LatinFinance - January/February 2013 - 30

Peru

mining projects are located, what you
find are the local communities and the
company. There are no adequate services,
roads, schools … paradoxically, the richest
areas in a country in terms of reserves and
mining projects are the poorest and have
the worst social indicators such as in terms
of malnutrition!”
The government has responded by
frontloading public works in communities
where projects are located, providing
resources to local governments to carry out
public works projects to increase the state
presence. In January 2012, it unveiled a $2
billion rural electrification project that will
increase coverage from 63% at the end of
2012 to 96% in 10 years.
An emblematic case is the Conga
gold and copper project spearheaded
by US-based Newmont Mining. The $5
billion project was put on hold in August
after months of protests and five deaths
in July. Anti-Conga groups claim the mine
would destroy water resources for farming
communities in the northern Cajamarca
region.
Regional president Gregorio Santos
swung his support to the protesters in

late 2011 and has started building a
presidential bid for 2016 on his antimining stance.
Newmont and its partners in Conga,
Peru’s Buenaventura and the World Bank’s
IFC, say they are committed to the project,
but this could change if a solution is not
reached shortly. There are other projects,
most recently the $1.5 billion Cañariaco
copper mine planned by Canada’s
Candente Copper, facing similar protests.
Anti-mining groups vowed in December to
stop Cañariaco, also arguing that it would
eliminate water resources for farming.
The state has responded by
creating a new agency that will review
environmental impact studies for largescale mining and other extractive projects.
President Ollanta Humala signed into law
legislation creating the agency, SENACE,
on December 19.
His administration also expects to lure
close to $30 billion in investment in its
energy sector, in oil and gas exploration
and production, electricity generation
and petrochemical production. However,
analysts say the goal will be hard to meet –
in this case due to government indecision

and confusing legislation.
In all, 27 oil and gas exploration
concessions have stalled largely because
of slow processes in issuing permits. The
process will likely be slowed further by a
so-called Prior Consultation Law, in force
since April 2012, which requires the state
– which has the final say, however – to
consult indigenous communities before
approving extractive agreements.
The government has not fully defined
how the process will work. As a result,
the state’s oil and gas promotion agency,
Perupetro, has indefinitely postponed the
launch on an international bidding process
for 36 exploration contracts and renewal
of one production contract.

In search of a strategy

The government has announced a series of
seemingly contradictory plans for Peru’s
natural gas resources.
In December 2011 it pushed through
Congress legislation to favour construction
of a gas and liquids pipeline in the south of
the country that would have been built by
a local subsidiary of Brazilian construction
giant, Odebrecht.

Keeping the pace
Interview with Peruvian finance
minister Luis Miguel Castilla

Castilla: Growth is sustainable, but the
automatic pilot will not work any longer.
We were helped out by very favorable
winds outside our country, with very
favorable terms of trade and commodity
prices at historic peaks. Given that the
world is most likely going to go into a
phase of slower growth, we need to
undertake a series of reforms to be able
to sustain growth. I would place them in
four categories.
The first is to improve our productivity,
our competitiveness. Our economy
has opened up and we have pursued
integrating into the world economy, both
trade-wise and in terms of the capital
account. This obviously entails boosting
our productivity, our competitiveness,

30 LATINFINANCE

PeruStory.indd 30

©REUTERS

LF: Peru’s recent growth story has
been impressive. What’s needed to
sustain it?

closing the infrastructure gap, upgrading
the skills of our labor force and, in general,
sustaining an environment where human
capital in its broad dimension is improved.
The second area involves a process
of diversifying our economy and taking
advantage of the rich natural resources that
we have. We have been blessed with huge
mineral reserves of and vast gas reserves,
so the issue is how to leverage these
resources to foster growth, adding value to
them. This involves trying to find a balance
between the exploitation of renewable and
non-renewable resources and fostering
confidence between the stakeholders who
are involved in the exploitation of natural
resources, namely the community, the local
government and the private firms.
We are trying to do what the
Scandinavian countries have done,
changing a comparative advantage into a
competitive advantage.
The third issue has to do with
improving the institutional framework and
effectiveness of our government. We have

January/February 2013

1/9/13 12:19 PM



LatinFinance - January/February 2013

Table of Contents for the Digital Edition of LatinFinance - January/February 2013

Latin Finance - January/February 2013
Contents
Remaking of a nation
Moving the market
Full court press
Andean push
Cleaning up
Best in class
Building up
Filling the void
‘Seize the opportunity’
LatinFinance - January/February 2013 - Latin Finance - January/February 2013
LatinFinance - January/February 2013 - Cover2
LatinFinance - January/February 2013 - 1
LatinFinance - January/February 2013 - Contents
LatinFinance - January/February 2013 - 3
LatinFinance - January/February 2013 - 4
LatinFinance - January/February 2013 - 5
LatinFinance - January/February 2013 - 6
LatinFinance - January/February 2013 - 7
LatinFinance - January/February 2013 - 8
LatinFinance - January/February 2013 - 9
LatinFinance - January/February 2013 - 10
LatinFinance - January/February 2013 - 11
LatinFinance - January/February 2013 - 12
LatinFinance - January/February 2013 - 13
LatinFinance - January/February 2013 - 14
LatinFinance - January/February 2013 - 15
LatinFinance - January/February 2013 - Remaking of a nation
LatinFinance - January/February 2013 - 17
LatinFinance - January/February 2013 - 18
LatinFinance - January/February 2013 - 19
LatinFinance - January/February 2013 - 20
LatinFinance - January/February 2013 - 21
LatinFinance - January/February 2013 - 22
LatinFinance - January/February 2013 - 23
LatinFinance - January/February 2013 - Moving the market
LatinFinance - January/February 2013 - 25
LatinFinance - January/February 2013 - Full court press
LatinFinance - January/February 2013 - 27
LatinFinance - January/February 2013 - 28
LatinFinance - January/February 2013 - Andean push
LatinFinance - January/February 2013 - 30
LatinFinance - January/February 2013 - 31
LatinFinance - January/February 2013 - Cleaning up
LatinFinance - January/February 2013 - 33
LatinFinance - January/February 2013 - 34
LatinFinance - January/February 2013 - 35
LatinFinance - January/February 2013 - Best in class
LatinFinance - January/February 2013 - 37
LatinFinance - January/February 2013 - 38
LatinFinance - January/February 2013 - 39
LatinFinance - January/February 2013 - 40
LatinFinance - January/February 2013 - 41
LatinFinance - January/February 2013 - 42
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LatinFinance - January/February 2013 - 60
LatinFinance - January/February 2013 - 61
LatinFinance - January/February 2013 - 62
LatinFinance - January/February 2013 - 63
LatinFinance - January/February 2013 - Building up
LatinFinance - January/February 2013 - 65
LatinFinance - January/February 2013 - 66
LatinFinance - January/February 2013 - 67
LatinFinance - January/February 2013 - Filling the void
LatinFinance - January/February 2013 - 69
LatinFinance - January/February 2013 - 70
LatinFinance - January/February 2013 - 71
LatinFinance - January/February 2013 - ‘Seize the opportunity’
LatinFinance - January/February 2013 - Cover3
LatinFinance - January/February 2013 - Cover4
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