• During Rumbo a PERUMIN, the major problems, restrictions, and proposals for correctly implementing expenditure at a regional and local level were explained in detail.
• Having an incentive scheme for joint investment, as well as a work plan for the regions, were some of the proposals that were brought forward during the event.

The low budget spending of revenue coming from extractive industries by regional and local governments is due to the fact that projects do not align with social gap closing objectives, according to economist Gonzalo Tamayo, partner at Macroconsult, during his analysis on territorial development—a work approach proposed by the mining industry in order to promote welfare in Peru.

During the second day of the event Rumbo a PERUMIN “Territorial Development: A Challenge to Closing Social Gaps,” Tamayo also pointed out that the poor budged spending compared to the growing evolution of resources, the sheer number of unfinished projects, the evidence of corruption, the fragmentation of projects, and the insufficient transparency in transfers hinder an adequate budget spending.

“The country’s issues are well known. Yet, the fundamental problem is failing to gradually improve citizens’ well-being. This is reflected in the gaps that currently exist, especially in key sectors such as education and infrastructure, as well as in the percentage of paralyzed and unimplemented projects across the country,” explained Tamayo.

Transfers will be Important for Project Implementation

Tamayo said that the high price of copper (over $3 a pound) means that transfers from canon (fiscal redistribution), royalties and the Special Mining Tax (IEM) will be structurally high in the coming years, owing to the high international price of minerals. However, he added that the country faces a structural problem that calls for longer-term solutions than those that have been applied so far.

The speaker mentioned that there will always be legal and institutional restrictions that interfere with a better use of resources, as well as acts of corruption. This does not allow for political consensus over making profound legal changes and easily fixing the problems resulting from a decentralization that is not linked to economically integrated corridors.

Proposal for Better Budget Spending

The partner of the economic consulting firm brought forward proposals to mitigate this problem. Tamayo stressed that we need the leadership of the Ministry of Economy and Finance (MEF) through efforts that can transcend, even more so when now there are 72 officials in that ministry.

Along the same lines, the speaker argued that communication should be permanent among the authorities from the different local governments, the MEF, and other ministries, especially now that modern technology enables remote interaction. Additionally, he highlighted that support to the MEF team from international technical cooperation and private companies will enable them to develop of a territorial development plan.

“We must keep in mind that central government officials can delegate functions to their peers in the regional governments in order to be able to concentrate on more macro issues. Also, and as a proposal, there could be an incentive scheme for joint investment and a plan in order to know in which regions to start,” said Tamayo.

Rumbo a PERUMIN

Rumbo a PERUMIN is an initiative of the Peruvian Institute of Mining Engineers (IIMP) and the Executive Committee of PERUMIN 36. It involves an agenda of virtual activities that seek to create spaces for analysis, knowledge and debate on mining.