LIMA - Peru Finance Minister Luis Miguel Castilla said Monday that the government is advancing in talks with mining companies on how best to increase taxes without affecting the sector's competitiveness.
"It is an important topic that requires a quick resolution," Castilla said in an interview with Radio Programas.
President Ollanta Humala took office on July 28 with promises to raise taxes on mining companies, which have been posting strong profits, thanks to record metals prices.
Investors have expressed concern that the initiative could affect planned investments of $42.5 billion in the sector this decade.
Members of Humala's Gana Peru party began discussions with the National Mining, Oil and Energy Society, or SNMPE, before the new government took office, Castilla said. "We are now in a technical phase and defining the different formulas to be able to reach the objectives that we have as a country," he said.
The government plans to use resources from the new tax to finance public works in areas that don't receive a regional mining tax. Half the income tax paid by mining companies goes to the governments of the regions in which they operate.
Mining companies contribute millions of dollars as a result of the tax every year, although about 80% of the funds are distributed to only eight of Peru's 24 regions, Castilla said. "It's going to be a tax regime that maximizes the state's resources, but without compromising the future of important investment projects," he added.
In early July, SNMPE President Pedro Martinez said that the mining society was willing to talk with the incoming Humala government, but that he didn't believe a windfall tax would be feasible. Instead, he pointed to an existing voluntary contribution program as a good model.
On Friday, Southern Copper Corp.'s (SCCO, SCCO.VL) parent company, Grupo Mexico SAB (GMEXICO.MX), said it is confident the Peruvian government will "maintain and provide its international competitiveness within the worldwide mining industry."
He spoke hours after Finance Minister Luis Miguel Castilla said modernizing public companies was important and state oil and gas company PetroPeru could be opened to private investment.
Peru's state-owned energy companies do not have the market share or international importance that Brazilian energy giant Petrobras or Chile's miner Codelco enjoy, and most Peruvian companies were privatized in the 1990s.
"When you look at economies like Colombia, Chile or Brazil you see a totally different situation," said Herrera at a press conference. "What we're looking at is allowing state companies to have a greater involvement in the management of the state."
Companies that could be reformed or expanded, possibly with the introduction of private capital, include PetroPeru and ElectroPeru, the state electricity company.
If taxes are not paid properly, the government will be losing a lot of its revenue and may increase taxes to meet their expenses.
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