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“It is good business to challenge economic activities in Peru”

Interview - July 31, 2015

“Despite people saying ‘Peru, a mining country’, they do not actually understand what mining is. Industry uses the term ‘research and development.’ In mining we do not use ‘research’; we use ‘exploration and development’, which is interesting because it is the key to understanding the industry.” Roque Benavides, CEO of Minas Buenaventura provide an in-depth analysis of mining in Peru and how to spot opportunities. 


Peru’s economic development during the last decade has led to Christine Lagarde calling it one of the most dynamic economies in the world. This is why Peru will host a meeting that had not taken place in Latin America in 48 years. We cannot understand this economic growth unless we look at the mining sector, highlighting the way in which it has contributed to this decade of growth and what it can do for the country’s future. Given the economy’s relative deceleration, the mining sector should be promoted to maintain economic growth and boost its diversification. I wanted, in this sense, to ask you: how much has the mining sector contributed to the country’s economic growth and what is the outlook for the future?

Certainly, mining has had a positive effect in recent years, both regarding investments coming to Peru, as well as investments carried out mainly by national companies.

Now, I think it is important to go back in time and truly understand the reason behind growth. It just so happens that many important reforms have been made in Peru.

One must recognize that Peru has managed to reduce inflation and almost eliminate terrorism, which has granted plenty of economic stability to the country.

Of course, this did not take place from one year to the other; it has been worked on for the last 25 years.

On the other hand, Peru has come to have free trade agreements with 55 countries in the world, which represent two-thirds of the global GDP, and in each one of these agreements there is a chapter on protecting investment.

Therefore, both local and international investors have in Peru the certainty that their investments will be respected. Which I think is paramount.

Another issue is that we have achieved the investment grade, which is very important. This is something that not all Latin American countries have.

I actually think that it is four or five that have the investment grade, which allows us, of course, to access financial resources at a lower cost.

The fact that we have a Central Bank that is absolutely independent from the executive power reserve and, by law, cannot loan money to the central government, is fundamental and has to do, of course, with reducing inflation.

I believe there are many aspects that have generated the climate of confidence that has allowed investment to take place in Peru.

The mining sector is an important one, and surely Peru – due to its geological conditions – is one the richest countries in mineral resources, meaning we have the obligation to enhance them, while taking care of the environment and respecting the communities where we work.

I have had the luck of traveling quite a lot, and one sees, when countries seek to develop, that natural resources have been a key factor in many of them.

People criticize countries that develop through enhancing natural resources.

I think this is wrong. Chile – the country to imitate in Latin America – is a most clear example, as it is the case of a country that has developed its natural resources well.

When you compare it with Venezuela, the situation is probably different, but I believe it is not its natural resources that have placed Venezuela in this situation, but the state’s administration of resources.

A country like Canada, in which many would like to live, is basically based on natural resources.

A country like Australia, a country like the US – all their natural resources were enhanced, and based on that they started developing other activities.

I believe these are stages in the development of a country and, who knows, maybe we are at the stage of enhancing our natural resources.

Our country is unique in the sense that many people do not understand Peru’s geography. This is a country that has a semi-desert coastal strip, the almost impregnable Andes that reach 6,000-7,000 meters, and an Amazonian jungle where it is quite difficult to develop any economic activity.

One of the economic activities that can contribute to generating the infrastructure needed to integrate this complicated country is the mining sector.

Infrastructure in terms of roads. How do we integrate Peru’s coastline, the Pacific coast with the Amazonian jungle, if not through building roads that can be justified thanks to the economic activity mining can generate?

The same goes for electrification, communications. In that sense, of course, mining has contributed beyond the local and foreign investment.

You will note that I keep saying ‘local and foreign’, because this is a company that was founded in Peru by Peruvians, that despite being listed in the New York Stock Exchange is basically comprised by Peruvian capital.

It seems as if foreign investment were a synonym for investment, but countries that have truly developed have done so because their people have had trust in their own country, which is what attracts more foreign investment.

It is not the other way around; foreigners will not come here to save us. Foreign investment is the cherry on top, it is always welcome and, of course, needs to be looked after and respected. 80% of investment in Peru is national, and 20% is foreign, generating a balance that we believe is positive, very healthy.

In these present times, one can analyze what is going on in Peru through external and internal factors, but the truth is – and you have mentioned it in several interviews – that there should continue to be investment in mining exploration. You are doing so through two projects: Tambomayo and San Gabriel. I would like you to comment on why it is necessary to continue investing in mining under these circumstances.

Despite people saying ‘Peru, a mining country’, they do not actually understand what mining is.

Industry uses the term ‘research and development.’ In mining we do not use ‘research’; we use ‘exploration and development’, which is interesting because it is the key to understanding the industry.

This means exploration is the research when it comes to natural resources; it is the research of the depths of the earth, of the subsurface, which at the same time are the ones that generate the mineral reserves that allow the reservoirs to be exploited.

Without exploration no reserves are found, and without reserves there is no way to develop mining.

So it is fundamental that there is plenty of exploration and, of course, this has to be made easier.

Exploration is not something that can be seen as harmful for the environment at all. We must explore and facilitate the availability of reserves.

And, when planning a project we have to, of course, comply with all international standards, environmental impact studies, the mine closure; basically, taking care of the environment and respecting the communities.

But if we delayed explorations, in the end we would be compromising the country’s mining future. That is something that needs to be understood.

On the other hand, there are people who state that, for example, mining is developed during times of high prices.

That is another fallacious argument, as it is not true. This is something that is not understood about the mining sector either.

This sector is a price taker, as economists would say. We do not fix prices, prices are set by the international economy and by circumstances on which we have no control and, therefore, it is key to have an efficient mining sector that will allow enhancing whatever resources we may have in the subsurface.

Thus, we need to remain competitive in terms of cost of production. This is what we have to bear in mind regarding the mining sector.

When it comes to time and procedures how do you make mining become a state policy, beyond the changing governments, so that the red tape and bureaucracy that afflict the sector are removed?

I believe the world has a problem with bureaucracy, and we need to try to avoid it. We need to be as viable, flexible, fastest as possible, while assuring the population that the economic activity is looking after the environment and respecting the communities.

There is no way we could develop the mining activity without these minimum requirements.

By the way, many people believe it is only the state that monitors us. I keep stating there are many investment funds that, in order to invest in companies and in mining companies in particular, require some commitments from us.

I, for example, have to sign a letter every year for a very important investment fund called Foreign and Colonial, based in London, in which I am asked to comply with a series of requirements: taking care of the environment, respecting the communities, committing to do so in a proper way.

And, of course, we do so and it is based on this that the community of investors invests in companies that look after the environment.

Something similar happens with organic food when it is time to talk about the Peruvian cuisine: whoever can assure they are using organic food can surely set a better price.

The same goes for whoever works at a company that looks after the environment and respects the communities; this is a value the market is demanding from us, not only the state or the communities, but also the investors, which is very important.

As we pointed out before, some projects have acquired an international status, such as the Conga or the Tia Maria ones. However, it is very important to know how to manage the communities, and you have been example of it. One of the last projects you are developing, the Tambomayo one, has a strategy that deals with a very important element, which is water. How do you make a community part of a project, and how do you convey the benefits this leads to?

The Tambomayo project is being developed not without problems. We still have private property issues in Peru, for example.

People easily say ‘You do not involve the community enough’ or ‘The community owns such territory’ or ‘You talk to the owner.’

But in Peru we sometimes find out there is one owner but five possessors, so you have to deal with the owner and the possessors.

The notion of property could be better defined, and this is where the state comes in and should define it.

The same happens in communities at 4,500-5,000 meters. Tambomayo is at 4,800 meters above sea level.

There are communities located at the top of the hill, and they do not have clear property rights so, who do you deal with?

I am saying this like a beggar. To be sitting in Lima, in San Isidro, in a comfortable building, and to think that that is Peru’s reality; that is not Peru’s reality.

The reality is much more complex, and working in the high Andes of Peru is complex.

Why have people not developed the high Andes in Argentina? Because it is easier to do in the wet Pampas, and because it is easier to live in Buenos Aires.

Peru has a different reality but we also have to understand how hard it is to develop companies in all these areas.

So, there are titling problems, which are evident. There are issues with the communities, which have their own political agendas.

As it turns, it is good business to challenge economic activities in Peru, not only mining.

It is good business to oppose the companies that generate electricity, the companies that supply water, the mining companies or the manufacturing ones.

This has to be banished, because a good business should be to generate wealth, not to hinder investment.

I would like to talk about the future of Conga. You evaluated adding it to Michiquillay and Galeno in Yanacocha, in order to try and push it through.

After the frustrating relationship with the community in the case of the Conga project, we analyzed different alternatives.

So when one sees that in that in the north of Peru, where Michiquillay, Galeno, Conga and La Granja are, there are such copper deposits, one says ‘Wow! This has great potential for copper exploitation.’

So we have to go and find alternatives. And if an alternative is economies of scale, by joining Conga and Galeno, then we need to discuss this with the Chinese investors in Galeno.

Michiquillay is in the hands of the state; Anglo American used to have it but dropped it.

I am Peruvian, with I do not know how many generations of Peruvian ancestors – as my ancestors on my mother’s side came with Pizarro, so we are talking about many years; mine is not a family that just got to Peru.

As a Peruvian, with roots in Peru, I ask myself how to add value beyond the business itself.

The final goal has to be to fight poverty, generate wealth and opportunities, especially for the ones that need it the most.

And the ones that need it the most are in the high Andes, in the rural area.

So if, if there was any chance – of course there has been no lack of conversations – we could join forces with these projects and generate economies of scale that would justify the projects in an economic and social way, then we need to make the effort.

There is nothing in concrete yet. Conga is paralyzed at the moment, and we will see what we can do for the future.

Speaking about family, I read an interview with your father where he mentioned how hard it was for him to enter the mining sector: he had to convince your grandfather two times, once when going to an opencast mine and once when going to an underground mine. When did the passion for mining strike you?

My father was the family’s first miner. My family, both on my father’s side as well as my mother’s side, comes from the farming sector, from agro areas in Ica and Trujillo.

In fact, my father was the only mining engineer and geologist in his generation, and we have somewhat followed his path.

I am not a mining engineer, I am civil engineer, but I have certainly been quite interested throughout the years, and I certainly have to agree with something my father once said: ‘Civil engineering also applies to mining’, and it does.

For example, I was reading the history of the Peru National Engineering University.

The department is called the Faculty of Civil and Mining Engineering, and if one starts wondering why civil engineering – I do not know if you have ever wondered why they call it ‘civil’ engineering – it is because there was only military engineering at first.

So, the ones who were not in the military were civilians. It is worth mentioning this encompassed the other branches of engineering. And then it became civil and mining engineering.

So, the truth is there is much relationship between the two. And this has been my calling and over the years I have generated an even passion for this sector, which can contribute so much beyond the matter of exports or tax collection.

I believe it contributes to the development of Peru, of my country. If there is something one wants for their country is that it develops and generates more opportunities for people.

When you went to communities such as Julcani, where it all started, have they told you how much the life of the citizens has changed?

I can assure you that in Cuenca del Ica, where Julcani is, the relationship is great. You may have never heard of a conflict, because these were other times.

It just so happens that we have done things with more ease. After that came the mining boom, that actually started with the beginning of Yanacocha in the year 1993.

Many people do not understand that, among all the big transformations that have taken place in Peru, there were no single mining projects between 1969 and 1993.

Twenty-four years without any mining projects. And of course, there will always be someone who says ‘Yeah, right, that is because prices were really low.’

This is not true. There were mining projects during that time Chile, Canada, Australia, the US and many parts of the world.

What is different is that Peru has had lost decades. Peru has lost the 60s, the 70s and the 80s, when really absurd policies were implemented, which generated instability.

I do not want to see lost opportunities in my country. I cannot solve Peru´s problems, but I can say something about them. As a Peruvian, I have the right to speak.

Regarding the relationship with the US, entering the New York Stock Exchange was a landmark. In fact, this was the first Latin American mining company to do so. This can be seen in the level of capitalization and in the relationship with some US companies for the development of new projects – like the case of Newmont and Freeport in Cerro Verde – your company has. Could you comment in the relationship with the US, you having been one of the participants in the free trade agreement with this country?

Yes! I feel very proud to have been part of that. This was the first free trade agreement Peru signed.

Truth be told, if it hadn’t been for the very important relationship between the public and the private sector, this could not have happened.

We started negotiating with five Andean countries: Venezuela, which quickly fell through, Bolivia, which decided to be a spectator, Ecuador, Colombia and Peru (Chile had already left the Andean Community).

The first country to sign a free trade agreement with the US was Peru. Why? The case of Ecuador is a curious one.

We had one Minister of Foreign Trade, or two, during the negotiation period, which lasted five years. Ecuador had six or seven.

Colombia faced, believe it or not, objections from the private sector, while Peru enjoyed much stability and the private sector worked side by side with the public sector to achieve the free trade agreement.

I happened to chair the Business Council for International Negotiations, of which I am very proud, and which I think was a valuable contribution.

From the on came the other free trade agreements, which generate stability because, I insist, in each agreement there is a chapter in defense of investment.

Meaning, who does not come and invest in a country where their investment is safe? What person does not invest in their own country if their investment is safe? Then it is very important.

And that, of course, has contributed to deepen, improve, the relationship with the US, which has always been good.

Tell me about the relationship with the US and the impact it has had on entering the New York Stock Exchange for the company.

Certainly, the transformation that has been taking place in Peru for the last 25 years has generated opportunities for companies.

Peru opened up, and is currently one of the most open economies in the world and, of course, we wanted to enhance the company’s value.

You mentioned my father, and it is certainly worth highlighting that we managed to list Buenaventura in the New York Stock Exchange when he was 74 years old.

A dramatic change, as when people hit 74 they say ‘Leave me alone, do not bother me’, but he surely saw the opportunity and we also insisted on it.

The great leagues demand from you a different discipline, and we are ruled by international standards, in terms of taking care of the environment, respecting the communities, having financial transparency, respecting the minority stockholders.

So this is a global company as much as the next one.

How did the relationship with US companies such as Newmont or Freeport impact?

Well, Buenaventura has an image that, who knows why, is also different from that of other companies.

We believe that projects should be launched sooner than later. And we are not going to drop a project just because we don’t have a 100% ready.

So, associating with first level international companies and, in this case, with US companies, has allowed us to enhance the value of Yanacocha and to contribute to the privatization of Cerro Verde first, and to its expansion later, which has allowed us to add value to the company.

You travel much. You have been in mining countries and know how important it is to keep an international image. In these trips, when you meet with businessmen and investors, what do they tell about Peru’s image?

Peru is regarded as the star of Latin America, which I am very glad about. However, when I come back to Peru, people are more humble, people in the rural areas ask ‘And where is my piece of the star?’

And they are right. I believe one has to be categorical in economic development having a spillover effect for the whole population. Now Humala likes to talk about inclusion.

I guess we are talking about the same thing. I do not like the word inclusion, because that would mean we are now excluding, and I do not think that is the case.

But it is evident that we have to see the benefits of economic development reaching everyone. In that sense, we have to work so that the star people see abroad is also seen here.

When we were negotiating the free trade agreement with the US there were objections, but we said the agreement had a foreign agenda, of exports, but also a local one, where we have to give people more opportunities, we have to have more roads that allow export products to reach the ports and the international markets.

And of course, that the farmer in Ayacucho and the farmer in the high areas of Cajamarca and Arequipa can reach these markets. That is the domestic agenda we have to work on.

Finally, I would like to ask you the same question we have asked each of our interviewees. Your father used to say ‘Do not tell me how much it costs, tell me when it will be ready, because I am short on time.’ When will the Peruvian mining sector be ready to attract all the potential and to take all the advantage it needs?

My old man’s phrase is from when we talked about a 10 or 20-year project, and he would say, ‘No, no, do not make me wait, because what I am lacking is time.’

I believe that Peru is on the right path, I believe there have been no only national but foreign influences, sometimes from bureaucrats sitting on desks in Washington or New York, who believe they can fix policies in the rural area.

I think they are smart people, who brainstorm ideas that, come reality, are hard to implement.

I believe we are in the process of balancing these innovative ideas, there is an excess of environmental issues where we have to comply with everything by the book, when really it is a mix between global warming with the possible environmental pollution in the mining sector.

Global warming has to do with greenhouse gases! It has nothing to do with mining! So I hear these things and I wonder what is going on.

I think we have to strike a balance and recognize that economic development is crucial to fight poverty. And poverty is the main source of pollution because, deep down, poor people do not care about pollution.

So what we have to do is to make that poor man have resources, have an education, and therefore become conscious about the care of the environment being fundamental for future generations.

And, of course, there should be formal companies, because Peru’s problem is informality. What I mentioned before about limits on property is directly linked to formality.

When they mention the cutting of forests, this is not the mining I am talking about. I am talking about formal mining, responsible mining.

Finally, if you had to define the mining sector in Peru for our public in one phrase, what would that be?

I might say that mining means development, as it contributes to the development of Peru and generates opportunities which, in turn, create a virtuous cycle to develop other sectors in the economy.

Many people might not realize it, but the impact that Cerro Verde has had on Arequipa is amazing. Of course! We have 12,000 people working in Cerro Verde.

These people generate economic activity; they start consuming from Arequipa’s economy, which generates a virtuous cycle.

To me, mining in Peru is part, not all, but part of the country’s development. Many people think it has to be all of it, but that is not possible.

That is the basis for diversification.

Well, of course!

Thank you very much.