By Ryan Dube
LIMA, Peru--Peru is pushing ahead with measures to shore up
private investment and boost growth despite concerns the changes
could weaken environmental oversight in major sectors like mining
and energy.
The government, which announced the proposals earlier this
month, seeks to relax environmental rules by temporarily reducing
fines and speeding up the approval process for permits.
However, the measures are facing stiff criticism from
environmentalists, who say they will reduce the Environment
Ministry's responsibilities in regulating mining and energy
activities. Representatives from the ministry weren't immediately
available for comment.
"This is a major setback for Peru's environmental advances,"
said José de Echave, a former deputy environment minister.
Efforts to strengthen environmental rules for mining and energy
companies are relatively new in Peru. The country created the
Environment Ministry in 2008 as a condition for signing a
free-trade agreement with the U.S.
The most contentious proposals include plans to reduce fines by
the country's environmental regulator, known as OEFA, over the next
three years and impose a maximum period of 30 days for the approval
of environmental impact studies.
These approvals now can take up to two years, depending on the
size and complexity of a project.
The government's proposals were approved by a congressional
committee late Wednesday, and are expected to be sent to Congress'
general assembly for approval in the next few days.
A group of more than 30 nongovernmental organizations have urged
lawmakers to reject the proposals. The Peruvian Society of
Environmental Law this week sent a letter to President Ollanta
Humala saying that the measures would weaken the country's
environmental laws and institutions.
But government officials say the measures are important to
ensure economic growth. "We believe that these regulations are
going to help our economy to continue to grow and to create
employment," Finance Minister Luis Miguel Castilla told reporters
this week.
The package also includes new tax incentives for mining projects
and proposals to reduce labor costs.
The government has said measures could add up to 3 percentage
points to economic growth in the next three years and help restart
investment projects for about $11 billion. The proposals also come
ahead of plans to launch an auction of oil and gas contracts in the
Amazon region and at offshore sites.
Mr. Castilla announced the proposals earlier this month
following the release of data showing that Peru's economy expanded
just 2% in April, the slowest monthly rate since 2009.
Economic growth has slowed in recent months in large part due to
a decline in investment and exports. The economy expanded 5% in
2013, compared with 6.3% in 2012 and 6.9% in 2011.
Economists expect growth of around 5% or less in 2014, compared
with previous forecasts of more than 6%. The outlook has been
dampened by weak investment and lower-than-expected output in the
mining sector.
Private-sector investment was a main driver of Peru's robust
economic expansion during the past decade. But growth has slowed in
recent months as investment has been hurt by a decline in prices
for commodities like copper, the country's top export earner.
The government's push has been widely supported by Peru's
business community, which has often complained the current
environmental rules are too strict and red tape is one of the main
sources of project delays.
"This is a question of confidence," Compañía de Minas
Buenaventura SA Chief Financial Officer Carlos Gálvez, said in a
telephone interview. "Speeding up the process for environmental
issues will help investors and speed up their investments."
Ratings agency Moody's said the proposals are credit positive.
"They will enhance potential output and private-sector investment,
while they also address concerns in the business community about
red tape that have negatively affected economic sentiment," it said
in a recent report.
Some economists are questioning whether the measures will be
successful in propping up the economy in the coming months.
Waldo Mendoza, the head of the economics department at Peru's
Catholic University, said the proposals address long-term
structural challenges rather than helping to increase demand to
spur the economy in the short term. He said it would be more
beneficial to increase public spending or lower the Central Reserve
Bank of Peru's reference interest rate, which has been on hold
since November 2013.
"This package of reforms is a good package for the medium and
long term, " Mr. Mendoza said. "But it isn't the right package to
confront the deceleration in the Peruvian economy in the past few
months."
Write to Ryan Dube at ryan.dube@dowjones.com