Peru-Australia Free Trade Agreement is Good News for METS
Australia and Peru have announced the conclusion of free trade agreement (FTA) negotiations. Accordingly to those negotiating the agreement, one of the key rationales behind the FTA is to try and better leverage Australian mining investment in Peru and create opportunities for the METS sector.
The Peru-Australia Free Trade Agreement (PAFTA) will lock in tariffs on key Australian minerals, petroleum and LNG exports at zero. PAFTA will also create new opportunities for Australian miners and oil and gas companies to find and develop reserves in the region.
METS companies and oil field goods and services will also stand to benefit considerably from PAFTA, which will facilitate the expansion of exports. Mining equipment is Australia’s top export to Peru and is valued at around $54 million.
Mining Equipment, Technologies and Services (METS) and Energy Services
Australian METS are already very active in Peru and are at the forefront of delivering a diverse range of innovative products and services across the mining and energy supply chain, including exploration, extraction, engineering, processing, power generation, environmental management, safety, research and development, education and training and community engagement. As projects develop and operations strive to become more productive, increasingly Peruvian miners are looking to Australia for solutions.
PAFTA will support and facilitate the expansion of exports by Australian METS into Peru through:
- Australian manufacturers and exporters of mining equipment benefit from duty-free access for virtually all exports to Peru. PAFTA will bind these tariffs at zero;
- Peru has guaranteed access on non-discriminatory terms for Australian suppliers of mining-related consultancy, research and development, engineering, environmental, mining and technical testing and analysis services; and
- For the first time, Australian suppliers will have the guaranteed right to bid for government procurement opportunities with PETROPERU and entities in Peru’s government-owned electricity and hydro power sectors.
Australian resources and energy exports
In addition to PAFTA locking in the duty free access Australia currently enjoys into Peru for major exports such as liquefied natural gas, iron, steel and aluminium, key market access gains include:
- immediate elimination of tariffs on base metals including iron ore, copper and nickel;
- immediate elimination of tariffs on coal; and
- immediate elimination of duties on tariffs on mineral fuels and mineral oils.
New exploration, extraction and production opportunities
In 2015, Peru was the seventh largest mining producer in the world. It is currently the world's third largest producer of copper, zinc and tin and the fifth largest producer of gold. Peru has the world's largest reserves of silver and leads Latin American reserves in lead and zinc, second for copper and molybdenum. In exploration, Peru ranks seventh in the world, attracting five per cent of the total global exploration budget – in 2014, US$623 million was spent on exploration.
PAFTA will provide legal certainty to Australian investors looking to explore new opportunities in Peru. In addition, PAFTA’s rules on state-owned enterprises (SOEs) will level the playing field between Australia’s privately-owned companies and the SOEs.
Streamlined investment processes and greater protections
Greater investment protection and streamlined processes will help propel investment by Australian miners, oil and gas companies, METS and oil field goods and service providers in Peru.
PAFTA will promote further growth of foreign investment in resources and energy in Australia by increasing the screening threshold at which private foreign investments in the mining and energy sectors are considered by the Foreign Investment Review Board (FIRB) from $252 million to $1,094 million (except in relation to uranium and plutonium extraction and nuclear facilities).
Temporary entry arrangements for professionals and employees
Australian companies will be able to transfer executives and managers more easily to work in Peru for an initial period of one year. This may be extended multiple times, based on the continuation of a valid work contract.
Australians working in the mining sector, including managerial staff, METS contractors, specialist staff and technicians working on oil and gas wells are covered by Peru’s commitments on temporary entry, allowing Australians to stay in Peru for one year with the possibility of extension.
Peru will not impose labour market testing on Australian professionals working in the resources and energy sector, including intra-corporate transferees, contractual service suppliers, technicians, installers and servicers and Australian investors.
The FTA will come into force once it is agreed up by the Australian Parliament and Peruvian Congress, and then signed. This is expected to take approximately 6 months.
Austmine recently completed a study looking at supply chain issues and the needs of mining companies in Peru. The study identified a number of areas of opportunities for Australian METS including in such areas as remote mining, automation, data/digital, community engagement, environmental management and remediation and closure. This report can be found on our member portal.
Austmine is also taking a mission to Peru in May 2018, following Expomin. Expression of interest for this mission can be found here.
(Pictured above: Australian Prime Minister Malcolm Turnbull and Minister for Trade, Tourism and Investment Steven Ciobo finalise negotiations with Peru's President Pedro Pablo Kuczynski and Minister for Foreign Trade and Tourism Eduardo Ferreyros.)
Christine Gibbs Stewart, CEO, Austmine