Peruvian coup: the Australian connection

Feb 12, 2023
The Antamina copper-zinc mine in Peru.

Pedro Castillo, the Peruvian president, overthrown in a coup 7th December 2022, and then sentenced to 18 months imprisonment, clearly represented a threat to some significant forces.

Following the overthrow, mass protests have spread across Peru, to which the government have responded violently, with 60 deaths in the past weeks.

As per usual with Latin American coups, there is a strong U.S. connection, the ambassador, Lisa Kenna, with a C.I.A. background, meeting the Peruvian defence minister the day before the coup.

Following the coup she was soon liaising with officials in the government, including the new president, Dina Boluarte. One crucial meeting took place with Peru’s Minister of Energy and Mining, Oscar Vera Gargurevich, along with Vice Minister of Hydrocarbons, Enrique Bisetti Solari, and Vice Minister of Mining, Jaime Chávez Riva.

In a media release following the meeting Peru’s Ministry of Energy and Mines, stated, the meeting discussed ‘themes linked to the expansion of natural gas, mining investments, and the development of renewable energies in our country’ ’Minister Vera was grateful for the support from the North American government in mining and energy issues.’

Things have returned to normalcy it seems.

Peru is a country rich in resources, the mining sector responsible for 58.7% of Peruvian exports, over 10% of the nation’s G.D.P.

The country is rich in copper, having the 2nd largest deposits in the world after its neighbour, Chile, lead, zinc and tin, and also LNG (Liquified Natural Gas), the last increasingly sought, following sanctions against Russian supplies.

Peru also holds large deposits of gold, in demand, as nations, fearful of U.S. unilateral sanctions, increasingly stockpile it as an alternative reserve to the U.S. dollar. That has seen it hit near $US 2,000 per ounce.

As the world moves to renewables as the source of energy, the minerals Peru holds are strategically important. Banking giant Goldman Sachs has stated, ‘copper is the new oil. The critical role copper will play in achieving the Paris climate goals cannot be overstated… As the most cost-effective conductive material, copper sits at the heart of capturing, storing and transporting these new sources of energy”.

Peru ought be rich, if only its resources were flowing to the country and its people.

Instead, many communities, especially Indigenous, have long protested the mines devastation of their environment, forcing the suspension of 10 mining projects by 2021. These rural communities overwhelmingly support Castillo, demanding his freedom, new elections be held, and a new constitution be promulgated.

Responding to the unrest companies have appealed to the International—State dispute settlement (ISDS) demanding compensation for profits, supposedly lost.

What is the Australian connection?

The world’s three largest transnational mining corporations; BHP, Rio-Tinto and Glencore are all heavily involved in Peru, the first two having a large Australian ownership share, BHP is known as ‘the Big Australian,’ while mainly British Rio Tinto is 35% Australian owned. Also present are Australian companies Orica and Ausenco.

Profits are lucrative, Peru’s Ministry of Energy and Mines revealing a record outflow of $15.7bn company profits in 2021.

It was some of these huge profits which Castillo wanted to keep in the country with a policy of Peruvian ownership of resources. Condemning foreign companies for ‘pillaging,’ he called for the rewriting of contracts so that 70% of all proceeds from mining went to the state, funding social programs.

Castillo charged, ‘These decades of betrayal, corruption, and cynicism are the symptoms of this neoliberal system dedicated exclusively to the exploitation of our people and natural resources for the benefit of a few scoundrels’.

Prior to the second round of the 2021 presidential election Castillo called for ‘renegotiation of mining contracts, an increase in company taxes, and potential nationalisation of mines’.

On coming to power Castillo moderated his position, proposing only incremental increases in tax rates of mining profits from 41% to 44%, sufficient however, to draw fierce opposition from the Chamber of Mines.

Managing Director of the Australian mining company Andean Mining, William Howe noted, clearly not approvingly, ‘The Peruvian government is planning to try amending the country’s tax code again after its previous attempt to increase taxes on the sector was voted down by Congress.’ (Stockhead 1st March 2022).

In December 2021 Castillo invited the IMF to look at tax options. They found, ‘the current fiscal regime for mining in Peru is competitive.’ Having examined the options in detail, the IMF concluded, Castillo’s proposals were fairly cautious, stating, ‘this increase in the tax burden would keep Peru in the mid-range of other mining countries.’

Of course the coup replicates, both in style and effect, that in Bolivia in 2019, one nullified by a subsequent election and return of the overthrown ‘Movement to Socialism’ (MAS).

One can never know of any direct involvement by Australian connected companies in the recent coup, though one could surmise that its success has brought joy to some Australian players.

With elections currently set for next year will the Bolivian scenario re-play itself, or will the coup succeed?

The stakes are high, Peru’s Ministry of Energy and Mines (MINEM) forecasting 46 major construction projects over the coming decade, worth over $A76 billion.

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