Peru Growth at Two-Year Low as Mine Protests Damp Investment

Peru’s economy expanded at the slowest pace in two years in the fourth quarter as social unrest threatened mining investment in the third-largest copper producing nation.

Gross domestic product rose 5.5 percent from the same period a year earlier, taking full-year growth to 6.9 percent, the government’s statistics agency said today. Growth slowed from a revised 6.6 percent in the third quarter and 6.8 percent in the second quarter.

Private investment slowed as Newmont Mining Corp. (NEM) halted work on its Minas Conga copper and gold mine in November following environmental protests. Though President Ollanta Humala supports the $4.8 billion project, investors doubt he’ll resolve the dispute and prevent social tensions stalling other projects, which is hurting business sentiment, said Pablo Secada, chief economist at the Peruvian Economy Institute.

“The only thing that could quicken growth in this global environment is far stronger private investment, and that depends on confidence,” Secada said in a phone interview from Lima. “Humala is supporting Conga and other mining projects politically, but there are doubts about his ability to deliver.”

Protests by local communities have also halted investments by Anglo American Plc and Southern Copper Corp. (SCCO), the country’s biggest producer of the metal. Opponents to the expansion of Southern Copper’s Toquepala mine rejected last week the company’s offer to invest 690 million soles ($258 million) in health and water projects.

Plans to overhaul labor legislation and an indigenous consultation law whose bylaws are being finalized by the government also risk deterring investment, Secada said.

The government pumped up infrastructure spending in the fourth quarter as part of a $3.5 billion package to offset the impact of slower global growth on the commodity-dependent economy.

Household demand rose 6.4 percent in 2011, the fastest in three years, fueled by rising income, record levels of consumer confidence and employment growth of 5 percent, the central bank said in a Feb. 24 report.

The sol was little changed at 2.6778 per dollar at 11:23 a.m. New York time.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net;

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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