more on Peru courtesy of Baystock on the Stockhouse forum;
Peru's gold deposits losing glitter, miners contend
Fri May 5, 2006 8:11 AM ET
By Robin Emmott
LIMA, Peru, May 5 (Reuters) - Peru is becoming increasingly unattractive for mining companies despite its huge mineral wealth because of its inability to pacify anti-mine protesters, guarantee land rights and keep its promises over contracts, say miners, consultants and nongovernmental groups.
Peru this year fell to 44th place out of 64 mining countries in competitiveness and stability, well below 15th place in 2003, according to a survey by independent Canadian research organization Fraser Institute.
That compares with neighboring Chile, the world's top copper producer, which is in fourth place, and Brazil, which ranks No. 19, the Fraser Institute's Fred McMahon told delegates at a gold conference in Lima.
"Peru has been on a steady slide down. It has one of the world's largest untapped mineral reserves, so it is the policies that are the problem," McMahon added.
Peru, the world's No. 5 gold producer, has been shaken by large-scale anti-mining protests since 2003 and companies such as U.S.-based Newmont Mining Corp. (NEM.N: Quote, Profile, Research) have been unable to develop key deposits because of local resistance by farmers who fear mining will pollute their water supplies.
Meanwhile, the outgoing government of President Alejandro Toledo last year begun charging a royalty on mining companies, regardless of their contracts that lock in tax rates.
"Peru's gold production grew 25 percent between 1990 and 1999. Between 2000 and 2004, it grew only 8 percent, so that has to tell us something is wrong," said Fernando Sanchez-Albavera, director of natural resources at the U.N's Economic Commission for Latin America and the Caribbean.
Miners say they are especially worried because two leftists are competing for Peru's presidency in June and both say they aim to levy more taxes on mining profits.
Nationalist front-runner Ollanta Humala, campaigning to restrict foreign investment in Peru, will face leftist former President Alan Garcia in a runoff on June 4, a contest that many foreign investors view as a worst-case scenario.
Garcia's 1985-1990 government left Peru in economic ruin, while Humala is viewed by business as a dangerous radical with no political experience who would be bad for the economy.
'ENORMOUSLY NAIVE'
Despite a lull in Peru's often violent mining protests, academics and experts say they could flare up again if a new president cannot deliver on promises of jobs and prosperity for the half of Peruvians who are poor.
Meanwhile, miners need to learn how to work in regions where poverty is the driving force behind the demonstrations.
"Miners and Peru's government have been enormously naive to believe that you can calm deep frustrations with money alone," said Rosemary Thorp, chair of U.K.-based charity Oxfam.
Via royalties and income taxes, miners now give millions of dollars to poor regions in Peru, but town halls often do not have the capacity to spend the income.
"It ends up sitting in the bank because the funds are so great that mayors don't know how to handle them," said Cesar Guzman, head of conflict resolution studies at Peru's Catholic University. "That also generates resentment."
Raul Benavides, business development manager at Peru's top precious metals miner Buenaventura (BVN.N: Quote, Profile, Research)(BUEv.LM: Quote, Profile, Research), said the solution lies in supporting local industries, linking small towns to paved roads and providing clean drinking water.
"We need to start working with legitimate local leaders, not with the people who shout the loudest," Benavides said.
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