Mining Investments in Peru: Regulatory challenges to achieve economic revival

Rubio Leguía Normand | View firm profile

Article written by Diego Grisolle, Partner for our Mining Practice Area.

Natural resources, especially minerals, are an important opportunity for national and foreign investments, the generation of direct and indirect jobs, the collection of taxes, as well as for the promotion of growth poles in regions where the basic needs of the population are not met by the Government, or are insufficient.

Attracting investments to develop mining activities requires, in addition to having an important geology – a criterion widely reached in our country – that the decisions of the authorities, at all levels of government, generate predictability and legal security. The latter is of utmost importance today given the tendency of the companies to make exploration budgets by region, and not by country.  A clear regulatory framework and efficient procedures that guarantee a prompt development of mining projects could make the difference between capital injection in our country instead of being received by another country in South America. In other words, the bureaucratic delay in a preliminary and uncertain stage such as exploration, affects us and reduces our competitiveness.

Historically, the mining industry in Peru has been, and still is, one of the most regulated economic activities due to the protection of the environment and its relationship with the communities that live within its influence area; however, its over-regulation  has  consequences such as the delay in executing important  mining projects for the economy of our country; but also its indefinite paralysis; a situation that can discourage private investment, especially in new mining projects. Added to this we have the impact that the COVID-19 has produced at a global level and the new challenges that the mining sector in Peru faces with the current regulation.

However, recent modifications to important regulations related to mining activities highlight the government’s efforts to overcome the current administrative and licensing obstacles and to introduce a brand new scenario in which investments can be developed within the framework of predictability and legal security. This is the case of the Environmental Regulations for Mining Exploration and the new Regulations for Mining Procedures.

As far as the Regulation on Environmental Protection for Mining Exploration Activities is concerned, the applied modifications have foreseen the execution of certain actions without the need of having an environmental management instrument; the approval and modification through positive administrative silence of the Environmental Technical Report (Ficha Técnica Ambiental-FTA) when dealing with projects of up to 20 platforms and with characteristics and/or location that generate low impact; and, the determination that the analysis and enforceability of the requirements of the regulation will be evaluated according to the nature of the projects.

As for the Procedures Regulations for Mining Activities, the approved changes allow to unify and shorten the terms of the mining administrative procedures to be processed to obtain various authorizations in the sector, which were scattered; and to simplify them, in order to promote investments and generate a greater predictability for the mining companies through the application of positive administrative silence in several of the existing procedures (accumulation of mining concessions, fractioning and division, waiver of areas, authorization of operation of benefit concession and its modification; among others); the presentation of Technical Mining Reports that allow the continuity of the projects; and the automatic approval subject to later inspection of some changes or modifications that require immediate implementation and imply, at the same time, a null and/or minor impact.

We consider that the important modifications mentioned above, are clear signs that allow us to have the conviction that the over regulation in the mining activity will be surpassed quickly and we will be able to attract investments that will encourage the recovery of the exploration, as well as the impulse of expansion projects, activities that will allow a fast growth and recovery of our economy.

Thus, the State should continue to promote the sector, taking into account some additional modifications such as the systematization of administrative procedures that can be carried out virtually, establish automatic approval assumptions for mining explorations – as in the case of the Environmental Technical Report-, speed up the mechanisms of citizen participation in cases of prior consultation, carry out the prior consultation only when the transition from exploration to exploitation occurs and not requiring it for modifications of ongoing mining operations, unless these include new areas to be exploited and to carry it out only with respect to the indigenous peoples who are in the new areas and not in the total area of the operation; among others.

The message is clear: The way to face the economic crisis and overcome the negative impact of the government’s measures after the declaration of the health emergency is to encourage private investment by establishing a legal framework based on real measures that simplify existing bureaucratic procedures. We clarify that this should not mean the issuance of deregulatory rules to the detriment of environmental standards or collective rights of communities, under the pretext of boosting investment in the country, as the latter could lead to further opening the gap of mistrust between civil society and private companies and the state, one of the main generators of social conflict in the country, being essential for this not to happen that investors work hard to get approval from the social environment where mining projects are carried out.

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