viernes, 31 de marzo de 2023

United States efforts to decouple from China and implications for Peru.

 United States is implementing a series of measures to try to cut off its dependence from China in certain areas, or to deny China access to certain technologies. In this sense, US is enlisting the help of some of its allies, as seen in the case of its effort to cut the flow of advanced semiconductors to China, as in the formation of the Chips 4 Alliance. Japan and Taiwan seem to be already on board in this idea. Netherlands, not a member of that alliance, is also participating. Still South Korea has not officially joined the Alliance.

What about Peru? Can Peru join in the effort to isolate China as US is planning to do? What, if any, can Peru do in that regard?

In this article a look at that issue is given. First, a brief review of Peru relations with China and US is given; second, in which areas could Peru cooperate with US effort is analyzed; and lastly, it is seen if really Peru can join that effort.

1.     Peru relations with China and United States

China became, from the beginning of last decade, the biggest trade partner of Peru. In 2022 Peru exports of goods to China were 32.9% of its total exports, while to US was only 13.6%. Imports of Peru from both China and US were around the same proportion, 25% of the total for each one. Then, Peru is dependent on the Chinese market for its exports, mainly of copper, which account for 30.5% of Peru´s total exports, and China is the destination for 73.6% of Peru´s copper exports.

Peru has Free Trade Agreements with both US and China. With the first from 2009 and with China from 2010.

Regarding investment, at the end of 2021 there was a stock of 117.8 billion dollars of Foreign Direct Investment, FDI, in Peru, of which around 26% was from China[1]. The amount of FDI from US in Peru, accordingly to US data at the end of 2019 was a stock of 7.5 billion dollars.[2] Probably US investment is bigger than that amount, but not as big as of China. According to Peru data, which is not reliable because it does not record all FDI in the country, at the end of 2022 there was a stock of 30.19 billion dollars of FDI, of which from US was 10.7% of the total, and from China 3.7% of the total[3]. Anyway, in the last years there has been no new US investment in Peru, but China continues increasing its investment in the country.

Regarding exchange of students and people, for many Peruvians US is still the desired destination for study. According to US data, by July 2022, there were more than 3,500 Peruvian students in US and almost 4,000 US students in Peru[4]. Data for China is not available but probably the number of Peruvian students in China, and of Chinese students in Peru is quite low, though in the last years it is increasing the number of Peruvians students going to China, because, among other reasons, the Chinese government is offering many scholarships to Peruvian students.

Regarding economic cooperation, specifically bilateral assistance, US has been in the last decade the second largest contributor to Peru. According to a report, from 2011 to 2019 Peru received 4.4 billion dollars in bilateral assistance from the DAC of OECD countries, and from that amount 24.5% came from US, being the second largest donor to Peru, after Germany which contributed with around 28% of the total, and in third place was Japan with around 14%.[5] For bilateral assistance received from China there is no available data, but probably is not meaningful.

For Peru, China is becoming more important in the economic aspect, but still US is important for Peru in the political and military aspect. US has provided armaments to Peru armed forces, and also Russia, but China not. And Peru is in the America continent, where US is the most important country for many Latin America ones, and certainly will remain that way in the foreseeable future.

 

II.  In which areas can Peru cooperate with US?

US competition with China happens in several areas. Regarding Peru possible involvement in that issue, perhaps it could in the following ones:

1.     Access to valuable raw materials, like lithium: Lithium is considered a strategic material needed for industries like batteries, for electric vehicles. This material is not abundant or easily to exploit, and in fact a few countries hold most of the mineral that could easily be exploited. Some countries in South America are well endowed with lithium. The so-called lithium triangle, along the borders of Bolivia, Argentina, and Chile, is said to hold around 60% of the world reserves. But in fact, Peru also has lithium around that triangle[6].

Peru has lithium and it is said that Chinese companies could be interested, as they are present now in those south American countries[7]. US criticize China involvement in the exploitation of theses resource, in particular, in the lithium triangle[8]. 

But the perspectives for the exploitation of lithium in Peru is not good now, among other reasons, because most of the mineral is situated in Puno, a region that is home to many social protests, where local communities have opposed other mining projects. Also, Peru government has not developed any framework to exploit that resource yet[9]. And there is only one company interested in the exploitation of this product. American Lithium, a company from Canada, is the owner of a lithium and uranium deposit in the Puno region[10].

2.     Peru adoption of the 5G technology

5G technology will be adopted by all countries. But still there is no data set for that in Peru[11]. It is known that Chinese companies, like Huawei, are the leaders in this field. In Peru Huawei is establishing itself as a leader in mobile technology and has cooperation agreement for example with San Marcos National University[12] and other public and private universities[13] to foster human capital in those areas.  

It is well known that US is pressuring some countries not to adopt 5G technology from China. It has done it in Europe, in Asia, and is doing in Latin America. For example, it is said that US pressed Ecuador not to adopt Chinese technology for its 5G network in exchange for extending a loan in January 2021[14]. Also, Chile government in 2020 decided to adopt a Japanese proposal for building an undersea fiber-optical cable, instead of a Chinese proposal that would have directly linked Chile with China, because of US pressure[15]. What will happen when Peru decides to adopt 5G technology?

III. Can Peru join US efforts to isolate China?

As has been seen, Peru has important economic links with China. China is its biggest trade partner, and around one third of Peru goods are exported to that country. Also, China is already the main investor in the country.

In 2019, when Mike Pompeo, then US secretary of State, visited Peru, he told the government that Peru must be very careful when taking a decision to implement 5G technology. He said that Huawei is an entity linked to the Chinese government and Peru data could/would go directly to China.[16]

Many considerations will have to be taken when adopting 5G technology from China´s Huawei. One of the concerns is for example about how access to Huawei technology will be sustainable in the face of growing sanctions that US is implementing against this company. US would cut off completely access to US technology to Huawei soon[17].

In some circles in government and academy in Peru, there is beginning to be an informal debate about how much Peru is being linked to China, and what this will mean this in the face of confrontation between the two big superpowers: China and US, and how this will affect Peru decision in that regard. Lessons are studied of, for example, how Australia and New Zealand are dealing with that dilemma. Australia in particular, a country much dependent in China market for its goods, had some problems when it criticized China at the beginning of 2020[18].

Anyway, still how Peru could or would help US intent on containing China, if that is the case, and how would react to China response to that, is not known. It is a theme not debated yet, but one that must be done. This author is much interested in that theme and will continue writing about it[19].    

 

 

                                                                                             March 22, 2023

 

 

 

 

 

   

 

 

 

 


[1] According to data from the Chinese Embassy in Peru and UNCTAD.

[4] According to US Department of State: https://www.state.gov/u-s-relations-with-peru/

[5] See MOFA: “Evaluation of Japan´s ODA to the Republic of Peru”  page 22 https://www.mofa.go.jp/policy/oda/evaluation/FY2021/pdfs/peru.pdf

[6] See the interview with Walter Sanchez of Peru´s Ministry of Energy and Mining: https://www.bnamericas.com/en/interviews/perus-take-on-the-future-of-lithium

[11] I could take to a former Vice Minister of Communications one month ago about this theme. 

[12] From 2018 Huawei signed several agreements with my university to foster experts in science and technology, in the information and communication technology. The last one was signed recently on March 2023. See: https://unmsm.edu.pe/noticias-y-eventos/noticias/noticia-detalle/san-marcos-y-huawei-promoveran-talento-digital-de-estudiantes-y-docentes#:~:text=futuro%20o%20el-,ICT,-Competition%20de%20la  and also  https://viceacademico.unmsm.edu.pe/?news=sanmarquinos-ganan-concursos-tecnologicos-de-huawei-por-cuarto-ano-consecutivo

[19] This author is talking to several policy makers about this theme now but still there is no formal debate. 

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sábado, 11 de marzo de 2023

Evolution of trade relations between Peru and South Korea eleven years after the Free Trade Agreement.

 

Evolution of trade relations between Peru and South Korea eleven years after the Free Trade Agreement.

https://www.slideshare.net/carlosalbertoaquinorodriguez/evolution-of-trade-relations-between-peru-and-south-korea-eleven-years-after-the-free-trade-agreement 


Carlos Aquino Rodríguez; Maria Osterloh Mejía*

State of issue

In 2011 a free trade agreement (FTA) between Peru and Korea entered into force, and from that year exports from Peru to Korea have increased, even if imports have not. Korea become the fifth biggest trade partner of Peru and its fourth largest export destination.

Not only trade have increased but also investment from Korea to Peru. In this article the evolution of trade and investment since the FTA between Peru and Korea entered into force will be seen aa also what are the perspectives for the economic relations for the two countries.  

Causes and analysis.

Peru and South Korea established diplomatic relations on April 1, 1963, and since then relations have developed smoothly, especially in the economic field. This year marks the 60th anniversary of the establishment of diplomatic relations between both nations.

South Korea has become a strategic trading partner, especially since the middle of the last decade. Peru has had a constant trade surplus with Korea since 2016, and as it can be seen in Figure 1, bilateral exchange in 2021 was 3.9 billion dollars, compared with around 3.2 billion dollars of 2011. This result is because exports, of mainly raw materials, have increased, even if imports decreased in that period (See below).

In 2010, a year before the FTA entered into force, South Korea ranked as the eleventh trading partner for Peru. By 2021, this country became the fifth largest trading partner and the fourth destination market for Peruvian exports. In addition, between January and November of 2022, Korea was the fifth destination for Peruvian exports in the world after China, United States, Japan, and Canada, and the third most important market in Asia.

 

 

Figure 1: Peru – South Korea: Evolution of Bilateral Trade and Trade Balance 2011-2021, million US dollars

Source: Authors elaboration with data from Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT)

As can be seen in Figure 2, between 2011 and 2021 Peruvian exports to South Korea have almost doubled. In 2021, the percentage of Peruvian exports to Korea represented 5% of the total exported by Peru, while imports represented 2% of the total.

Figure 2: Peru: Exports to South Korea 2011-2022

Gráfico, Gráfico de líneas Descripción generada automáticamenteMillion USD

Source: Authors elaboration with data from Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT)

As seen in Table 1 and Table 2, bilateral trade between Peru and Korea is complementary. Peruvian exports are mainly concentrated in a few products, especially raw materials (called traditional products). In 2011, when the FTA entered into force, the five main products exported to South Korea represented 90% of the total exported to this country, these being mainly minerals and natural gas.

10 years later, the core structure of the export basket to South Korea have changed little. The value of the amount exported have increased, but the five main products participation have decreased from 90% to 81%. But thanks to the FTA, Peruvian exports to Korea of so called non-traditional products have increased. For example, in the case of the export of agricultural products, they went from 3% of the total exported by Peru to Korea in 2011 to 7% in 2021. Korea opened an important part of its agricultural sector to Peru and import duties for these goods were reduced or eliminated.

According to the Ministry of Foreign Trade of Peru, agricultural exports to Korea reached a record amount in 2021 (US$ 204 million), due to higher shipments of fruit (+79%), mainly avocado (+159%), grapes (+ 119%), Brazil nuts (+66%) and mango (+33%). According to The International trade Centre, South Korea imported fruits for US$ 1.8 billion in 2021, and Peru become its 5th biggest supplier that year (7% of the total). In the year 2011, Peru was the 14th biggest supplier accounting for only 0.2% of the total[1]. Also, there are products from the chemical sector that saw its participation in total exports increase from 0.3% of the total in 2011 to 1% in 2021 and fishery products from 4% to 5%.

As described before, the exports of mining products and fuels to South Korea continue to be the ones that increased the most. For Korea, Peru is an important supplier of mining goods, since it ranked as its second largest supplier of copper and lead.

Table 1: Comparison of the five first products exported by Peru to South Korea in 2011 and 2021

Authors elaboration with data from International Trade Centre (ITC)

On the other hand, as can be seen in Table 2, imports from South Korea are characterized for being inputs, of products of high technology, such as capital goods, and final consumer goods, therefore, purchases are highly diversified. In 2011 the first five products imported represented 37% of the total and in 2021 these represented only 29% of the total imported. In 2021, imports from South Korea were divided into 28% from the automotive sector and heavy industry, 18% of plastic industry products, 10% of fuels, 7% of pharmaceutical products, 5% of steel products, 5% chemical products, 4% cement and 2% electrical appliances.

Figure 3: Peru: Imports from South Korea

Millions USD

Authors elaboration with data from Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT)

Even so, Peruvian imports from South Korea are declining, particularly since 2016. This may be explained by the fact that many of the Korean companies that produce mobile phones, cars, televisions, or other electric appliances have moved operations to countries like Mexico, Brazil, China, or Southeast Asian countries. Peru continues buying Korean products, but not assembled in Korea itself, but from its companies established in other countries.

Calendario Descripción generada automáticamente con confianza mediaTable 2: Comparison of the five first products imported from South Korea by Peru in 2011 and 2021

Authors elaboration with data from International Trade Centre (ITC)

This can be seen from the data of imports from 2011 to 2022 of the main Korean companies of tech appliances established in Peru. For example, LG Electronics Imports Peru purchased in 2011 around 268 million dollars, of which 45% came from South Korea. In contrast, in 2022 it imported products for 200 million dollars but from Korea only 10% of the total, and from Mexico 59%; China 14% and Thailand 12%.

Another good example is Kia Import Peru, that purchased from the world a total amount of 158 million dollars in 2011 and 99.9% of that came from South Korea. In 2022, this scenario changed. Of the total 201 million it imported, goods from South Korea represented 50% of the total; India 21%; China 20% and Mexico 9%[2].

Regarding investment, the FTA has helped to increase Korean investments in Peru, going from 51.8 million dollars in 2011 to 475.8 million dollars in 2021, increasing eight times more. In 2021, Peru was the third largest destination of Korean investments in Latin America and the Caribbean, contrasting with the number eight position in which it was in 2011. See Figure 4. The FTA includes a chapter on investment, and this replaced the Bilateral Investment Treaty. 

Korean investment arrived in Peru in the 1990s, during the first wave of internationalization of the companies of that country and amid the reforms and economic opening that Peru was going through. Between 1994 and 2021 investment from Korean companies in Peru were mainly concentrated in the mining and fuel sector, accounting for 98% of total stock between those years.

Figure 4: Korean Investment Flow in Peru between 2005 – 2022*, Millions U$D

*Data from January to September

Author’s elaboration with data from Korea Export – Import Bank

For example, in 2018, Korean Japanese consortium LS Nikko Copper Inc. a trader dedicated to sell molten copper, subscribed an agreement for one billion dollars with Peruvian company MINSUR to buy copper concentrates between 2021 and 2030.

On the other hand, companies like Samsung, LG, and Daewoo, have been in Peru since the late 1990s and are very popular for their electrical appliances and electronics sold in department stores and in their own stores, but they do not have assembly plants in the country.

In the construction sector, three projects for the construction of gas power plants carried out by POSCO were completed in 2012 and 2016. Likewise, the consortium Korea Airports Corp. (KAC) is involved in the construction of the Chincheros International Airport from 2019.

And finally, in the food industry sector, the only Korean company in this area is Freeko Peru S.A., which was established in 1997, and stands out for being one of the largest packers of frozen pre-cooked fish and shellfish, and it operates in the Paita Special Development Zone in the Piura region.

Korean investment stock in Peru between 1994 and 2021 accounted for around 3.5 billion dollars, according to the data published by the Korea Export Import Bank.

 

Future expectations and implication

Regarding the evolution of trade between Peru and Korea, imports from Korea would continue to decrease, not only because less Korean goods would be bought from Korea itself (but bought from other countries where Korean companies are established) but also because there are goods from China competing very strongly, in fields like automobiles, electronic, mobile phones. Chinese goods are cheap and increasingly of better quality. As Korean goods before replaced Japanese goods, now Chinese goods are replacing Korean goods.

One reason for expecting that imports from Korea will decrease in spite of a FTA can be seen from the fact that in the case of Peru trade with Japan, a country with which Peru signed a FTA that went in force in 2012, imports from Japan also fell in 2021 compared with the level of 2012. In the case of Japan imports fell from a level of 1.5 billion dollars in 2012 to 957 million dollars in 2021. Many Japanese goods in Peru are imported not from Japan but from Brazil or Mexico, in automobiles for example, or from China, in the case of TV sets. Also, because Japanese goods are competing with ones from Korea and China.       

Regarding Peruvian exports, there is a potential for increasing Peru exports of agricultural goods to Korea, specially of fruits and vegetables. Peru has become a big player in the international market for those goods. For example, Peru now is the biggest exporter of berries, of grapes, in the world, and the second of avocados and asparagus. One problem for increasing the exports of agricultural goods to Korea is that this country has very strict phytosanitary requirements and takes a long time to give approval to imports.

Peru has also potential to increase exports of fishery goods, as its shares a long coastline of Pacific Ocean with rich marine resources. More investment in this field will be necessary to exploit these resources. Also, Peru territory is nearly 50% of Amazon area and there is plenty of wood there, but not enough transport means exists to bring these goods to the ports in the coast and export them (and to process the wood and create a wood industry).

Investment from Korea could increase more because Peru has plenty of natural resources, like minerals, oil and natural gas, and lithium, but probably a more stable political and social situation in the country is needed for foreign investment to exploit these resources. Also, the manufacturing sector could attract investment as Peru is signatory to many FTAs that would allow access to many markets for the products made in the country, but again a more stable situation and policies to promotes this sector will be needed. Perhaps if Korea become a member of the Pacific Alliance, which Peru is a member with Mexico, Chile, and Colombia, a biggest common market will make Peru a more attractive place for Korea investment.  

 

*Carlos Aquino is Director of the Asia Studies Centre at San Marcos National University, and Maria Osterloh is a professor and researcher in the Centre.       

 

 

 


[1] See International Trade Centre, Trade Map: List of supplying markets for the product imported by Korea, Republic of in 2021

Product: 08 Edible fruit and nuts; peel of citrus fruit or melons https://www.trademap.org/Country_SelProductCountry.aspx?nvpm=1%7c410%7c%7c%7c%7c08%7c%7c%7c2%7c1%7c1%7c1%7c1%7c1%7c2%7c1%7c1%7c1

[2] Source: data from SUNAT, consulta por importador / exportador http://www.aduanet.gob.pe/cl-ad-itconsultadwh/ieITS01Alias?accion=consultar&CG_consulta=1

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Risks faced by Chinese companies and Peru political situation.

 

Risks faced by Chinese companies and Peru political situation.

publicado tambien en: https://www.slideshare.net/carlosalbertoaquinorodriguez/risks-faced-by-chinese-companies-and-peru-political-situation 

                                                                                                               Maria Osterloh[1]*

Chinese investment in Peru is quite large. According to Chinese Ambassador in Peru, Song Yang, there are around 200 companies from his country that have invested 30 billion dollars in Peru[2]. This represents around 32% of the 117.8 billion dollars of stock of foreign direct investment in Peru at the end of 2021[3]. According to another source, Peru is the second largest destination for Chinese investment in Latin America, with an amount of 28.2 billion dollars invested in the period 2005-2002, the first being Brazil with 76.2 billion dollars invested in that period[4].

Most of the Chinese investment in Peru is in the mining sector. Peru is a country rich in natural resources, mainly in the mining sector. In 2021 Peru ranked as the second biggest producer of copper and zinc in the world, the third in silver and tin, and the fourth in lead and molybdenum (and the ten in gold)[5]. The mining sector contributes with 8.5% to the Peru´s Gross Domestic Product[6].

Peru is facing now a difficult political and social situation. Last year, President Pedro Castillo, who assumed office in July 2021, was removed by the Congress on December 7, 2022, after he attempted a coup d’état. His removal, the naming of Vice president Dina Boluarte as his replacement, and Boluarte´s intent to stay until July 2026, the time of period which Castillo would have completed his mandate, originated social protests. For most of Peru´s population the Congress and the government are all inefficient, corrupt, and should gone now and there should be new elections.

The social protests calling for new elections have originated the blocking of roads and strikes and have also disrupted production in some areas. One of the most affected have been some mining operations, and specially of a big Chinese company that operate Las Bambas, a copper mine. The acquisition of Las Bambas by a consortium of Chinese companies leaded by MMG Limited, represented the biggest Chinese investment in Peru. In 2014 it paid 7 billion dollars for the operation[7].

Las Bambas output represent 2% of world copper production and accounts for 1% of Peru´s gross domestic product[8]. Also, Las Bambas production represent around 10% of Peru total copper production. Additionally, its importance for Peru´s economy can be seen in the fact that last year 2022 Las Bambas exported around 1.98 billion dollars, becoming the sixth biggest earner of foreign currency for the country (Shougang, another Chinese company producing iron ore, was the seventh biggest exporter, with 1.63 billion dollars)[9].

There are also other Chinese companies that have problems with local communities in Peru that protest that those companies activities will damage the environment or their livelihood. These includes the Hidrovia Amazonica (Amazonian Waterway), where the company Sinohydro Corporation Limited participates. Its operation has stopped since 2019[10]. The other case is of a copper mine project in the north of Peru, Rio Blanco, that was bought by a Chinese company Zijin Mining Group Limited in 2007 but also is paralyzed by opposition from the local communities[11].

But actually, the case of Las Bambas copper mine is the most clear example of how conflicts with local communities are not the only problem affecting operations but also the country political situation. Here a brief discussion about the conflict in Las Bambas is presented and an overview of Peru political situation with its impact in economic activities is given. 

Las Bambas´s conflict with peasant communities

Las Bambas mine is in the Apurimac Region in the south of Peru. It depends on the South Mining Corridor (See Map 2), a national road that ends in the port of Matarani, to export its production as well as to bring materials for its operations.

Since it began its extractive process in 2016, it has had problems with the peasant communities along the Mining Corridor.

Map 1: Map of Peru (left) and Map of Communities around Las Bambas Mine and the South Mining Corridor (right)

Mapa Descripción generada automáticamente

Source: Map on the left: https://www.tripsavvy.com/maps-of-peru-1619938, Map on the right: Las Bambas  https://elaportedelasbambas.pe/home-sobre-las-bambas-comunidades-locales-mapa-de-comunidades.html

The problem is that in 2011 when Glencore owned Las Bambas and another copper mine “Tintaya”, there was a project to transport the production of Las Bambas to Tintaya, where there was a mineral concentrator plant, through a pipeline. But when Las Bambas was sold to MMG, this company built its own concentrator plant, and it has no need to build that pipeline. Instead it began using a road to transport the mineral by trucks and then by railway to the port of Matarani in the Coast.

If the pipeline would have been built, around twenty communities along it would have benefited by being paid by the company for the right of using part of their land for the pipeline. But even if there is no pipeline, they want to receive payment for use by Las Bambas of the road that go through its land. But they do not receive any payment because the government in 2016 declared that road part of a national road (The South mining corridor). Besides that, the communities complain that as the road is not asphalted, the trucks when passing produce dust that cause damage to their farms and livelihood[12].

 Map 2: of Peasant Communities Around The South Mining Corridor and trajectory of the southern mining corridor

38 comunidades soportan paso de camiones mineros | Arequipa | Apurímac| Cusco | lrsd | Sociedad | La República

Source: La Republica Daily https://larepublica.pe/sociedad/2019/10/13/38-comunidades-soportan-paso-de-camiones-mineros-arequipa-apurimac-cusco-lrsd

As it can be seen in the following figure, since la Bambas started operations in 2016 it has encountered social protests and blocking of roads that have caused a negative impact in its production.

 

 Graph 1: Las Bambas Mine Days of blockages (in the left) and their impact on annual production since its start of operations (on the right, in fine metric tons)

Gráfico, Gráfico de barras Descripción generada automáticamente

Source: author’s elaboration with data from the Ministry of Energy and Mines of Peru; Energiminas magazine; Las Bambas Mining company website

Political turmoil protests

Besides problems with the local communities, Peru political situation has an impact also in economic activities of companies like Las Bambas. As was said before, the ousting of President Pedro Castillo and the discredit of the National Congress have ignited social protests asking for general elections. If there is new elections a time of uncertainty will follow as it is not know which kind of government will be elected. Peru has no stable political system and established political parties, and in the last 30 years, from 1990, the ones which won the elections were most new parties formed just before elections.

Political instability has been especially manifest in the last five years, when 6 Presidents have occupied office, due to infighting between the Executive and National Congress. This infighting is also the reason why still there is no agreement on when a new election will happen, even if most of the Peru population want that.        

The problem is compounded by the fact that leftist groups also ask for elections for a constituent assembly to elaborate a new Constitution, to replace the one of 1993. The danger is that this could mean a change in the economic rules that govern Peru now, in which there is a free market economy with a minor state presence. Leftist groups want to increase the state presence in the economy, even that the State regulate foreign investment and it could own companies exploiting natural resources (or that the state could have the monopoly in this economic activity).  

Given this situation, is probably that now and in the following months political instability and social protests would continue. If a date for elections is decided, the uncertainty about which economic policies would be adopted will last until a new government is elected. But if there is an agreement to elect a constituent assembly to prepare for a new Constitution, the uncertainty will last more.   

 

 

 

 

 

 

 

 

 

 

                                                                                      22 de febrero del 2023

 

 

 

 

Annex:

Economic importance of Las Bambas:

A)    Importance in the national production of copper and molybdenum:

In 2022, Las Bambas ranked as the fourth largest producer of copper representing 10% share in the national production of this mineral. So far, of the three Chinese mining companies that produces copper, Las Bambas is the largest producer, keeping this position since it began operations as it can be seen in the next graph. Furthermore, in 2015 national production of copper amounted for 1,700,817 tons, but when Las Bambas started operations in 2016, its production added 329,368 tons to national production. This, together with Minera Chinalco production of copper, added half million tons of copper to Peru’s production of this mineral.

 

Graph: Chinese Mining Companies in Peru: Copper Production (Fine Metric Tons), 2014 – 2022

Gráfico, Gráfico de barras Descripción generada automáticamente 

 

 

 

 

 

 

 

 

 

 

 


Source: Elaboration of the author with data from the Ministry of Energy and Mines of Peru

 

In the case of molybdenum, Las Bambas ranked as the third largest producer of this ore in Peru with a share of 11% of the total production.

Graph: Chinese Mining Companies in Peru: Molybdenum Production (Fine Metric Tons), 2014 – 2022

Gráfico, Gráfico de líneas Descripción generada automáticamente
 

 

 

 

 

 

 

 

 

 


Source: Elaboration of the author with data from the Ministry of Energy and Mines of Peru

B)    Importance on Peru’s foreign trade:

Las Bambas ranked in 2022 as the fifth largest exporter of the mining sector. Its main markets were China with a share of 79%; South Korea with 10%; Chile with 5% and Japan with 4%.

Las Bambas exports to the world accounted for 3% of the total amount exported by Peru in 2022. Moreover, Las Bambas export amount represented 1% of Peru’s GDP in 2021.

Finally, Las Bambas is very important for the communities around its influence area and at the regional level. In 2022, its exports represented 98% of total exports of the Apurimac region.

 

C)    Importance on Peru’s foreign direct investment:

As mentioned before, Las Bambas mine project was purchased by the Consortium MMG Ltd. The payment of this transaction became the largest investment amount made by a foreign company in Peru.

Besides that, according to the embassy of the PRC in Peru, the total amount invested by Chinese companies in Peru since they arrived in the 1990’s was of 30 billion dollars so Las Bambas acquisition represented 23% of the total invested by Chinese companies. Peru is the second largest receiver of Chinese investment in South America after Brazil.

 

Moreover, Las Bambas annual investments in its plant, equipment, infrastructure, etc. accounted for 219 million dollars in 2022 representing 4% share of the total invested by mining companies in Peru.

And in its area of influence, in the Apurimac region this amount represented 90% share of the total invested in mining.

D)    Importance in the mining sector employment:

In 2022, the average of workers hired in the mining sector in Peru accounted for 230,737 people. Of the total mining workers hired in 2022, Las Bambas hired workers represented 1%. At first glance this may be seem little but this mine represented 32% of the total mining workers hired in the region that operates as can be seen in the next figure. Besides, of the three Chinese mining companies that have active mine operations in the country, Las Bambas is the one that contributes more with employment.

Graph: Average number of workers hired in the mining sector by region and by Chinese mining companies in Peru in 2022

Gráfico, Gráfico de barras Descripción generada automáticamente

 

 

 

References

Cruz, E. (April, 2022). Las Bambas: Conflicto anti-minero o lucha por ser re-incluidos. Rumbo Minero. Retreived from https://www.rumbominero.com/peru/las-bambas-conflicto-anti-minero-o-lucha-por-ser-re-incluidos/#:~:text=En%20el%202016%20Las%20Bambas,v%C3%ADa%20llamada%20Corredor%20Minero%20Sur.

Ayuda a memoria 2023. Provias Nacional. Recuperado de https://cms.pvn.gob.pe:10443/PortalWeb8UIT/Forms/frmAyudaMemoria_Ext.aspx

Banco Central de Reserva del Perú (BCRP). (2014 – 2021). BCRP Data. Cotizaciones internacionales. Recuperado de https://estadisticas.bcrp.gob.pe/estadisticas/series/mensuales/cotizaciones-de-productos-promedio-del-periodo

Banco Central de Reserva del Perú (BCRP). (2014 – 2021). BCRP Data. Producto Bruto Interno Trimestral. Recuperado de https://estadisticas.bcrp.gob.pe/estadisticas/series/trimestrales/resultados/PN02635BQ/html

Chauvin, L. (12 de marzo de 2022). China's MMG races for deal to protect copper flow from Peru mine. Nikkei Asia. Recuperado de https://asia.nikkei.com/Business/Materials/China-s-MMG-races-for-deal-to-protect-copper-flow-from-Peru-mine

China's MMG secures supplies to continue copper production in Peru. (10 de febrero de 2023). Nikkei Asia. Recuperado de https://asia.nikkei.com/Business/Markets/Commodities/China-s-MMG-secures-supplies-to-continue-copper-production-in-Peru

Cruz, E. (27 de setiembre de 2022). Las Bambas ha pagado más de S/ 6,389 millones en impuestos y regalías. Rumbo Minero. Recuperado de https://www.rumbominero.com/peru/noticias/mineria/las-bambas-impuestos-y-regalias/

Las Bambas ha tenido que soportar exactamente 321 días de bloqueos de vías entre 2016 a la fecha. (16 de marzo del 2021). Energiminas. Recuperado de https://energiminas.com/las-bambas-ha-tenido-que-soportar-exactamente-321-dias-de-bloqueos-de-vias-entre-2016-a-la-fecha/

Las Bambas perdió más de año y medio de producción desde su inicio de operaciones en 2016. (28 de diciembre del 2022). Proactivo. Recuperado de https://proactivo.com.pe/las-bambas-perdio-mas-de-ano-y-medio-de-produccion-desde-su-inicio-de-operaciones-en-2016/

Ministerio de Energía y Minas del Perú (MINEM). Compendio de estadística de producción minera 2001 - 2022. Recuperado de  https://www.minem.gob.pe/_estadistica.php?idSector=1&idEstadistica=13494

Por bloqueos, Minera Las Bambas inicia reducción de operaciones (03 de noviembre de 2022). Las Bambas. Recuperado de https://www.lasbambas.com/notas-de-prensa/por-bloqueos-minera-las-bambas-inicia-reduccion-de-operaciones

PromPeruStat. (2014 – 2022). Ranking de exportaciones por países. Recuperado de https://exportemos.pe/promperustat/frmRanking_x_Pais.aspx

Sector minero cerró el 2022 con más de 230 mil puestos de trabajo directos. (08 de febrero de 2023). Proactivo. Recuperado de https://proactivo.com.pe/sector-minero-cerro-el-2022-con-mas-de-230-mil-puestos-de-trabajo-directos/

Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT). (2014-2022). Consulta por Importador/Exportador. Recuperado de http://www.aduanet.gob.pe/cl-ad-itconsultadwh/ieITS01Alias?accion=consultar&CG_consulta=1

 

 

 

 

 

 

 

 

 


[1] Member of Centre for Asian Studies, San Marcos National University

[2] In a speech given by Ambassador of China to Peru, 25th November 2022:  https://mp.weixin.qq.com/s/L-dRV22hnlHwPA1q9npp3w

[3] See Annex Table 2 of UNCTAD: World Investment Report 2022, page 216  https://unctad.org/system/files/official-document/wir2022_en.pdf

[4] Derek Scissors, 2023: “Zero COVID” Ends, and Chinese Investment Returns, January 2023   https://www.aei.org/research-products/report/2023-zero-covid-ends-and-chinese-investment-returns/

[6] See Peru Central Bank: Resumen Informativo Semanal February 16, 2023 page 1 https://www.bcrp.gob.pe/docs/Publicaciones/Nota-Semanal/2023/resumen-informativo-2023-02-16.pdf

[7] See Reuters: Glencore reaps 7 billion from Las Bambas mine  sale to China´s MMG, July 31, 2014       https://www.reuters.com/article/uk-glencore-mmg-lasbambas-idUKKBN0G12XN20140801 

[9] Peru Ministry of Foreign Trade and Tourism, Trade Monthly Report, December 2022, page 10  https://cdn.www.gob.pe/uploads/document/file/4090459/RMC%20Diciembre%202022.pdf?v=1675959528

[12] For a detailed explanation of the problem see Cruz, E. (April, 2022). Las Bambas: Conflicto anti-minero o lucha por ser re-incluidos. Rumbo Minero. Retreived from https://www.rumbominero.com/peru/las-bambas-conflicto-anti-minero-o-lucha-por-ser-re-incluidos/#:~:text=En%20el%202016%20Las%20Bambas,v%C3%ADa%20llamada%20Corredor%20Minero%20Sur.

 

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