Mining industry
Standing
What is the nature and importance of the mining industry in your country?
The mining industry is one of the most important economic activities in Peru. Mining represents almost 10 per cent of GDP and 60 per cent of the country’s exports. During the past decade, mining activity has had an important role in the Peruvian economy because it generates added value, higher foreign exchange and tax revenues, the creation of direct and indirect jobs, and the improvement in potential growth of economic activity, enabling necessary and real social inclusion and promoting general welfare.
The Peruvian government has always been committed to supporting mining activities and has adopted significant changes in legislation to avoid illegal mining. In 2018, the Mines Ministry approved a legislative package to regulate a new formalisation process for informal miners that had not started their formalisation process under the previous legislation.
The mining industry has focused its efforts on being appreciated as an activity that makes sustainable use of resources and the environment, including the preservation of water sources, the promotion of agriculture and good relations with stakeholders.
Target minerals
What are the target minerals?
Peru occupies a leading position in the global production of mineral commodities such as copper, zinc and silver (second), gold and lead (first in Latin America), molybdenum (fourth) and tin (third in Latin America).
Regions
Which regions are most active?
The most active regions according to the minerals are as follows:
- copper - Ancash, Arequipa, Moquegua, Cusco and Junín;
- gold - La Libertad, Cajamarca, Arequipa, Madre de Dios and Ayacucho;
- lead - Pasco, Lima, Junín, Ica and Huánuco; and
- silver - Junín, Lima, Pasco, Ancash and Arequipa.
Legal and regulatory structure
Basis of legal system
Is the legal system civil or common law-based?
The Peruvian legal system is civil law-based.
Regulation
How is the mining industry regulated?
The mining industry is mainly regulated by the central government through the Ministry of Energy and Mines (MINEM).
What are the principal laws that regulate the mining industry? What are the principal regulatory bodies that administer those laws? Were there any major amendments in the past year?
Mining activities and industry are regulated by:
- the Peruvian Political Constitution;
- unified text of the General Mining Law;
- Special Administrative Rules and Dispositions; and
- complementary rules granted by MINEM and the Peruvian Civil Code.
The main regulatory entities are:
- MINEM;
- the Geological Mining and Metallurgical Institute (INGEMMET); and
- the National Environmental Certification (SENACE), authority in charge of the approval of category III detailed environmental impact assessments, which refers to mining projects whose execution could cause significant negative impacts on the environment.
Classification system
What classification system does the mining industry use for reporting mineral resources and mineral reserves?
The Code of Standards for Reporting Mineral Resources and Reserves issued by the Lima Stock Exchange is based on the principles and content of the Australian Joint Ore Reserves Committee Code, the South African Mineral Reporting Codes and the Canadian Institute of Mining, Metallurgy and Petroleum Standards.
The classification adopted by the aforementioned Code in order to report mineral resources is the following: inferred mineral resource; indicated mineral resource; and measured mineral resource.
The classifications adopted by the aforementioned Code in order to report mineral reserves are probable mineral reserves and proved mineral reserves.
Mining rights and title
State control over mining rights
To what extent does the state control mining rights in your jurisdiction? Can those rights be granted to private parties and to what extent will they have title to minerals in the ground? Are there large areas where the mining rights are held privately or which belong to the owner of the surface rights? Is there a separate legal regime or process for third parties to obtain mining rights in those areas?
The Peruvian state is the owner of natural resources, which include minerals, therefore the Peruvian state owns the mining rights. Exploration, use and exploitation of mining rights can be granted to private parties, through the regime of mining concessions. Mining concessions have the nature of immovable goods.
Mining concessions constitute a different right from surface land over them. Owners of surface lands are not authorised to perform mining activities on them, unless they have a valid mining concession title granted by the INGEMMET.
Publicly available information and data
What information and data are publicly available to private parties that wish to engage in exploration and other mining activities? Is there an agency which collects mineral assessment reports from private parties? Must private parties file mineral assessment reports? Does the agency or the government conduct geoscience surveys, which become part of the database? Is the database available online?
INGEMMET is the governmental entity that runs the mineral concessions cadastre providing complete public information regarding mining concessions. Information held by INGEMMET is public and available through its website.
Title holders of mining concessions shall submit a consolidated annual declaration to MINEM providing information regarding the activities performed. Information submitted is used to create statistics on mining activities on Peruvian territory.
Acquisition of rights by private parties
What mining rights may private parties acquire? How are these acquired? What obligations does the rights holder have? If exploration or reconnaissance licences are granted, does such tenure give the holder an automatic or preferential right to acquire a mining licence? What are the requirements to convert to a mining licence?
Persons or entities are entitled to request mining rights. The General Mining Law establishes four different types of mining rights as follows:
- a mining concession grants rights to execute mining activities of exploration and exploitation - it has the nature of an immovable right;
- a beneficiation concession grants the right to perform physical, chemical and physical-chemical processes to concentrate minerals or to purify, smelt or refine metals;
- a general labour concession grants the right to perform auxiliary mining services or activities such as ventilation, drainage, lifting or extraction to mining activities; and
- a mineral transportation concession grants the right to provide massive and continuous transport of mineral products by unconventional methods.
Title holders of mining concessions shall pay validity fees to INGEMMET. The amount of such a fee depends on the condition of the titleholders (small, artisanal or general regime).
Small title holders are entities or persons holding concessions in an area of less than 2,000 hectares with no more than 350 metric tonnes of production per day and must pay a validity fee of US$1 per hectare; artisanal titleholders are entities or persons holding concessions in an area of less than 1,000 hectares with no more than 25 metric tonnes of production per day and must pay a validity fee of US$0.50 per hectare. The general regime applicable to titleholders for entities or persons who do not qualify as small or artisanal and the fees are US$3 per hectare. Validity fees must be paid annually to maintain mining concessions in force. The non-compliance of validity fee payment for two consecutive years results in the extinction of the mining concession.
The Mining Law obliges mining concessions holders to move into production. Holders shall reach a minimum annual production (MAP) established by the General Mining Law. Nowadays, there are two MAP regimes, depending on the date of the mining concession title. However, in 2017, the Peruvian government decided to regulate only one regime for all types of mining concession. In this context, according to Legislative Decree No. 1320, from 2019 holders of mining concessions will be required to reach a minimum annual production, equivalent to one tax unit (approximately US$1,250) per year per hectare. If the holder of a mining concession cannot reach the minimum annual production in the first quarter of the 11th year from the year in which the concession was granted, the holder will be required to pay a penalty equivalent to 2 per cent of the applicable minimum production per year per hectare until the 15th year. If the holder cannot reach the minimum annual production in the quarter of the 16th year from the grant year of the concession, the holder will be required to pay a penalty equivalent to 5 per cent of the applicable minimum production per year per hectare until the 20th year. If the holder cannot reach the minimum annual production in the first quarter of the 20th year from the grant year of the concession, the holder will be required to pay a penalty equivalent to 10 per cent of the applicable minimum production per year per hectare until the 30th year. Finally, if the holder cannot reach the minimum annual production during this period, the mining concessions will automatically expire. Holders of mining concessions that were granted before 2008 will be obliged to achieve MAP from 2019.
Renewal and transfer of mineral licences
What is the regime for the renewal and transfer of mineral licences?
The mining concession must be maintained by paying validity fees and complying with the corresponding minimum production, when appropriate (see question 10).
Transfer of mining concessions can be done by private civil agreements regulated by terms freely agreed. The main principle that rules commercial transactions in Peru is ‘contractual freedom’; therefore, there are no limitations to the transfer of mining concessions.
On the other hand, regarding the transfer of authorisation to the environmental permits and commencement of mining operations (exploration and exploitation), it is considered as an inherent right to the mining concession. Therefore, once the mining concession is transferred, the permits and authorisation are transferred to the new titleholder. The new holder must communicate the transfer to MINEM. Notwithstanding the aforementioned, in order to simplify the permits transfer, the Peruvian government approved a law that regulates that in cases of a simple merger, split or reorganisation, all records, certificates, permits, licences and authorisations obtained or in process, will be automatically transferred to the (new) company that receives the patrimonial block. This provision shall not apply to permits whose special regulations prohibit their transfer, such as water permits and the registration of chemical inputs and taxable goods.
Duration of mining rights
What is the typical duration of mining rights?
According to the General Mining Law the mining concession is irrevocable as long as the titleholder fulfils the legal obligations required to maintain it in force. However, the titleholder shall comply with all the obligations in order to maintain the mining concession valid (see question 10). The General Mining Law provides that mining concessions can be extinguished only by:
- expiration (as a consequence of a failure by a titleholder to pay the mining validity fee and/or penalties for two years (consecutive or not));
- abandonment (as a consequence of the breach of the mining procedure rules applicable to a mining claim);
- nullity (in case a mining concession was claimed by an individual or entities that have restrictions according to the mining law);
- resignation (in case the titleholder requests the extinction of the mining right); and
- cancellation (in case mining concession overlaps with priority rights or when the right is unassailable).
Acquisition by domestic parties versus acquisition by foreign parties
Is there any distinction in law or practice between the mining rights that may be acquired by domestic parties and those that may be acquired by foreign parties?
According to the Constitution, foreigners have exactly the same rights as Peruvians. The only exception is in the case of foreigners intending to acquire mining rights or properties located within 50km of the Peruvian border - in such a case, they will not be able to acquire properties or mining rights unless they previously receive express authorisation through a Supreme Decree.
Protection of mining rights
How are mining rights protected? Are foreign arbitration awards in respect of domestic mining disputes freely enforceable in your jurisdiction?
According to the Constitution, Peru has an independent judicial system based on independence of powers. Notwithstanding, a party can freely elect to submit its controversies to local or international private arbitration.
The Peruvian state is party to the:
- the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958;
- the Inter-American Convention on International Commercial Arbitration 1975 (Panama Convention); and
- the Inter-American Convention on the Extraterritorial Effectiveness of Foreign Arbitral Judgements and Awards 1979 (Montevideo Convention).
The above conventions guarantee the recognition and enforcement of foreign arbitral awards in Peru.
Surface rights
What types of surface rights may mining rights holders request and acquire? How are these rights acquired? Can surface rights holders oppose these requests?
Titleholders of mining concessions can freely acquire surface lands located over its mining concessions.
In the case of surface lands owned by native communities, it will be necessary to obtain approval from the community through an agreement approving the transaction by a qualified majority of the community.
For the purchase of surface lands owned by the government, it is necessary to follow an acquisition process with the Peruvian state through the Superintendency of National Properties.
Participation of government and state agencies
Does the government or do state agencies have the right to participate in mining projects? Is there a local listing requirement for the project company?
In accordance with the Constitution, the Peruvian state has a promotional role to develop private investments. In a subsidiary way, the Peruvian government, through a special law, can be entitled to perform business activities (including mining).
Government expropriation of licences
Are there provisions in law dealing with government expropriation of licences? What are the compensation provisions?
According to the Constitution, property rights are inalienable (Peruvian Civil Code mining rights have the same status as property). Private parties may be expropriated of their rights only in the case of an event of national security or public necessity duly declared by special law. In those specific cases, the Peruvian state must pay a fair appraised compensation for the expropriated property.
Protected areas
Are any areas designated as protected areas within your jurisdiction and which are off-limits or specially regulated?
Investors interested in developing mining activities in Peru must respect protected areas appointed by the Peruvian government. The treatment of protected areas has special regulation according to their nature.
Duties, royalties and taxes
Duties, royalties and taxes payable by private parties
What duties, royalties and taxes are payable by private parties carrying on mining activities? Are these revenue-based or profit-based?
Income tax
Corporate income tax
Companies incorporated in Peru are considered domiciled for income tax (IT) purposes and, therefore, subject to a 29.5 per cent rate on net worldwide income; while the branches of foreign companies are only subject to IT on their Peruvian source income. The income tax for a domiciled company is known as corporate income tax (CIT).
To calculate the taxable basis, domiciled companies are entitled to deduct expenses, to the extent that they are necessary to produce income or to maintain its source. Additionally, there are certain limits and/or caps for the deduction of certain expenses, such as finance costs (thin capitalisation rules apply), provisions for bad debts, salaries and travel expenses, among others.
Dividends and any other type of profit distribution are subject to a 5 per cent withholding tax. The previous rates (4.1 per cent or 6.8 per cent) shall be applied on retained earnings, depending on the fiscal year the profits were generated.
Withholding income tax
Non-domiciled companies are subject to a withholding income tax in Peru on Peruvian-source income, on a gross basis.
The tax rates for non-domiciled entities are the following:
|
Name |
Witholding tax rate |
|
Other incomes |
30 per cent |
|
Interest |
4.99 per cent (as long as certain requirements are fulfilled) 30 per cent (all others) |
|
Dividends |
5 per cent |
|
Royalties |
30 per cent |
|
Services fees |
30 per cent (general and digital services) 15 per cent (technical assistance, provided certain conditions are met) |
Mining tax regime
From October 2011, the mining royalty was modified and two new mining taxes came into effectthe special mining tax (IEM) and the special mining contribution (GEM). The mining royalty, the IEM and the GEM are economic considerations paid to the Peruvian government for the exploitation of mineral resources. Note that the mining royalty includes metallic and non-metallic mineral resources, while the IEM and the GEM only include metallic mineral resources. The GEM is only applicable to the mining companies that have valid tax stability agreements. These companies will voluntarily sign contracts with the Peruvian government for the payment of said charge, which must be determined by each stability agreement that they maintain.
The payment obligation of the mining royalty, IEM and GEM falls due at the closing of each quarter (January-March, April-June, July-September and October-December), and the basis of calculation is the operating profit or the sales revenue of the quarter (in the case of the mining royalty).
The operating profit is obtained by deducting from the revenue generated from the sales of mineral resources of each quarter, the sales cost, the operating expenses (including selling expenses and administrative expenses) incurred in order to be able to generate said revenue. Said expenses and costs must be at market value.
Within the past 12 business days of the second month following the generation of the obligation, mining companies must present a quarterly declaration (January-March, April-June, July-September and October-December) and make payment of the corresponding mining royalty, IEM and GEM. Said declaration must determine the basis for calculating the mentioned contributions.
The amounts paid for mining royalty, IEM and GEM will be considered as an expense for IT purposes in the period in which they were paid.
They are calculated as follows:
|
Name |
Base |
Tax rate (range) |
|
Mining royalty |
Operating profit (minimum 1 per cent of sales) |
1-12 per cent |
|
Special mining tax |
Operating profit |
2-8.4 per cent |
|
Special mining contribution |
Operating profit |
4-13.12 per cent |
Temporary tax on net assets
Companies subject to corporate IT are obligated to pay the temporary tax on net assets (ITAN). This tax is levied on the net asset value contained in the balance sheet as of 31 December of the previous period to which the payment corresponds, deducting the depreciations and amortisations permitted by law. A company is subject to the ITAN as of the year after it starts its activities:
|
Rate |
Net assets |
|
0 per cent |
Up to 1 million soles |
|
0.4 per cent |
More than 1 million soles |
The amount paid for ITAN is a credit that will be offset against the advanced IT payment or the annual IT regularisation payment. Any remaining balance can be reimbursed by the tax administration.
Financial transaction tax
Financial transaction tax (ITF) obligations paid through cash payments of amounts greater than 3,500 soles or US$1,000 must be made through bank accounts or deposits, bank transfers, payment orders, credit cards or non-negotiable cheques, among other means of payment provided by the entities of the Peruvian financial system.
Any obligation that is not carried out using these methods prevents the deduction of the expense or the recognition of the cost for tax purposes, and prevents the recognition of tax credits (ie, VAT). Additionally, the ITF is applied, among other transactions, to all debits or credits in bank accounts maintained by the taxpayers. The applicable tax rate is 0.005 per cent. Certain operations are exempt from the ITF, such as the operations between accounts of the same account holder, credits or debits in bank accounts opened at the request of the employer exclusively to be able to deposit the salaries of its employees, credits or debits in bank accounts of severance payments.
ITF is deductible as an expense for IT purposes.
Valued added tax
Value added tax (VAT) is levied on the following operations at a rate of 18 per cent:
- sale of real property within Peru;
- services provided within Peru;
- importing services (services economically used within Peru);
- importing goods;
- construction contracts; and
- the first sale of a real property made by the constructor.
The VAT Law follows a debit or credit system by which the VAT paid in the purchase of goods and services can be used as a credit against the VAT originated by the future taxed operations. Any VAT credit that is not used within a determined month can be carried forward (at historical values) to be used against the VAT of future operations. It must be taken into account that the return of VAT in cash is only available for exporters and some entities in the pre-operating stage, as long as certain conditions are met.
Tax advantages and incentives
What tax advantages and incentives are available to private parties carrying on mining activities?
Early VAT recovery
To promote investment in the mining industry, a VAT recovery regime has been established for the holders of mining concessions that have not begun operations and are in the exploration stage. In addition to this regime, exclusively applicable to the mining industry, there is a regime of early recovery of the VAT applicable to any industry (including the mining industry) for companies in the pre-operating stage (for example, in the construction stage).
The following regimes are applicable to mining companies in the exploration and pre-operating stage:
- VAT recovery regime for mining companies in the exploration stage; and
- VAT early recovery regime for companies in the pre-operating stage.
Tax depreciation
There is a special depreciation annual rate for mining companies with a stability agreement of up to 5 per cent for buildings and up to 20 per cent for other fixed assets.
Also, for mining companies with or without a stability agreement, the tax depreciation for machinery and equipment for mining activities is up to 20 per cent.
Works for taxes
In 2008, the Works for Taxes regime came into effect. Companies have the option to pay part of their taxes through the execution of regional infrastructure works in some of the poorest regions of the country. For these purposes, companies must comply with certain conditions, such as signing agreements with the regional and local governments, and obtaining an authorisation from the Private Investment Promotion Agency (ProInversion) for listed or new projects. The amount invested by the company can be used as tax credit of up to 50 per cent of its IT from the previous fiscal year. This regime will generate benefits for private companies and for the government.
Tax stablisation
Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?
Stability agreement
Investors can sign stability agreements with the Peruvian government, whether under the special regime or under sectorial regimes (ie, mining and oil).
Legal stability agreements
Under the general regime, investors can sign legal stability agreements that guarantee the following rights for a 10-year period:
- stability of the current IT regime at the time of the signing of the agreement, with regard to dividends and profit sharing;
- stability of the monetary policy of the Peruvian government, according to which there is an absence of exchange controls, foreign currency can be acquired or sold freely at any type of exchange rate offered by the market, and funds (remittances) can be sent abroad without requiring prior authorisation; and
- the right of non-discrimination between foreign and local investors.
Tax stability agreements for mining companies
Under the mining regime, local mining companies can sign stability contracts and guarantees and investment promotion measures that guarantee the following for 10, 12 or 15 years:
|
Term stability |
Minimum investment |
Other requirements |
Possibility to advance stability |
Incentives |
|
10 years |
US$20 million |
An initial capacity of concession no less than 350 tonnes per day or than 5,000 tonnes per day in extensions |
Investment period of no more than three consecutive years |
|
|
12 years |
US$100 million US$250 million in current mining entities (as an exception) |
An initial capacity of concession no less than 5,000 tonnes per day or than 5,000 tonnes per day in extensions |
Investment period of no more than eight |
This agreement includes the incentives aforementioned for a 10-year term of stability and the accounting books can be expressed in US dollars or in the currency in which the investment was made |
|
15 years |
US$500 million (as an exception) |
An initial capacity of concession no less than 15,000 tonnes per day or than 20,000 tonnes per day in extensions |
Investment period of no more than eight consecutive years |
This agreement includes the incentives aforementioned for a 12-year term of stability and the mining investor is entitled to apply a global depreciation rate of 20 per cent for its personal property (moveable assets) and 5 per cent for real estate (buildings and constructions) |
Carried interest
Is the government entitled to a carried interest, or a free carried interest in mining projects?
According to Peruvian regulations, the government is not entitled to carry interest in mining projects.
Transfer taxes and capital gains
Are there any transfer taxes or capital gains imposed regarding the transfer of licences?
As a mining concession qualifies as immovable property, separate and distinct from the premises where it is based, the income derived from the transfer of a mining licence generates a capital gain that is subject to IT, as follows:
- individuals - effective rate of 5 per cent IT; and
- companies or any other entities subject to CIT - 29.5 per cent CIT.
Distinction between domestic parties and foreign parties
Is there any distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign parties?
According to the Peruvian Constitution, there is no differential treatment of Peruvian and foreign investors.
Business structures
Principal business structures
What are the principal business structures used by private parties carrying on mining activities?
The most used business structures are the sociedades anónimas (SA) corporation and limited liability company (SRL) regulated by Peruvian corporate law.
There are three types of corporation in which stock capital is divided into shares, as follows:
- typical corporation (SA) where a board of directors is mandatory;
- closed corporation (SAC), under which legal form the board of directors is merely optional; and
- open corporation (SAA), which shall list its shares in the stock exchange public registry. A board of directors is mandatory.
SRLs and joint-venture agreements are business structures commonly used by mining companies, and are described as follows:
- a limited liability company whose stock capital is not represented in shares but in quotas; and
- a joint-venture agreement, which is intended to create a common business platform for its parties for a determinate or indeterminate period without generating an independent entity from its parties.
Local entity requirement
Is there a requirement that a local entity be a party to the transaction?
No.
Bilateral investment and tax treaties
Are there jurisdictions with favourable bilateral investment treaties or tax treaties with your jurisdiction through which foreign entities will commonly structure their operations in your jurisdiction?
The Peruvian government has subscribed to free trade agreements with the following countries and groups - the Andean Community, Canada, Chile, China, Costa Rica, Cuba, the European Union, Honduras, Japan, Mercosur, Mexico, Panama, Singapore, South Korea and the United States, and it is currently negotiating others with El Salvador and Turkey.
Peru has signed double taxation relief agreements with Brazil, Canada, Chile, Mexico, Portugal, South Korea and Switzerland. In addition, Peru belongs to the Andean Community of Nations, which also includes Bolivia, Colombia and Ecuador. These countries also have a valid double taxation relief agreement (Decision 578), which follows the United Nations model.
Financing
Principal sources of financing
What are the principal sources of financing available to private parties carrying on mining activities? What role does the domestic public securities market play in financing the mining industry?
The principal sources of financing for mining activities are the private banking system and the public stock market (Lima Stock Exchange, BVL).
During the past few years, the BVL has been very active and attractive, listing junior mining companies, whereby several Peruvian investors had participated in the negotiation and creation of the price of shares and have actively been participating in different private or public placements made by such companies.
Direct financing from government or major pension funds
Does the government, its agencies or major pension funds provide direct financing to mining projects?
The Peruvian government has an increasing interest in financing mining projects with proven mineral reserves.
In addition, private pension funds are allowed by law to acquire equity and debt instruments from mining companies as long as these companies are at the operating stage and have proper risk classifications.
Security regime
Please describe the regime for taking security over mining interests.
Mining concessions are considered immovable goods in Peru. In this regard, a security interest can be granted in favour of any third party through a mining mortgage. Such mining mortgage must be registered on the Mining Public Registry to be valid. Pledges are not applicable to mining concessions given that this kind of security only applies for movable goods. However, it is possible to grant pledges over the minerals extracted by the mining concessions.
Restrictions
Importation restrictions
What restrictions are imposed on the importation of machinery and equipment or services required in connection with exploration and extraction?
There are no trade restrictions (neither import nor export) of machinery and equipment required for mining activities. However, the Peruvian government - in order to limit illegal mining - regulates certain prohibitions to operators of small and artisanal mining. As a consequence of this, operators that develop small and artisanal mining are completely forbidden to acquire and use certain machinery and equipment such as dredges, front-loaders, dumper trucks and, in general, assets used to execute illegal mining activities.
Standard conditions and agreements
Which standard conditions and agreements covering equipment supplies are used in your jurisdiction?
Peruvian law does not require standard conditions for equipment supply. Notwithstanding this, any equipment supply shall be included in the company mining plan. Peru is friendly towards buyers because the Peruvian government safeguards and promotes investment. In the event of any dispute resolution in equipment supply agreements, as is established in question 14, parties can appeal to the judicial system; or in the case that the parties have agreed, submit the disputes to local or international private arbitration.
Mineral restrictions
What restrictions are imposed on the processing, export or sale of minerals? Are there any export quotas, licensing or other mechanisms that prevent producers from freely exporting their production?
Mineral commercialisation is free and does not require authorisation. Only entities dedicated to processing and trading gold are obliged to be registered in the Registry of Traders and Processors of Gold administrated by MINEM.
Import of funds restrictions
What restrictions are imposed on the import of funds for exploration and extraction or the use of the proceeds from the export or sale of minerals?
There are no restrictions on the importation of funds or investment for exploration, extraction, export or sale of minerals to any national or foreign private party. The Peruvian state encourages national and foreign investment and establishes that production of goods and services and foreign trade are exempt from restrictions.
Environment
Principal applicable environmental laws
What are the principal environmental laws applicable to the mining industry? What are the principal regulatory bodies that administer those laws?
The principal environmental laws are the following:
- Law No. 28611 (General Environmental Law);
- Law No. 27446 (Law of the National System of Environmental Impact Assessment);
- Supreme Decree No. 042-2017-EM (Environmental Regulation for Mining Exploration Activities); and
- Supreme Decree No. 040-2014-EM (Regulation of Protection and Environmental Management for the Activities of Exploitation, Benefit, General Labour, Transport and Mining Storage).
The principle regulatory bodies that administer these laws are MINEM, the Assessment and Environmental Control Agency (OEFA), SENACE and regional governments as an environmental controlling entity.
Environmental review and permitting process
What is the environmental review and permitting process for a mining project? How long does it normally take to obtain the necessary permits?
To initiate mining activity, the titleholder must have in force the corresponding environmental certification, as well as the licences, authorisations and permits established under current legislation.
The environmental certification is classified into the following categories:
- an environmental impact statement includes the projects where execution will not generate significant negative impact in the environment. This environmental certification is obtained automatically;
- a semi-detailed environmental impact study includes the projects where execution can cause a moderate environment impact for which negative effects can be eliminated or minimised through the adoption of simple applicable measures. To obtain this environmental certification could take between six to eight months; and
- a detailed environmental impact study, which includes the projects where characteristics, scope and location could produce significant environment impact requiring a deep analysis of said impacts. To obtain this environmental certification could take a year.
Closure and remediation process
What is the closure and remediation process for a mining project? What performance bonds, guarantees and other financial assurances are required?
Peruvian regulation establishes the mining closure plan as an environmental management tool formed by the technical and legal actions that the titleholder must perform to establish all the measures to remediate the area used for mining activity to restore the necessary characteristics to establish a healthy environment.
The titleholder of the mining activity will submit the mining closure plan to MINEM for its approval. This mining closure plan will establish the studies, actions and site management to reduce and eliminate, where possible, all the contaminant effects that would harm the population and the ecosystem. This plan is to be executed in a progressive way during the lifespan of the mining operation.
The titleholder of the mining activity must establish securities in favour of the competent authority to cover the costs of rehabilitation measurements for the periods of final closure and post-closure of the mining activity.
Restrictions on building tailings or waste dams
What are the restrictions for building tailings or waste dams?
The restrictions for building tailings are established in Supreme Decree No. 040-2014 (Regulation for Protection and Environmental Management for Exploitation, Benefit, Overall Work, Transport and Mining Storage Activities). The restrictions are:
- the control and management of emissions of particulate material in all the stages of the process;
- the control and management of reagents; and
- to prioritise the circulation of water to optimise the final disposition, etc.
After the construction of the building tailing, the OEFA can undertake checks at any time, which may be previously advised or without advice.
In Peru, a mandatory alarm system and emergency drills with the local community have not yet been implemented.
The mining companies and authorities’ responsibility regarding the rescue of people in case of a dam failure could be civil, criminal and/or administrative, as applicable.
Health & safety, and labour issues
Principal health and safety, and labour laws
What are the principal health and safety, and labour laws applicable to the mining industry? What are the principal regulatory bodies that administer those laws?
The principal health, safety and labour laws on mining activities are:
- Supreme Decree No. 014-92-EM (Unified Text of the General Mining Law);
- Supreme Decree No. 030-89-TR (Minimum Salary for Mining Employees);
- Supreme Decree No. 031-89-TR (Mining Employee Holiday);
- Supreme Decree No. 055-89-TR (Mining Employee Holiday Additional Regulations);
- Law No. 25009 (Mining Employees Retirement Law);
- Supreme Decree No. 029-89-TR (Regulation of Mining Workers’ Retirement Law);
- Supreme Decree No. 003-97-TR (Productivity and Competitiveness Labour Law);
- Supreme Decree No. 001-96-TR (Regulation of the Productivity and Competitiveness Labour Law);
- Supreme Decree No. 055-2010-EM (Safety and Health Regulation in Mining Activities);
- Law No. 29783 (Safety and Health in Labour Law);
- Supreme Decree No. 005-2012-TR (Regulation of the Safety and Health in Labour Law);
- Supreme Decree No. 010-2003-TR (Collective Labour Relations Law); and
- Supreme Decree No. 024-2016-EM (Regulation of Occupational Health and Safety in Mining Activities).
The principal regulatory bodies are:
- the Supervisory Agency for Investment in Energy and Mining;
- MINEM;
- the Labour Ministry; and
- the National Superintendency of Labour Inspection (SUNAFIL).
SUNFIL supervises the safety and occupational health obligations following the provision stablished by the Superintendency Resolution No. 151-2017-SUNAFIL (Protocol for the Control in Matters of Security and Health in the Workplace in the Sub-Sector of Mining).
Management and recycling of mining waste
What are the rules related to management and recycling of mining waste products? Who has title and the right to explore and exploit mining waste products in tailings ponds and waste piles?
The principal rules related to the management and recycling of mining waste are as follows:
- Law No. 28271 that regulates the mining environmental liabilities; and
- Supreme Decree No. 059-2005-EM (Law Regulation of the Mining Environmental Liabilities).
According to these regulations, generators of environmental liabilities as well as third parties may re-use tailings or waste piles. For such purposes, it is necessary to obtain an Environmental Impact Study approved by the Mining Ministry. Also, it is necessary to have title over the mining concession.
Use of domestic and foreign employees
What restrictions and limitations are imposed on the use of domestic and foreign employees in connection with mining activities?
From 1 January 2015, companies with 50 or more employees have to employ disabled people equating to 3 per cent of their total personnel and are subject to audit every other year (Law No. 29973, article 41, section 1 of the General Law of Persons with Disabilities).
For domestic employees, Peruvian labour law presumes that every labour relationship is permanent, unless the proven to the contrary. Despite this presumption, employees can be hired by means of fixed-term contracts in the cases established by law. In some cases, they can be extended for a maximum of five years. Legal benefits and labour conditions are generally the same for all employees, regardless of their type of employment contract.
In the mining sector, the minimum wage of a mining worker cannot be less than the amount resulting from applying an additional 25 per cent to the legal minimum income.
Foreign employees have generally the same rights as Peruvian workers, but their hiring is subject to special rules. Foreign employees cannot exceed 20 per cent of the total personnel of the company and their salaries cannot exceed 30 per cent of the total payroll of the company, unless they are included in one of the legal exemptions (eg, technical or specialised personnel).
In addition, some foreign citizens shall not be considered ‘foreigners’ for labour purposes (eg, if they are married to Peruvians, are nationals of countries that have signed a treaty on labour reciprocity with Peru or have dual nationality).
Social and community issues
Community engagement and CSR
What are the principal community engagement or CSR laws applicable to the mining industry? What are the principal regulatory bodies that administer those laws?
The main community engagement laws are rural community law, civil participation law and prior consultation law (based on the Indigenous and Tribal Peoples Convention (ILO Convention 169).
The principal regulatory entities are MINEM and the Ministry of Culture.
Rights of aboriginal, indigenous or disadvantaged peoples
How do the rights of aboriginal, indigenous or currently or previously disadvantaged peoples affect the acquisition or exercise of mining rights?
The protection of rights of indigenous and tribal people do not affect the acquisition or exercise of mining rights. However, the Peruvian government has adopted the ILO Convention 169 by which titleholders shall consult indigenous communities domiciled in areas located in projects on previous matters. The government controls the process of prior consultation.
International law
What international treaties, conventions or protocols relating to CSR issues are applicable in your jurisdiction?
The Peruvian government has approved the International Organization for Standardization’s ISO 2600, which is the first guide regarding social responsibility applicable to every organisation, company and state.
Also, the Peruvian government has ratified several conventions, such as:
- the ILO Convention 169;
- the Convention of Technical Cooperation with the Inter-American Development Bank for the Regularisation of Indigenous Reserves Insulation Project; and
- the International Covenant on Economic, Social and Cultural Rights.
Anti-bribery and corrupt practices
Local legislation
Describe any local legislation governing anti-bribery and corrupt practices.
Peruvian legislation establishes that any person who in any form offers, gives or promises a public official or public servant a donation, advantage or benefit to perform or omit acts in violation of their obligations, will be punished with imprisonment. In addition, in order to avoid corrupt practices in the public sector, the Peruvian government has approved the sentence of civiliter mortuus for public officials or public servants who are accused and convicted of corrupt practices. Likewise, for the private sector, entities will assume a major administrative responsibility.
Foreign legislation
Do companies in your country pay particular attention to any foreign legislation governing anti-bribery and foreign corrupt practices in your jurisdiction?
Peruvian companies are not obliged to comply with foreign legislation that governs anti-bribery and foreign corrupt practices. However, if the parent company is incorporated and governed by such foreign legislation, it is very common that they apply these rules into their Peruvian subsidiary by internal policies or guidelines (eg, the Foreign Corrupt Practices Act of 1977 is applied to Peruvian subsidiaries as internal guidelines by mandate of the parent companies that are listed on New York Stock Exchange).
On 8 January 2019, the Regulation of Law No. 30424, the law that regulates the liability of entities, was published through Supreme Decree No. 002-2019-JUS. According this regulation, if entities have no crime prevention model, and some of its members incur in the commission of the aforementioned crimes for the benefit of the entity, this may be sanctioned with fines, disqualification to contract with the state, temporary closure, etc.
Disclosure of payments by resource companies
Has your jurisdiction enacted legislation or adopted international best practices regarding disclosure of payments by resource companies to government entities in accordance with the Extractive Industries Transparency Initiative (EITI) Standard?
Yes. Supreme Decree No. 028-2011-EM set up the special commission in charge of gathering information, supervision and monitoring the transparency and use of resources and tax revenues obtained from extractive industries. The Decree also regulated the actions needed for the implementation and development of the EITI in Peru.
In February 2012, the EITI board designated Peru as a compliant country.
Foreign investment
Foreign ownership restrictions
Are there any foreign ownership restrictions in your jurisdiction relevant to the mining industry?
There are no foreign restrictions regarding ownership and investment in the mining industry. The Peruvian state promotes and encourages mining activity across all its territory, establishing the same restrictions and regulations to any private, national or foreign party. The only limitation that foreigners have are those related to the acquisition of properties or concessions located within 50km of the Peruvian border (see question 13).
International treaties
Applicable international treaties
What international treaties apply to the mining industry or an investment in the mining industry?
In order to consolidate an appropriate legal framework for the promotion of foreign investment, Peru is a member of:
- the Multilateral Investment Guarantee Agency;
- the International Centre for Settlement of Investment Disputes; and
- the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and has more than 32 bilateral agreements with countries in Asia, Europe and Latin America.
