Peru
News

Miners study royalty details

Bnamericas Published: Thursday, June 10, 2004
Peru's large-scale miners are jointly studying the royalty recently approved by the country's congress, with the aim of presenting specific concerns to the government, a lawyer involved in the process told BNamericas. "There are various problems which have been discussed internally and the idea is to communicate these to Peru's executive power," said Luis Carlos Rodrigo of law firm Rodrigo, Elías and Medran. Peru's congress overwhelmingly passed on June 3 a sliding-scale royalty on the value of concentrates or equivalent based on international market prices. President Alejandro Toledo has 15 days to sign the law or return it to congress with observations. The royalty was defined as an "economic consideration" for the extraction of a natural resource, as opposed to a "tax." Among the most important issues, according to Rodrigo, is that if the law defines the royalty as an "economic consideration," it would only cover future mining concessions which are authorized and not current operations. "The general legal position is that the state can't add "economic considerations" to those already established for mining concessions which have been authorized," said Rodrigo. The lawyer argued that if the state wanted to create more charges for current mining operations, it would have to be done in the form of a tax, a measure that would raise different issues. Secondly, Rodrigo said lawmakers needed to clarify and correct what was meant by the "value of a concentrate or equivalent." Prices quoted on international markets would not necessarily reflect the real value of concentrates to individual companies and the law needed to be clearer on how metallic concentrate by-products would be considered, he said. Rodrigo also said that Peru's framework mining law, which establishes "economic considerations" for exploration and mining, would need to be modified to take the new rule into account. LEGISLATIVE CONSIDERATIONS Peru's mining and energy minister (MEM) Jaime Quijandría and economy and finance minister (MEF) Pedro Pablo Kuczynski have both openly opposed the initiative, arguing that it will hit the country's competitiveness and growth prospects. It seems clear that the government will make observations to congress on the bill, with Kuczynski saying on local radio that the executive power would try to speak with congress to reduce some of the law's "negative impacts." Alejandro Oré, the president of the congressional mining and energy commission and one of the main proponents of the royalty, has said he is open to discussion on the law's details, but not to its essence. At the end of the day, if Toledo does not sign the bill or make observations, or if congress disagrees with the observations, the congressional president has the right to enact the law if put to the vote again. Within 60 days of the law coming into force, the MEM and the MEF must introduce supreme decree regulations to implement the statute, the current text stipulates.

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