The 2019 Dakar Rally through the Peruvian coastal desert took place this month. Thanks to the media exposure it received, it will not only contribute to strengthening the position of the Peruvian tourism sector but also promote the country globally, which will, in turn, increase the awareness of Peru among potential foreign investors.
As reported by the National Institute of Statistics and Informatics (INEI), the Peruvian economy improved greatly in November 2018, with an increase of 5.27% in national production. Its well-developed mining sector partly explains this growth, which is expected to continue to hold for 2019.
Despite diversifying its economy over the past decade, Peru’s mining sector remains a key national sector and the region has been able to keep its title as a regional leader, along with the likes of Chile, Mexico, and Brazil. The mining sector is a key GDP contributed and is a great supporter of local employment. For many years, the Peruvian government has had a pro-mining and pro-business mentality, creating exciting commercial opportunities for companies involved in the mining sector. This article will look at Peruvian mining trends, business opportunities and challenges for 2019.
Overview of the Peru mining sector
After achieving the 28th rank of world’s most attractive destination for mining investment in 2016, the Fraser Institute Annual Survey of Mining Companies recently announced Peru has consolidated its position. Thanks to ranking in the top 20 mining countries, Peru’s mining investments are expected to reach approximately US$6 billion in 2019. This is an increase of 30.4% compared to investments in 2018. See below some key mining projects for the year ahead:
Quellaveco Copper Project: This copper project has already started thanks to a UK investment of approx. US$5.3 billion. The Peruvian President Martin Vizcarra announced this European contribution will bring thousands of jobs to the nation.
Fosfatos del Pacifico project: This project involves open pit mining and the processing of rock phosphate to produce and export phosphate concentrates. Its investment is forecasted to be around US$831 million.
Los Chancas Copper Project: This advanced exploration project has an expected investment value of over US$1.5 billion.
These are just some examples of the many projects that are expected to take place in the coming year/s. Other mining projects set to begin in 2019-2022 include the Santa Maria Expansion (US$110 million) and Lagunas Norte (US$640 million) in the La Libertad region; Pachapaqui Expansion (US$117 million) in the Ancash region; Corani (US$585 million) in the Puno region; Coroccohuayco Integration (US$590 million) in the Cusco region; and Tia Maria (US1.4 billion) in the Arequipa region.
What does Peru offer foreign investors?
- Prudent Macroeconomic Management: Mentioned in the official gazette El Peruano, human resources together with a favorable investment climate are fundamental to the economic growth in Peru. For this reason, trade openness and creating foreign investment benefits are key points on the government’s agenda in 2019. In the same vein, inflation will be managed and the fight against poverty is one of the governments top priorities this year.
- Increasing Mineral Prices: High nickel prices are here to stay and as China’s demand for the silvery-white metal increases, Peru is expected to benefit.
- Gold and Silver Sector: Peru will strengthen its position as LATAM’s greatest gold-producing nation. The gold reserves are estimated at 244 million ounces. Likewise, Peru’s silver industry is the second-largest in the world, with an annual production of approximately 4,300 tons.
- Lithium: Recently, a lithium reserve was discovered near Puno, which has the potential to become one of the largest lithium mines in the world.
- Trade Integration Policy: More than 90% of Peru’s trade is covered by strategic trade agreements.
- Non-Metallic Mineral Deposits: Peru is one of the few countries with non-metallic mineral deposits, including bentonite, limestone, and phosphate. There are ample opportunities for foreign companies to take advantage of these deposits.
- Toll Milling: Illegal mining entities are still extracting gold without paying taxes or adopting environmental friendly extraction methods. Toll mining has emerged and it has created a way for artisanal miners to sell ore to licensed mineral buyers.
Responsible extraction – an upcoming challenge
President Martin Vizcarra recently took over leadership and is paving the way for responsible mineral extraction. Despite promoting the Peruvian mining sector to foreign business, he has mentioned his desire to get rid of environmental degradation.
Among other things, Martin Vizcarra will develop a plan to promote the advantages and benefits of responsible extraction. The main purpose is to make companies aware of responsible extraction that could improve the quality and wellbeing of the people and the land.
The future of Peru mining is promising
Peru offers a great environment for foreign mining companies. With an abundance of unexplored natural resources and a government open to foreign participation in the mining sector, it comes as no surprise that Peru remains a key Latin American and global mining nation.
If you are interested in expanding your mining activities to Peru, it is advisable to work with a local partner. Reach out to Biz Latin Hub today to see how we can support your mining operations in Peru. Contact our mining lawyer, Jose, at [email protected] for personalized support.
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