Bureaucratic maze 

Peru's mining sector navigates red tape to unlock economic potential. 

Peru’s renowned mining event, Perumin, has shifted its focus from political instability to bureaucratic challenges this year, highlighting the hindrance caused by intricate permitting processes. Held in the bustling city of Arequipa, surrounded by vast copper deposits, the event’s attendees expressed frustration over the convoluted procedures involving multiple state agencies, delaying an estimated USD 57 billion in projects.  

Prime Minister Luis Alberto Otárola Peñaranda announced plans to establish a digital one-stop shop to simplify processes and unlock USD 11 billion in pending projects. Most people were supportive, however Peruvian asset manager and board member commented, “I don’t think it will happen very quickly, especially because there are no defined deadlines.” A mining executive of top world producer of Zinc, Lead and Silver in Peru agreed, “I find it difficult for projects to accelerate because this government is playing a double game. They announce positive intentions regarding mining promotion but don’t take any action because they don’t want to upset the communists.”

“I find it difficult for projects to accelerate because this government is playing a double game.”

A board member of a top world producer of Zinc, Lead and Silver, Peru

Peru, the world’s second-largest copper supplier, faces significant economic repercussions if these bureaucratic obstacles persist. The Peruvian board member explained this government has increased regulations from 40 to nearly 250 to gain approval. This might explain some of the 18% decline in mining investment reported by the Central Bank this year. Reducing bureaucracy would help address a further 8% drop predicted in 2024. The asset manager retorted, “The government is working on unclogging the pipeline. They have set a goal to clear 13 major mining projects, and according to the Minister of Energy and Mines, 9 have already been cleared.” 

Winning over local communities remains essential, but simplifying these intricate permitting systems is paramount as there are still contradictions between government announcements. The chairman of Buenaventura, Peru’s top public precious metals company, thought more efficient permitting could have accelerated a recent project by a decade. 

“the government is working on unclogging the pipeline.”

Asset manager, Peru

Another stark example emerged at the Perumin conference when Hochschild Mining Plc revealed plans to halt a Peruvian mine in the fourth quarter due to pending permits. A recent industry-funded study disclosed that Peru missed out on USD 32 billion in tax revenue due to social conflict and delayed projects, highlighting the economic toll of bureaucratic delays.  

Industry insiders are cautiously optimistic about the government’s initiatives. Prime Minister Otarola’s commitment to streamlining efforts through a digital portal has resonated positively. While the sector is hopeful, there’s a sense of reserved enthusiasm. “We should be producing 7 million tons of copper per year, but our current production is 2.7 million.” The board member informed, “Chile, the world’s largest producer, produces 5.5 million tons per year. We should be leading.” Mining at that rate might help the Peruvian economy in the short-term but would be a more aggressive approach to towards its estimated 81m metric tonne reserves, compared to Chile’s 190m. 

“Chile, the world’s largest producer, produces 5.5 million tons per year. We [Peru] should be leading.”

Mining executive, Peru

The mining community acknowledges positive signs, “What is coming are the projects that have already obtained permits and are now starting to invest, although these are few.” The Peru based mining executive explained, “It’s at least a positive sign that the decline is slowing.’ Despite differing political affiliations, it has been acknowledged that the government is moving in the right direction. The asset manager and board member stated that “since Dina Bouluarte’s government came into power, bureaucracy has improved somewhat, meaning that permit processes have become a bit more streamlined. To give you an example, Hocschild Mining obtained an extension for the Inmaculada mine permit, and they are expected to invest 1.3 billion.”

In essence, Peru’s mining industry stands at a crucial juncture. The government’s commitment to simplifying permitting processes has instilled hope. As the industry awaits the actualisation of these plans, the nation’s economic trajectory hangs in the balance. Successfully navigating this bureaucratic labyrinth could not only reinvigorate Peru’s mining sector but also pave the way for sustained economic growth and stability. 

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