By Marco Aquino

LIMA, Reuters – Peru, world number 2. The country’s economic minister said that the government will tax “excess profit” made by mining firms from soaring metals prices to increase taxes.

The current plan, while President Pedro Castillo won the election last July with a promise to raise taxes for the power-rich mining sector’s profits, is much less ambitious than its initial promises to sharper tax hikes. This was despite fierce opposition from the industry as well as a split Congress.

Oscar Graham (NYSE;), the minister of finance and economy, stated in Lima that the focus was on “surplus profits”. He added that the government is looking into an “adjustment” to tax rates.

The Russian invasion of Ukraine has caused copper prices to trade at an all-time high of close to $10,000 per tonne.

He stated that while the margins of the adjustment are under evaluation, he added that there was no need for the sector to lose its competitiveness or discourage mining investment.

Graham stated Peru should have a better distribution of its mining wealth to local communities, to quell the protests against mining that have rocked it and caused a halt to production at important mines like MMG Ltd.’s Las Bambas or Southern Copper (NYSE :)’s Cuajone mine.

He said, “We must look at the question of efficient mining resource use. Otherwise we will be having recurrent conflict in the country.”

INFLATION

Graham stated that Peru is at risk due to any extension of the conflict in Ukraine. The country’s prices have risen at an unprecedented pace for nearly a quarter century, and this was March.

“We are net exporters of corn and oil, which make up the chain that inputs most affected the family basket”, he stated, noting that the government is evaluating increasing the budget for social services to combat inflation among the most vulnerable.

Graham maintained that the projections of this year’s economic growth of 3.5% and 4.0% were stable, however, he was open to revising them in light of the global crisis.

Graham stated that he will present to Congress, a plan to reduce the deficit from 1% to gross domestic product (GDP), to rebuild investor confidence after political and economic turmoil.

This year’s deficit fell to 2.6% from 8.9% for 2020.

“This is extremely important to provide certainty to both international rating agencies as well as investors”, he stated.

In mid-March, ratings agency Standard & Poor’s cut its rating for Peru, citing political uncertainty. The second time that lawmakers tried to impeach President Castillo, he survived the March impeachment vote.

Peru: Inflation spikes https://tmsnrt.rs/3NFT34c

Peru: Inflation spikes (Interactive graphic) https://tmsnrt.rs/3iXZ1iO