Thursday, August 23, 2012

The Mining industry in Peru

 

Mining industry

1 What is the nature and importance of the mining industry in your country

Peru is the second largest producer of silver, zinc and tin, the third largest producer of copper, the fourth of lead and the fifth of gold. In addition, Peru holds third place in the global gold reserves, with

8.3 per cent (Source: US Geological Survey). Peru’s mining industry contributes to the country’s economy with close to 60 per cent of total exports. Moreover, recent economic studies reveal that the mining industry accounts for almost a third of the GDP.

Today, Peru can claim to have several of the most productive and modern mines in the world, and yet still has an enormous potential for growth. Recently, new mines have entered into production and the existing mines have increased their exports of minerals

2 What are the target minerals?

The most important target minerals within the metallic minerals are gold, silver, copper, lead, zinc and tin.

3 Which regions are most active?

The region that is the most active exporter is Ancash, with shipments of US$1.687 million, 41 per cent more than in the first six months of last year (US$ 1, 195.9 million) followed by Arequipa, which recorded an increase of 91 per cent (US$1,603.4 million), based on shipments of copper ores and concentrates which grew by 92 percent, thereby contributing 49 per cent of the total. The third most active mining department is Ica, followed by Moquegua and La Libertad.

Legal and regulatory structure

4 Is the legal system civil or common law-based?

The Republic of Peru is a unitary state under the civil law system. However, in accordance with the Natural Resources chapter of the Peruvian Constitution, mineral resources are the property of the nation and the Peruvian state is sovereign in their administration. The government may establish by law the conditions for granting exploitation rights and titles to individuals and legal entities

5 How is the mining industry regulated?

The Peruvian territory is divided into regions, departments, provinces and districts, within which jurisdictions the unitary government is executed in a decentralized and non-concentrated manner. There are three layers of administrative authorities: central government; regional governments; and local governments.

The main provisions regarding the execution and development of mining activities in Peru are established in the Single Revised Text of the General Mining Law approved by Supreme Decree 014-92- EM (General Mining Law). The mining industry is divided into four segments according to production and beneficiation capacity. Mining rights for the medium and large-scale segments of the industry are granted through a system that is administered by central government. Mining rights for the small-scale and artisanal segments are granted through systems that are administered by each region. Therefore, the mining industry is regulated by both central government and regional governments.

6 What are the principal laws that regulate the mining industry? What are the principal regulatory bodies that administer those laws

The principal laws that regulate mining activities are:

• the Peruvian Constitution, enacted in 1993;

• the Organic Law of Sustainable Use of Natural Resources, Law 26821;

• the General Mining Law, Single Revised Text approved by Supreme Decree 014-92-EM;

• the Regulations for the General Mining Law, Supreme Decree 03-94-EM; and

• the Regulations for Mining Procedures, approved by Supreme Decree 018-92-EM.

Likewise, the main international agreements to which Peru is a party that might directly affect mining activities are:

• the Convention Concerning Indigenous and Tribal Peoples in Independent Countries, C169; and

• free trade agreements entered into between Peru and important mining investor countries.

The principal regulatory bodies that administer those laws are the Ministry of Energy and Mines, the Environmental Supervisory and Enforcement Agency (OEFA), among others, depending the sector involved.

7 What classification system does the mining industry use for reporting mineral resources and mineral reserves?

The mining concessionaires are required to report mineral resources and reserves to the Ministry of Energy and Mines (MEM) through the Annual Consolidated Statement (DAC). The DAC format was created by the MEM and does not follow any international system.

However, the Venture Exchange of the Lima Stock Exchange (BVL) has approved the JORC Code (Australia). The purpose of this code is to standardise the criteria and guidelines to follow in the preparation of geological reports to be submitted by junior compa- nies for listing in the BVL Register, which are distributed for market information.

Mining rights and title

8 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 performance of geological surveys, prospecting and commercialization activities do not require any special governmental authorization other than compliance with general environmental and civil laws related to surface land access.

Also, exploration, exploitation, beneficiation, general mining labour and mining transport activities can only be performed by individuals or legal entities that have obtained a concession. Con- cessions are granted for an established territory and therefore new concessions must be obtained when activities are to be carried out in different areas. In that context, parties wishing to perform the above mentioned activities must procure the awarding of one or more of the following:

• a mining concession;

• a beneficiation concession;

• a general mining labour concession; or

• a mining transport concession.

An exploration and exploitation concession (mining concession) is granted for a minimum of 100 hectares and a maximum of 1,000 hectares. A mining concession qualifies as an in rem right to the extent that its holder fulfils the obligations required to maintain its validity. The concession grants the holder the right to explore and exploit mineral resources within a space of indefinite depth, limited by vertical planes corresponding to the sides of a square, rectangle or closed polygon, whose vertices are referred to Universal Transversal Mercator (UTM) coordinates. A mining concession does not grant its holder rights over surface land. Therefore, concessionaires are required to acquire such surface rights directly from the state or from private parties in order to execute their activities.

A beneficiation concession grants its holder the right to extract or concentrate the valuable part of an aggregate of rootless minerals and to melt, purify or refine metals by means of a set of physical, chemical or physicochemical processes.

A general mining labour concession grants its holder the right to provide ancillary services to two or more mining concessions. Mining concessionaires do not require a general mining labour concession to perform activities within the areas of their own mining concession. This type of concession is aimed at corporations looking to participate in mining activities by rendering services related to exploration and exploitation activities.

A mining transport concession grants its holder the right to install and operate a non-conventional mass continuous transport system for mineral products between one or various mining centers and a beneficiation plant or port, or a refinery or one or more of these

Given the cost of building non-conventional mass continuous trans- port systems such as mineral ducts, mining transport concessions are usually requested directly by mining concessionaires or by a corporation that has already reached an agreement with a mining concessionaire to render transportation services. There is no legal provision in place that forces a mining concessionaire to procure the services of a mining transport concessionaire if one should be near the area of its concession.

 

9 What information and data is 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?

Transparency is a general principle of government in Peru. Under Law 27806, in force since 2002, all information managed by the state is public and free access is granted to every citizen.

This applies equally to legal proceedings relating to the mining industry. Exceptions are established in cases relating to national security or supervision proceedings executed by governmental entities.

The Geological, Mining and Metallurgical Institute (INGEM- MET) has a database with includes the mining rights cadastre, available online (http://geocatmin.ingemmet.gob.pe). Although the database includes geological, geochemistry and geophysics surveys, geological risk assessments, geodynamic studies, satellite images, etc, all of the information that INGEMMET makes available should be used for reference purposes only.

Mining concessionaries must file a monthly report with the MEM, containing information regarding production, details of their activities and investment issues.

10 What mining rights may private parties acquire? How are these acquired? What obligations does the rights holder have? If exploration or reconnaissance licenses are granted, does such tenure give the holder to a preferential right acquire a mining license?

The Peruvian mineral tenure is an administrative system, in opposition to a contractual system where arrangements can be made on a project or investor basis; mineral concessions are granted by application on a first-come first-served basis, in a non-discretionary administrative procedure conducted nationwide.

Mining concessions can be acquired by the following mechanisms: a request made to the relevant mining authority to recognize and grant a new mining concession for an area not previously occupied or, an area which, though previously occupied, is considered free due to non-compliance with legal requirements by a previous concessionaire; or the acquisition of an existing mining concession from a third party.

INGEMMET is the administrative entity in charge of granting mining concessions. The procedure requires a mining claim to be submitted for an area not previously granted or for an area which, having previously been occupied is considered free due to non- compliance with legal requirements by a previous concessionaire. The claim will be accepted if the area is not occupied.

As stated above, investors can also enter the Peruvian mining sec- tor by acquiring concessions that have been already granted. In this context, it is possible to directly acquire one or more concessions, or to buy shares in a mining company. No governmental authorization is required to transfer mining concessions. As in other countries, the execution of mining option and lease agreements (recognized in the General Mining Law) are frequently used in the mining industry. The lessee has the right to perform exploration activities and eventually exercise the option (under a parallel option agreement) to acquire the mining concession.

General obligations applicable to mining concessionaires include the payment of an annual license fee by 30 June of each year in the amount of US$3 per hectare in order to keep the mineral right in good standing as well as a penalty fee if applicable. Failure to pay the license fees for two consecutive years, will result in the forfeiture of the mineral right. In addition, since 11 October 2008, the minimum production of the mineral concession is equivalent to one tax unit per year (approximately US$1,240) per hectare granted for metallic minerals, and 10 per cent of one tax unit (US$124) per year per hectare. Under this penalty regime, the minimum production must be attained no later than the 10th year following the year that title to the mineral concession was granted.

As stated under question 8, the mining concession grants the holder the right to conduct works (explore and exploit) within the internal boundaries of the mineral concession, other than surveying and prospecting.

11 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?

As discussed under question 8, concessions are granted to individuals or legal entities, whether national or foreign, without any distinction or privilege. The only exception is established by the Peruvian Con- stitution, which bans foreigners from acquiring mines, whether indi- vidually or in partnership, directly or indirectly, within 50 kilometres of the borders. The illegal acquisition is considered to be legally void. Exceptionally, through a Supreme Decree approved by the Council of Ministers of State, this prohibition may be withdrawn provided that the matter is considered to be in the public interest. There is nei- ther a specific procedure nor any timeframe in which the Council is requested to deliver its opinion. Also, it is not necessary for a foreign party to have a domestic partner.

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12 How are mining rights protected? Are foreign arbitration awardsin respect of domestic mining disputes freely enforceable in your jurisdiction?

The General Mining Law has designated an administrative authority, called the Mining Council, with jurisdiction to solve administrative problems related to mining rights. The decision of the Mining Coun- cil can be appealed to the judiciary.

In addition, the mining concessionaires have the alternative of resolving private disagreements by arbitration. There are institutions that specialize in arbitration, such as the National Institute of Mining, Oil and Energy (INDEMIPE), which has modern arbitration rules that allow interested parties to submit their disputes to arbitrators with criteria in the areas of interest involved.

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13 What surface rights may private parties acquire? How are these rights acquired?

The owner of the surface land can be a person, a private entity, a farming community, an irrigation project or the state, among others. The right derived from a mineral concession is different and independent from the ownership or any other surface right over the surface land under which it is located.

Mining concessionaires need to negotiate with the surface owner in order to acquire surface rights or enter into a contractual easement that will allow him or her to conduct mining activities, request a mandatory easement to the government in order to conduct mining activities in third parties’ land properties or obtain a right of way that may be required in order to access an area that is blocked by a third party’s land or properties.

14 Are any areas designated as protected areas within your jurisdiction and which are off-limits or specially regulated?

Effectively, there are areas designated by law as protected areas and they are specially regulated. According to the current legislation of natural protected areas, the holders of mining titles are allowed to develop mining activities in the buffer zones of natural protected areas, subject to the implementation of the necessary protection and mitigation measures that prevent negative environmental impacts. The same require the favorable opinion of SERNANP.

The authority is extremely cautious in approving the development of extractive or related activities, as they consider they might result in an imminent threat of significant environmental damage. Nevertheless, under Peru’s legislation, there is no express prohibition to carrying out mining activities in the area.

Duties, royalties and taxes

15 What duties, royalties and taxes are payable by private parties carrying on mining activities? Are these duties, royalties and taxes revenue- based or profit-based?

The most important specific taxes applicable to the mining industry are the mining royalty, special mining tax and special mining burden.

The mining royalty has been in force since 1 October 2011. Mining titleholders are required to pay a mining royalty to the Peruvian government for the exploitation of metallic and non-metallic resources. The amount of the royalty is payable on a quarterly basis and is equal to the greater of an amount determined in accordance with a statutory scale of tax rates based on a company operating profit margin and applied to the company’s operating profit, and 1 per cent of a company’s net sales, in each case during the applicable quarter.

Furthermore, according to the special mining tax in force since

1 October 2011, mining titleholders are required to pay a special mining tax to the Peruvian government for the sale of metallic resources, regardless of the state in which they are sold. The special mining tax payments will be deductible as an expense for income tax purposes in the fiscal year in which such payments are made. This tax is payable on a quarterly basis and is calculated on the basis of the operating profit derived exclusively from the sale of metallic resources. The applicable special mining tax rate (which is between 2 per cent and

8.4 per cent is determined by the quarterly operating profit margin of the company and such a rate is applied to the operating profit derived from the sale of metallic resources.

Finally, since 1 October 2011, mining titleholders who have executed a legal stability agreement and who enter into voluntary agreement with the government are required to pay a special mining burden on a quarterly basis. This will be deductible as an expense for income tax purposes in the fiscal year in which the payments are made. The applicable special mining burden rate (which is between 4 per cent and 13.12 per cent) is determined by the quarterly operating profit margin of the company.

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16 What tax advantages and incentives are available to private parties carrying on mining activities?

Laws and regulations have been enacted to approve regimes and benefits in order to promote investment. The principal aspects of such regimes and benefits are explained below.

Legal stability is given to mining titleholders who sign stability agreements.

The export of goods, such as minerals, is not subject to the VAT and customs taxes.

The regime of balance in favour of the exporter

Exports of goods and services – operations that are not subject to VAT – grant the right to recover the balance in favour of the exporter. In normal conditions, VAT paid for goods and services used in the production process is recovered by the producer applying it against VAT to be paid for the goods and services it produces. However, since VAT is not levied on minerals exported and sold abroad, it is not possible to apply the VAT recovery method described above, so the law provides for the regime of balance in favour of the exporter, under which the exporter can recover the VAT levied on its acquisi- tions intended for the performance of operations levied with VAT or intended for export operations. This VAT can be recovered in the following order of priority:

• by deducting it from the gross tax for the month if taxes have

been levied against the exporter’s internal operations;

• by offsetting it against the exporter’s income tax;

• by offsetting it against any other tax, which is revenue of the Public Treasury (in general terms, central government taxes) and with respect to which the exporter acts as taxpayer; and

• by requesting a refund. The limit of the offset or refund is an amount equivalent to 18 per cent of exports, given that the VAT rate is set at 18 per cent.

Special VAT recovery regimes

There are two special regimes that allow the recovery of the sup- ported VAT, applicable to the mining titleholders who have not started production and who are at the preproduction stage or who, having started production, have a project at preproduction stage. This is very important for a company that may be engaged in a medium or large mining project that requires large purchases of local goods and services upon which VAT is levied and may take over a year or two to complete. The regimes are as follows:

• VAT Early Recovery Regime for companies that have executed agreements with the government for the exploration, development or exploitation of natural resources, governed by Legislative Decree 973. In order to access this regime, the mining company must have a project at preproduction stage and it must have signed a sectorial stability agreement, among others. This regime implies the effective start-up of the production operations, so that if the company does not start such operations as anticipated, it must refund the early recovered amounts to the government; and

• VAT Final Refund Regime for mining titleholders during the exploration phase, governed by Law 27623. In order to access this regime, the mining company, among other requirements, must be fully at the preproduction stage (no project must be at the production stage). This regime is not contingent on the effective start-up of the production operations, so that if the company does not commence operations, it need not refund the amounts earlier recovered from the government. In all these cases, the refund of the VAT is processed by the Peruvian Tax Administration (SUNAT) and the refund is granted through negotiable credit notes, which may be redeemed in order to obtain a non- transferable check or they can be transferred to third parties.

Exemption from municipal taxes in rural areas

Mining concessionaires are exempt from municipal taxes in rural areas (where most mining is carried out).

Investment in infrastructure which constitutes public service

Investments made by the mining titleholders in infrastructure which constitutes public service, will be deductible from taxable income, as long as the investments have been previously approved. Assets whose purpose is to provide housing and welfare in favour of the workers who work in areas that are far away from the populations referred to in the General Mining Law, do not form part of the tax base of the mining titleholders.

Treatment of the costs of concessions and of prospecting, exploration, development and preparation expenses

The acquisition value of the concessions (price paid or claim expenses)

will be amortized as from the fiscal year when the minimum production must be accomplished, within a term to be determined by the mining concessionaire, based on the probable life of the deposit, calculated and taking into consideration the proven and probable reserves and the minimum production according to law.

Prospecting and exploration expenses until the date when minimum production must be accomplished can be considered, at the discretion of the mining concessionaire as part of the acquisition value of the concession in order to receive the treatment mentioned above or be deducted in the fiscal year in which they are incurred.

Exploration expenses at minimum production stage may be fully deducted in the fiscal year or amortized as from that fiscal year at the rate of an annual percentage based on the probable life of the mine, at the concessionaire’s own discretion.

Development and preparation expenses that allow for the exploitation of a deposit for more than one fiscal year may be fully deducted in the fiscal year when they are incurred or amortized in that fiscal year and in the following years up to two additional years at most, at the concessionaire’s own discretion.

17 Is there any distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign parties?

There is no distinction between duties, royalties and taxes payable by domestic and foreign parties.

Business structures

18 What are the principal business structures used by private parties carrying on mining activities?

The General Companies Law (LGS), regulates the incorporation and conduct of business entities in general. The main two forms commercial entities with limited liability recognized in the LGS are corporations and limited liability companies. The most common type of corporation used for carrying mining activities is the anonymous partnership (SA), which limits the liability of the shareholders.

Another type of corporation used in Peru, also with limited liability, is the open anonymous partnership (SAA). This is usually a public corporation with a large number of shareholders. All its shares must be registered in the Lima Stock Exchange and it is subject to the supervision of the Business and Securities National Supervisory Commission (CONASEV).

19 Is there a requirement that a local entity be a party to the transaction?

No, there is no legal provision requiring a local entity to be part of the transaction.

20 Are there jurisdictions with favorable bilateral investment treaties or tax treaties with your jurisdiction through which foreign entities will commonly structure their operations in your jurisdiction?

One of the most important is the Free Trade Agreement between

Peru and the United States of America, which has been in force since

1 February 2009.

According to the provisions established in the agreement, ‘investment’ can include investments made in the mining industry. In this context, any and all assets that are the property of an investor, or con- trolled by the investor, either directly or indirectly, which maintain investment features, including commitments to contribute capital or other resources, expectation of future profits or earnings, and risk assumption shall be deemed as investments in Peru.

In recent years, Peru has executed further free trade agreements and, in terms of investment, these basically reproduce the provisions established in the Free Trade Agreement between Peru and the United States of America. These agreements are as follows:

• the Free Trade Agreement between Peru and Canada:

in force since August 2009, pursuant to Supreme Decree 013-2009-MINCETUR;

• the Free Trade Agreement between Peru and the People’s Republic of China:

in force since 1 March 2010 pursuant to Supreme Decree 005-2010-MINCETUR;

• the Free Trade Agreement between Peru and Chile:

in force since 1 March 1 2009 pursuant to Supreme Decree 010-2009-MINCETUR;

• the Free Trade Agreement between Peru and Singapore:

in force since 1 August 2009 pursuant to Supreme Decree 014-2009-MINCETUR;

• the Free Trade Agreement between Peru and Korea: in force since 1 August 2011 pursuant to Supreme Decree 015-2011-MINCETUR;

• the Free Trade Agreement between Peru and Mexico:

in force 1 February 2012 pursuant to Supreme Decree 001-2012-MINCETUR;

• the Free Trade Agreement between Peru and Japan: in force since

1 March 2012 pursuant to Supreme Decree 004-2012-MIN- CETUR; and

• the Free Trade Agreement between Peru and Panama:

in force since 1 May 2012 pursuant to Supreme Decree 008-2012-MINCETUR.

In addition, Peru has treaties to avoid double taxation with Chile and Canada, in force since 2004. Also, Peru is part of the Andean Community of Nations (CAN) that has provisions to avoid double taxation with individuals and legal entities domiciled in the countries members of the CAN (Ecuador, Bolivia, Colombia and Peru). Recently, the government has entered into conventions with Brazil and Spain.

Financing

21 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 most common source of financing are direct loans from banks. Most loans come from foreign banks through their local branches and usually more than one bank participates in the financing. This is because mining requires a high budget for the development of the project. Therefore, long term financing requirements are covered in the Peruvian market.

For the mining sector, financing through the Lima Stock Exchange (BLV) is still incipient. Only a few junior companies have used this type of financing. A few years ago, the BVL became the only stock market in Latin America with a junior mining segment. This shows the importance of junior companies in the BVL. Nowadays, the integration of the Latin American Stock Exchange (MILA) should encourage the financing of the mining sector.

Restrictions

22 What restrictions are imposed on the importation of machinery and equipment or services required in connection with exploration and extraction?

There are no restrictions to the import of machinery and equipment or services.

23 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?

There are no restrictions on buying, selling or exporting minerals. In addition, pursuant to the General Mining Law, the commercialization of minerals across the country and abroad is free and does not require the granting of a concession or any governmental authorization. Domestic and foreign companies are subject to the same rules on commercial matters associated to minerals.

24 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?

For the mining industry, there are no restrictions on the import of funds for investment in exploration and extraction of minerals or the use of the proceeds from the export or sale of minerals.

Environment

25 What are the principal environmental laws applicable to the mining industry? What are the principal regulatory bodies that administer those laws?

The General Environmental Law, created by Law 28611 and the Law of the National Assessment and Environmental Control System approved by Law 29325 creates a legal framework for the general environmental regulations that are applicable to all industries.

In the mining sector, the Environmental Regulations for Mining Exploration Activities, approved by Supreme Decree 020-2008-EM, provide specific environmental regulation, which is subject to complementary regulation.

Pursuant to the regulations, the competent authority to approve environmental certificates is the General Directorate for Environ- mental Matters of the Ministry of Energy and Mines (DGAAM). The supervision of environmental regulations lies with the Environmental Supervision and Evaluation Office (OEFA).

26 What is the environmental review and permitting process for a mining project? How long does it normally take to obtain the necessary permits?

The Environmental Regulations for Mining Exploration Activities establish that there are two types of environmental license for the exploration stage, depending on the degree of impact that the exploration activities might produce. These are the Environmental Impact Sworn Statement (DIA) and Semi Detailed Environmental Impact Assessment (EIAsd).

When mining titleholders are about to start the exploitation phase, they must submit an Environmental Impact Assessment (EIA) for the development of the project to the Ministry of Energy and Mines.

Article 5 of the Regulation for Environmental Protection in Mining and Metallurgy Activities, approved by Supreme Decree 016-

93-EM, establishes that each mining titleholder is responsible for emissions and waste resulting from their operations. To this end, the mining titleholder must fulfill all of the environmental protection obligations that are stated in its approved environmental impact assessment.

As discussed in question 25, the DGAAM is the competent authority to approve environmental certificates. An EIA approval process takes, on average, a year to be conducted.

27 What is the closure and remediation process for a mining project?

What performance bonds, guarantees and other financial assurances are required?

Pursuant to article 7 of the Law regulating Mine Closures, the mining titleholder must file a mine closure plan with the DGAAM at least one year after the mining project EIA is approved. The plan conforms to technical and legal actions aimed at developing measures to be taken to rehabilitate the area used or disturbed by mining activities in order to reach an ecosystem healthy and suitable for development of life and landscape preservation.

The mining titleholder must provide guarantees on behalf of the competent authority for covering the costs of rehabilitation measures for the periods of final closure and post closure. For this purpose, the competent authority accepts bonds, performance bonds, trusts, pledges and mortgages.

Health & safety, and labour issues

28 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?

Law 29783, the Occupational Safety and Health at Work Law and its regulation approved by Supreme Decree 055-2012-TR, are the general regulations on Health and Safety matters applicable to all industries. The mining industry has a specific regulation in the Mining Occupational Health and Safety Regulation, approved by Supreme Decree 055-2010-EM. Health and Safety regulations are administered by the Ministry of Labour.

29 What restrictions and limitations are imposed on the use of domestic and foreign employees in connection with mining activities?

Pursuant to the Legislative Decree 689, domestic and foreign companies are prohibited from hiring more than 20 per cent of foreign workers and their remuneration must not exceed 30 per cent of the total payroll for wages and salaries. In addition, contracts for foreign employees shall be for a term not longer than three years and may be renewed successively for periods not exceeding three years. This regulation applies to all industries.

In some cases in which qualified professional are needed for a given situation, these limitations can be detrimental to the mining industry.

Social and community issues

30 What are the principal community engagement or CSR laws applicable to the mining industry? What are the principal regulatory bodies that administer those laws?

There are no legal regulations for CSR. Nevertheless, for the mining companies CSR is a very important issue. The work of a mine in a remote community generates, in fact, a set of expectations in the population, and sees the company as the agent that will solve their problems. Citizen Participation Regulations, approved by Supreme Decree 028-2008-EM and the rule governing the process of participation, approved by Ministerial Resolution 304-2008-MEM/DM, are the main legal mechanisms by which the mining company makes contact with the community. This process must be considered in the EIA. As discussed in question 25, the DGAAM of the Ministry of Energy and Mines is responsible for verifying that the process has been carried out.

31 How do the rights of aboriginal, indigenous or currently or previously disadvantaged peoples affect the acquisition or exercise of mining rights?

Law 29785 approves the Law of Prior Consultation for Indigenous or Aboriginal Peoples established by the 169 ILO Convention. It establishes that indigenous peoples have a right to be consulted in advance regarding legislative or administrative decisions, which may directly affect their collective rights, with regard to their existence, cultural identity, life quality or development. It should be noted that the obligation of prior consultation constitutes a state obligation. Recently, the Ministry of Culture, has issued the Supreme Decree

001-2012-MC, dated 3 April 2012 which regulates the Law 29785. This regulation aims to conduct consultation processes in compliance with the provisions of ILO Convention 169

32 What international treaties, conventions or protocols relating to CSR issues are applicable in your jurisdiction?

International treaties, conventions or protocols concerning CSR that are in force in Peru are the Universal Declaration of Human Rights; the International Convention for the Eradication of all forms of Racial Discrimination; the United Nations International Convention on Civil and Political Rights; the United Nations International Convention on Economic, Social and Cultural Rights; the American Convention of Human Rights Additional Protocol on Economic, Social and Cultural Rights; and the International Labour Organization, Convention 169 on Indigenous Peoples and Tribal Groups in Independent Countries.

International treaties

33 What international treaties apply to the mining industry or an investment in the mining industry?

As discussed in question 20, there are bilateral treaties that regulate commercial relationships between Peru and other countries. The Ministry of Commerce and Tourism of the Peruvian government has played an important role in the signing of these treaties, which coincides with the policy adopted by the former and current government.

All these treaties have a direct influence on the mining sector, as the investment for the development of mining projects mainly comes from countries with whom Peru has signed free trade agreements

Source: Getting the Deal Through  - Mining 2012