Peru is coming off an excellent year of growth. The economy expanded 3.9% in 2016, faster than most in the region, driven largely by a booming copper business with soaring export volumes and a tentative price recovery that led metals exports to a three-year high. President Pedro Pablo Kuczynski took office mid last year amid bubbling optimism after one of the closest races in the country's history, having won on platform where a significant element was his promises to clear the way for key mining and infrastructure projects.
Peru was already considered one of the best places to invest in Latin America with a stable legal framework and firm respect for private property, not to mention excellent geological potential.
But Kuczynski has not had it easy so far. His infrastructure program in particular - itself a key element in supporting mining - has suffered the suspension of emblematic public-private partnership (PPP) projects resulting from the Odebrecht scandal and more recently the cancellation of the controversial Chinchero airport contract. The latter also resulted in the resignation of transport minister Martín Vizcarra - the third cabinet member to leave office in the president's first 10 months.
Economic growth forecasts for 2017 have fallen to 2.7% from earlier predictions of 4.5%, in large part due to the project deferrals. Severe flooding in many parts of Peru in early 2017 also interrupted some of the country's productive sectors and have diverted attention to reconstruction, making efforts to streamline permitting and investment protocols all the more urgent.
The deteriorating political environment does not bode well for the advance of such reforms, including the energy and mines ministry's (MEM) bill to create a framework for advance spending on social and other infrastructure in the areas of influence of mining projects, which is awaiting approval by the opposition-controlled congress.
Nonetheless, the most urgent factor in determining the advance of Peru's near-term mining pipeline is markets. Further rises in metal prices or at least consolidation at current levels is necessary to support investment decisions at decision-ready projects, such as Anglo American's Quellaveco copper asset.
In the medium to longer term, assuming a price recovery or at least a return to more predictable and less volatile, if shorter, cycles, what will determine the timely advance of Peru's wider mining project pipeline is better infrastructure and a structurally sound approach to reducing and attenuating community conflicts.
For a more detailed look at the history of Peruvian mining and the latest generation of projects to have come on stream, please read our April 2016 Mining Intelligence Series report, Mining in Peru: Social Issues Top of Agenda as Copper Supply Grows
(Cover photo: Antamina mine. Credit: Minera Antamina)