Peru: the government wants to increase taxes on mines and the devaluation of the sun is accentuated

The Minister of the Economy of Peru, Pedro Francke said on Monday that Pedro Castillo’s new left-wing government is confident it can raise mining taxes without affecting the competitiveness of the private sector.as long as metal prices remain high.

Francke’s remarks came as the sun continued to lose value. On Monday, the currency devalued again and reached its historic minimum: it fell 0.22%, to 4,104 / 4,105 units per dollar, amid investor uncertainty over the US inflation report and the lack of clear signs from the new government leadership Pedro Castillo. While the benchmark index of the Lima Stock Exchange lost 0.12% to 456.4 units.

Peru, the world’s second largest producer of copper, relies heavily on mining to finance public spending and the new socialist president Pedro Castillo pledged to increase spending on social programs to help the country’s poor.

Castillo’s hypothesis, member of the Marxist Peru Free party, and his first cabinet of ministers with a few die-hard officials, scared markets and investors.

“We are studying the precise formula,” Francke said of the proposed mining tax hike, after adding that now high copper prices make it possible to take this step. “In any of these (formulas), we will always take into consideration that these measures will not endanger the profitability of the companies or the investment.“he claimed.

Francke, a moderate left-wing economist, said in his ministerial office in downtown Lima that they work hard to regain investor confidence.

For this, the new management undertakes to maintain the discipline tax and reduce the deficit in 2022 by 1 percentage point compared to 2021. He also pointed out that the budget expenditure ceiling rules, Suspended due to pandemic needs, they will be restored next year.

“We will maintain a declining fiscal deficit path in time to keep the debt ceiling at a reasonably reasonable levelThe official said.

Peru has one of the lowest debt-to-gross domestic product (GDP) ratios in Latin America, which, together with fiscal stability, has enabled it to benefit from the “investment quality” of the main international rating agencies.

Francke acknowledged that public spending will increase, but said tax revenue would increase by 24% in 2021 compared to the previous year due to the rise in metal prices and the reopening of the economy.

And next year, tax revenues would increase by 8% compared to 2021, according to preliminary estimates, as the ministry prepares the draft 2022 public budget in which “We will surely have an increase,” he said without giving further details.

“There are additional requests in next year’s budget, but the ministry’s job is to adjust the request as much as possible.“, He explained.

The minister said that in the preliminary projections for 2022, a local economy growth of 4.8% is envisaged; compared to the 10% expected for this year.

(With information from Reuters)

Read on: