Cheap oil's effect on the Peruvian mining industry

We’ve extensively discussed the potentially disastrous effects that collapsing oil prices could have on the future of Colombia’s economy. However, predictions regarding oil’s fall on the Peruvian economy are much more mixed: clearly it will hurt the Peruvian oil sector, but how will it affect the rest of the economy? According to Cesar Peñaranda, Executiv Director of the Lima Chamber of Commerce’s (CCL) Institute of Economy and Entrepreneurial Development (IEDEP), cheap oil will, overall, have a positive impact on the Peruvian economy.

He said that the decrease in oil prices would benefit the Peruvian industrial, mining, and construction sectors, which together comprise 36 percent of Peruvian GDP. In addition, lower oil prices should also boost domestic consumption, as Peruvian consumers’ disposable income should be commensurately boosted by lower oil prices. Furthermore, because Peru imports approximately $6 billion worth of oil products and its derivatives, cheaper oil should also help reduce Peru’s trade deficit.

Peruvian Deputy Mining Minister Guillermo Shinno had more good news for the Peruvian mining sector, announcing that the Peruvian mining megaprojects Constancia and the Cerro Verde will start commercial production this year. He added that the Peruvian government would continue to work to facilitate the exploration process to guarantee that Peru’s mineral reserves are boosted by new discoveries. Energy and Mining Minister Eleodoro Mayorga noted that the value of the portfolio of mining projects in Peru has reached almost $62 billion.