LIMA, April 20 (Reuters) - Peru's presidential front-runner
has proposed nationalizing mining and redrafting the Andean
country's Constitution, raising risks to mining investment in
the world's no. 2 copper producer that could put upward pressure
on prices of the red metal.
Mining industry insiders and analysts have expressed alarm
about Pedro Castillo, the surprise socialist favorite for the
June run-off who often sports a cowboy-style hat and who has
gained support in Peru's rural hinterlands.
Castillo has a strong lead over conservative Keiko Fujimori
in pre-election polls after surging from relative obscurity to
win the first round this month, when he rode on a horse to vote
and pledged to be a champion for the country's poor.
The leftist has said Peru needs to nationalize gold, silver,
uranium, copper and lithium to "rescue" its strategic resources
and redirect the mineral wealth away from rich mining companies
to help alleviate widespread poverty.
"Castillo is not moderating his positions at all and it
seems that he won't do so," said Roque Benavides, Chairman of
miner Buenaventura. Benavides said he was not ready to call any
candidate an "enemy" of the sector and that dialogue was key.
However, he said Castillo appeared more radical than former
Peruvian President Ollanta Humala, who after winning the 2011
election softened his anti-establishment rhetoric and shifted
away from leftists like Venezuelan socialist leader Hugo Chávez.
"It will be more difficult for (Castillo) to change."
Brokerage Jefferies said in a report that election
uncertainty raised risks for Peruvian mining and that Castillo
could usher in "mining nationalism". Under Fujimori, miners
could still see taxes and royalties rise.
"While the outcome of the upcoming runoff may not
significantly impact volumes from existing mines in the country
initially, the risk premium for investing in Peru is likely to
increase," it said.
"Higher risk means less investment, less supply over time,
and a higher copper price."
TIME FOR REFLECTION?
Peru accounts for some 11% of global copper production,
second to neighboring Chile. Peru's mining sector has taken a
big hit during the coronavirus pandemic, with a new wave of
cases hitting the country again in recent weeks.
Fujimori, daughter of ex-president Alberto Fujimori who is
imprisoned for human rights abuses, supports a free market
economic model though she is being investigated over allegations
she received bribes, charges she denies.
Victor Gobitz, president of the powerful Peruvian Institute
of Mining Engineers (IIMP) chamber, told Reuters that if the
sector wanted to grow then it needed "dialogue and consensus"
with the winning candidate.
Peru is also the world's second largest producer of silver
and zinc and the sixth of gold. It hosts global miners like
Freeport McMoRan, MMG Ltd group, Aluminum Corp
, Newmont Corp, Barrick Gold and
Southern Copper of Grupo México among others.
Gobitz, who is also president and CEO of the local Antamina
mine controlled by BHP and Glencore, said the
polarized current position was sparked by years of political
confrontation and the economic crisis due to the pandemic.
"We hope that soapbox speeches seeking votes soften a little
and that reflection comes," said Gobitz, speaking in his
capacity as IIMP representative.
Peru has some $56 billion of open mining investments, mostly
in copper. The country is no stranger to political instability
with five presidents in the last five years. Community protests
have also stalled mining production.
Benavides said he hoped Castillo's talk of a new
constitution softened into plans to improve the existing one.
"The only irreversible thing in life is death and surely the
1993 Constitution can be improved, but I find it idle to think
of a new Magna Carta," he said.
"If Mr. Castillo and Mrs. Fujimori want to talk with the
business associations representing the different industries,
that dialogue should get going now."
(Reporting by Marco Aquino; Editing by Adam Jourdan and David