Fitch Ratings warns that mining companies operating in Peru are more exposed to social protests

Mining companies that operate only in Peru face a greater threat of business interruption due to social unrest that has led to a series of protests and roadblocks in the country, the rating agency said. fitch reviews.

However, the agency noted that companies with multiple businesses have strong liquidity conditions and that any difficulty in its ability to execute its mineral shipments from Peru should be limited.

“Although a handful of companies are more exposed to disruption, the effect on cash flow is limited. We believe the protests and blockades which extend over more than three months may represent a material risk for mine operations, including logistics,” said Fitch.

The agency also recalled that the Central Reserve Bank (BCR) of Peru estimated that the protests cost more than four percentage points of Peru’s January GDP growth. He also noted that companies that pose a high risk of business interruption include Buenaventura (BB-/Stable) and Volcán (BB/Stable), which only operate in Peru.

“It should be noted that neither has experienced indirect operational disruptions due to the protests, but they operate assets exposed to logistical disruptions. At the same time, he considers Minsur (BBB-/Positive) and Nexa Resources (BBB-/Stable) to be medium risk.

Although the San Rafael de Minsur tin mine has seen direct operational disruptions due to the protests, the company is now the world’s second-largest tin producer, branching out widely into Peru and Brazil.

According to forecasts of fitch reviewsPeru will only have 2% growth during these 2023 and 2024. Likewise, the growth projection is below the average of countries that have a “BBB” rating, the same rating as Peru’s debt.

Similarly, the rating agency estimated that the political instability it poses a significant downside risk to foreign investment and economic growth. “Many investors and markets are waiting for any sign of political change to consider future investments,” he added.

At this time, it is anticipated that there will be a limited number activity on the international market of corporate debt in 2023 and warns of the risks to which macrofiscal trajectory in the medium term if adverse conditions persist, Bloomberg Online reported.

“The weakening of the investment and economic outlook, if it persists in 2023 and 2024, as Fitch predicts, could undermine the sovereign’s macroeconomic and fiscal trajectory, compared to its ‘BBB’ counterparts. Monetary and fiscal policies more stringent slowed domestic demand,” the report said.

“While active roadblocks were reduced to six on February 27, 2023 from a peak of 127 on January 19, 2023 and the business-friendly principles of the Peruvian legal framework remain, there is no clear way out. crisis,” he said. Bloomberg.