Peru's PM says no talks until mining protests stop

LIMA Wed Nov 5, 2008 3:42pm EST

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LIMA Nov 5 (Reuters) - A day after declaring a state of emergency in the southern province of Tacna, Peru's prime minister said on Wednesday he would not discuss protesters' demands to change a new mining law until the area was calm.

Tacna is locked in a dispute with Moquegua, a neighboring province, over how to share millions of dollars in taxes paid by Southern Copper Corp (SPC.LM)PCU.N, one of the world's largest mining companies.

Protesters, who have asked for a commission to review the law that would redistribute royalties, have blocked roads, cut water supplies and burned a mayor's office.

Over the weekend, the government gave the military the green light to maintain order. On Tuesday, it went a step further and declared a state of emergency.

"There will be no commission until Tacna is peaceful," said Peruvian Prime Minister Yehude Simon, a leftist whose appointment last month was seen as an effort by the government to dissuade protesters from taking their complaints to the street.

"They have the right to protest, but not ... to burn government buildings," he told reporters.

The legislation, passed by Congress last week, overhauls the way royalties are distributed to all provinces in a country with hundreds of mines. It would assess taxes based on how much mineral wealth a mine produces, rather than on how much dirt a mine moves, as the system does now.

President Alan Garcia is expected to sign the bill into law.

Under the current system, Moquegua will receive 20 percent of taxes paid by Southern Copper that are distributed to provinces, while 80 percent will go to Tacna. The new law would direct more money to Moquegua.

Southern Copper, which is a unit of Grupo Mexico (GMEXICOB.MX), has the Cuajone mine and Ilo smelter in Moquegua and the Toquepala mine in Tacna.

Leaders in both provinces say they need the revenue to pay for basic services like water, electricity and education.

Some 40 percent of Peruvians live in poverty, despite seven years of fast economic growth, and critics say Garcia has not done enough to bring the boom's benefits to the poor. (Additional reporting by Maria Luisa Palomino; Writing by Dana Ford)

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