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Peru is currently the third-largest producer of copper and the sixth-largest producer of gold in the world. Peru’s mining industry is booming and government officials expect copper production to double by 2015. Because of this projected growth, it is no surprise that Peruvian officials and business executives are visiting cities like New York City to attract foreign investments. Forecasts indicate that by 2015, investment in the mining sector will make up close to 50% of total investments in Peru.
Currently, China consumes the majority of Peruvian mineral exports, which raises some concerns as China faces a potential economic slowdown. Executives, however, have dismissed these concerns because they are confident in Peru’s diversification of its mineral export destinations. Despite emerging market capital outflows in the region, specifically in Venezuela and Argentina, Peru continues to grow economically at a steady rate. Interest rates are likely to remain stable in 2014 and the mining and hydrocarbons sector is expected to experience the highest percentage growth of all of Peru’s sectors over the next two years.
Peru does face some problems that could hinder economic growth and the amount of foreign investments it receives. It is estimated that Peru currently has a $90 billion infrastructure gap, which is the difference between infrastructure needs and the resources that the government has historically invested in meeting those needs. An infrastructure deficit of this magnitude can lead to lower productivity and reduced competitiveness – two characteristics that repel investors.
There is no question that the future outlook for Peru’s mining industry is bright; however, it remains to be seen how much a lack of sound infrastructure will impede the growth of this sector. Hopefully an influx of foreign investments will encourage the government to devote more money to improving the nation’s infrastructure, a decision that would surely attract even more foreign investments.
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