The recently elected Government of Peru is firmly committed to turning around the fortunes of the country's economy and President Kuczynski's decision to appoint a new energy and mines minister, Gonzalo Tamayo is the latest example of this. Given that close to 10% of the country's GDP is allocated to mining activity and that mining products represent approximately 40% of the country’s exports, a commitment of this magnitude is required if domestic and international firms, as well as the communities serving local mines, are to fully benefit.
Peru has a rich mining history, with significant global rates of production throughout a range of materials including cooper, gold and silver. However, there have been, to date, a number of barriers to mining activity in the region as Chris Gale, managing director of Latin Resources, confirms:
"Given Peru's enviable position within the global mining hierarchy – it has recently been cited as the world's Third largest copper producer – the level of processes and unnecessary red tape required to instigate communications between mining companies and local communities has, to date, actually increased. While this was originally intended to create more fairness and accountability it has, in-fact, resulted in delays and frustration.
"With this being one of the most pressing matters in his in-tray, it is therefore likely that Tamayo will want to iron out delays in key processes and procedures around obtaining shared buy in for proposed explorations/ excavations so that key projects which have, to date, been on hold will finally get the green light."
Wise words indeed. Given the excellent record of health and safety the country has within its mining industry, as well as heightened sensitivity about the need to minimise damage to the environment, the potential for these qualities to be matched with local communities that are newly engaged in the part they can play in driving successful projects forward is now much greater so Peru's most recent government appointment bodes well for country's economic future.
Chris Gale also honed in on this link, commenting that: "This appointment represents a major opportunity for Peru to further embed its enviable position on the mining world stage. Its pole position as a leading producer of copper, silver and gold, to name a few, is no accident and has instead, come about as a result of the consistent adherence to the safety and collective success of local communities as well as ensuring that strict environmental guidelines are met during the operational process."
The level of commercial interest in the region is high and has been for some time. However, their latest political appointment may very well be the trigger required to combat the bureaucracy that has afflicted Peru's mining industry in recent years. Matching high levels of community engagement with the activities of agile and responsive global mining players clearly needs to be prioritised and given the core focus of the new minister, this is highly likely.
Written by Charles Bond, a partner at Gowling WLG