IMPORTANCE OF MINING AND AGRICULTURE ON THE PERUVIAN ECONOMY IMPORTANCIA DE LA MINERIA Y LA AGRICULTURA EN LA ECONOMÍA PERUANA

This article presents the contribution of the mining, agricultural and other sectors to the Peruvian economy. It describes the performance of the mining and agricultural sectors during the last two decades, using macroeconomic indicators; In addition, it describes how in this period the Peruvian economy shows an impressive growth of 5.4% in terms of gross domestic product (GDP); This period is also known as the "mining boom". The excellent performance of mining and agriculture sectors contributed to this economic performance. However, despite the economic growth and changes during the last two decades, extreme poverty, malnutrition and childhood anemia are still a serious problem. To eliminate the extreme poverty Peru has to grow at least 6% per year in terms of GDP. This study proposes that mining and agriculture should continue to grow, as well as the other sectors to ensure Peruvian development. The recent recovery of the Peruvian economy is due to the latest 1 Ph. D. of Economy from Iowa State University USA and Professor at the Private University of Trujillo, Peru. faustino.ccama47@gmail.com 2 Mining Engineer and Professor at the National University of San Marcos, Lima-Peru. romulomucho2006@yahoo.es Este artículo fue recibido 17 de octubre de 2018 y su publicación aprobada el 20 de diciembre de 2018. Faustino Ccama Uchiri and Rómulo Mucho Mamani 8 mining investments and the interest of the current government in the promotion of private investments. Palabras clave: Agriculture, economic growth, mining, Peru, social conflict. RESUMEN Este artículo presenta la contribución de los sectores minero, agrícola y otros a la economía peruana. Describe el desempeño de los sectores minero y agrícola, durante las últimas dos décadas, utilizando indicadores macroeconómicos; además, describe cómo en este período la economía peruana muestra un impresionante crecimiento del 5.4% en términos del producto interno bruto (PIB); este período también se conoce como el "boom minero". El excelente desempeño de los sectores minero y agrícola contribuyó a este desempeño económico. Sin embargo, a pesar del crecimiento económico y los cambios durante las últimas dos décadas, la pobreza extrema, la desnutrición y la anemia infantil siguen siendo un problema grave. Para eliminar la pobreza extrema, Perú tiene que crecer al menos 6% por año en términos del PIB. Este estudio propone que la minería y la agricultura deben seguir creciendo, así como los otros sectores para asegurar el desarrollo peruano. La reciente recuperación de la economía peruana se debe a las últimas inversiones mineras y por interés del gobierno actual en la promoción de las inversiones privadas Palabras clave: Agricultura, crecimiento económico, minería, Perú, conflicto social. Importance of Mining and Agriculture on the Peruvian economy . 9

mining investments and the interest of the current government in the promotion of private investments.

INTRODUCTION
There is a believe that Mining and agriculture activities are in conflict, because they compete for land and water resources and environmental problems that has been causing the mining industry. This study presents data that mining and agriculture contributes to economic growth and they are not exclusive activities. The historic contribution to national GDP is estimate and published by INEI and BCRP. With this historical information by economic sector it is possible: a. to measure the contribution of each economic activity to the Peruvian economy b. It is also possible determine the rates of national economic growth, and the growth by each sector, for a given period.

c.
Another indicator that helps to explain these changes are the investment, exports and social variables d. Environmental negative effects are possible to reduce using modern technologies. Social conflicts are present, but this can be solved by good governance, such as: Corporate responsibility, appropriate intervention of the government.
To explain the socioeconomic situation of Peru, agriculture and mining sectors, several documents were reviewed, among them: (Lampadia, 2012)  Taking all this data allow to understand the national and sectorial economy, as well allows us to see the economic cycle, inflation rate and the trend of economic growth in terms of GDP.

Recent Peruvian economic history
Peru is the third country with the largest territory in South America. The country has a great biodiversity and huge non-renewable resource in the Peruvian Andes. Peru is a country with a democratic system with problems of labor informality, corruption and low competitiveness.  Humala and PPK governments, due to issues of bureaucracy and indifference to solve social conflicts. In this period, the GDP growth rate decreased from 6.9% to 2.9% and the external debt / GDP ratio increased from 14.3 % to 15 .2%. In this same period, monetary poverty has been reduced by 6.0% in p.p. However, there are still areas in the country, where social anomalies are present as: infantile anemia and chronic child malnutrition.
Peruvian GDP increased by 2.5% (in 2017); we need to grow at least at 6%, to generate new jobs and eradicate poverty. See figure 1. During the first months of 2017, the country faced floods and "huaicos" which are landslides in the north of the country, known as the "niño costero", which caused economic losses and deaths.
The study uses macroeconomic indicators some of them are: GDP, export, investment and others, the secondary information comes from: MEF, BCRP, SUNAT, MINAGRI, MIMEN and ADEX. The basic analysis is with graphics across the last two centuries, to see the trends and make inferences. It uses also correlation analysis among the main variables, to see if the correlation is positive or negative and the grade of correlation. Finally, a regression analysis is performed to measure the contribution of the main sectors. The review of literature is done about the Peruvian economy, mining and agriculture.
The objective of this study is to remark the mining and agriculture sectors contribution to the Peruvian economy. For this purpose, the performance of the Peruvian economy is described during the last two decades; using macroeconomic indicator's such as GDP, export value and investment. The hypothesis is: the contribution of mining and agriculture are relevant to the development of Peruvian economy.
Importance of Mining and Agriculture on the Peruvian economy .

Type of study.
This study is comparative and historical. It uses historical data (time series) of macroeconomic variables as well sectorial and social variables; also, it is comparative in two moments the Peruvian economy.

Instruments used in data collection.
It uses secondary data published by several governmental institutions and by private research institutes. The data comes from national censuses and national surveys on poverty and social conditions of the country.

Estimation methodology.
The study presents the data in tables and graphs across the last two decades, by main variables; rates of growth were estimated for each of variables in analysis; also, multiple correlation was run among variables. Finally, a regression analysis was performed to see the contribution of key variables to the growth of the economy.

Gross Domestic Product (GDP)
The average annual GDP growth of Peru between 2005 and 2017 has been 5.6 %; however, this rate was higher than the world growth rate. The GDP in 2017 increased only on 2.5%. See Figure 1. Several forecasts indicate that this year 2018, the GDP will grow around 4%.

Figure 1. Peru and world: Growth of GDP, 2005 -2017
Source: UNCTAD, BCRP, Macroconsult GDP is the total value of goods and services produced in different sectors of the economy in a given country. In the last 10 years (2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015)(2016), the sectors that have contributed most to the composition of GDP in Peru has been: services 47.4%, followed by manufacturing 14.8%, mining 13.0%, commerce 10.8%, construction 6.2%, and the agricultural sector 5.5%. Note that 18.5% of Peruvian GDP is made up of agriculture and mining, in recent years. See table 2.

The annual average growth rate
The annual average growth rate by economic sectors, are different in the last 10 years. For example, the fishing sector, presents years with great positive rate and years with negative growth rate. Mining presents an average growth rate of 3.47%. The majority follows the trend of national GDP growth (5.05%). (See   table 3).

Peruvian exports
The Peruvian export is very diverse, including mining, agricultures products, natural gas and oil, fishing among the main ones. The mining sector contribute with 60.4% fallowed by agriculture 13.6%. Both make up 74% of total export. See figure 2.

Public and private investment
In the last 11 years, the sum of private and public investment per year on average was 24.7 % of GDP. In 2017, total investment reached 23.1% of GDP, of which 18.3% was private investment and the difference of 4.8% was public investment. See figure 3.    This means that there will be difficulties to satisfy the social basic needs.
The only way to overcome this deficit is generating more wealth. The budget for 2018 is S/. 157,000 million; this amount will not be enough to cover the needs of the country, then the other alternatives are to increase taxes, or ask for loans, both of them are dangerous alternatives.

Production
The Peruvian portfolio of production of metal is diverse. The main metals produced are: Copper, Gold, Zinc, Silver, Lead, and tin. In general, the volume of production has grown significantly during the last two decades. However, the prices fluctuate, some periods could positive or negative. See table 5.
In terms of GDP the mining sector, registered an annual average growth

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MINSUR is the main producer of tin, it will expand its investment in Bofedal 2, with the recovery of tailings from operations in San Rafael by 2018.
This means a significant increase in its production, for which it plans to an Likewise, these operations would represent 4.2% of the current national copper production (MINEM, 2016).

Mining reserves
At Latin America level Peru, has the largest reserves of gold, zinc, and lead. Also, Peru has large reserves at world level of silver, copper and zinc.

Mining investment and future portfolio
The mining investment in 2017 was US $ 4,921 million; the mining sector presents the largest private investment in Peru. However, the estimated portfolio of mining investment, for 2017 -2022 has 49 major projects, with an expected investment of US$ 58,508 million, this figure is dynamic since the CAPEX20 (Investments in Capital Goods) costs usually increases every year. The execution of these projects will give a great impetus to the Peruvian economy, creating new direct and indirect jobs and contributing to export value. See table 7.
Importance of Mining and Agriculture on the Peruvian economy . Source: MINEM 2017.

Mining tax "canon minero"
A significant contribution of the mining sector to the Peruvian economy is the "Canon minero". It consists of 50% of the Income Tax (IR) of the third category that the mining companies pays annually. Other mining companies, in addition to the contribution that the Mining Canon, voluntarily assign a "Social Development Funds".
The National Society of Petroleum and Energy Mining, states that during the last 23 years, 44,999 million soles have been transferred to local and regional governments, universities and state institutes (SNMPE, 2018). The transfer of "canon minero" of 2018 presents a significant increase, compared to previous year (1863 to 3,158 million soles).

Figure 5. Peru: Transfer of ¨Canon Minero¨, 1996-2017 (Million of soles)
Sources: Sociedad Nacional de Minería, Petróleo y Energía del Perú, 2017. Report Canon Minero. Transferencias 2017 However, the use of Mining Canon has not best been the best in some cases it has contributed to the "inequality" between regions and they were not used as investment. Figure 5 presents resources generated in the mining sector, measured a "canon minero". The transfer is to central, regional and local government. The discovery of lithium in Puno is of rocky origin similar to other deposits found in rock, such as the origin of lithium from Australia and the USA among others.

Discovery of lithium
It opens the possibility of turning Peru into one of the main producers of this alkaline metal, whose industrial application grows progressively.
So far, Chile, Australia and Argentina, are the countries that export this product the most and 90% of the refineries are in China, however, as a result of this discovery, Peru would also become one of the biggest players in the country.
World Market.
Lithium is not negotiated like other metals, but directly between producer and client, it began to be used for batteries at the beginning of the 90's. The appearance of the electric car and the development of batteries for technological products has increased the World demand, however, this metal has many other applications as in agriculture and medicine. At the beginning of the 90 the use of lithium battery was 6% of the demand of the metal, today it skirts 40% of the total, for the 2021, it is projected that 59% of the total will be destined to batteries of automobiles and electronic devices. We know that each smart phone requires between two and three grams of lithium, the electric car requires 45 Kg. And an electric bus almost 240 Kg, then an extraordinary leap in the demand of the metal is generated.
In 2015, the value of lithium was quoted at US $ 5851 per ton on average, in 2017 it gave a huge jump at US $ 12,500, and in July 2018, its price already exceeded by more than 20% per ton, everything indicates that the price of the metal will continue to grow.
According to the executives of the company, with an investment of US $ 800 million, Peru can start exporting lithium carbonate for US $ 500 million per year starting in 2021 if the Macusani project is launched, the plan would be to start with a production of 40,000 tons of lithium carbonate, with the projection of reaching 100,000 per year.
Producing lithium as raw material is not enough, it must be exported with added value. The prospects for industrialization are excellent, it is needed a lithium refinery; beside added value must be created, by producing batteries, Importance of Mining and Agriculture on the Peruvian economy .
27 electric cars and other products that use lithium as input. Since it is an alkaline metal, the risks of contamination are minimal.
Therefore, the government must provide the legal and regulation related to the production of lithium and uranium. It is expected that lithium will have a large and positive economic and social impact in Puno and Peru.

Agriculture sector
The agricultural is important for two reasons: it provides products for food security and generates direct jobs. This sector contributes to 5.3% of total GDP, employs 24% of population economically active and contributes to total exports in 20%. Peruvian agriculture is a very important sector and must keep investment in new irrigated areas, transfer agricultural technologies to farmers and generate new technologies via: research, development and innovation (R+ D+ i).
A study of the Peruvian agriculture performed by World Bank says that agriculture has linkage (impact) with the rest of Peruvian economy. The same study indicates that agriculture contribution to GNP is higher than official reports.
The Peruvian agriculture is composed of several types of producers, from the agriculture for exporting, family agriculture and agriculture of subsistence.
However, the agriculture sector will continue as a one of main engines to move the Peruvian economy. ((Banco Mundial, 2017).

Main crops
Peru is rich in biodiversity, therefore the number of crops are many and it is composed of transitory and permanent crops. The cycle of permanent crops is less than 12 months (cereals, vegetables, etc.); on the contrary, permanent crops takes 4 to 5 years before production and requires higher amounts of investment.
This most important transitory crops are: potatoes, hard yellow corn, starchy corn and rice among others. The main permanent crops are composed of coffee, banana, and cocoa. See tables 8 and 9.

Livestock
According to MINAGRI data, the number of the animals from 1912 to 2017 presents a significant increase for ovine, porcine, alpacas, lamas and caprine species. However, the inter census data for 1994 -1912 presents a decrease in ovine, lamas an equine number of heads. This inter census shows an impressive increase of broilers (93%) also shows an impressive increase of guinea pigs and rabbits. See table 10.

Agricultural exports
The agriculture export is composed of traditional and nontraditional exports. The nontraditional product shows an impressive growth and they have some degree of value added (packing, selection and others), this group of agro exports products is composed of: grapes, blueberries, mango, avocado, asparagus, passion fruit, artichoke, quinoa and other, with international demand.
On the contrary the traditional agricultural exports have a minimum of increase.

Position of Peru in the world agro-export market
Peru has managed to take the first places in exports of some agricultural products. By 2016 we have passed the first place in the export of quinoa, peeled  Importance of Mining and Agriculture on the Peruvian economy .

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Orihuela (2013) summarizes the social conflicts that have plagued the country between mining and other sectors. It concludes that the more mining there is, the greater the social conflicts.
Likewise, there have been reports of social conflicts in mining areas, which has delayed investments in exploration and mining operations; but many of these are not due to the mining -agriculture conflict over the use of natural water and land resources, but because of the imperfect distribution of income between the mining companies and the population around the mines.
According to ANA, the consumptive use of the quantity of water resources by mining is lower (2%) than in other economic activities; being the main user the agriculture and the use by the population.
For three days from June 6 to 8, 2018, the AGROMINERA Convention called AGROMIN was held, under the slogan "Agriculture and Mining united by nature", together with the main actors that drive the economy and employment in our country.
In this event there have been representatives from the mining and agriculture sectors, researchers, public sector officials and international guests; the topics dealt with were: Territorial Planning, education, unemployment generation, the potential of natural resources, corporate social responsibility, the location of water resources and their use to increase water supply, the participation of mining and agro-exporting companies, and the ways and mechanisms how social conflicts are solved in other countries.
According to the various reports, it is evident that social conflicts will be less, due to corporate responsibility, better use of the mining canon and the participation of the state in preventing any of the organized conflicts. Most of the papers conclude that the synergy between mining and agriculture will be present for the development of the country.

CONCLUSIONES
The Peruvian economy depends on mining and agriculture activities.
National GDP is highly and positively correlated and with mining GDP.
In year 2017, the mining sector contributed with 13.9 % of GDP and 58% of Peruvian export (S$ 26,258 million). The increase of international prices of metals such as copper are good news. The mining production in Peru is increasing, and that this trend will continue.
The agricultural sector provides food for food security. This sector contributes to 5.3 % of total GDP, employs 23.5 % of population economically active and contributes with 19.8 % (US$ 5,550 million) of total export. The Peruvian agriculture is composed of family (small and poor) agriculture and agro export groups. The exporting of agricultural products is growing; however, the agriculture at family level requires more access to land, water, technical Importance of Mining and Agriculture on the Peruvian economy .