Mining to help drive 4.8% Peru GDP growth - cenbank

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Friday, January 23, 2015

Peru's mining industry will help economic growth rebound to 4.8% this year, central bank president Julio Velarde said.

Copper and zinc are forecast to be key performers.

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Hopes are also high for the fishing, construction and manufacturing industries.

GDP expanded just 2.4% last year after mining contracted 2.2% and manufacturing led by steel and metals refining shrank 2.9%, according to the bank. Export earnings, 60% of which come from minerals, fell 2.2% in 2014.

Mining production will grow 6.3% this year, Velarde said in a state news agency Andina article. According to a new inflation report, copper production is expected to rise to 1.43Mt this year from 1.29Mt in 2014, while zinc output is estimated to hit 1.41Mt, up from 1.31Mt. Gold output is expected to fall to 4.27Moz from 4.51Moz.

"Many projects are going to start producing," Velarde told reporters Friday at the central bank. "We're going to double copper output over the next three years."

Peru is counting on US$62bn in mining investment projects including China Minmetals' US$7bn Las Bambas mine and Freeport-McMoRan Copper & Gold's US$4.6bn Cerro Verde expansion, to double copper output to 2.8Mt by 2017.

Peru-based mining companies have been closing operations and slashing costs since minerals prices started dropping in 2012, Velarde said. But Peruvian copper producers' costs are half those of their Chilean counterparts, he added.

"China continues to generate demand for copper. The problem is that supply is growing faster," Velarde said. "If prices fall further, other countries are going to close operations because they can't cover costs, but not Peru."

Both the IMF and ratings agency Moody's this week forecast lower growth in Peru for 2015. The IMF expects 4% growth and Moody's 4.4%

"Sluggish growth is likely to carry into the first quarter of 2015, when output should expand by about 3% year-on-year, but we expect the recovery to gather momentum thereafter, underpinned by a reversal of supply-side shocks affecting the mining and manufacturing sectors," Moody's analyst Jaime Reusche said in a report.