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Peru only has 15 years of mining boom left

(www.peruthisweek.com)
Updated: 2014-05-22 14:49
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    Peru won't always have the growth potential that it shows today. We should be concerned that in 15 years, the demographic dividend- that is, the number of people of working age compared with the dependent population- will begin to shrink, which means that there are a number of key reforms in the mining industry that cannot be put off.
   
    "Peru, demographically, has its best years ahead of it. But it's only 15 years, so we can't lose even a single day," said economist Pedro Pablo Kuczynski at the Gold and Silver Symposium.
   
    Luis Carranza, the former Minister of Economics, has said that the biggest contribution of the mining industry- that each job it generates directly in turn generates 9 jobs indirectly- and the countdown on the demographic dividend demand that reforms be made in order to compete for investment in the sector as well as to disentangle the mess of regulations that exists now.
   
    Carranza said that the industry-wide policies that generate business opportunities in Peru have been abandoned, which has caused the country to fall in competitivity rankings in the past few years. "We've gone from 36 to 43 in competitivity, losing the leadership position that we had in Latin America," said the former minister.
   
    These days, mining companies wait four, five, or six years to get their environmental permits in order to realize their projects, when the appropriate waiting time should be between one and two years.
   
    Carranza added that mining reforms have to begin now and not wait until the next presidential administration, as the Peruvian economy currently has sufficient size and financial capacity to move forward gradually with reforms and to compensate sectors that are damaged [by the reforms].
   
    Currently, Peru's Gross Domestic Product reaches US$207 billion, and the working age population is 8.3 million- 73% more than 30 years ago- and that figure will only grow by 3% in the next 12 years, according to Peru's National Institute for Statistics and Information.
   
    Diversification plan
   
    In addition, Carranza has said that the government's productive diversification plan must not "start from zero," rather, that it should create a strategy of manufacturing and services growth in mining in order to take large steps forward. "We can't leave our minerals buried for 200 more years. We have to take advantage of these resources so that in 40 years, Peru is a first world country."
   
    Diversified model
   
    The former Ministers of Economy Pedro Pablo Kuczynski and Luis Carranza agreed that the Peruvian economy is no longer just a raw materials export economy, due to the diversification and dynamism seen in the exportation of non-mineral products, like agroindustrial products, textiles, and mechanical metal products.
   
    Economy without mining
   
    Without mining investment, the Peruvian economy would only grow between 3% and 4% each year, Carranza estimated.
   
    Exporters
   
    In 2000, there were only 18 companies that exported more than US$50 million and they were all mining companies. In 2013, there were 99 companies that surpassed the US$50 million mark, and half of those were not mining companies.
   
    Obstacle
   
    The principal obstacle that takes competitivity away from the mining industry is the "permitology," that is, the long waits for approvals of environmental studies, which can take between four and six years, according to McKinsey & Co.
 

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