Peru's Presidential Field Split over Mining Taxes
Source: Reuters, Caroline Stauffer and Teresa Cespedes (3/17/11)
"Candidates debate strategies for maximizing mining's economic benefits."
Front-runner and former President Alejandro Toledo says Peru should consider taxing windfall profits from surging global commodities prices to help finance anti-poverty programs. Leftist Ollanta Humala, who is in fourth place, also wants to raise taxes.
The country's association of mining companies criticized the candidates for making "populist promises." Miners say higher taxes would threaten some $42 billion in foreign investment planned over the next decade in a sector that has long been the engine of growth in Peru's economy, which expanded 9% last year.
The other three main candidates in the April 10 election—lawmaker Keiko Fujimori, former Lima Mayor Luis Castaneda, and former Prime Minister Pedro Pablo Kuczynski—have said changing tax rules would be a bad idea for Peru, which is a leading producer of gold, silver, copper, zinc and lead.
Toledo, who negotiated the U.S.-Peru free trade agreement during his 2001-2006 presidency, has said Peru's mining towns are not seeing the benefits of higher commodities prices.
"Obviously we need to take advantage of this price bonanza to get more resources for a state with many needs and a low tax collection rate compared to other countries in the region," said Jaime Quijandria, a former mining minister who is part of Toledo's economic team.
But Kuczynski, a former Wall Street banker who years ago was Peru's mining minister, said windfall profits are cyclical, making them unreliable as a source of revenue.
"Even less so if so-called windfall profits are supposed to finance everyday expenditures such as education and security. . .we just saw copper prices fall 10% in one day—where are the windfall profits there?," he said.