Tis rigor and not law

Peru mining political risk is rising due to the election run-off

This piece is from the IKN Weekly subscription service IKN365, out last Sunday evening. It’s a tight race between Keiko and PPK and both sides are scrambling for every vote they can get, not a scenario that makes for business stability in Peru. What I do know is that due to the sudden appearance of Hernando de Soto on the scene, there re a lot of mining executives in Peru who are getting a quiet and controlled attack of nerves.

Peru: Keiko
adds Hernando de Soto to her team

With the voter intention polls
indicating a tight race between Keiko Fujimori and Pedro Pablo Kuczynski, the
Peru election campaign is now about finding minor issues and attracting
specific sub-sets of voters. Keiko Fujimori is going full populist as well,
with the last week seeing her announce that she’d scrap the current mining
formalization plan and also saying she opposes “Civil Union” (i.e. not marriage
but legal rights of partnership) for homosexual couples. On that one she’s
simply running the numbers pretty cynically, as she spoke publicly in favour of
Civil Union as recently as August 2015.

And as this paragraph points out,
Keiko’s penchant for populist vote-winning policies may be about to land on the
mining industry as well. Yesterday Saturday brought confirmation (8) that
economist Hernando de Soto was joining the Keiko campaign. As he’s one of the
very few Peruvian figures known on the world stage, it’s a significant fillip
for her campaign and adds potential prestige to her eventual government. It’s
also interesting because De Soto was a strong supporter of her disgraced father
when he was President in the 1990’s. On the subject of mining, it was De Soto
last year who proposed (9) that the “Ollachea Model” of giving at least 5% of
any mining project to local populations (in the way Minera IRL has done at
Ollachea) should be adopted nationwide. As Keiko’s party has also flirted with
that idea, it could become a formal policy for the industry and if so, watch
out. It’s the type of thing that sounds fine on paper but in practice there are
a ton of traps waiting for any similar policy and it would only work on some
very specific projects, such as a geographically controlled (no geologically,
we’re talking maps) Ollachea. Imagine for example what would happen when a line
is drawn around Antamina/Las Bambas/Toquepala and all those villages inside the
deemed “area affected” (be it 10km or 20km or whatever km) get presented with
5% of billions of dollars’ worth of production, while those outside the
imaginary line get nothing? Not to mention the backlash we’d get from the
mining companies, their shareholders and FDI sponsorship people on political
risk issues when producing and stable operations are suddenly forced to hand
over 5% of their assets and cash flow by law. How “Miner Friendly” would Peru
look all of a sudden?

Finally, the latest voter intention
poll came out today Sunday (10) and it’s at the bottom of our lengthening list

  • IPSOS April: Keiko
    40%, PPK 44%
  • CPI April: Keiko
    43.6%, PPK 41.5%
  • Datum April: Keiko
    40.4%, PPK 41.1%
  • IPSOS April: Keiko
    39%, PPK 43%
  • CPI May 1st: Keiko 42.3%, PPK 40.1%
  • IPSOS May 8th:
    Keiko 42%, PPK 39%

We need to take pollsters in Peru
with a pinch of salt because they have their own agendas, but this new IPSOS
poll is a departure from the other results because it’s the first poll that’s
changed position. IPSOS was giving PPK a clear lead last week but has swung to

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