Mining in Peru is a fundamental pillar of the nation’s economy. Its importance is reflected in various macroeconomic indicators. In this blog post, we will analyze in detail how mining impacts the country’s production, investment, employment, and exports.
Contribution of mining to national GDP
During the last ten years, mining activity has driven, on average, more than 8% of the national GDP. This places it as one of the most significant contributors to the nation’s economy and consolidates it as a critical sector.
At the end of 2022, the GDP of the metal mining sector reached S/ 47,039 million (US$ 12.5 billion), contributing 8.3%
It is essential to highlight that national copper mining production leads with 57.9% of the metal mining GDP. In addition, the national mining production of zinc and gold follows with 12.1% and 9.8%, respectively.
Production and reserves of metallic minerals
Peru remains one of the largest producers of minerals in the world, boasting significant volumes, seven of which are most traded: gold, copper, silver, zinc, lead, tin, and molybdenum.
Due to mining in Peru, we must highlight that the country remains the second-largest producer of copper and zinc globally. In addition, it is the first producer of zinc and tin in Latin America. No less important is that it has the largest silver reserves globally and the third-largest reserves of copper and molybdenum.
Mining exports are important to the country due to their notable participation in total national exports. In the last ten years, mining exports represented, on average, 60% of the total value of national exports.
At the end of 2022, the total value of national exports registered US$ 65.8 billion, of which US$ 38.8 billion represent mining exports (metallic and non-metallic), representing 57.3% and 1.7%, respectively. It should be noted that copper and gold exports are the most representative.
Mining investment in Peru for 2022 was US$ 5.4 billion, registering a positive variation of 2.1% compared to what was registered for 2021, where it reached US$ 5.2 billion. Of the latter, plant investment recorded US$ 1.4 billion in companies that included Anglo American, Quellaveco, Compañía Minera Antamina, and Minera Chinalco, which concentrated 52.8% of the investment in processing plants. In infrastructure, it recorded US$ 1.3 billion in the companies that included Anglo American Quellaveco, Minsur, and Southern Peru Copper Corporation, which concentrate 46.1% of the investment in infrastructure. In development and preparation, it is recorded that US$ 931 million was invested in mining companies. Among them were Yanacocha, Shougang Hierro Perú, and Volcan Compañía Minera, concentrating 65% of the investment in development and preparation.
The 2023 Mining Investment Project Portfolio comprises 47 mining projects with an investment of US$ 53.7 billion. This portfolio is made up of projects whose objective includes the execution of the investment through the construction of the necessary infrastructure to achieve operational start-up to carry out mining activities such as exploitation and/or benefit of minerals. All projects are owned by large and medium-sized private mining companies that cover metallic and non-metallic production.
Mining in Peru positively impacts local communities by implementing support and job training programs. The sector also encourages the growth of local employment and services.
At the end of 2022, mining activity generated an annual average of 231,479 direct jobs, which represented an increase of 6.8% compared to the yearly average of 2021 and 21.7% higher than the average of 2019(before COVID-19). This is a historical record achieved in Peru.
It is essential to highlight that the mining sector generates direct jobs and represents a significant source of indirect employment for other sectors of the national economy. According to a Peruvian Institute of Economics (IPE) study, eight additional jobs are generated in the rest of the economy for every direct job generated in mining activity.
The mining canon consists of 50% of the income tax revenue the State receives for exploiting mineral, metallic, and non-metallic resources. It aims to finance projects and infrastructure works that impact the regional and local levels. In addition, an amount is allocated for scientific and technological research, which is transferred to the national universities of the regional government constituencies.
In 2022, transfers for royalties from mining in Peru amounted to more than S/ 7,844 million (US $ 2.07 billion), marking a historical maximum value and experiencing a significant increase of 166.1% compared to the previous year. This incredible increase is due to the impressive collection obtained in 2021 thanks to the historic prices achieved by essential metals such as copper and gold.
The mining royalty is the economic consideration that the owners of the mining activity are obliged to pay the Peruvian State for exploiting metallic and non-metallic mineral resources. It comprises two types of income: mining royalties of legal origin and mining royalties of contractual origin.
At the end of 2022, national, regional, and local governments received more than S/ 2,953 million (US$ 779 million) in legal and contractual mining royalties, experiencing a reduction of 17.2% compared to 2021. This decrease is due to the drop in the prices of metals in the international market and the decrease in the volume of exports to the leading industrialized countries.
Mining in Peru stands as a cornerstone of the nation’s economic vitality, playing a pivotal role in shaping critical macroeconomic indicators. With mining consistently contributing over 8% to the national GDP, the sector has emerged as one of the primary drivers of economic growth. The production and reserves of metallic minerals, particularly gold, copper, silver, zinc, lead, tin, and molybdenum, underscore Peru’s global significance as a major player in the mining arena. Notably, the industry’s impact extends beyond economic metrics, fostering job creation with a historical record of over 231,000 direct jobs generated in 2022. Moreover, mining exports, accounting for a substantial portion of total national exports, have positioned Peru as a significant player in the global market. The sector’s economic contributions extend to regional development through the mining canon and royalties, which fund critical projects and infrastructure at local and national levels. With its impressive growth, strategic global positioning, and multifaceted contributions, Peru’s mining industry is vital to the nation’s progress and prosperity.