Discontent with the economic model is visible. The candidates of the last presidential elections tried to capitalize on this discomfort. Despite its good macroeconomic figures, with the current model, the quality of services did not improve. This issue was addressed on the second day of Perumin 2022 conferences, which takes place in Arequipa.
“It is not clear why the model that supports these growth figures does not have the support of the population,” former Economy Minister Waldo Mendoza raised yesterday with the president of the Central Reserve Bank of Peru (BCRP) Julio Velarde. For the manager, people do not perceive an improvement in basic public services such as health and education.
“We have failed a lot in providing basic services. It is intolerable that, in a democracy (only) those who have money can save their mothers or their children (…). They are the important aspects for society. People want better education and better health,” Velarde replied.
According to the president of the BCRP, even with the current income of the country, it would have been possible to implement a health system similar to the one that Spain had a few decades ago.
For his part, Mendoza concluded that as long as economic growth is not appreciated by the majority of the population, “political experiences like the one we recently experienced” will continue, referring to the last electoral process.
Inflation and prospects
Julio Velarde expects that this year inflation in Peru ends with figures of 7% or 8% and the perspective is that by 2023 this will drop to 3%. However, it will also depend on external variables that may arise along the way. “If you asked me at the beginning of the year when we will have inflation at 3%, I would say this year. But the invasion of Ukraine came and it meant high pressure,” Velarde said.
Regarding the interest rate applied by the BCRP as a measure to contain inflation, Velarde said that it is at 6.75% and they hope not to raise it any more, but it will again depend on the context.
In addition, he referred to GDP growth figures, which he projects for this year and the next at 3%. The president of the BCRP tried to see the positive side despite some projections of zero growth. For example, it was reaffirmed that by 2023 public investment will grow by 0%, in part because there will be new regional and municipal authorities. However, he referred that this last semester a growth of public works is expected, in the final stretch of the mandate of governors and mayors.
In the case of private investment, for this year the growth will be 0%. However, Velarde maintained that compared to 2019, it grew by 15%. “It is as if it had grown 5% per year,” he said, noting that 2021 was an exceptional year.
Waldo Mendoza projected a complicated international scenario in the short term, which would complicate the country due to other facts, such as the fact that several mining companies are not operating at their maximum capacity. He referred that these situations contribute to the pessimism that is reflected in the BCRP expectations surveys.
For Velarde, part of the pessimism is also because positive figures are not recognized, such as consumption that continues to rise. He referred that the spending capacity has not yet been exhausted due to the savings generated by people in recent years. In addition, he said that the formal employment figures are already surpassing the period prior to the pandemic.
The manager added that the feeling of pessimism of businessmen would be linked more to the national situation. “What they are fearing is for the country, but they don’t see their company as badly,” he said. Mendoza agreed, pointing out that political uncertainty would contribute to said climate. “There is no hyperinflation, but there is political uncertainty. Neither Julio (Velarde) nor I know how Peru will be next year,” said the former head of Economy.
Quellaveco and Tambo
Diego Ortega, Vice President of Corporate Affairs for Anglo American, which operates the Quellaveco mine, participated in one of Perumin’s round tables. At the end of the conversation, he referred to the rejection of the Tambo Valley (Islay) user associations, who are opposed to diverting water from the Titire River (a tributary of the Tambo River) to the mine, despite the fact that it will pay the resource from the Vizcachas dam.
Ortega pointed out that the boards have the legal right to appeal the resolution of the National Water Authority, the entity that approved the license to use Titire’s water resources. However, he remarked that since 2008 the intentions of the mining company have been informed and socialized. “It is not a process of a year or two, but part of 2008 and it was a transparent process.”
On the other hand, he said that this month the mining company plans to carry out its first export of copper. “We are already with the ships committed to start loading the copper that we are producing.”
insurance against conjuncture
The spokesman for the insurance broker Marsh, César Kahatt, reported that In recent years, mining companies began to contract specialized insurance against political risk, due to the social situation that countries in the region are going through (Peru, Chile or Brazil). He added that this insurance is activated when there is material damage, but it would not cover blockages that affect production.
On the other hand, he argued that due to inflation, mining companies are updating the prices of their insured assets, whose original value (which is covered by insurance) has decreased in the face of rising prices.
They point out bad design in the distribution of the mining canon
At the round table Proposal for Sustainable Mining Development, The reason why the mining canon has not substantially improved the human development indices of many districts in the area of mining influence was addressed.. The consultant and former vice minister of the PCM Raúl Molina, argued that there are in part deficiencies in the design of the canon, which concentrates enormous amounts of resources in a few municipalities, beyond what they can spend.
He gave the Arequipa district of Yarabamba as an example, which received an average figure of 125 thousand soles per inhabitant in the last period. For Molina, it is difficult for the district to execute that amount in a year. In the end, the resources go to works without impact such as sports tiles, transportation, even to pay debt and salaries, despite the fact that the latter is prohibited.
Molina said that the provinces in mining areas do show improvements in their human development indices compared to the districts, but they also fail to match the figures of other provinces with other competitive advantages, such as being part of the national road network. He cited the case of Sicuani in Cusco, which still outranks Espinar, even though the latter has mining projects. He proposed a new approach that bets on territorial development.
For his part, the former Minister of Agriculture Milton Von Hesse, argued that the mining canon and mining royalties are executed little, with works of little impact, also often with acts of corruption. The former official considers that less than 50% has been spent with the last transfer, when at this point in the year it should be above 60%. He specified that now the municipalities receive an advance of the canon, so they cannot say that the resources arrive too late.
- Lecture by Gonzalo Tamayo, Partner Macroconsult & IIMP
09:40 – 10:40
- Round Table: Long-term mining policy and consensus to achieve sustainable development- Javier Aguilar “Diagnosis of Peruvian mining”, Latin American Regional Coordinator of Extractive Industries, World Bank. Martin Walter, Sector Specialist (Mining) – Department of Infrastructure and Energy, IDB
11:30 a.m. to 1:15 p.m.
- Round Table: Conflict and its impacts on society: Rolando Luque, Deputy for the Prevention of Social Conflicts and Governance, Ombudsman’s Office. Paola Bustamante, Consultant in Management of Organizations, Negotiation and Public Policies, Videnza Consultores. Baltazar Lantarón, Regional Governor, Regional Government of Apurímac
17:00 – 17:50
- Mineral wealth of Peru: Henry Luna “Portfolio of mining projects in Peru and its prospects for 2030”, President, Geological, Mining and Metallurgical Institute – INGEMMET