in 1991 and the business community appeared to support his appointment.
Peru’s mining industry grew during the authoritarian regime of former President Alberto Fujimori, who ruled for 10 years starting in 1990.
Fujimori, now in jail for human rights abuse and corruption, initially drew multinational firms to Peru by signing agreements to lock in low tax rates for some two decades and promising to defeat leftist insurgents.
Humala fiercely criticised Fujimori and portrayed himself as a defender of democracy and human rights during the campaign against Fujimori’s daughter, Keiko Fujimori.
He pledged to defuse, through dialogue, community opposition to natural-resource projects in poor towns left behind by Peru’s decade-long economic boom.
Humala earned widespread praise for early legislative victories. He negotiated additional tax and royalty payments of about $1bn a year with the mining sector without losing investment and passed a law requiring firms to consult with indigenous communities before building projects.
But he has since found mediation difficult and labeled as “intransigent” the protesters who had hoped he would usher in a period of rapid social change. The leaders of the Cajamarca demonstrations have been arrested.
Although Humala’s approval rating is a relatively high 59%, he has struggled to govern as a moderate in polarized Peru who can keep big business happy while helping poor voters impatient for change.
“The (cabinet) changes signal that Mr Humala could be substantially less tolerant of protests that aim to stop mining projects,” wrote Nomura Analyst Benito Berber in a research note.
Peru’s stocks were down 1.3% and the sol currency closed bidding 0.15% weaker against the dollar on a bleak day for global markets.
