Today it is pretty easy to start a social conflict, and the response is very slow, which causes the problem to escalate, warned the president of the National Society of Mining, Petroleum and Energy of Peru (SNMPE), Raul Jacob.
According to information from the Ombudsman’s Office, as of August, there are 209 registered social conflicts, of which 89 are mining. During the year, stoppages such as Las Bambas and Cuajone stand out.
Jacob said the loss of mining production due to social conflicts, based on an estimate as of September 30, has been US$790 million, along with an impact of PEN 740 million (US$186 million) in taxes and mining royalties not collected.
“Normally, there were no conflicts in mining operations, but rather in the projects (before entering into operation). Since this administration, tolerance to these conflicts has increased.
“It is a situation that cannot be sustained because the country’s resources are not being used.
“The rule of law has to be respected because, for example, with Quellaveco (about the dispute over water rights), we see that eight years of work on permits is being set aside,” he said in the framework of Moody’s Inside LatAm Peru 2022.
In this regard, BBVA Research lowered its copper production projection for the following year due to social conflicts in the sector in its October Peru Situation Report.
“Social conflicts have been increasing worryingly and will affect the normal deployment of production activities. The entry into operation of Quellaveco would mitigate the scenario,” he said.
Raúl Jacob pointed out that, in copper production (Peru’s main export metal), actors in the sector, such as Southern Copper, have low costs compared to a current price of US$3.46 per pound, even though an environment with guarantees is needed to start the projects.
“Despite all the concerns, mining companies have solid balance sheets. There are projects, but many companies are waiting for a more favorable environment to enter an investment cycle. For now, it is not seen as feasible, but the opportunity is there,” he emphasized.
ANOTHER GREAT CHALLENGE FOR THE SECTOR
The SNMPE representative emphasized the current challenging situation of the leading copper demanders worldwide, which means a challenge for the mining sector due to the impact on commodity prices.
“In China, a 2.5% growth feels like a recession. We have Europe in recession and the United States with a significant rate hike cycle to contain demand.
“We hope that the recession will not be strong, and when it passes, we should see a return of better (copper) prices, especially if it coincides with a depreciation of the dollar, which has been appreciating a lot,” he said.
Jacob added that a mitigating factor for these forecasts of lower demand is the low inventories of the metal, especially considering that copper consumption has continued to grow worldwide.
With information from CRU