Peru tilts towards China, but taxing miners will become a controversial issue
LIMA, Aug 7, 2021, MercoPress. Recently inaugurated Peruvian president Pedro Castillo seems to be clearly tilting his country towards China: cabinet members have met with the Beijing ambassador, an updating of the 2009 trade accord between the two countries is advancing and this Friday the president will be vaccinated with the SinoPharm Covid 19 shot, MercoPress reported.
According to the foreign ministry in Lima, “Currently technical teams from Peru and China are working in the optimization of the Free Trade Agreement between the two countries. Bilateral relations with China are extremely important”.
In effect, this is particularly true for mining and copper. Peru is the world’s second producer and a major supplier for China, and president Castillo has pledged to improve living and social conditions of the Peruvian peasants by increasing taxes on the mining industry.
Castillo is the first non conservative Peruvian president since the return of democracy four decades ago, and most administrations lately have kept to stable market policies and respecting contracts, well aware of the significance of China as the country’s main trade partner.
Thus mining tax policy is crucial both for China, which has several companies operating in Peru, but also to the whole industry and their long term accords. Modifying the tax framework won’t be an easy task.
The head of Peru’s National Society of Mining, Oil and Energy, Pablo de la Flor revealed that among the companies that enjoyed tax stability deals are China’s MNG Ltd., and Chinalco’s Aluminium Corp. which helps to understand the interest on both sides of satisfactory negotiations.
But a third leg of the discussions are the indigenous communities in the Andes that have repeatedly complained, and blockaded access to mining areas, because companies suck most water resources, ignore environmental conditions and deeply ingrained cultural traditions
Last but not least, this Friday, Castillo announced he will be vaccinated with the Chinese Sinopharm, which was involved in several scandals when members of the political system and business elite jumped queue, as in Argentina to be the first in receiving the shots.