LIMA – Peru's President Ollanta Humala wants to create a rainy-day fund to house part of the millions of dollars provincial leaders receive from mining activities in their regions, the finance minister said on Thursday.
The fund would accumulate money when global mineral prices are high and distribute it to local leaders when they drop, Finance Minister Luis Miguel Castilla said.
Regional presidents and mayors are now not legally required to save payments from mining taxes and royalties payments.
The proposed fund could please mining companies that want to see more consistent development in poor provinces where they work, but it might upset local leaders who oppose some mining projects and accuse the Humala administration of meddling in their affairs.
The proposal could also pay out revenues so that more benefit.
"There are municipalities that receive a lot and others that get almost nothing," Castilla said in an interview on RPP radio.
Other mining-dependent countries like Chile use similar policies to weather periods of low prices and weak production.
Humala's proposal comes as local leaders complain they cannot finish projects because the mining royalties and payments they usually receive have dropped more than expected this year.
Some regional presidents and mayors have criticised the Humala administration for initially forecasting bigger mining proceeds and have urged the government to distribute funds.
The mining revenues come from company profits, which have shrunk as mineral prices have tumbled this year.
The highland province of Espinar in the southern Cusco region, where antimining protests turned deadly last year, has reported a 92% drop in expected funds this year.
The proposed fund would also apply to money that local governments receive from natural gas and oil projects.
"These are volatile resources," said Castilla.
But Castilla said local governments now have access to some $4-billion in unspent natural resource revenues that should help them withstand the current dip in incoming money.
According to the government and private groups, about half of all money generated by mining taxes that is transferred to provinces is not spent. That means roads, hospitals and schools are still lacking in remote towns near billion-dollar mines.
The Humala administration has tried to defuse dozens of disputes over the spoils of natural resources that have helped delay a mining investment pipeline worth more than $50-billion.
Earlier this year the Humala administration said it was revising rules to press regional governors to unlock the piles of mining receipts that are sitting idle.
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