Peru to insist on tax reform with new bills after legislative thumbs down, says minister

Peruvian Finance Minister Pedro Francke said on Friday that the government would insist on a tax reform that includes higher taxes for the mining sector, after Congress rejected much of the initial proposal earlier in the day.

“We will present the bills so they are discussed in the next legislature,” Francke wrote on Twitter.

The result in Congress, which allowed the government to carry out only a significantly watered down tax reform, was a blow to the four-month-old administration of leftist President Pedro Castillo.

His flagship plan is to hike taxes on mining companies in order to fund higher social spending. Peru is the world’s No. 2 copper producer.

Earlier this week, lawmakers had watered down the government’s proposal and removed any mention of a modification to the mining tax regime during committee discussions. The final text voted on by Congress did not mention mining.

“Unfortunately the current climate is not the best…and this government has given the wrong signal to the (mining) sector that is responsible for 60% of our exports,” said Carlos Anderson, a right-wing lawmaker, explaining why mining had been removed from the package.

Peru’s mining industry had also vigorously opposed the tax hike plan, arguing that it was already paying as much or more than in other countries with large mining industries and said it put in jeopardy a pipeline of new mining projects that would require $50 billion in investments.

“We will work with Congress in more detail to reach consensus on the subjects that were not approved,” Francke added on Twitter.

Congress’s decision to reject the mining tax hike occurred as one of Peru’s largest copper mines, MMG Ltd’s Las Bambas, is set to suspend production indefinitely starting on Saturday due to a road blockade by local residents who are demanding jobs and higher economic contributions from the company.

(By Marco Aquino and Marcelo Rochabrun; Editing by Paul Simao and Alistair Bell)