Extractive Industries in the Economic Reactivation Strategy

By: Juan Luis Dammert, Director for Latin America – Natural Resource Governance Institute (NRGI)

Platform for a Sustainable Reactivation (PLARS)

The economic reactivation is one of the main objectives of the Government, as expected after a brutal fall in productive activity during the pandemic. The current Administration expects the country to grow more than 10.5% in 2021 and, on average, 5.5% in the 2021-2025 period. Extractive industries are expected to play a central role in the economic reactivation of the country.

What is less clear, however, is what is the Government’s strategic vision for extractive industries in the context of the global energy transition, which creates opportunities for mining – for the generation of clean energy – and challenges for hydrocarbons – due to the need to discontinue fossil fuels.

The need to increase the use of clean energy, in a context of climate change, has caused a growing demand for minerals such as lithium and copper, which have the potential to be used in renewable energy technologies, such as solar and wind. In addition to simply taking advantage of the increased demand, Peru should bet on the strengthening of the socio-environmental agenda for mining, while the “green” origin of this impulse puts more emphasis on the considerations of sustainability, respect for rights and economic justice that should govern the extraction of minerals. This is increasingly visible among multilateral organizations, financial agents and final consumers.

In the case of hydrocarbons, despite the high prices at this juncture, Peru should prepare for the decline in oil extraction and the decarbonization of energy for transportation. In the case of Camisea gas, the announced gas massification presents a paradox. Gas is a fossil fuel, the exploitation and consumption of which must be discontinued to reduce greenhouse gas emissions, which are leading the planet into a potentially catastrophic climate crisis. Investments in infrastructure for the massification of gas should be aimed at industrial domestic consumption in the south of the country, since we already have the resource, and access to cheap energy increases competitiveness. But it would be a mistake to look for more gas so as not to compromise the export commitments, or decide to extract it from places like Candamo or the Kugapakori Territorial Reserve, Nahua, Nanti and others. In this sense, the Government should clarify what it refers to when it declares intentions to “evaluate the expansion of reserves.”

It is important to address the redistributive agenda around extractive industries. Higher collection will, in theory, increase resources to address challenges in health, education and social development. It could also serve to seriously promote an agenda of diversification of the productive matrix. However, the repeated commitment to extractive industries must also be considered as the key to the global energy transition. Not only for climatic considerations, but also as an economic strategy to tune in with the new trends and demands of the global economy, which has a growing emphasis on the decarbonization agenda.

[Publirreportaje]