Peru will increase deficit spending to boost the country's sputtering economy

This week, the Peruvian government announced a $1.6 billion package of new stimulus efforts to try to boost the country’s economy, after the country’s heady growth slowed to just 2.35% in 2014. Jaime Reusche, a senior analyst at Moody’s, was quoted by Reuters as saying, “The big question is going to be whether or not the private sector is going to respond to these measures.” Unfortunately, the Peruvian finance ministry predicts that private investment will rise by just 1.5%, well below its initial forecast of 6%.

Though private investment overall is expected to rise, the Peruvian ministry of finance and economics predicts that private sector investment in the mining sector will fall by 7% in 2015, to approximately $8 billion. Given the furor that has erupted both locally and nationally over the Tía María copper mining project, the Peruvian government should probably be happy that more investment dollars have not disappeared. That said, the investment dollars accounted for in the 2015 totals are from projects that have been in development for a long time. The concern for Peruvian officials will be to maintain the pipeline of future projects.

In other mining related news, Los Andes published an opinion piece by Peruvian anthropologist Carlos Herz Sáenz defending the protestors who have frequently been labeled as “anti-mining” and “anti-investment” by the Peruvian press. Sáenz explained that these protestors are simply asking that the fundamental human rights of the Peruvians living in these communities where the mining projects are developed, be respected. He argues that all they want is basic education and health infrastructure, to just be included in the “system” that they are supposedly protesting against.

Colombia's oil revenue will fall dramatically in 2016

Federsarrollo director Leonardo Villar, one of the most important economists in Colombia, told Colombian daily El Espectador that government revenues would be severely affected in 2016 by the fall in oil prices. According to Villar, the Colombian government will receive $20 trillion pesos less than originally expected due to lower oil production and prices.

The Fedesarrollo director warned that the drop in revenue will have a real impact on governmental spending, saying, “This has huge implications for Government spending in all of its activities, for example security, social policy, education, and others. In addition, it requires that some of the adjustment come from higher taxes during the next few years.” The El Espectador piece went on to quote a different expert as casting doubt on the ability of the other sectors of the Colombian economy to pick up the slack.

In other oil-related news, María Angélica Jara, the spokesperson for Ecopetrol’s shareholder relations office, visited the Colombian town of Barrancabermeja to explain the stock’s poor performance over the last year. She said that the collapse in the company’s stock price was due to the similar collapse in oil prices, and emphasized that Ecopetrol is still a very solid company. Nonetheless, the market is dynamic and variable, and there will always be a strong degree of risk.

There was an update in the controversy over former Secretary of State Hillary Clinton’s change in her stance on the U.S.-Colombia free trade agreement. Former Colombian Ambassador to the U.S. and Colombian Defense Minister Gabriel Silva defended Hillary Clinton to CNN, saying, “I saw no evidence that any part of the treaty was impacted by any contribution made to the Clinton Foundation or any other group in the United States.”

Peruvian government's response to Tía María Protests goes from bad to worse

A huge scandal has erupted in Peru over the Peruvian police force’s response to the Tía María protest. It started when Peruvian daily Diario Correo published a photo of a Tía María protestor brandishing a weapon against a Peruvian police officer, accompanied by a story with the headline “this is how the anti-miners attacked.” However, a video emerged online showing the article to be a fake:

“A video shows four police officers holding Coasaca, with a fifth officer seen running towards him from approximately 30 meters and brandishing a sharp handheld weapon. This officer proceeds to place the weapon in the hand of Coasaca. Coasaca drops the weapon but the officer picks it up and presses it into his hand, forcing to hold it. At this point, the officer turns around and lifts Coasaca’s hand with the weapon for a ready photographer to take pictures of the farce. The faces of all of the officers are covered and the name badge of the officer placing the weapon in Coasaca’s hand depicts the fake name ‘Filosofexxx’.”

Understandably, Peru is in an uproar over this absurd display of police incompetence, and Peruvian Prime Minister Pedro Cateriano even publicly stated that the police officers involved in the incident should be punished and demoted. Ultimately, this kind of incident hurts all parties involved, from the Peruvian government, to the mining company, to the Peruvian people. Tía María is being used as a litmus test for the government’s ability to support mining projects, and so far, events have gone very, very poorly.

In other mining-related news, workers for the mining company Coopsol Minería y Petróleo started a strike and marched to the city of Ica to protest for improved working conditions. They want a bonus, cleaning tools, and housing for the workers.

Colombia turns its attention to the country's mining sector

Now that the Colombian Mining Association’s (ACM) annual congress has come to a close, the country’s leading publications are releasing a series of mining-related articles prompted by discussions and revelations during the congress.

Colombian business journal La Republica published an infographic summarizing the results of an ACM study on the country’s mining sector. The accompanying article explained that the biggest challenge currently facing the mining industry in Colombia is the Colombian government’s lack of support to the industry, and the high taxes and tariffs that are holding the sector back. Ex-mining minister Amylkar Acosta told Portafolio, “Although Colombia is not a mining country, its geological potential would allow it to be one.” High taxes, though, have driven mining investment elsewhere, with 32% of companies planning on reducing their operations in the country.

Colombian President Juan Manuel Santos announced during the Congress that “knowing the low prices during recent years has forced you to put on the brakes, I know that the sector today requires support to adjust and keep its dynamism. As a result, I have asked Mining minister Tomás González and his team to do what is necessary to stimulate the [mining] industry.”

El Colombiano explained that really, though, it is less about prices and more about just general support from the Colombian Executive. President Santos words, then, are very welcome for the country’s beleaguered mining industry: the sector is receiving the support it wants and will likely receive some tax relief.

Meanwhile, Colombian Environment Minister Gabriel Vallejo López defended the decision that his ministry made in delimiting the borders of the Santurbán paramo. He argued that these borders protect the paramo while also allowing for responsible mining outside of it, in a way that will not jeopardize the water security of the areas that depend on the paramo.

Amid social conflicts, mining op-eds in vogue

The social conflict in southern Peru over the proposed Tía María mining project continues. Last week, protests erupted in violence, leading the Peruvian government to supposedly consider asking Southern Copper to make changes to its proposal for the $1.4 billion mining project. Energy and Mines minister Rosa Maria Ortiz told Reuters, “If the government feels that the changes are necessary, it may ask the company to modify the project's environmental impact study, depending on the need.” This comes in light of the fact that the government approved Southern Copper’s environmental impact study in August of last year.

Over the weekend, Peruvian business journal El Comercio ran a series of op-eds touching on the subject of mining in Peru. Jurgen Schmidt, an economics professor at the University of the Pacific, writes about the environmental downside of the mining industry. He explains that two-thirds of the socio-environmental conflicts in the country are related to the mining industry, and notes that many of these infractions are not from artisanal miners but from big players in the mining industry.

Mining consultant Veljko Brcic writes about how formal mining in Peru is still in high demand even though the sector has been in decline for the last three years and does not show signs of a quick recovery. He explains that one of the real bright spots in the sector has been mineral treatment or “tolling” plants. Peru’s focus on formalizing the mining sector has fueled the growth of mineral treatment service providers, as they process the ore from the artisanal miners. Brcic argues that incentivizing and simplifying the procedures for setting up tolling plants will help combat informal mining.

Ian Vásquez, from the Cato Institute, outlines a proposal for disarming anti-mining sentiment in Peru. He notes that the cost of the social conflicts over mining projects is very high, costing Peru 1.5% of GDP over the next ten years. Vásquez argues that this situation will not change unless the underlying problem is addressed: a lack of clarity over basic property rights. The local communities where resources are discovered and exploited receive just a very, very small part of the resulting wealth, and consequently are resentful of the companies and the government. He believes that the government should grant property owners the mineral rights to their lands, and that this would resolve the social conlicts in Peru.