Gold, Food of the Gods

The work of Eric van Daniken’s classic 1973 treatise, Gold of the Gods or Barry Storm’s earlier 1945 Thunder Gods Gold, epitomize how the imagination of man has been captured by the gold of the Americas for millennia. However, even today, the distribution of wealth from mining still struggles to be managed well in Peru.

The Canon Minero exists to collect and distribute royalties from miners to regional and local governments in Peru. However, it has faced challenges in effectively allocating these funds:

– In 2023 (Jan-Jun), only 273.2 million Peruvian soles were collected in the La Libertad region, a 22% decrease from the same period in 2022[5].
– In 2022, 15.7% of the Canon Minero collected was distributed.
– In 2021, 16.1% was distributed, the same as in 2019 and 2018[4].
– In 2020, 14.3% was distributed[4].
– In 2016, 18.3% was distributed[4].

The Canon Minero collects a portion of mining taxes and royalties paid by companies to the Peruvian government. Here are the collections year by year from 2016 to present:

– 2023 (Jan-Jun): 273.2 million Peruvian soles in La Libertad region[2]
– 2022: 6.1 billion Peruvian soles[3]
– 2021: 5.2 billion Peruvian soles[3]
– 2020: 4.9 billion Peruvian soles (1.1 billion Euros)[1][3]
– 2019: 6.3 billion Peruvian soles (1.4 billion Euros)[1][3]
– 2018: 6.1 billion Peruvian soles (1.3 billion Euros)[1][3]
– 2017: 5.4 billion Peruvian soles (1.2 billion Euros)[1][3]
– 2016: 5.2 billion Peruvian soles (1.1 billion Euros)[1][3]

The collection of mining taxes and royalties is overseen by the Peruvian tax authority, SUNAT (Superintendencia Nacional de Aduanas y de Administración Tributaria). Mining companies are required to report their mining activities and pay their taxes and royalties to SUNAT on a regular basis. SUNAT then calculates the Canon Minero based on the percentage determined by law and transfers the revenue to the regions where mining activities take place[1].

Since its creation in 2001, the Canon Minero has accumulated over 48 billion Peruvian soles (12 billion Euros)[4]. However, it has faced allegations of corruption and mismanagement, with concerns about lack of transparency, conflicts of interest, and favoritism in allocation[2].

The distribution of the Canon Minero revenue to the regions is managed by the Ministry of Economy and Finance. The ministry is responsible for determining the allocation of funds based on a formula that takes into account various factors such as the amount of minerals extracted, the size of the mining operation, and the environmental impact of the mining activities. The ministry also monitors the use of the funds to ensure that they are used for their intended purposes.

One issue is that the allocation of the Canon Minero funds is determined by the National Canon Council (CNC), which is a government entity that includes representatives from the mining industry, as well as regional and local authorities. This has led to concerns about conflicts of interest, as some officials may have a vested interest in allocating the funds to certain projects or regions.

There have also been allegations of mismanagement and embezzlement of the Canon Minero funds. In some cases, local officials have been accused of diverting funds intended for infrastructure projects and social programs for their personal use or for political purposes. Additionally, there have been cases of inadequate oversight and monitoring of the use of the funds, which has made it difficult to ensure that they are being used effectively and efficiently.

To address these concerns, there have been calls for greater transparency and accountability in the Canon Minero system. Some have proposed establishing an independent oversight body to monitor the allocation and use of the funds, as well as increasing public participation and consultation in the decision-making process. Additionally, there have been efforts to improve the management and use of the Canon Minero funds, such as implementing better monitoring systems and improving the capacity of local authorities to manage the funds effectively.

Ordinal Gold goes a long way to address this imbalance and bring democracy to the mining sector in Peru.

Citations: [1] https://www.resourcedata.org/document?country=Peru&dataset_type=document&law_practice_question=practice&res_format=PDF&topic=Tax+policy+and+revenue+collection 
[2] https://perusupportgroup.org.uk/2018/09/the-canon-and-its-impact/ 
[3] https://www.researchgate.net/figure/Canon-Minero-transfers-to-district-governments-in-million-S-5_fig2_372239828 
[4] https://hummedia.manchester.ac.uk/schools/seed/andes/seminars/JArellano_PresentationSummary_Seminar3.pdf 
[5] https://perumin.com/perumin36/public/en/noticia/la-libertad-ingresos-por-canon-y-regalias-mineras-caen-un-22-en-lo-que-va-del-2023-por-impacto-de-la-ilegalidad

References:
[1] https://perusupportgroup.org.uk/2018/09/the-canon-and-its-impact/ 
[2] https://perumin.com/perumin36/public/en/noticia/la-libertad-ingresos-por-canon-y-regalias-mineras-caen-un-22-en-lo-que-va-del-2023-por-impacto-de-la-ilegalidad 
[3] https://assets.kpmg.com/content/dam/kpmg/pe/pdf/GU%C3%8DA%20DE%20MINER%C3%8DA%20CHILE-PER%C3%9A.pdf 
[4] https://resourcegovernance.org/sites/default/files/documents/mineral-revenue-sharing-in-peru_0.pdf 
[5] https://ordinalgold.io/our-team/peru/