Peru's natural resources

Peru is extraordinarily rich in mineral resources, some of which, silver and gold especially, were produced in large quantities in the Spanish colonial period, as early as the mid-sixteenth century. After gaining independence, Peru took on global importance as a source for a number of other key minerals, especially copper, tin, and, by the late twentieth century, petroleum and natural gas. However, a large proportion of the exploitation of the country's natural resources was undertaken by foreign companies.

The Country

Peru rises from its long western coast along the Pacific Ocean eastward toward the peaks of the Andes Mountains. It has borders with Bolivia and Chile to the south, with Ecuador and Colombia to the north, and with Brazil to the east. Although much of the country consists of high mountains, low coastal regions are hot and dry, running southward to join similar terrain in coastal Chile. By contrast, the vast northeastern interior of Peru joins the Amazon River basin, characterized by hot, humid tropical forests. Peru’s largest city and governmental capital, Lima, is located on the Pacific coast.

Tin

Peru was one of the largest producers of tin in the world in 2022, along with China and Indonesia. In contrast to most of Peru’s capital-intensive mining ventures, the tin sector is dominated by a family-owned company, Minsur, founded in 1966. The Brescia family kept controlling interests following incorporation in 1977. Minsur’s operations are concentrated in the southeastern high-mountain region near Juliaca, more than seven hundred kilometers from Lima. Minsur also controls the Funsur tin and refining installation in Pisco, south of Lima. Annual production from its San Raphael mine began to decline as the mined tin grade fell, and Minsur commissioned a new ore sorting system that became operational in 2016; in 2017, the International Tin Association reported that the mine produced 17,791 metric tons, and in 2022, Peru's tin exports totaled $661.665 million. Tin mining in Peru, like other sectors of the mining industry, has suffered from recurring strikes of its workers. In midsummer 2008, for example, both the San Raphael mine and Funsur smelting operations were shut down as miners tried to pressure the Peruvian government to pass legislation improving working conditions and wages not only in tin mining but also in the copper, gold, silver, and iron sectors. This situation was repeated in 2021, 2022, 2023, and 2024 with ongoing protests that sometimes resulted in violence.

Silver

With nearly 18 percent of the world's silver reserves in 2023 according to the International Trade Administration, silver mining has been extremely important for Peru’s economy since the 1500s. The Spanish colonial administration, based in Lima, began to exploit a number of rich veins from the mid-sixteenth century forward. Particularly rich were mines in the region around the legendary “silver capital” in Potosí (now in Bolivia), from which Spain shipped an imperial fortune in silver ingots both to Europe and to China.

In modern times, the Caylloma mining district (about 200 kilometers northwest of Arequipa), among other areas, continued to mine enough silver to make Peru one of the world's largest silver producers in 2023. The Vancouver, British Columbia, mining firm Fortuna Silver obtained 100 percent financial control over the main Caylloma operation in 2005, investing major funds to modernize both mining methods and processes used to extract silver from ore. Fortuna transports silver to the port city of Callao for export marketing. Although the Peruvian-run Buenaventura mining company does not limit itself to silver mining, its extensive operations place it among the ten major producers of silver in the world. In the first decade of the twenty-first century, mining companies like the Canadian Silver Standard and Colorado-based Golden Minerals (previously Apex Silver) financed new prospecting projects along the Pan-American highway transportation network, with particular interest in prospects in Peru. Such projects can run substantial risks (Apex, for example, filed bankruptcy in 2009). Pan American Silver of British Columbia, another relative “newcomer” founded in 1994, obtained several mining operations in Peru. Advances in silver output have been limited at times throughout the twenty-first century by a number of factors. One of these is the volatility of global silver prices.

An example of Peru’s tactical response to downward trends in world silver prices occurred in 1989, when the government attempted to restrict supplies of silver globally by buying silver from local mining companies (with a premium of 5 percent more than prevailing prices) and stockpiling what it purchased in hopes that prices would recover within a few months. Not only did such tactics fail to attain their goals, but also Peru was criticized internationally for introducing fears of shortages (and price increases) by disregarding normal world market supply-and-demand principles.

Another factor affecting silver output in Peru is continual labor unrest. Striking workers at Buenaventura’s Uchucchacua mine (deemed to be the largest silver mine in Peru), in Oyón Province near Lima, caused periodic closures, forcing the company to rely on continuing but precarious labor cooperation in two other Buenaventura mines (Orcopampa and Antapite) to maintain acceptable levels of production.

Gold

Gold, along with copper, is one of the most valuable of Peru's mineral exports, which contribute over 50 percent of the country's total export revenue, according to the business consulting firm EY Peru in 2017. In 2003, Peru’s mines produced more than 170,000 kilograms of gold, marking clear increases over previous years. In 2023, according to the Statista, the country produced 99.9 metric tons of gold. Although Peru enjoys major earnings from gold exports, closer examination of the sector shows that it relies on a very heavy concentration of foreign companies to exploit this vital resource. An example of this is the huge Yanacocha gold mine near Cajamarca in northern Peru, considered by many to be the largest and richest gold mine in the world. It has produced billions of dollars of gold, mined out of an open pit measuring more than 250 square kilometers. The Peruvian-run mining corporation Compania de Minas Buenaventura (CMB), holds only 43 percent of the mine’s capital, while Newmont Mining, of Denver, Colorado, holds more than 50 percent, with remaining capital supplied by the International Finance Corporation (under World Bank aegis).

This giant mine, together with the Pierina mine in central northern Peru (developed by the giant Canadian Barrick Gold Corporation), has been strongly criticized by environmental and human-rights groups, which charge that irresponsible operations, especially dangers created by cyanide leach tailing dams, have gone uncorrected and should be subject to closer control by the Peruvian authorities.

Copper

In 2023, Peru ranked as the world’s second-largest producer of copper. In 2008, production figures totaled more than 1.2 million metric tons, most of which was exported. According to Statista, Peru produced 2.76 million metric tons of copper in 2023, an increase from 2.2 million metric tons in 2022.

Copper mines are located in several regions of the country, some (the Toquepala and Cuajone mines) high in the Andes, 400 kilometers southeast of Lima; others (mainly the La Granja copper mine) also in the Andes, northeast of the capital. The Toquepala and Cuajone mines, originally discovered by a German freelance miner/explorer, have been exploited for more than a century. Since the mid-1950s a giant firm, the Southern Peru Copper Corporation (SPCC, with major stakes at that time held by four US companies), has been the prime motor for exploitation of Toquepala and Cuajone. SPCC has undergone a number of major changes, especially between 1968 (when a Peruvian military junta cancelled large parts of its concession) and the conclusion of agreements in the mid-1970s, leading to expansion of production in the Cuajone mining zone. In the 1990s, SPCC profits set records when global copper prices were at an all-time high. In 1999, another major change came when Grupo Mexico bought out the Tucson, Arizona, company ASARCO’s shares in SPCC (at a cost of $2.5 billion), thereby gaining a 54 percent majority interest in the giant firm.

Although the SPCC’s activities are unique, one can gain an impression of the overall status of Peruvian copper on the international market from SPCC’s annual production and export sales figures. When copper prices slumped in 1999 (eventually reaching the lowest point in sixty years, at about twenty-seven cents per kilogram), SPCC was producing more than 337 million kilograms yearly (yielding about 250 million kilograms of refined copper). Leading up to what became a turning point at the end of the 1990s, sales of SPCC’s Peruvian copper were going to Northern Europe (about 34 percent), Asia (30 percent), other Latin American countries (about 15 percent), and the United States (4 percent). Even though a partial recovery of global prices brought copper back to nearly two dollars per kilogram by 2006, chances of continued fluctuation continued to suggest that the halcyon days of copper returns were unlikely in the first decade of the twenty-first century.

However, some developments after 2000 suggested that Peru’s global position could change, as plans for exploiting new or previously only partially exploited went forward. Notable new developments were symbolized by the emergence after October 2001 of the Antamina company’s exploitation of what may be one of the largest reserves of copper and zinc in the world. Antamina operations are located almost 300 kilometers north of Lima and have a state-of-the-art pipeline connection capable of carrying slurry, or processed and concentrated ore mixed with water, to coastal transshipment facilities. As of 2021, joint participating members of the Antamina operation included around 33.75 percent held by BHP Billiton, over 33.75 percent held by Glencore, approximately 22.5 percent held by Teck, and 10 percent held by the Mitsubishi Corporation of Japan. This situation of Peruvian dependence on foreign investment for exploiting resources is as visible, and potentially even more controversial, in another key sector: petroleum and natural gas.

In 2022 and the beginning of 2023, political turmoil caused significant disruption in copper production in Peru as violent anti-governmental protests, and rising instability stalled production and caused closures of mines. This sparked considerable spikes in the cost of copper and concern across the globe as production dwindled.

Petroleum and Natural Gas

Beginning in the 1970s, the Upper Amazonian area of Peru promised to offer an important addition to the country’s exportable resources. From relatively modest 1977 figures (export values of $52 million), production increased rapidly to almost $650 million in 1985.

By 2021, estimates of known oil reserves topped 858.89 million barrels. By 2023, production was about 118,000 barrels a day. In addition, Peru possesses, at Camisea, deep within the Amazonian rainforest, one of the largest fields in South America as of 2022. Although the existence of natural gas reserves was known for some time, operational exploitation of the Camisea field dates from only 2004. Gas was initially transported by impressive pipelines over the Andes to the Pacific Ocean port of Pisco. In 2007 and 2008, following rising controversy over pipeline leakage, two foreign firms, Suez Energy and Kuntur Gas Transport, presented the Lima government with proposals to build two more efficient pipelines, one of which would end and be combined with a gas-run power plant at the port zone of Ilo in southern Peru. Efforts to complete the construction of a pipeline to southern Peru were halted in December 2019 at the advice of military officials. Threats of guerrilla attacks in the Valle de los Ríos Apurímac, Ene y Mantaro, areas known for drug-trafficking, were perceived to be too great to continue to build in the area. This continued through December of 2024. Additionally, four landslide incidents stalled the construction of the pipeline.

The Camisea Project also involves, in part, delivering liquefied natural gas to Mexico. In 2003, in order to encourage the Camisea Project, the Peruvian government reduced royalties that would normally be owed to it by foreign concessionaires. As plans moved ahead, an unprecedented public reaction—mainly from ecologists abroad—criticized the project as not only ecologically destructive but also a menace looming over the lives of Indigenous tribal populations in the tropical forest area to be affected. Critics underline Camisea’s apparent disregard for respecting the ecological conditions that traditionally support very rare flora; among them exist approximately seventy plants that are considered important in pharmaceutical treatment of cancer. Regardless, the project became operational in 2004 and continued to attract controversy regarding negative effects on nearby residents and the environment into the second decade of the twenty-first century. By 2021, despite the continued controversy, 40 percent of Peru’s electricity was produced in Camisea.

Other Resources

Peru is not a major producer of iron, although the one important company involved in iron-ore mining (Shougang Hierro Peru, a Chinese-owned business with head offices in Lima) has succeeded in increasing the country’s production of ore in stages. From a production level of about 3 million metric tons of ore exported in 2003, valued at about $95 million, the company registered a notable annual increase, reaching 4 million metric tons in 2005. In 2018, Peru was the third largest exporter of raw tin, and in 2021, exports reached $859.65 million. Shougang Hierro Peru operates several open-pit mines in the coastal desert region about 500 kilometers south of Lima. A combination of conveyor belts and a trucking network connects the mines to the Pacific coast port of San Nicolas, from which the ore is exported.

Although there is only one significant manganese mining area in Peru (at Berenguela in the southeastern zone), already existing exploitation of copper and silver at that location was substantial enough for one company, Lampa Mining, to hold exclusive mining rights for more than half a century (between 1905 and 1965). About 500,000 metric tons of ore were extracted by Lampa, but only a small part of the manganese content of this mass was processed for sale. In later decades, manganese extraction became more economically viable and attracted a Canadian firm, Blackstone Resources, to acquire 80 percent interest in a Peruvian holding company venture, the Mining Society of Bernguela (SOMINBESA). By 2019, this mine's monthly high production reached 2,177.74 metric tons, and in Apr 2018, a record low of 72.55 metric tons in Jun 2017.

Bibliography

Arellano-Yanguas, Javier. A Thoroughly Modern Resource Curse? The New Natural Resource Policy Agenda and the Mining Revival in Peru. Institute of Development Studies at the University of Sussex, 2008.

DeWind, Josh. Peasants Become Miners: The Evolution of Industrial Mining Systems in Peru. Garland, 1987.

Dore, Elizabeth. The Peruvian Mining Industry: Growth, Stagnation, and Crisis. Westview Press, 1988.

Hall, Anthony L. Amazonia at the Crossroads: The Challenge of Sustainable Development. Institute of Latin American Studies, 2000.

Hendrix, Cullens. "Copper Should Be Named a Critical Mineral Following Peru's Political Crisis." Peterson Institute for International Economics, 2 Feb. 2023, www.piie.com/blogs/realtime-economics/copper-should-be-named-critical-mineral-following-perus-political-crisis. Accessed 5 Jan. 2025.

“Mineral Commodity Summaries.” U.S. Geological Survey, 2023, www.usgs.gov/centers/national-minerals-information-center/mineral-commodity-summaries. Accessed 10 Feb. 2023.

Newell, Charlotte. "Peruvian Gold Mining Gangs Launch Increasingly Brazen Attacks." Insight Crime, 23 Jan. 2024, insightcrime.org/news/peruvian-gold-mining-gangs-launch-increasingly-brazen-attacks/. Accessed 5 Jan. 2025.

"Peru Country Commercial Guide: Peru—Mining and Minerals." Export.gov, International Trade Administration, 30 Dec. 2023, www.trade.gov/country-commercial-guides/peru-mining-equipment-and-machinery. Accessed 5 Jan. 2025.

"Peru Tin Production Declines in 2017." International Tin Association, 20 Feb. 2018, www.internationaltin.org/peru-tin-production-declines-2017/. Accessed 5 Jan. 2025.