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Peru-Bolivia’s Border Crossing via Desaguadero Made Easy

A guide for getting to Puno to La Paz fast – and without a hitch

Considering flying from Lima to La Paz, but put off by expensive flights? Bit nervy about doing the border crossing on your way across up from Arequipa or down from the Uyuri salt flats, and looking for information?

Look no further.

Crossing the Peru-Bolivia border at Desaguadero is simple and completely legit.

It’s less scenic than the alternative crossing at Copacabana, but if you’re in a hurry you can get from Puno to La Paz in just over five hours.

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Here’s my account.

Flying into Juliaca

I flew from Lima to Juliaca to save cash. International flights tend to work out about double for La Paz.

LAN or Avianca airlines fly in total about six times daily.

On getting into Juliaca’s Inca Manco Capac airport, I pre-organized a shuttle bus to Puno which waits outside the tiny arrivals hall. It cost S/.15 and I did it through Rossy Tours travel agency (tel.: 051/366-709). Puno is 45 miles (28 kilometres away) and takes 40 mins to arrive. You can take combis for less, though these will go via the centre of Juliaca and will take longer.

Don’t spend the night in Juliaca. It’s a god foresaken place, dirty, potholed, seedy.

Spend the night in Puno, safer, friendlier, and much more of a tourist destination.

Puno – Desaguadero 

The next morning, take a taxi (no more than 5 soles) to the Terminal Zonal. Be careful not to go to the Terminal Terrestre, which does longer domestic journeys to Arequipa, Cusco, Tacna.

Outside of the smaller terminal, which sits just off of Lake Titicaca, the world’s highest navigable lake (at 3,800 metres altitude), you have two options.

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1. Go by minibus. They carry about 15 people will cost about 10 soles. But they leave less often (waiting until all seats are occupied), are slower and far less comfortable.

2. Take a taxi with three other passengers. This works out at 20 soles, and takes on average two-and-a-half hours.

You won’t get stopped for customs or passport checks on the Peruvian side of the border. On the Bolivian side, it’s more likely.

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At Desaguadero

After taking this route round Lake Titicaca, you arrive to the border town of Desaguadero. It’s like all border towns, shabby, full of merchandise, and a bit dodgy.

Still, there are border police on hand and nothing will happen to you.

First, go to Peruvian immigration, a small hall with four officials behind counters. Present your Andean Migration card, which you will have filled when you entered Peruvian territory. If you’re within your allotted time (typically 183 days on a tourist visa; given on entry at the immigration official’s discretion) your passport will be stamped once more, you cede the card, and you leave.

Easy peasy.

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Arriving into Desaguadero. Immigration hall to left.

Exchanging soles for bolivianos

Next, change your Peruvian soles to Bolivia’s bolivianos.

The rates are good (exchanging soles for bolivianos

in mid-October 2015, 1 sol = 2.4 bolivianos; on return you get 1 sol for 2.5 bolivianos)

Spot rate was 1 sol = 2.35 bob, 15 October 2014.

It’s legit and do it on the Peruvian side. Don’t haggle; they won’t budge. There are more police and ultimately more cambiastas – women sat on stools with wooden boxes for their change.

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Now walk over the bridge connecting the two sides of Desaguadero, adding an extra hour for time difference.

They’ll be various walking salespeople selling all manner of things, from food to key rings to coca leaves.

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Bolivia immigration

Walk into Bolivia, take selfie with “Bienvenidos a Bolivia” sign, then walk to the left side of a big building in the middle of the street. That’s the immigration hall.

They’ll usually be a queue and it will be slower on the Bolivian side. At busy times it could take an hour, on slower days 20 mins.

Before getting in line, walk to a first booth inside the building to the left to get your immigration card for Bolivia to fill in. You don’t need to queue to get this part and will just waste time.

With the card join the back of the queue, and fill it in as you’re snailing along. For Brits (I’m a brit) and most nationalities it’s free and you get 3 months max on a tourist visa. Americans will have to pay and Israelis now need a visa, as of July 2014.

After that you’re done.

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On to La Paz

Walk 50 yards to where you’ll have the same choice – taxi vs. minibus. Take the taxi – it’ll be even cheaper – 30 bolivianos versus about 8-15 on the minibus.

Again taxers are faster, safer and more nimble if you hit frequent, crippling traffic jams. You’ll know because your driver will curse and mumble about ‘atrancado’ (being stuck).

From Desaguadero the taxi takes less time than the one to Puno. As little as an hour and ten if you’re lucky, up to 2 and a half if you’re not.

Delays will occur once you hit El Alto, the world’s highest city (containing more than people 100,000) at 4,050 metres above sea level.

You’ll realise that’s a good pub quiz fact.

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Snow-capped mountains on horizon

Day considerations

If you arrive on Thursday and Sunday it will take longer as these are market days. There are loads of vehicles and blocked of streets and diversions.

It’s not the end of the world, it will just take longer.

In my case, despite promises to be taken to La Paz’s general cementery (cementerio general) my taxi driver gave up and I had to walk away from the jam to take a taxi to downtown La Paz.

In that case walk away from the blockage and ask for the Plaza San Francisco, La Paz’s centre. Many backpackers hostels are 5-10 mins walk away.

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View over La Paz

Reverse trip: La Paz to Puno

Take a taxi to the ‘cementerio general’ and ask for the ‘paradero Desaguadero”. Practically all taxi drivers should know where this is. From the Plaza San Francisco, don’t pay more than 15 bolivianos.

In my case when I arrived there were only the white 15-person minibuses, so I told my driver to take me to the taxis. He wasn’t sure but knew where to go in El Alto.

We climbed up from La Paz, which sits in a bit of an egg cup at 3,600 metres to El Alto at about 4,050 metres. Taxi drivers are master improvisers, knowing a diversion if you hit more inexplicable traffic.

After arriving in the ‘desaguadero paradero’ in El Alto, I don’t know the address, but confide in your driver, he or she [almost never] I had to pay 70 bolivianos, so I got a bit stung. My driver wasn’t out to con me, I just hadn’t realized the trip would rise to 70 bolivianos.

From there I found the taxi cabs, agreed 30 bolivianos, and took a seat waiting for the cab to fill. They will never go until full, and some drivers insist someone sit in the boot (trunk), facing the rear. These cars are station wagons. Don’t sit in the boot.

el alto

Then there’s another 90 minute drive. You may get stopped close to the border. Showing your passport should be enough and registering your name. They rarely search you.

I can’t see how Bolivians officials could find a pretext so that you have to pay a commission (bribe). Obviously judge it as it is, but I’d vehemently refuse unless it was clear for the sake of a few dollars, you don’t want the hassle. I don’t know anyone this happened too.

Go straight to Bolivian immigration with the immigration slip of paper you had stamped and filled out on the way in.

There is no exit tax (at least not for Brits), cross the bridge, and go to Peru’s immigration hall. Get a card, fill it out, and put yourself in line. Wind your clock an hour back. The whole process took 5 mins at 10am on a Tuesday morning.

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Peruvian side in background on Desaguadero border bridge.

Desaguadero to Puno

Bear right and you should encounter varuous taxi drivers chatting. If you’re gringo they’ll seek you out and be shouting Puno. You won’t have to look far. It costs 20 soles again and you have to wait until full. I had a great ceviche from one of the stalls by the way for 6 soles.

Then it’s about two-and-a-half hours to Puno.

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Finally to Juliaca

To get to the airport in Juliaca, I organized a minibus through the same Rossy tour company for 15 soles. That’s not a direct endorsement. They were just a number I was given. That journey takes 45 mins to an hour.

Don’t fret if you arrive even an hour before schedule take-off. It’s a domestic airport, and it took me all of 10 mins to get through.

And there you have. Relatively stress free and having made some big savings.

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Morales Proclaims Victory In Bolivia Elections

Official results not yet released but exit polls in Bolivia’s elections show a third consecutive term for incumbent Evo Morales

LA PAZ, Bolivia — Evo Morales declared victory in Sunday’s Bolivian presidential vote, after exit polls indicated a huge victory for the incumbent.

Official results have yet to be released but a national exit poll awarded Morales 60 percent of the vote, paving the way for him to become the country’s longest-serving president.

“We thank the Bolivian people for this triumph,” Morales said from the balcony of the presidential palace to ecstatic followers thronging the capital of La Paz’s main square.

Bolivia’s first indigenous leader dedicated his victory to “all the people of Latin America and the world who fight against capitalism and against imperialism,” and paid tribute to Fidel Castro and the late Hugo Chavez.

Morales, 54, a former coca-leaf grower turned populist politician, has expanded social programs and presided over a commodities boom that has seen Bolivia’s economy triple.

Victory seemed inevitable after polls consistently placed the incumbent and his Movement for Socialism (MAS) party at more than 50 percent of the vote, securing an outright majority.

Polls on the eve of the election predicted a Morales victory with 59 percent of the vote. According to the Ipsos figures, nearest challenger Samuel Doria rose six points in the election, finishing at 25 percent.

Morales said his party made gains in all of Bolivia’s nine regions, and declared the country was no longer a “half moon” but a “full one,” making reference to political divisions which split the country’s middle.

If he governs until the end of his term in 2020, Evo, as he is known, would have ruled for the longest since independence in 1815. But he is accused by critics of consolidating power and smothering the opposition. His candidacy was controversial after the country’s highest court allowed him to run for a third term – barred by the constitution.

MAS’ projected share of the vote put the Socialist party within distance of the two-thirds majority needed in the legislature to alter the constitution.

Analysts say Morales may seek to abolish term limits, paving the way for indefinite election. He is considered to have a strong grip over party members while no clear successor exists.

“Will Evo try to engineer so that he can run for a subsequent term? Everything (for MAS) relies on that, so my guess is he will,” Jim Shultz, executive director of the Democracy Center in Cochabamba, told The Anadolu Agency (AA).

“What holds MAS together is Morales. Without him they’d have a harder time,” said Raul Madrid, a professor of government at the University of Texas.

For supporters who donned the party colors of royal blue and white, and waved flags, Morales was the only choice for Bolivia.

“The whole Bolivian people know that brother Evo has done great work,” Eduardo Sinani told the AA.

“He’s the only president, the best president who’s ever lived. We’re in a process of change, and this process needs not just five years to develop, but until 2025,” he said.

Voting went smoothly Sunday, with electoral observers from the Organization of American States not declaring any major irregularities.

The country’s election authority said it would announce 70 percent of the results Monday after being postponed on Election Day.

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Bolivia’s Morales on Verge of Third Election Victory

Populist indigenous leader set for resounding outright majority in first round, extending rule to 2019

LA PAZ, Bolivia (AA) – Bolivia incumbent Evo Morales is set to cruise to a third consecutive victory in Sunday’s presidential election, securing five more years to expand popular social programs.

A rash of closing polls put the leftist leader of the Movement for Socialism (MAS) party on 59 percent – a 40-point advantage over nearest contender, Samuel Doria.

Outright victory will extend Morales’ rule to 2019, contentiously making him Bolivia’s longest-serving president in history.

Opponents accuse Morales of defying the constitution, which bans anyone running for a third term, after a constitutional court ruled in his favor last year.

“There’s no doubt in anyone’s mind who’s going to win,” Miguel Centellas, a professor in political science in Jackson State University in Mississippi, who focuses on Bolivia told The Anadolu Agency (AA). “The real question is can he get a two-thirds supra-majority in the legislature.”

87 of Bolivia’s 130 lower house seats could allow Morales to do away with term limits, giving way to indefinite election.

The fragmented four-party opposition has struggled to make inroads with the electorate, splitting the vote to Morales’ advantage.

Nearest rival Doria, a centre-right businessman who brought Burger King to Bolivia, or trailing former president (2001-02), Jorge “Tuto” Quiroga, are considered to not offer clear alternatives.

“The opposition on the right of Morales is so weak, and it’s not that anybody is doing it to them,” said Kathryn Ledebur, of the Cochabamba-based Andean Information Network.

“They haven’t developed the skills, diplomacy or policy generation to convince anyone in the voting public. They are regurgitated, remodelled politicians.”

Morales, 54, a former coca-leaf grower turned country’s first indigenous leader, has presided over a natural gas boom which tripled the economy and slashed poverty by 25 percent.

Known popularly as “Evo”, the Aymara indian has allied himself with other leftists leaders such as Venezuela’s Chavez and Ecuador’s Correa, united in their contempt for the United States and the neoliberal ‘Washington consensus’.

Morales has come under fire for hostility to the opposition and smothering of the press. His party boycotted a presidential debate last month, saying it refused to debate with ‘neoliberals’ opponents.

Today Bolivia’s 6-million electorate will elect 130 deputies and 36 senators by a mixture of first-past-the-post and proportional representation.

Voting is obligatory for those between 18 and 70.

To ensure high turnout, Bolivian electoral law bans alcohol 72 hours before polling, and all transport on election day. On Thursday an act of “electoral silence” began, where further campaigning by candidates is illegal.

To win an election, a candidate must either win an absolute majority of the vote or at least 40 percent with a 10 percent lead over the second candidate.

Election observers from the Organization of American States (OAS) have dismissed accusations of voter fraud after 20,000 deceased persons remained on the electoral register.

OAS president Alvaro Colom said it was “normal” for an election, pointing out Bolivia’s biometric registry used to prevent double-voting.

Morales won 54 percent of the vote in 2005, and increased his share of the polling to 64 percent in 2009.

www.aa.tr.com/en

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Bolivia’s Pacific Quarrel Rumbles on as Election Nears

The longstanding dispute with Chile looms large as analysts see Morales flaring tensions for electoral gain

LA PAZ, Bolivia (AA) – Nothing unites Bolivians more than their claim to the sea.

The landlocked country’s loss of territory in a 19th century war against Chile is an open wound that seeps resentment, still.

President Evo Morales (pictured right) has made Bolivia’s so-called “sovereign access to the sea” a central plank of his second government, bringing a claim before the International Court of Justice last April.

And in bidding for a third term, the maritime cause, as it’s locally known, has heavily figured in his Movement for Socialism (MAS) party’s campaign.

“It’s something that has been decisive in the Bolivian identity,” Kathryn Ledebur, director of the Andean Information Network in Cochabamba, told The Anadolu Agency (AA).

“It’s political jockeying by MAS to show it’s behind the cause, though this is a genuine national issue where consensus exists.”

-War of the Pacific

Bolivia lost 250 miles (400 km) of coastline and 46,000 sq. miles (120,000 square km) of territory in the 1879-84 War of the Pacific. That deprived it of key ports – choking off international trade and its development.

While its coastal sovereignty was formally relinquished in a 1904 treaty, a series of Chilean presidents have promised its return.

This is the crux of a Bolivia’s demand put before the International Court of Justice at The Hague last April – that Chile negotiate in “good faith” and work toward a diplomatic resolution.

But Chile says it isn’t obliged to do so. Bolivia “intends to re-write history” and has mounted false arguments to distort the process, according to foreign minister Heraldo Muñoz. This year Chile challenged the court’s jurisdiction to decide the matter, suspending Bolivia’s claim until all arguments are heard.

“How can a country that’s so efficient and respectful in other disputes maintain this lie?” Gustavo Aliaga, an international analyst with 25 years’ experience in Bolivia’s foreign ministry told the AA, with a weighty blue document, “The Book of the Sea,” which outlines Bolivias position on the issue, before him.

“They say Morales is like the Gaddafi of Bolivia, putting at risk the peace and stability of the continent. When he just wants to see Chile respect its promise.”

-Diplomatic blows

Ahead of Bolivia’s election, both sides have traded diplomatic blows. Last week Chile published a six-minute video seeking to debunk its neighbor’s claims.

The video, which features President Michelle Bachelet along with former presidents, emphasized how Bolivia enjoys preferential customs agreements, use of roads and access to ports.

“An access that is undeniably better than the majority of countries without coastline,” according to the foreign minister.

Aliaga refutes this assertion, arguing Bolivia hasn’t the free movement Chile attests and is hobbled as a landlocked country.

Although Bolivia’s economy has tripled since Morales came to power, buoyed by sky-rocketing natural gas sales and the country will be Latin America’s best economic performer this year, Bolivians should not be distracted that “for the moment (theyre) rich on two hours of a commodity boom”, Aliaga says.

“Every state has the right to make the world aware of its arguments, but it can’t do it lacking the truth,” President Morales said in response to the video.

-Case outlook

The chances, however, for a decision in Bolivia’s favor look faint, with the ICJ ruling unequivocally for one side on rare occasions.

“The obligation to negotiate is simply an obligation to negotiate, not to agree to grant sovereign access,” Julian Ku, a professor of constitutional law at Hofstra University in New York told the AA.

“Moreover, Chile has arguably fulfilled the obligation to negotiate repeatedly over the years. I just find this case pretty implausible from a legal point of view.”

Some analysts say Morales is using the cause for political gain, rousing nationalist spirits – following previous presidents who have tapped into ingrained anti-Chilean sentiment.

Bolivia retains a navy, primarily in Lake Titicaca, high in the Andes and every March celebrates the day of the sea.

“It allows the government to sell to the people that it is pursuing a national cause,” said Mariano de Alba Uribe, professor in international law at Universidad Catolica Andres Bello in Caracas. “It’s able to focus the attention on an external “enemy.”

“There is little ground for opposition to the idea in the internal political spectrum of Bolivia.”

That’s correct, however the issue has bridged those on either side of the ideological divide — with former opponents, presidents Carlos Mesa and Eduardo Rodriguez leading the demand – lending it bipartisan credibility.

But as Morales has rallied support, dissenting opinions have prompted backlash, with critical journalists discredited as pro-Chilean.

“The issue can be delicate in terms of freedom of expression in a country with a jingoistic culture,” Ricardo Aguilar, a journalist at La Paz-based La Razon daily told the AA.

Aguilar is among several journalists pursued by the state for criticizing Morales’ handling of the cause. He was threatened with espionage charges in May after writing a column in the daily La Razon perceived to be critical of the government.

-Terrible cost

If the court rules in the favor of Bolivia it could be at a “terrible cost” for Chile, after its effort to improve its image internationally after years of dictatorship, he added.

Chile may deny to comply with the ruling, similar to a ruling given against Colombia with a case with Nicaragua in 2007.

But Morales has support from Venezuela and Ecuador in the Union of South American Nations (UNASUR) political bloc, which could see the issue move past legal arguments. Bolivia must present its response to the ICJ by November and the verdict on Chile’s objection should be known by next June.

While progress in the international court is typically glacial however, time doesn’t faze Aliaga.

“Us Bolivians have waited over 130 years, we can wait 20 more.”

(An early version of this story stated Ricardo Aguilar gave up a source under duress from the Bolivian government. This article has been amended to show Aguilar did not do this.)

www.aa.com.tr/en

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IMF: Latin American Growth to Hit 5-year Low in 2014

Globlal lender says region “still losing speed” after lowering growth forecasts for the second time in six months

Published by Anadolu Agency Oct 7.

Latin America’s growth in 2014 will be it’s slowest in five years, the International Monetary Fund (IMF) said Tuesday, after lowering growth forecasts for the second time in six months.

The region will expand 1.3 percent this year, rising to 2.2 percent in 2015, the Washington-based global lender said in its quarterly report.

That’s just about half of the 2.5 percent the IMF predicted in April, and 0.7 percentage points lower than July’s forecast, as a languid Brazil and sluggish commodity exporters Peru and Chile, drag the region further away from rates of near 3 percent achieved in 2012 and 2013.

South America fared even worse, projected to grow just 0.7 percent in 2014, as recessions in Argentina and Venezuela took hold.

Downside risks

The fund predicted a “modest recovery” for 2015, but “risks remain tilted to the downside” as many economies lacked growth alternatives facing slumped raw material prices and supply bottlenecks.

Bolivia will be the region’s top performer, expanding 5.2 percent if estimates match expectations, closely followed by Colombia and Ecuador.

The region’s largest economy, Brazil, will expand just 0.3 percent, however, as weak competition and rising interest rates hit private investment. In 2015, it will see growth rise to 1.4 percent as political uncertainty surrounding this year’s elections subsides and activity regains momentum, the IMF expects.

Mexico was seen gathering momentum, set to hit 2.4 and 3.5 percent this year and next, after a slight expansion in 2013. A firmer U.S. recovery and an uptick in construction will complement “gradual dividends from the ongoing reform of the energy and telecommunication sectors.”

Growth in Chile and Peru in 2014 is expected to slow on reduced private investment, as softer Asia demand for raw materials lowered exports.

Eased monetary and fiscal measures, helped by a weaker peso, would see Chile’s economy advance from 2 percent this year to 3.3 percent in 2015. Rising metal production in Peru would see growth expand 5.1 percent in 2015 on 3.6 percent this year.

Argentina and Venezuela will spend 2014 and 2015 trying to leave recession. A widening trade gap and instability over payments to debt holders forecast contractions of 1.7 percent in 2014 and 1.5 percent in 2015.

Venezuela was the region’s worst performer, decreasing 3 percent this year and 1 percent in 2015, as 60 percent inflation and a dysfunctional policy mix in the Nicolas Maduro administration took hold.

Central America and the Caribbean will each average about 3.9 percent this year, helped by a firmer U.S. recovery.

Consecutive revisions

FocusEconomics, a Barcelona-based economic forecaster, last month mirrored the IMF’s lowered predictions.

“September’s result represents a notable downward revision to the region’s economic outlook,” adding it was the 17th consecutive lowering of forecasts, in a report published Sept 16.

“The deterioration in Latin America’s economic outlook came within the context of rising uncertainty about the global economic recovery. After three consecutive months of downward revisions, the outlook for the global economy stabilized in September,” it added.

The global economy is expected to grow 3.8 percent in 2015, after a slowdown in the first half of this year, the IMF added.

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New Peru State Governors Could Stall Mega Mines

Mining foe forerunners may deprive faltering economy of 1.5 percent of GDP through delayed projects

Published by Anadolu Agency Oct 7

Leading anti-mining candidates in Sunday’s gubernatorial race could disrupt Peru’s key industry on winning office by delaying multi-billion dollar projects, experts said Monday.

Top finishes by vocal opponents in three mineral-rich regions risked $12 billion of investment involving seven mines, Juan Mendoza, economist at the University of the Pacific in Lima told Gestion newspaper.

That includes the $5 billion Conga mine owned by Newmont Mining Corp in Cajamarca, where firebrand leader Gregorio Santos – whose protests in 2011 stalled operations – held 46 percent, in an early count by pollster Ipsos.

Contenders in Apurimac and Ancash, Michel Martinez and Waldo Rios, both received the most votes, but below the 30 percent avoiding a November runoff.

The outcome may reduce Peru’s gross domestic product by 1.5 percent this year and in 2015, and forego as much as $18 billion factoring in a multiplier effect, Mendoza added.

Global producer

Mining makes up 15 percent of output and two-thirds of exports in the top global producer of gold, copper and zinc.

Slumped demand for raw materials has weighed heavily on the economy, seeing it cool to its slowest rate for five years in June, expanding just 0.3 percent.

Peru’s central bank has revised a series of forecasts and now projects the economy to now expand just 3.5 percent this year, rising to 5.5 percent in 2015.

The contested three states make up $23 billion of mining investment, more than a third of the $61 billion committed up to 2020, according to the Energy and Mines Ministry.

Peru’s extractive industries have been integral in slashing poverty from 60 percent in 2004 to 24 percent in 2013, and buoying related sectors.

But they remain a source of great controversy, through environmental contamination and the displacement of indigenous communities.

A community meeting at Yanacocha lake in Cajamarca, before mining operations got underway (photo: anticapitalistes /cc)
A community meeting at Yanacocha lake in Cajamarca, before mining operations got underway (photo: anticapitalistes /cc)

Social conflicts

Peru’s national ombudsman reported 132 “socio-environmental” conflicts in August, many arising from the extractive industries.

Apurimac and Ancash had the highest number of social conflicts in the country.

Protests in 2011 at the opencast Conga gold mine were centered on alleged polluted water supplies, and nearby to Newmont’s Yanacocha mine (main image) – one of Latin America’s biggest – which has also seen violent demonstrations.

Controversially, Cajamarca’s likely-winner, Santos is currently jailed on corruption charges, which he denies, though hasn’t been prosecuted. If found guilty, he will be demoted to vice-governor.

Ancash’s Rios moreover, gave 500-sol ($172) handouts to voters from regional mining receipts.

Peru’s legal system has been criticized for allowing detained citizens to vote.

Juan Jose Marthans, an economics professor at the University of Piura, told The Anadolu Agency (AA) the legal system was “worrying” and should be changed.

He did expect the projects to eventually go ahead.

“The government must develop a very proactive communication strategy in all of these regions, so that the benefits developing these projects directly or indirectly are visualized for communities.”

Santos had “whitewashed public opinion” due to the poor communication of the state and mining firms.

A chief executive of a foreign mining firm operating in separate regions downplayed the state governors’ influence, but blamed the gridlock on central government inaction.

Mining and hydrocarbon activity fell for the fifth consecutive month in August, receding 3.5 percent.

“It’s more a lack of stability of ministers as well as a lack of direction. Nobody wants to take the risk of signing contracts if they don’t go anywhere, as they may get crucified afterward,” the source told the AA.

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Peruvian Sol Nears 5-year Low, Risking Growth

Stronger dollar could cool investment and consumption as indebtedness increases

Published by Anadolu Agency Oct 4.

Peru’s sol slumped to an almost five-year low against the U.S. dollar Friday, threatening to choke growth by raising the debt of Peru’s businesses and households, analysts said.

The currency closed at 2.90, its lowest level since November 2009, after the central bank held off intervening in the spot market with dollar sales, and U.S. labor figures beat expectations.

A stronger greenback devalues incomes for those who pay dollar-denominated debts including mortages or goods priced in dollars such as automobiles or appliances, in domestic currency.

Passing the 2.90 mark would pose “systemic risk” to the financial system, reducing investment and consumption, Paul Lira, an academic at the Peruvian University of Applies Sciences told the daily El Gestion earlier this week.

Better insulated

Nearly half of Peru’s deposits, from pension funds to individual loans, are in dollars, leaving a degree of exposure to the economy on adverse foreign exchange movements.

Currently, Peru is better insulated when compared to 82 percent of deposits being in dollars in 2001.

The currency has since strengthened after ruinous hyperinflation in the early 1990s, and on a boom that made it South America’s best performer last decade when it averaged 6.4 percent growth.

But dollar deposits rose in May compared to a year earlier from 41 to 48 percent, as the Federal Reserve pared back its bond-buying program and capital left emerging markets, including Peru.

Strengthening dollar

A strengthening dollar was the greatest factor in the slide of the sol, which has fallen 3.4 percent in 2014, Mario Guerrero, analyst at Peru’s Scotiabank, told The Anadolu Agency.

“There’s a general tendency of a strengthening dollar against almost all emerging market currencies, including developed countries, commodities, bonds and stocks.

“A second factor is the general deterioration in the fundamentals of emerging market economies, like Peru, which has been intensified by the dollar,” Guerrero added.

Weaker outlook

Peru’s economy grew the least in five years, expanding just 0.3 percent in June as the mineral exporter faltered on reduced copper demand, and the trade deficit widened to its greatest shortfall in more than 20 years.

The Andean country’s outlook has been revised to 3.5 percent or less this year, after initial expectations of 6 percent by the monetary authority. A weakening currency may dampen growth further.

Peru’s monetary authority makes regular interventions by selling foreign reserves to stabilize the currency.

Using its $66 billion foreign currency reserves, the central bank last intervened Sept 26. selling $423 million.

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