Collapse in mining revenue for regions sparks protest

21 August 2013

Thousands of people protested in Arequipa in early August as public budgets were hit by falling mining income.

Regional governments’ income from mining taxes has fallen by a quarter, US$43 million, since 2012. The revenue stream provides for up to 80 per cent of their expenditure.

Arequipa’s canon was a little over half the projected amount, while Ayacucho and Cusco have experienced falls of 80 and 90 per cent respectively . Authorities in Cusco have also warned of protests if the central government does not act to make up the shortfall. The finance ministry (MEF) has promised emergency funds to cover local investment projects that have already begun, but other plans may have to be put on hold. Talks have begun between central and regional governments.

Analysts said that the fall in income was largely due to weak international demand and lower mineral prices, as well as variations in production as some Peruvian mines have closed down. But the Humala administration’s special mining tax has reduced companies’ other liabilities, affecting the canon. Finance Minister Luis Miguel Castilla has said the new tax accounts for no more than a tenth of the reduction in flows to regional governments.

Environmental NGO Cooperacción has called for a “transparent discussion” on how tax breaks and companies’ efforts to reduce their liabilities are reducing public resources.

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