History of Mining in Peru and Chile

History of Mining in Peru and Chile

Since the Inca civilization, stretching through the Spanish colonial period into present times, Peru's mining industry has been linked most closely with gold recovery. Currently Peru is South America's largest gold producer, with its economy benefiting immensely from the country's large scale gold mining industry. As of 2010, gold exports from Peru were worth nearly $7.7 billion, accounting for over 20% of the South American country's total export revenues. The World Gold Council report of 2012 titled "The Economic Contribution of large-scale gold mining in Peru", illustrated the strength of the country's mining industry, showing that in the years between 2000 and 2010 the industry had contributed on average 6% of Peru's GDP and almost 14% of Peru's Government revenue were also attributed to the sector.

The Gold mining industry is a major creator of employment opportunities in Peru as well as globally. With the study going on to estimate that for each employment position directly provided by a gold mine, an additional 1.9 indirect jobs are likewise created. This multiplier effect has in some cases, been noted to be as high as creating 3.8 further indirect jobs for each directly related employment opportunity at some commercial mining sites.

The world's largest copper reserves are situated in Chile, with the country being the largest producer and exporter of the vital commodity. At the same time the country accounts for 5% of gold production in the Western Hemisphere, nearly half of which, 41% is generated as a by-product of the nation's massive copper recovery efforts. Furthermore, Chile has the largest known reserves of both rhenium and potassium nitrate in the world, while the country's molybdenum reserves are the third-largest in the world. The overwhelming majority of Chile's mineral resource deposits are situated in the north of the country. Gas and the Country's smaller coal and oil reserves which are sufficient for domestic needs, are to be found in the Magallanes Region of Chile's South.

With copper's relative importance decreasing during the late 1970s and early 1980s, it still remained Chile's chief export product in 1992, with the country's mining industry contributing 6.7% of that year's GDP, rather than 8.9% of the total GDP in 1985. With the country's copper exports accounting for 30% of the total value of exports in 1991, a marked decline when compared with the 1960s, when nearly 80% of total exports came from the industry, it became increasingly clear that fundamental changes to the nations mining industry were called for.

Two of the most significant changes to affect the copper mining industry in Chile occurred during the years between 1987 and 1992; firstly the output of refined copper was increased dramatically, while the production of blister copper declined at an accelerated rate. The second major shakeup and revival of the copper mining industry came about following Chile's Government and its massive state run Copper Corporation, the (Corporación del Cobre—Codelco), which is the largest copper producer in the world, accounting for nearly 60% of the country's total copper production output in 1991.

Amended legislation, The Codelco Law, as it came to be known after its introduction in April of 1992 allowed for the first time Codelco to operate in conjunction with the private sector to better survey and develop unexploited deposits. This was further expanded in 1995, when Codelco sought out both domestic as well as foreign mining firms to be involved in a number of operations in Chile's North. The involvement of foreign owned companies was to be an important one, as new investment projects began to get underway.

The increasingly important presence of these foreign mining companies in large-scale copper mining operations was due in no small part to the international business community's increasingly positive perception of Chile in addition to the sense of security resulting from mining laws enacted under the Pinochet regime, which laid out clearly defined compensation rules in the unlikely case of nationalization, often a barrier to investment in other Latin American countries.