Mining and Peru's cities

Felix Villanueva for Gestión

How big an impact can mining play on the economies of Peru’s cities? Felix Villanueva provides some examples.

Mining and Peru's cities

Arequipa (MapachitoMD/Creative Commons 3.0)

When we look at the rankings of the biggest businesses in Peru, we see that some of the top spots are held by various mining companies, like Antamina, Southern, Cerro Verde, Yanacocha, Barrick, Buenaventura, Xstrata, Shougang, et cetera. These companies work on different mineral deposits around the country, including some that are located near different cities.

How does mining affect the commercial activities of these cities, their prices and their lifestyle?

While the economy is growing enormously in the majority of provincial cities, they are still relatively small compared to Lima and other large Latin American cities. Thus, the mining industry alone can be profoundly influential, bringing a flow of money from the good and services required not only by the mining company, but also by the workers employed by the mine and the contractors, workers who live in the city and need housing, recreation, food, transportation and other services.

The influence of the mine depends on a number of factors, including physical proximity. Contrary to popular belief, the relationship between the mines and the cities is not only bad. There is a case (Arequipa) where the mining activity happens less than 15 kilometers from the Plaza de Armas and fewer than 10 kilometers from the city’s outskirts. It’s as if in Lima, using the Plaza de Armas as a reference, there was a mine located in La Molina. Nevertheless, the relationship is generally harmonious and the majority of the population values the mine.

Trying to trace those demands over time, we can take the example of an engineer recently graduated from the Faculty of Mines at UNI. This new engineer is hired to work for a mining company whose camp might be located in a rural area without a nearby town, in which he will work according to a mining regimen, and on his days off will return to Lima to visit his parents. However, he could also be relatively close to a city, in which he could rent a “bachelor pad” apartment. In the provinces, there is little of the “empty-nest syndrome” because children tend not to leave home. Thus, while before there were few small apartments on the market, now the construction companies and real estate agencies are creating a supply (in Arequipa, they will build 350 small apartments for this market in the City Aparts project).

Entry-level wages at mining companies are comparatively high, so the new engineer will be able to spend more on rent. On his days and nights free, he can generate more business at shopping centers, night clubs, cafés, et cetera, because, for the moment, saving money is not one of his highest priorities.

With the passage of time, he will form a family. If he decides to live in the city near the mining camp, he will buy a home or apartment. This, rightly or wrongly, is believed by many to cause the housing bubble in many provincial cities.
“The mine employees pay the high housing prices, and this high demand makes the prices similar to those of Lima,” is a commentary frequently heard by real estate developers, agents and others in the industry.

But those aren’t the only sectors that are influenced; the auto sector and education also grow. Every day, there are more people in the provinces who can pay for exclusive schools or purchase SUVs that will require auto shops for maintenance.

As you can see, there are many areas that benefit, as well as many opportunities.

Many companies prepare projects, products or services specifically for the time of year when the mining companies pay bonuses to their workers. This flow of money expands and goes from person to person, from industry to industry, bringing development, but also raising prices.

So, who wants their children to study mine engineering?