Affinity Gold Corp (AFYG)

[TripleL]

Peru's Mineral Wealth and Woes
Author: Toni Johnson, Staff Writer
February 10, 2010

LIMA, PERU -- The commodities boom of the last decade fueled growth, but it also poses social and environmental problems. Peru is emblematic of the economic promise and trials facing nations rich in mineral wealth. One of the world's largest producers (PDF) of gold, copper, tin, zinc, and silver, Peru has been the fastest growing country in Latin America over the last decade, and it has cut poverty during that time from 50 percent to about 34 percent. But Peru is also grappling with the fallout from its resource wealth, including governance challenges, controversial oil and gas concessions in the Amazon, mercury pollution from unregulated gold mining, the deforestation threat from illegal logging and new dams, and the impact of the new Trans-Oceanic Highway with Brazil.

Economic Ups and Downs
Demand from emerging markets such as China and India have fueled a resource boom in Latin America, and many resource-rich countries are reaping the benefits of increased commodities prices. Peru is one of them. In 2007, the mining sector represented 63 percent of the country's export revenue. Though neighboring Chile is considered exemplary (Reuters) as a well-managed Latin American economy and Brazil has emerged as world-class economic competitor, Peru's decade of economic growth and stability makes it one of the region's best performing countries. Between 2002 and 2008, the Peruvian economy grew between about 5 and 10 percent per year. The country cut the ratio of public debt to less than 30 percent of gross domestic product (GDP) by 2007, down from nearly half at the beginning of the decade. In 2010, GDP is expected to grow as much as 5.5 percent.

Peru is also attempting to make the government more business and foreign-investment friendly and more transparent, while other countries in the region, such as Venezuela and Ecuador, are working to socialize their extraction industries. "We've tried every macroeconomic model, and we've learned from our mistakes," says Francisco Sagasti, a senior associate at FORO, a development think tank based in Lima. "No one is pushing for nationalization here" (CSM).