Govt Seeks to Attract Investment, Package Includes Curtailing Environment Ministry

President Ollanta Humala said Thursday that the good economic conditions that have benefited Peru’s economy during the past decade are over, according to daily El Comercio.

Humala’s comments came when he was presenting legislation aimed at simplifying the permitting and tax codes in order to facilitate investment in the Andean nation.  The package of proposals has been sent to Congress, and Premier Rene Cornejo said he hoped the Congress would approve the measures quickly.

Private sector investments have slowed considerably over the past year largely due to weaker commodity prices.  Record high commodity prices during the past decade boosted investment and economic growth in Peru, one of the world’s leaders in the output of base and precious metals.

“The favorable wind that favored [the Peruvian economy] during the past decade is over,” Humala said. He added that despite the government’s efforts, there are still several obstacles that have slowed down private investment.

Both mining and oil companies operating in Peru say that red tape is a major challenge to advancing any project, in addition to opposition from rural communities.

Weakening the Environment Ministry

But not all cabinet members are happy with Humala’s investment attraction proposals.  According to reports last week, Environment minister Manuel Pulgar-Vidal did not vote in favor of making environmental standards more flexible nor of reducing fines on environmental damage, and called on Finance minister Luis Miguel Castillo to “not retreat” from environmental successes achieved thus far.

Pulgar-Vidal told the official gazette, El Peruano, that applying the Prior Consultation Law in indigenous communities has not been a setback to private investment.  “The business sector needs to demonstrate greater maturity and recognize its role and responsibility in investments and not look for culprits where there aren’t any,” Pulgar-Vidal said.

The measures, now in Congress, also attempt to weaken the Environment Ministry’s power to declare Reserved Zones (ZR) and to draw up environmental quality standards.  The Finance Ministry says that handing over these powers to the cabinet is justified because a ZR may affect the rights of concessionaires in other sectors — Environment officials, however, say that no new ZR is retroactive and therefore already existing concessionaires are not affected.

The Ministry of the Environment was created during the 2006-2011 Garcia administration to meet requirements set by the U.S. Congress for approval of a Free Trade Act, but it was largely window-dressing, despite the efforts of the portfolio’s first chief, environmentalist Antonio Brack.  The ministry was given more muscle during the first two years of President Humala’s government, but again faces a cut-back on key powers.

Peru’s economy is expected to grow by about 5.5 percent this year, according to the Central Bank, and it is still one of the strongest in the region.

 

 

 

 

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