In the United States the Republican party might well moan about Marxists in the universities, but in Peru they actually have one as President – an avowed Marxist, no less, not one of these closet social justice types who are constantly arguing about language.
What’s more, the new President, Pedro Castillo, has recently appointed a Prime Minister, Mirtha Vasquez, who looks like she’s actually prepared to seize the means of production, and has already set the process in motion.
No pronouns here – this is about stuff that matters: money, jobs, capital, assets and power.
The means of production in question, at least today, are some of Peru’s most significant mines – four in particular at this stage, two of which are owned by London-listed Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF).
Not surprisingly, when the market digested this news, and Hochschild was forced to make a fairly upfront statement about it, the shares tanked. As of Monday morning, Hochschild is now worth just over GBP400mln on the London stock exchange.
Last week, it was worth over GBP800mln.
Which shows you just what a small dose of Marxism can do.
Vasquez said at the end of last week that operating licences for Hochschild’s Pallancata and Inmaculada mines would not be renewed.
Typically, closure dates are set for mines in Peru as a condition of the operating licence. But the assumption is generally that extensions will be allowed.
Vasquez, though, is not minded to grant the extensions, on environmental grounds.
Might she have a point?
Certainly, mining companies in Peru have had a mixed track record in the past. And that’s putting it generously.
For years, protests and issues have swirled around the huge Yanacocha gold mine in Peru’s Northern Highlands. The mine is owned by US major Newmont, and has been in production since 1993.
More recently, riots at the Rio Blanco project, which was sold by Monterrico to Chinese interests in the early 2000s, have resulted in loss of life, and this year protestors have blocked roads to prevent shipments, occupied mines and plant, and destroyed equipment, to the consternation of mining industry lobbyists.
Representatives of, amongst others, Antamina, Peru’s largest copper miner, called on the government a couple of weeks ago to rein in protestors, who are particularly worried about water table issues and compensation for land use.
But instead of reining in the protestors, it looks like the government are trying to rein in the mining companies themselves.
But it’s a difficult balancing act for any government to make. Peru is the world’s second-largest producer of copper, and mining as an industry accounts for a significant portion of national income. Hochschild itself reckons its mines employ 5,000 works and support a further 40,000 jobs.
Environmentalists may quibble, but mining unions will want mining in general to continue, with workers allowed a bigger piece of the pie.
And in that context, Hochschild, which has thus far reacted forthrightly to the news, may well be allowed to continue to operate if it holds its nerve.
After all, it hasn’t yet received any official government communication on the mine closures, and until it does, it’s hard for it to take anything other than a robust line.
Nevertheless, with Western investors increasingly mesmerised by the social credit scoring methods offered by ESG proponents, the company will have to watch its step.
