Peru’s new President Pedro Castillo addresses the law makers and invitees during the Inauguration Day at the Congress in Lima, Peru July 28, 2021. (REUTERS)
LIMA – In his first week in office, Peru’s new left-wing administration under President Pedro Castillo has been quick to extend a friendly hand to China, the Andean nation’s most important commercial partner and the main buyer of its copper, a crucial source of tax revenue.
Since Castillo was inaugurated on July 28, administration officials have met with the Chinese ambassador and Chinese mining executives to discuss not just policies for their industry but also to strengthen a previous free trade agreement first signed in 2009, government sources told Reuters.
Castillo is poised to tilt Peru to the left after successive center and right-wing administrations, although preserving a good relation with China has been a priority of all recent Peruvian leaders, analysts said.
“This doesn’t have an ideological character, this has a pragmatic character,” said Jorge Heine, a professor of international relations at Boston University and a former Chilean ambassador to China, in an interview.
In addition to China, Peru also has a free trade agreement with the U.S. and has been considered for decades a U.S. ally.
Mining tax policy will be crucial to China, whose companies are important copper miners in Peru, the world’s No. 2 producer of the metal.
Castillo has said he wants to extract higher tax revenues from mining companies, and would potentially push to tear up the tax stability deals that prevent such hikes agreed with many miners.
Pablo de la Flor, who heads the National Society of Mining, Oil and Energy. said miners who enjoyed tax stability deals included China’s MMG Ltd and Chinalco’s Aluminium Corp and that the topic was likely to have come up.
“I imagine that this should be a concern especially when the modification of the tax framework is discussed,” he said.
On the commercial front, Chinese Ambassador Liang Yu met with Foreign Trade Minister Roberto Sanchez on Monday. In aiming to modifying their free trade agreement, Peru is hoping to cut red tape and push e-commerce.
“At present, the technical teams of Peru and China are working, through virtual means, in the optimization of the Free Trade Agreement between both countries,” said the ministry in a release. “Bilateral relations with China are extremely important.”
Castillo has also opted for a Chinese COVID-19 vaccine, it was announced this week. Pfizer is the principal vaccine being rolled out in Peru but the president will on Friday be vaccinated with the Sinopharm vaccine, which was mired in scandal last year over the secret, early vaccination of several Peruvian official.