LIMA — Peru, the world’s no. 2 copper producer, will target “excess profits” that mining firms have gained from soaring global metals prices for extra taxation, the country’s economy minister told Reuters.
While President Pedro Castillo came to power last July pledging to increase taxes on the powerful mining sector, the current plan is far less ambitious than initial promises of sharp tax hikes that met fierce resistance from the industry and a divided Congress.
“The focus is on the surplus profits,” Oscar Graham, the country’s minister of economy and finance, said in an interview in Lima late on Friday, adding that the government was looking at an “adjustment” to taxes.
Copper prices are currently trading at near record levels around $10,000 per tonne in the wake of Russia’s invasion of Ukraine.
“The margins (of the adjustment) are being evaluated,” he said, but added it was important that the sector did not lose competitiveness and that mining investment was not discouraged.
Graham said Peru needed better distribution of mining wealth to communities to quell mining protests that have rocked the sector and stalled production at key mines such as MMG Ltd’s Las Bambas and Southern Copper’s Cuajone mine.
“We have to look at the issue of the efficient use of resources provided by mining, otherwise we will have recurrent conflicts in the country,” he said.
Graham also said Peru faced risk from any “prolongation” of the war in Ukraine, with domestic prices having risen at their fastest pace in a quarter of a century in March.
“We are net importers of oil and corn, which form the chain of inputs that most affect the family basket,” he said, adding that the government was evaluating doubling the budget for social programs to mitigate inflation for the most vulnerable.
Graham said projections of economic growth this year of between 3.5% and 4.0% were unchanged, but he did not rule out a revision given the global crisis.
To rebuild investor confidence that has been dented by economic issues and political turmoil, Graham said he would present to Congress a plan to cut the deficit to 1% of gross domestic product (GDP) by 2026.
The deficit was cut to 2.6% last year from 8.9% in 2020.
“This is very important to provide certainty, especially to international rating agencies and investors,” he said.
In mid-March, ratings agency Standard & Poor’s cut its rating for Peru, citing political uncertainty. President Castillo survived an impeachment vote in late March, the second time lawmakers have tried to remove him.
(Reporting by Marco Aquino; Editing by Adam Jourdan and Edwina Gibbs)