The mineral industry of Peru has played an important role in the nation's history and been integral to the country's economic growth for several decades. The industry has also contributed to environmental degradation and environmental injustice; and is a source of environmental conflicts that shape public debate on good governance and development.
In 2019, the country was the 2nd largest world producer of copper, silver, and zinc; 3rd for lead, 4th of tin and molybdenum; 5th for boron; and 8th largest global producer of gold.
In 2006, Peru occupied a leading position in the global production of the following mineral commodities: fourth in arsenic trioxide, third in bismuth, third in copper, fifth in gold, fourth in lead, fourth in molybdenum, fourth in rhenium, first in silver, third in tin, and third in zinc. In Latin America, Peru was the first ranked producer of, in order of value, gold, silver, zinc, lead, tin, and tellurium and the second ranked producer of copper, molybdenum, and bismuth.
In 2006, Peru's economy benefited from high prices for mineral commodities. To date, the government has privatized 220 state-owned firms via joint ventures and consortia in the mining and fuels industries. The firms have generated $9.2 billion, with an additional committed capital flow of about $11.4 billion, representing 17% and 21% of Peru's GDP, respectively. Privatizations and concessions generated a committed investment of $6.9 billion (2006–2010) by mining companies such as Perú Copper Inc., Toromocho copper project ($2.5 billion), Xstrata plc. for Las Bambas copper mine ($1 billion), Phelps Dodge for expansion of Cerro Verde copper mine ($850 million), Monterrico Metals Inc. for Rio Blanco base metals project ($800 million), Rio Tinto Limited for La Granja copper project ($700 million), Southern Copper Corporation for expansion of Ilo smelter ($400 million), Goldfields Ltd. for Cerro Corona copper-gold project ($350 million), and Companhia Vale do Rio Doce for the Bayovar phosphate project ($300 million). The Ministerio de Energía y Minas reported that of the committed investment in 2006, Peru received $1 billion for gas and $200 million for petroleum.
Petróleos del Perú (PETROPERU S.A.) was created on July 24, 1969 (Law No. 17753) as a state-owned entity, dedicated sequentially to the transportation, refining, and commercialization of refined products and other derivatives of petroleum. On June 2, 2004, the Peruvian Congress (law No.28244) excluded PETROPERU S.A. from the privatization process and authorized its participation in the exploration and production of hydrocarbons. The state agency Perupetro S.A. was created on November 18, 1993 (Law No. 26221) to promote investments for hydrocarbon exploration and production in the country. Perupetro negotiates, signs, and administers hydrocarbon contracts, for which PETROPERU must compete with private firms as well. In 2006, PETROPERU invested $4.5 billion in the hydrocarbon sector.
The mineral industry in Peru has also generated controversy. While the mineral industry has spurred national economic growth, it has also produced changes to the environment that compromise rural populations' livelihoods. As a result, there has been a rise in corporate-community conflict between extractive corporations and rural populations, primarily in the form of peasant protests.
Minerals in the national economy.
In the 1990s, President Fujimori implemented several market reforms that allowed for the growth of Peru's mineral sector. In 1995, the Fujimori government passed a land law (Law 26505) that granted mining corporations the right to use land for their operations in exchange for monetary compensation to the landowners. In addition, the Fujimori administration installed a new tax regime that exempted mining corporations from taxation and paying royalties until they regained their initial investments. Fujimori also spearheaded other reforms that removed restrictions on profit/capital remittances, eliminated performance requirements for foreign investments, reduced tariffs on imports and removed tariffs on exports, established simpler licensing procedures, modified policies regarding indigenous land tenure, lowered taxes, liberalized the capital market, and privatized state firms and financial institutions. These changes facilitated a dramatic increase in new foreign direct investment (FDI) and allowed entry into the global market. In the period from 1990 to 1998, Peru's exports increased by over 85 percent. Out of this, the mineral industry accounts for 50 percent of Peru's total exports and has played a major role in its national economic growth.
In 2006, the mining and mineral processing industries represented almost 1% of the GDP. The minerals sector employed about 5% (83,000) of the industrial sector's total of 1.7 million miners; this did not include nearly 5,000 active informal miners engaged in illegal mining.
Government policies and programs.
Peru's legal framework regarding domestic and foreign investors is governed by Constitutional Mandates as Legislative Decree No. 662 (promotion of foreign investment), which provides unrestricted access to all economic sectors; Legislative Decree No. 757 (framework for the development of private investment), which pertains to private investment growth; and Texto Unico Official (TUO) approved by Supreme Decree No. 059-96-PCM, which promotes private investment in public infrastructure and utility works. Within the framework of Decree Law No. 708 of November 1991 (promotion of investment in mining), Legislative Decree No. 818 of April 1996 (incentives for investing in natural resources), and Supreme Decree No. 162-92-EF of October 1992 (rules guaranteeing foreign investment), more than 250 domestic stability and guarantee contracts have been signed since 1993.
Supreme Decree No. 014-92-EM of June 1992 (the general mining law) and Legislative Decree No. 868 of May 1996 (Texto Unico Official) provide guaranteed protections to mining ventures and contracts under the Peruvian Civil Code. Consequently, such ventures and contracts are immune from unilateral changes by any governmental authority in Peru without an appropriate legal or administrative remedy or arbitration by the Convenio Constitutivo del Centro Internacional de Arreglo de Differencias Relativas an Inversiones (Formal Consent of the International Center for Settlement of Relative Differences on Investments). Additionally, Peru enacted the Supreme Decree No. 047-2002-EF of April 2002 (import duties for capital goods) to reduce the duties paid to 7% from 20% and 12% on capital goods to be used in exploration and production of certain minerals, such as oil and gas in the Amazon region. The capital, goods, and services linked to minerals exploration benefited from the elimination of 18% sales tax when law No. 27623-EF was enacted in January 2002. Supreme Decree No. 015-2004-PGM of January 2004 (legal framework for decentralization) was established to use revenues from mineral production to maximize the well-being of the local communities through economic growth, environmental protection, and social development in a sustainable way. Supreme Decree No. 066-2005-EM of May 2006 (legal framework for creation of the Dirección de Gestión Social) was established to administer the Corporate Social Responsibility program in the mining sector.
The Peruvian Constitution establishes equal protection for domestic and foreign investors who may enter into agreements with the Government and guarantees free access, possession, and disposal of foreign currency. Hydrocarbon Law No. 26844 of May 1997 eliminated the exclusive rights of the state-owned Petróleos del Perú S.A. to control the secondary recovery of crude oil, refining, and imports and subsequent resale of petroleum and byproducts. The Peruvian laws have attempted to ensure more-favorable minerals and crude oil and gas exploration and production contract terms for investors. Legal procedures to obtain mining rights were made easier by the enactment of complementary legislation Supreme Decree No. 018 of July 9, 1992. The Government relinquished exclusive control over exploration, mining, smelting, and refining of metals and fuel minerals. Individuals and private companies are allowed to hold mining permits in Peru. In the legal framework for investment and taxation, no distinction is made among domestic and foreign investors, corporations, joint ventures, and consortia formed in Peru or abroad. Municipalities and Regional governments in areas where mineral resources (metals and industrial minerals) are exploited will receive 50% of the taxes collected to be invested in education and social programs (health, housing, and others) in conformance with the Canon Minero (Ministry Resolution No. 266-2002-EF/15 of May 1, 2002). The remittance of dividends, depreciation, and royalties abroad has no restrictions. Contracts can be signed by investors, and the Government guarantees the stability of legal commitments and taxes. To increase protection of investors’ interests, Peru signed agreements with the World Bank's Multilateral Investment Guarantee Agency in April 1991, which was authorized by Legislative Decree No. 25312 and with the Overseas Private Investment Corporation in December 2002, which was authorized by Legislative Decree No. 25809.
The Dirección General de Asuntos Ambientales (DGAA) of the Ministerio de Energía y Minas (MEM) is responsible for addressing environmental problems that result from energy and mining activities and is mandated to implement the laws and regulations of the environmental legal framework, such as Legislative Decree No. 613 of September 1990 (the environmental code) and Supreme Decree No. 016-93-EM of April 28, 1993 (the environmental regulation). The sustainable development model for the mining and energy sectors began in 1993 with regulations and procedures for the gradual reduction of pollution, which include economic development policies and environmental protection. The mining industry must comply by adjusting its ongoing operations to permissible effluent levels and its new operations by using cleaner technologies. The DGAA evaluates and proposes the environmental regulations for the mining and energy sectors, which include the maximum emission levels that are compatible with the internationally accepted limits set by the United Nations and the World Bank, approves environmental impact assessments for new operations and environmental adjustment and management programs for ongoing ones, and administers the national environmental information system. The MEM is authorized to manage environmental affairs in the minerals sector, such as establishing the environmental protection policy and maximum allowable levels for effluents, signing environmental administrative stability agreements, overseeing the impact of operations determining responsibilities, and imposing administrative sanctions. The oil companies, in particular, are under pressure because the number of operations in the Amazon Rainforest, one of the world's most sensitive ecosystems, is increasing.
Production.
In 2006, the value of Peruvian minerals (metals, industrial minerals, and fuels) production amounted to $6.5 billion, compared with $5.1 billion in 2005. Mining and fuel production increased by 8.1% as a result of larger values of metals (7%) and fuel output (23%). The increase in mineral outputs (content) was mainly led by natural gas (77%), molybdenum (22%), gold (20%), crude oil (18%), and iron (8%), and to a lesser extent by silver and lead (4% each) compared with 2005 outputs. In 2006, metal prices were also driven upwards because of the higher consumption associated with increased world economic activity, such as in China, the United States, and other countries.
Metal production growth was mainly led by an increase in copper, iron, silver, and lead, which offset the decreased output of gold, molybdenum, and zinc. The hydrocarbon sector's output also increased due to the increased extraction of natural gas at Aguaytía and Camisea. Crude oil output was expected to increase as the result of the 16 new oil exploration and production contracts signed in 2006.
Structure of the mineral industry.
Peruvian laws have attempted to ensure equitable mineral, crude oil, and gas exploration and production. Owing to these terms, an increased number of domestic and foreign companies, AngloGold Ashanti, Barrick Gold, BHP Billiton, Cambior, Falconbridge, Mitsui &amp; Co, Mitsubishi, Peñoles, Teck Cominco, and others, have expressed interest in participating in prospecting, exploration, production, and distribution of natural gas and petroleum contracts with Perupetro and mineral properties with Centromín. The structure of the Peruvian mineral industry continued to change as a result of privatizations and joint-venture projects. The establishment of consortia in such deregulated industries as oil and gas, and joint ventures in energy and mining projects were becoming a common practice in Peru. According to the Ministerio de Energía y Minas, Peru was the seventh most attractive area for investments in exploration after, in order of investment attractiveness ranking, Tasmania (Australia), Nevada and Alaska (USA), Northwest Territories (Canada), Western Australia, and Indonesia.
The new operating process, which was the result of the privatization and joint-venture projects, incorporated policies that deal with economic and societal development issues and with environmental protection in a sustainable way. Private local interests owned most of the medium- and small-sized mining operations. More than 250 foreign mining companies have been established in Peru since 1990. Crude oil was transported through 1,754 km pipelines, natural gas and natural gas liquids through 983 km dual pipelines, and refined products through 13 km pipelines. Important mineral industry ports included Callao, Chimbote, Ilo, Matarani, Paita, Puerto Maldonado, Salaverry, San Martin, San Nicolas, and Talara on the Pacific Ocean and Iquitos Pucallpa and