Mining executives worried about new left-wing administration in Peru

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LIMA, Aug 3 - Peruvian mining executives are worried as they watch the rise of a new left-wing administration headed by President Pedro Castillo, inaugurated last week following campaign promises of higher taxation on the sector despite lacking a concrete framework for the sector yet.

Higher taxes are the main worry we have now, said Pablo de la Flor, the head of the National Society of Mining, Oil and Energy, which represents mining companies.

The expectation on the side of the industry is to clarify the doubts that we still have about the sector, fed in large part by signals that were disparate and contradictory, added he in an interview with Reuters.

The administration has said it will work with all players in the mining sector to create a new deal that will address social profitability. The Newly Installed Minister of Energy and Mines told Reuters that this means mines should not only make money for indigenous companies and generate tax revenues, but also help the population through improved infrastructure, respect for private communities and better environmental protection.

Social profitability is already an inherent part of the industry, said De la Flor. There is another dimension which has to do with the responsibility of the state to use the income generated by mining to move forward in closing social gap.

Mining is already a key source of tax revenue for Peru, which has been boosted in recent months by high mineral prices.

De La Flor said he met with Merino over the weekend. Although the two did not discuss specific policy issues, the mining executive said he had told the government about the industry's concerns.

Before being appointed to the job, Merino was little-known, overseeing mining regulations in the world's second largest copper producer. He is a member of the far-left party that led Castillo to the presidency, Peru Libre.

The chairman of Compania de Minas Buenaventura, one of the country's largest miners, told analysts in an earnings call on Tuesday that they were operating under difficult circumstances but gave a glimpse at optimism.

It is not easy to deal with people like the government that was elected, Benavides said. I think we have to wait and see, but this will change and I believe it will change for the better.