Leading Presidential Candidate in Peru Wants More Taxes on Mining

Pedro Castillo, the leading candidate in the presidential election of Peru, is planning on renegotiating mining contracts in the country’s mining industry. Instead of expropriating assets, Castillo wants a larger share of profits from mining companies in the country to benefit the state’s citizens.

Ana Maria Cordova, the party’s legal representative, stated that the official platform of Free Peru highlights taking control of natural resources. However, she adds, Castillo isn’t considering nationalizing mining in the country, which is the second-largest copper industry globally.

She explained that instead of seizing assets or nationalizing the mining firms in the country, Castillo’s move to renegotiate conditions would help ensure that populations where these mining operations or industries are located are in some way favored.

A rural schoolteacher who became a politician, Castillo will be facing Keiko Fujimori, a right wing candidate, in a run-off vote on June 6. Fujimori has claimed that his opponent’s plans to take charge of some companies and rewrite the constitution make Castillo a danger to democracy.

Christopher LaFemina, an analyst at Jefferies, stated that higher investment risk will cause a decrease in the supply of copper over time, regardless of the outcome. This may prompt an increase in copper prices as the demand increases in the midst of a transition to clean transport and energy.

Cordova explained that Castillo’s aim was to make sure that specific resources would be used to serve local populations better, noting that while Peru was a major producer, it still had the highest gas prices in South America. However, uncertainties that surround Castillo seem to have alarmed investors. Last week, Castillo had pledged that he would nationalize the Camisea gas deposit.

Grant Sporre, an analyst from Bloomberg Intelligence, noted that he didn’t see Peru ending up like Venezuela, adding that if the country did raise its taxes and royalties, it would become harder to invest, with projects in copper being more likely to slow. This, he said, was why the country needed to remain competitive.

Operations in the country that are owned by various companies, including Freeport-McMoRan Inc. (NYSE: FCX), make up 11% of the total copper mined globally. Apart from producing copper, Peru is also a major producer of gold, silver and zinc.

Cordova noted that private capital wouldn’t be affected by Castillo’s plans, asserting that the government plan would remain the same and that only detailed clarifications would be spelled out.

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