Richard Lapper and Hal Weitzman in Lima wrote a Financial Times article Peru’s Humala vows heavy mining taxes (subscription required). As the title suggests, Peru might extract higher taxes from mining companies.
International mining companies would face aggressive tax hikes under a government run by Ollanta Humala, the radical nationalist former officer who is the frontrunner in Peru’s presidential race.
The increases would be used to fund a large expansion in public spending, with an emphasis on building roads, bridges and other infrastructure, according to senior economic advisers.
“The extraordinary profits mining [companies] are currently enjoying must be taxed,” said Félix Jiménez, Mr Humala’s top economic aide. “The situation is like in 1973 when oil prices spiked.”
If Peru hikes taxes against mining companies, mining companies might be more reluctant to operate in Peru, fearing that the fiscal regime is fluid and uncertain. Should mining companies avoid or reduce their planned investments in Peru, prices for gold, zinc, copper, silver, lead, molybdenum, and some other metals might increase. In the article, Newmont Mining, BHP Billiton, Southern Copper and Barrick were identified has having significant operations in Peru.
As I have mentioned in other articles, I think most investors in North America do not pay much attention to developments in South America. However, South America is an important contributor to supplying commodities, which are in great demand. Thus, we need to pay attention to their developments.
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