Mining has long been the primary driver of Peru's economy, representing nearly 60% of export revenue and 14% of GDP on average over the last 10 years. More than two decades of neoliberal, mining-friendly policies combined with the commodity price boom of the 2000s saw mining sector investment skyrocket from US$396mn in 2004 to a peak of US$9.72bn in 2013.
Production has grown disproportionately, with copper output rising just 32% since 2006 and gold actually falling 31%. While the fall in gold production is mainly due to a government crackdown on illegal mining operations, the figures do not seem to do justice to the large sums invested.
In 2014, Peru's economic growth fell to 2.35%, a five-year low, in part because metals prices have refused to rebound from their 2013 falls and new mining projects have not come online as quickly as planned. Total mining sector investment fell in 2014 for the first time since 2007. While investment last year remained astronomically higher than that of 2007 - and indeed a hair higher than 2012 - the decline reflects Peruvian miners' struggle against relentlessly unfavorable market conditions and continued difficulty around social conflicts and bureaucratic permitting delays.
National confederation of private industry associations Confiep has said that at least US$22bn of investment has been held up due to "permitting delays and bureaucratic obstacles," mostly attributable to mining projects.
This has led to a series of government measures to stimulate mining investment, most notably new environmental rules and a simplified permitting process for mining, as well as generalized economic stimulus measures including tax cuts that industry leaders say will make the mining sector more competitive.
While GDP growth is expected to speed up in 2015, forecasts are being revised downward. The central bank has reduced its projection from 5.5% earlier this year to 4.2%, while the International Monetary Fund (IMF) is now expecting to see Peru grow 3.8% this year, contrasting its 5.1% forecast made six months ago.
But while slow permitting and bad market conditions have delayed project development, so have community conflicts, and to a large degree. While authorities are now proactively addressing the bureaucracy side and no one has much control over the market, social issues are far more complex.
Many claim the state should be much more involved in getting communities to accept mining, and that historical lack of adequate basic services such as water, electricity, healthcare and education in many rural communities combined with inaction during the presidency of Ollanta Humala has seen opposition to mining grow and the increased presence of radical or independent political groups and anti-mining non-governmental organizations (NGOs).
There are also more pragmatic NGOs working to educate communities and local leaders on inclusive development and the effective use of mining social funds, and indeed mining companies have built countless schools, roads, water systems and other infrastructure in their communities of influence over the years. But industry leaders such as national mining and energy industry association SNMPE president Carlos Gálvez say the state ought to act as witness to agreements between companies and communities and support companies in their local negotiations.
Peru's total portfolio of major mining investments expected over the next decade stands at a massive US$64bn, not including perhaps hundreds of earlier stage exploration projects. Most of the portfolio, however, is comprised of unapproved projects. SNMPE estimates the realistic value of total mining projects to be executed over the next five years is around US$20bn.
The industry's concern is that, because of the permitting delays, social conflicts, poor metals prices and the expected effects of the pre-election period over the next year, mining sector investment will continue to decline through 2018, when it is likely that no major projects will be under construction, according Gálvez.
In any case, Peru has no lack of mineral potential. The country is among the world's 10 biggest hosts of silver, copper, zinc and gold reserves, according to USGS, and continues to command a significant portion of declining global exploration spending. Its US$64bn longer-term project pipeline will provide ample opportunity for investment, provided the right conditions are in place. But right now, it would appear that they are not.
"The mineral potential exists, yes. The issue is that the institutional and social conditions and political disputes make any project unviable today," says Miguel Santillana, an economist and lead researcher at think tank Instituto del Perú.