Risk is a moving target

With more than 99.6% of the votes counted in Peru’s presidential election, it looks like left-wing Pedro Castillo of the Peru Libre party has defeated his right-wing opponent, Keiko Fujimori, by a super slim margin of about 63,000 votes, taking 50.2% of the popular vote.

And even as Fujimori contested the results alleging fraud (without evidence it seems) and has asked to throw out hundreds of thousands of ballots, meaning the outcome could be scrutinized for weeks, a handful of politicians from around the region have already started congratulating Castillo on the victory, first among them President Alberto Fernandez of Argentina. Bolivia’s former president, Evo Morales, called Castillo a “soul brother and companion in struggle,” Reuters reported on June 11, while Luiz Inacio Lula da Silva, a former president of Brazil, said the election result “represents another advance in the popular struggle in our dear Latin America.”

Castillo, the son of poor Andean farmers, campaigned on pledges of rewriting the constitution and redistributing wealth from mining in the country, the world’s second-largest copper producer. Among his promises: there would be “no more poor people in a rich country.” In the final weeks leading up to the vote, Castillo toned down his comments on nationalization, and as the ballots were being counted this week, Castillo told his well-wishers, according to the British newspaper, The Guardian, that his government would be “respectful of democracy, the current constitution … [and of] financial and economic stability.”

If the count holds, what will it mean for mining companies?

In a flash research note to clients from Haywood Securities with the headline: “Castillo will bring change; but radical measures appear unlikely,” seasoned mining analyst Pierre Vaillancourt wrote that a Castillo victory “will likely result in higher taxes for mining companies operating in Peru,” but “given the fragmented congress, we believe these changes will not be as radical as feared.”

“Regardless of the eventual outcome, there remain sharp divisions within the national assembly, with no clear majority for any party,” he wrote on June 9. “While the election of Castillo will likely shift government policies leftward, with a commitment to help poorer, more rural communities in the country, we believe these political divisions are likely to prevent any radical agenda from being enacted. Despite Castillo’s socialist leanings and a desire to make mining companies pay more taxes, we believe he will recognize the importance of the industry, which represents 10% of GDP, and that his actions will be measured.”

Vaillancourt also pointed out that when Ollanta Humala was voted into office in Peru in 2011 on a socialist platform, “he developed a constructive relationship with mining companies that helped to grow the industry and its contribution to the country’s revenues.”

Let’s hope that will be the case if Castillo is confirmed the victor.

Of course Peru isn’t the only country in the world that may be causing sleepless nights for some mining executives. In Chile politicians are weighing higher tax rates on copper sales. And across the world in West Africa, a horrific terrorist attack on a village in northern Burkina Faso near the nation’s border with Niger, reminds us that violent extremism continues to be a threat in the Sahel.

The government said no group had claimed responsibility for the June 5 killings that left more than 130 people dead, but according to media reports, it may have been the work of the Islamic State in the Greater Sahara (ISGS), a regional affiliate of Islamic state. According to the Wall Street Journal, the massacre was “the deadliest since jihadists first hit Burkina Faso in 2015,” and is “prompting calls to intensify international counterterror efforts across West Africa.”

The newspaper reported that during the three-hour attack, “militants shot indiscriminately, torching homes and a market before lobbing explosives at civilians seeking refuge in gold-mining holes, according to government officials and nongovernmental organizations based in the region.”

France has shouldered much of the burden of fighting terrorism in this part of the world. But it has been trying to get more help from other governments in recent years to share that responsibility. In the wake of the latest atrocity, President Emmanuel Macron of France, which has about 5,100 soldiers deployed in the Sahel region, an area south of the Sahara encompassing parts of Burkina Faso, Chad, Mali, Niger, and the Ivory Coast, said at a news conference on June 10 that “the time has come; the continuation of our commitment in the Sahel will not be in the same way.”

“We will make a drawdown in an organized way,” Macron said. “We will have to hold a dialogue with our African and European partners. We will keep a counterterrorism pillar with special forces with several hundred forces  … and there will be a second pillar that will be cooperation, and which we will reinforce.”