http://finance.yahoo.com/news/insight-peru-provinces-sit-cash-161649037.html LIMA (Reuters) - Peru's provincial governments are sitting on billions of dollars in mining tax revenue earmarked for new roads, schools and water projects - an institutional failure contributing to anti-mining protests nationwide.
http://finance.yahoo.com/news/insight-peru-provinces-sit-cash-161649037.html
Regional and local governments had 9.5 billion soles ($3.5 billion) from natural resources taxes collected over the last decade lying dormant in bank accounts as of December, according to a Reuters analysis of finance ministry data. The swollen coffers represent a fortune in poor provinces where the poverty rate is around 60 percent despite Peru's decade-long boom fueled by minerals exports to a rising China.
Most of the receipts come from mining, though a fraction come from energy or commercial fishing companies.
The central government blames a lack of administrative capacity in the
provinces - a polite way of saying incompetence - for the spending
shortfalls that contribute to a cauldron of discontent in the
hinterlands and feed anti-mining sentiment.
Congress passed a law
in 2001 requiring local governments to spend their income from mining
taxes on infrastructure projects. It was part of a broader push to
decentralize decision-making after centuries of concentrating power in
the capital. But failing to comply with the law doesn't carry penalties
for rural officials.
Under rules designed to let provinces share
in Peru's resource wealth, the central government keeps half of the cash
from income taxes it levies on mining companies and distributes the
rest, known as the mining canon, to local governments. Peru's corporate
income tax rate is 30 percent.
Funds from the canon could help
defuse hundreds of conflicts in Peru over the spoils of natural
resources. The disputes threaten to halt some of the $53 billion in
mining projects planned by the private sector. Mediating the conflicts -
there is usually at least one violent protest a month, with several
others brewing - has become President Ollanta Humala's biggest
challenge.
But none of the 16 regions and local governments
within them that receive the mining canon have spent all of their funds
in recent years, finance ministry data shows. On average, less than half
of the money available to spend in 2011 was spent on sorely needed
projects like water, sewage and electricity systems.
Even as the
national poverty rate has fallen by half since 2004 to 27.8 percent,
many rural communities near mines have been left behind. Frustrated
residents often turn against mining companies, instead of local
politicians, to vent their woes. Others block roads to demand more tax
revenues and voice fears that mines will soak up scarce water supplies
and pollute.
"In the zones that receive the canon, people see a
ton of money coming in and say 'at the end of the day, this doesn't do
anything for me,'" said Carlos Casas, a former deputy finance minister.
"This contributes to greater social unrest ... the money is there, but
what is missing are capable players in the regional and local
governments."
Failure to spend the tax revenue puts greater
pressure on Humala to fulfill key campaign promises like improving
wealth distribution, slashing extreme poverty, and calming conflicts.
One dispute the government has struggled to manage is over U.S.-based Newmont Mining's
$4.8 billion Conga gold and copper project. Work on the mine in the
northern region of Cajamarca has been on hold since November as
townspeople say it would hurt water supplies.
Conga is the largest mining investment ever proposed in Peru, the
world's second largest copper, silver and zinc producer and the No. 6
gold producer, and Humala is committed to seeing it built to keep the
economy humming at 6 percent a year.
His government blames the
protests on left-wing extremists, while public prosecutors have opened
an investigation into the alleged use of public funds in anti-mining
demonstrations by Gregorio Santos, the region's president.
Santos, who has denied the allegations, said on Monday he spends the
canon money wisely. But he spent only 34 percent of the region's canon
on infrastructure last year, according to data from the finance
ministry.
"Contracts with miners and their contributions must be
renegotiated," Santos said in Congress this week. "We need to teach
companies what real social responsibility and economic inclusion is -
not like today's irrational profiteering."
To shell out money
faster, the government is considering a plan that would ramp up spending
on new infrastructure projects by paying for them using future mining
tax receipts. It is also trying to define how to give regions without
mines access to the mining canon.
"We have to see how we can move
towards a better use of these resources. They tend to be locked away in
bank accounts and not used on projects the country needs," Finance
Minister Luis Miguel Castilla said recently.
http://articles.chicagotribune.com/2012-06-14/business/sns-rt-us-peru-mining-taxesbre85d14z-20120614_1_mining-peru-local-governments
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