The State should have invested S/9,806 per inhabitant with the taxes generated by mining

Since 2005, Peru’s mining regions have received billions in canons and royalties, taxes paid by extractive companies to the state.

The Gérens graduate school carried out the per capita per inhabitant exercise in six regions located in southern Peru. How much money would correspond to each inhabitant of Arequipa, Apurímac, Moquegua, Tacna, Puno and Cusco?

The study concludes that for an Arequipeño the annual disbursement amounts to S/6,079, period from 2005 to 2022. In this department several Mining companies. The taxes financed transfers of canons and royalties of more than S/8,000 million in the last 17 years.

Gérens carried out a similar drill in Moquegua and Tacna. In these two jurisdictions he operates Southern Peru with the Cuajone and Toquepala copper deposits. Here the mathematical operation leaves better yields. The equivalent of S/17,341 corresponds to the Tacneño, while to the Moqueguano S/28,549.

Arturo Vásquez is the Director of Research at the Gérens Graduate School, one of the authors of the work in question. He clarifies that the per capita income of Moquegua and Tacna is higher than that of Arequipa due to the number of inhabitants. While in the mistiana region the population exceeds one million people, in these two departments it does not even reach 550,000. Apurímac, Cusco and Puno are also jurisdictions with a mining industry.

In the first, the per capita per inhabitant reaches S/1,000. The amount is lower than that of neighboring regions due to the recent entry of Las Bambas. This mine began activities in 2016.

The mining per capita of Cusco amounts to S/3,318. The study does not consider the transfers from the canon and gas royalties that add up to the same amount for the exploitation of the Camisea wells in the La Convención jungle. While the mining transfer amounts to S/3.6 billion in that period of years, the gas transfer is six times more.

In Puno, the per capita per inhabitant reaches S/2,558 from an income of S/3,000 million.

Vasquez argued that These are significant amounts of money that even increase in areas of direct influence to the mining operation. San Marcos (Ancash) is considered one of the richest districts in Peru. Antamina, one of the main copper producers, operates there. “If in 2017 each citizen of that jurisdiction had to be given a check for canon contributions and royalties, they would have to collect 133,000 soles,” says Vásquez, noting that the jurisdiction has only 17,000 inhabitants.

70% receive mining canon

The resources of the canon and royalties swell the coffers of regional governments, provincial and district municipalities and public universities. The distribution is given according to formulas established in Peruvian legislation that reward the producing area.

In the country there are 1,845 districts; of that total, according to Gérens, 70% receive these transfers. “There is a distribution laweveryone does not like it equally, but they receive ”, adds the director of Gérens.

Vásquez clarifies that mining resources cannot be distributed directly among the population and it would be a mistake to do so. However, they should reach the inhabitant with better basic services: drinking water, electricity, health or infrastructure. This does not happen due to the management crisis that prevails in subnational governments. They lack spending capacity or the investment is squandered in useless works, many of them contaminated with acts of corruption.

Yarabamba in Arequipa, area of ​​direct influence of the Cerro Verde copper mining company, is the district with the third best budget in the country thanks to the contributions of the canon and royalties. It has less than 2,000 inhabitants. Last year it received S/376 million, a figure higher than what corresponds to the provincial municipality. However, its inhabitants do not have drinking water. Municipal management only spent 31% of the annual budget. Can’t you build a drinking water plant with 336 million? Asks the specialist.

The scale of priorities is striking. They do not have water connections, but they do have a stadium for 3,000 spectators, with an athletic track and modern lighting, which has become a white elephant due to its scarce use.

On the other hand, Vásquez also warns of a bureaucracy that blocks the completion of works. The maturation of a project lasts between three and four years due to the procedures. “At least the authorities should leave the file ready for the successor mayor to do it,” he recommends.

The Citizen Proposal economist, Epifanio Baca, recognizes that several mining districts do not have how to execute those funds. For this reason, he recommends that part of that money go to a trust or savings fund that is managed financially as it is done in La Oroya, so that when mining ends in Arequipa, the reserve is used. That goes for other regions, such as Cusco, whose districts also receive extraordinary remittances from mining and gas exploitation.

The specialist also suggests changes in the canon and royalty law, making it more flexible so that part of the game finances goods and services.

Remember that today you can only spend on investments, and that leads to having very good infrastructure in schools and hospitals, but they are not well equipped because there is no money and the canon cannot be used for that. “We must gradually take these initiatives that must be endorsed by the Ministry of Economy and Finance and Congress. That will fix the failed decentralization.

Mining districts and human development

The Gérens study also looked at the human development Index (IDH) in the mining districts, area of ​​direct influence of the mines. Until 2017, 125 were counted. A comparison was made between mining and non-mining districts. The investigation concludes that in the former there is an HDI higher by 10% in relation to non-miners. This index is higher in districts with medium and large mining.

The HDI measures life expectancy, level of education, and per capita income.. The presence of a company generates demand for local labor, use of goods and services from district suppliers, and works that are carried out with mining canon and royalties. The director of Gérens maintains that this indicator would be higher with a better used canon.

Poverty in those districts was also reduced by 10%. That is why Vásquez regrets that in recent years “a narrative” coming from radical and left-wing leaders has predominated. They maintain that the contribution of mining activity is not relevant.

Rethink decentralization

For the director of Gérens, the fiscal decentralization model failed, it must be reformed. Subnational governments need binding plans and goals with commitments to address priority needs. Another core problem is corruption. For Vásquez, there must be an impact on accountability, that the citizen be demanding in asking for what and where the resources of the State are spent.

On the other hand, the specialist questions the role of the Comptroller General of the Republic. He suggests that you renew your approach. The punitive only discourages execution; no official wants to sign a paper for fear of inspection. “The Comptroller must monitor the execution of works,” he adds.

Augusto Cauti, former Vice Minister of Mines, is also in that line. He affirms that the legislation that has been created to produce works and services in the public sector is not very transparent and creates many obstacles.

“That is where you have to attack with solutions before thinking about delivering bonuseswhich would be the last thing if there are no other options”, he points out.

For the former Energy and Mines official, more than a tax reform, the first thing that must be done to improve spending capacity is to address the historical problems associated with public investment in projects. In other words, discuss whether we should put so many locks on the public investment system.

Data

Mining canon. It is financed with 50% of the Income Tax paid by mining companies to the State.

The mining royalty. A percentage is levied on direct mineral sales made by companies.

The word

Epifanio Baca, Economist of the Citizen Proposal Group

A fund for times of drought

After 20 years it is clear that decentralization has failed, mainly because it was not accompanied by a modernization of public management.

In the government of Alan García, in the years 2008-2009, the decentralist shock was carried out, through which all the functions and competences that were foreseen in the norm were transferred without going through training and certifications for those who assumed these tasks. It was only done for the first few years and then the requirements were simply dropped.

What is the solution to improve the impact of royalties and canon? A stabilization fund must be created for both. It cannot be that up to now municipalities like Yarabamba, San Marcos, put tremendous amounts of money into their budget when they do not have the capacity to spend it, they are small devices. It is absurd that they have 10 or 20 times more of the budget that they can execute annually.

Augusto Cauti, former Vice Minister of Mines

The investment system did not help

Undoubtedly, the generation of taxes and royalties has been very important in mining regions, thanks to the spectacular prices of copper and other metals.

What happens is that there is no public management capacity to develop projects and public works that generate well-being for people.

It is in these circumstances in which the communities feel that there is no return in their favor and these problems alluded to by Gérens are generated, the important moment has arrived to rethink how the resources generated by the extractive activity are translated into welfare and infrastructure for human development.

The problem goes through several aspects: corruption and capacities. I think the main one is public management. To carry out projects, the public investment system in general, the public procurement law, for works and services, has not helped in recent years.