Canada and Peru have a long history of commercial ties thanks to the two countries’ endowments of natural resources which led to a close development of their mining sectors, but these two countries are now looking to diversify their relationship as well as their economies.
The timing is right – as mineral prices fall, concerns are being raised over the stability of Peru’s mineral-dependent economic growth.
For the last quarter of a century, the mining sector has been the motor of Peru’s growth – with a particularly strong influence in the last decades’ GDP, averaging over 7% growth from 2003-2013. But unlike many resource-dependent countries that have faced certain downward spirals once commodity prices fall or resources production drops, the outlook for Peru’s growth is looking up for years to come.
Local bank BCP even expects Peru’s economy to hit double-digit growth once a series of mega-projects in the mining sector hit production post-2015, the banks economic studies manager Carlos Odar said at a recent press conference.
But despite this impressive growth, concerns remain over a dangerous dependence on natural resources and the threat of the Dutch Disease – an eventual economic downturn due to an over dependence on natural resources. Even Peruvian President Ollanta Humala himself has reached out for assistance from the United Nations Industrial Development Organization (UNIDO) to begin a transition of Peru’s economy from natural resources through industrialization.
“It is necessary that we speed up the process of industrialization in Peru if we want to fight poverty,” Humala said at the inauguration of the 15th UNIDO General Conference, held in Lima at the request of the Humala administration.
“We must use these sacred resources more efficiently,” UN Secretary-General Ban Ki-Moon said at the event, adding that in order to do so, the developed countries of the world need to lend a hand to those who were left behind in the first industrial revolution.
So what better partner to help Peru through this transition than the one that aided its initial economic boom?
“Canada was one of the first countries to engage with Peru in mining,” Canadian Ambassador for Peru, Patricia Fortier, told Peru this Week.
Nowadays, the engagement remains strong, with just shy of 100 Canadian companies working in the extractive sectors in Peru, representing investments worth in-or-around US$78 billion.
Which makes sense, seeing as the Peruvian mining code was based on the mining code in Canada, according to Ambassador Fortier.
And while Peru and Canada continue to develop their relationship based on mining, these two countries seem to be giving this relationship a facelift.
A series of programs and private-public alliances initiated in recent years in Peru by the Canadian Government are looking to build upon this strong mining connection to spread its benefits and help diversify the Peruvian economy as well as their relationship.
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