LATAM Weekly News
16th June 2021
The big news in Latin America this week is the leftist Pedro Castillo claiming victory in the Peruvian elections. At the time of writing, his opponent, Keiko Fujimori, has not conceded defeat and is seeking to have some votes annulled on the basis of seemingly ill-founded claims of possible fraud, but all in all it could take some time, maybe even weeks, before legal challenges are sorted out and a winner is officially declared. In the meantime, Castillo is taking on the role of President Elect - he changed his Twitter bio to include the title of President Elect of Peru and hosted a celebration in Lima.
The remarkable ascent of Castillo, a former teacher and the son of Andean peasants, has caused elation in some quarters and panic in others. Reuters reports that wealthy Peruvians are frantically sending their money abroad, and banks have been importing US dollars in anticipation of surging demand for cash. This is likely at least in part due to Fujimori’s campaign stoking fears about communism, with Peru having suffered land appropriations and hyperinflation under former leftist leaders. And, despite attempts towards the end of his campaign to cozy up a little more to markets, Castillo’s public statements haven’t been too business-friendly, especially in regards to mining, which is central to the Peruvian economy, as evidenced by the country’s status as the #2 copper producer globally and the fact that mining overall represnts 60% of Peruvian exports.
Castillo himself had called some time ago for possible nationalization of mines and gas fields in Peru, and nationalization was the official platform of his far-left Perú Libre party. But starting around April this year, that began to be walked back, with Castillo and party representatives giving assurances that he didn’t plan to nationalize or expropriate anything, just that he thought Peruvians should get a bigger cut of mining profits. Clearly inspired by recent rumblings in Chile, the campaign seems to have settled on a platform of something like a 70% tax on mining profits plus extra royalties to fund Castillo’s ambitious education and health plans. There are more general worries for business as well, with concerns about his respect for the independence of Peru’s central bank, as well as Castillo’s much-promoted desire to tear up Peru’s constitution and renegotiate tax stability agreements.
But there are plenty of reasons for miners and other businesses to remain circumspect. The most significant is that Peru’s congress, through which most measures will have to pass, is fractious at best. There will be ten parties at odds once Castillo takes office, and they are not going to give him carte blanche to do whatever he likes. Negotiations will have to take place, and radical legislation will almost certainly be watered down in that process, beefed up by Congress’s well-known willingness to impeach Presidents. Next, Castillo and his party seem to have developed a genuine interest in not frightening markets too much. He’s made clear overtures to them at the back end of his campaign, and he recently made Pedro Francke, a former World Bank economist, a key economic advisor. Franke supports what Foreign Policy calls “fiscal prudence” and has suggested alternative means of increasing the government’s income. Finally, several outlets have noted the habit of Latin American presidents of getting elected on a popular leftist basis that spooks markets, but then governing largely as centrists. For example, Luiz Inácio Lula da Silva presided over an economic boom in Brazil, and Ollanta Humala pulled the same trick in Peru itself.
Most likely, the costs of doing business in Peru will increase for many miners. But there is no reason to panic; the reaction of markets has already created a buying opportunity in the country, and the largest extremes of left idealism are more likely to be moderated than not. Moreover, in a country with mineral wealth like Peru, wily investors will always find a way.
Around the Traps
Here is a great update from Mammoth Resources on their recent, highly successful capital raise and their work on their exciting Tenoriba project in Mexico. Check it out!
There’s a fabulous video out from Conquest Resources on the work they’ve been doing, with the company recently beginning a large drill program at their Belfast project. Have a look below or on YouTube.
We’ve got a great news release from Mountain Boy Minerals outlining their 2021 exploration program for their multi-element Theia project, in British Columbia’s famous Golden Triangle. They’re exploiting the glacial retreat that has happened since the 1990s to look at new ground.
That's all for this week, take care everyone!
- Jane Lockwood