Peru’s presidential frontrunner is dangerous for Chinese mining firms

Peru's presidential forerunner targets the coveted tax stability agreements of copper mining companies that freeze tariffs. The plan could have an extraordinary impact on Chinese miners .

2024-07-07 15:22:08

Peru's socialist presidential candidate Pedro Castillo plans to target tax stability agreements of mining companies

Peru's presidential forerunner targets the coveted tax stability agreements of copper mining companies that freeze tariffs. The plan could have an extraordinary impact on Chinese miners in the world's second-largest producer of the red metal. Socialist candidate Pedro Castillo, the favourite to win Sunday's run-off vote, has proposed new royalties on mineral sales and a plan to renegotiate the long-term tax treaties signed under former governments. A teacher who was a shock winner in the first step, Castillo accused the mining firms of "looting" Peru's wealth. He talked about more than doubling the state's share in mining profits to 70 percent and using the funds to promote health care and education and reduce income inequality. According to a Reuters analysis of government data, it would hit Chinese mining companies the hardest, including MMG Ltd and Aluminum Corp of China (Chinalco), if Castillo won the election and followed his plan. Chinese mining companies have become a significant player in the mining industry in Peru. The Asian country is by far the biggest purchaser of Peruvian copper, used for everything from building to the development of electric motors. Investments at risk Peru has approved as many as 25 tax treaties since the 1990s, data from the Ministry of Mines and Energy shared with Reuters. The deals are intended to deter investors from political or economic upheaval, and experts believe they provide the basis for investing in some of the largest mines in the country. Castillo's tax plan could further derail markets and raise uncertainty in the world's top copper-producing region. In neighbouring Chile, the world's largest copper producer, the lower house of Congress has already approved a plan to increase royalties for mining. According to the ministry's data, MMG, which contains the Las Bambas copper mine in Peru, approved a deal in 2011 that ensures no change in tax on its operations until the end of 2030. According to the company's data, the deal encouraged the company to invest $ 10 billion in the sprawling mine, which now produces 350,000 tons of copper a year. Broker Jefferies said in a note that MMG is very exposed to Peru, given the importance of the Las Bambas mine. "Tax/royalty increases in Peru could therefore be a problem, depending on the outcome of the upcoming presidential run-off," he said. Chinalco has signed a tax stability agreement with Peru until 2028, the data showed. The company's Toromocho mine produces 200,000 tons of copper concentrates per year. Mining giant Anglo American and its partner Mitsubishi have signed a tax stability agreement until 2037 for their soon-to-be-completed $ 5.3 billion Quellaveco copper mine, which would be available in 2022 with 330,000 tons of copper production.

Monika Walker

Monika Walker is an experienced journalist specializing in global political developments and international relations. With a keen eye for accuracy and analysis, Monika has been reporting for over a decade, bringing stories to light that matter to readers around the world. She holds a degree in International Journalism and is passionate about giving a voice to underrepresented communities through factual reporting.