Mining Investment Won’t Switch from Chile to Peru – by Marianela Jarroud (Inter Press Service News Agency – April 2, 2013)

SANTIAGO, Apr 2 2013 (IPS) – The Chilean government has warned of the potential flight of mining and energy investments to Peru because of court rulings that have paralysed large-scale mining projects in the north of the country. But this fear is unfounded, at least in the short term.

Peru and Chile are in the top ten world destinations for investment in non-ferrous metal exploration, according to the Metals Economics Group, which collects information about the industry. In its 2013 report it places Chile fifth and Peru sixth, while Latin America heads the ranking of regions, receiving 25 percent of exploration investment capital.

Chile is the world’s top producer of copper and the country with the largest reserves for future extraction. Mining investment is concentrated mainly in the north, near the borders with Peru, Bolivia and Argentina, where mines are estimated to consume 80 percent of the area’s electricity.

Against a backdrop of rising energy demand, industry owners have expressed concern about several court rulings and administrative decisions against mining projects.

One high-profile case was that of the Castilla plant, a project of the MPX Energia company owned by Brazilian billionaire Eike Batista, that was to be the largest coal-fired generating plant in South America.

The Supreme Court ordered a halt to the Castilla project in September after the community of Totoral, close to the planned site for the thermoelectric plant in Atacama region, 810 kilometres north of Santiago, filed for an injunction against it.

The ruling against Castilla was apparently the last straw for Batista’s troubled investments in Chile, where his empire is in crisis due to capitalisation of his companies based on market expectations of potential projects that have not been realised.

Six months after the court decision, MMX, another of Batista’s companies, announced that it was abandoning an iron exploration project that was at the geological mapping stage.

MMX said that problems with energy supply would drive up the cost of investment and make the project “less attractive.”

That was when Economy Minister Pablo Longueira said the “painful” decision by MMX must make Chileans aware that “Peru is a market that is becoming increasingly attractive for mining development.”

But according to Lucio Cuenca, the head of the Latin American Observatory of Environmental Conflicts (OLCA), Longueira’s statements are “fictional blackmail” because “Chile, with its strong institutions and its mining and environmental policies, is still the main attraction for mining investment at the international level.

“Of the 320 billion dollars projected to be invested in Latin America from now until 2020 (according to industry estimates), one-third is forecast to be targeted to Chile,” he told IPS.

However, if investments in the electricity sector are delayed, Chile “could end up with a rather limited and expensive energy supply, so that it is not surprising that investments that could have been made here should shift elsewhere,” said economist Jorge Rodríguez Grossi, who served as energy minister in the government of former president Ricardo Lagos (2000-2006).

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