Peru's Herrera seeks mining profits tax

LIMA Fri Jul 22, 2011 5:01pm EDT

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LIMA (Reuters) - Peru's new government will seek a tax on miner's windfall profits but will consult with companies first, confirmed Carlos Herrera, President-elect Ollanta Humala's pick for minister of energy and mines on Thursday.

Herrera, an engineer who briefly led the ministry under former President Valentin Paniagua, told Reuters the windfall profits tax would be the only new tax sought by the government and revenue would be used for rural towns that have largely not seen the benefits of Peru's decade-long economic boom.

Humala is a former radical who appears to have abandoned his anti-free market past in favor of foreign investment. He still promises more equitable growth in a country with a 30 percent poverty rate and repeatedly said he supported the tax.

"This theme has political consensus as much of the population needs more resources," Herrera said in an interview. "A tax on windfall profits will be created with the sole limitation that the sector not lose competitiveness."

Herrera said his government, which will take power on July 28, would consult with firms about specifics of the tax and that greater resources for communities around mines would help avoid nagging social conflicts that are bad for business.

"We have met many of the mining companies and all have understood and are willing to put an effort into giving more resources," he said.

Peru's human rights agency says there are some 200 social conflicts over natural resources in Peru, mostly in poor rural areas that oppose projects in part because they have not seen benefits from Peru's decade-long economic boom. The conflicts have left nearly 100 people dead in the last 3-1/2 years.

Some $50 billion of mostly foreign investment is lined up for extractive industries in Peru in the next decade, and Humala has promised to respect Peru's many free trade agreements and chosen a market-friendly finance minister.

"The logical, correct attitude is to talk about these concepts with companies to pin down the numbers," Herrera said of the proposed tax, without giving a timeline for the proposal.

He also said the government will continue negotiations to charge higher royalties on exports from the Camisea natural gas fields that are controlled by a consortium lead by Argentina's Pluspetrol and prioritize energy for domestic consumption.

The existing government has sought to charge higher royalties to address price disparities that make gas sold locally more expensive than exported gas.

"From the outset we will seek a law stating that the internal market has priority," he said.

(Reporting by Teresa Cespedes; Editing by Alden Bentley)

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