PERU: Mining Co's Making a Mint, Tax Free

[Derechos]

LIMA, Feb 1, 2010 (IPS) - Experts and activists in Peru complain that while mining corporations are cashing in on soaring metals prices, they continue to enjoy exemption from royalties and corporate taxes, if they reinvest their profits.

http://ipsnews.net/news.asp?idnews=50184

[Peace Patriot]

1. Thanks for this post! "Free trade for the rich" continues in Peru, alas,

and things won't likely change until they get rid of the corrupt Garcia regime, and CANCEL the obnoxious, Bushwhack-written U.S./Peru "free trade for the rich" agreement.

[Bacchus39]

2. profits repatriated I don't think is a bad thing. they did the same thing

in Puerto Rico for a long time. it was section 936 of the IRS code I think. profits from pharmaceuticals that were returned to the island for investment didn't pay taxes. the benefit was revoked about 10 years ago. I don't know the extent of the effect, but PR's economy is quite poor these days.

I believe the Federal tax on rum is someowhat similar. Federal taxes imposed on Puertorican rum imported to the mainland are returned to the island.


I don't how this compares to a direct tax on profits with regard to benefit. but it seems if the Peru is going to tax profits anyway, there isn't much sense for companies to reinvest within Peru and can just take their profits elsewhwere

[Peace Patriot]

3. The "free trade for the rich" mind set focuses on what the rich want to do

rather than what a sovereign people and its government can do and have a right to do, in their own sovereign interest. For instance, make investment in Peru a requirement of doing business in Peru--not just an enticement. They follow the rules or they don't do business in Peru. There are plenty of mining companies in the world. Peru doesn't need a particular mining company. They can play them off against each other, and get the very best deal possible for Peru--as Venezuela and Bolivia have notably done.

Venezuela, for instance, just signed a big deal with an Italian oil company, for development of part of the Orinoco Belt, and a thermoelectric plant. The Italy company was thrilled to get the business (and said so), and readily agreed to Venezuela's 60/40 split of the profits, favoring Venezuela and its social programs. Exxon Mobil had walked out those talks, refusing the 60/40 deal, and now they are aced out of the biggest oil reserve on earth, which the USGS just reported to be twice that of Saudi Arabia's. (--unless the Pentagon achieves for Exxon Mobil what Exxon Mobil could not achieve at the bargaining table).

The difference is that Peru has a rightwing, "free trade for the rich" government--and a very corrupt and unpopular one at that--which toadies to the rich, and Venezuela and Bolivia (which is also doing some hard bargaining) have leftist governments acting in interest of the people. The mind set has to change, that sovereign governments representing the interests of millions of people have to bow and scrape to the rich and powerful few. And if sovereign governments band together--to exercise collective clout, to back each other up, to set labor and environmental standards, and to set common rules for multinational corporations--as the EU is doing, they can get even better deals and can fend off "divide and conquer" tactics by big multinationals.

This is one of the goals--collective clout--of a number of trade groups that have formed in Latin America: UNASUR, an all-South American trade group and prototype for a South American "common market"; MERCOSUR--a more limited group with big players like Brazil; and ALBA, a trade group comprised of relatively small second- and third-world countries, organized by Venezuela and Cuba, in the Central American/Caribbean region.

In fact, the potential collective clout of the ALBA trade group was likely one of the reasons for the rightwing military coup in Honduras, and the sneaky support for it by the U.S. The coup government withdrew from ALBA weeks before the new president and legislature were to take office, thereby insuring that that probable requirement for U.S. support (withdrawal from ALBA) got done, and not leaving it to chance. While the new president and legislature were elected in martial law conditions in an election that every established election monitoring group in the world refused to participate in, and while the rightwing, of course, won, in those conditions--they still might have seen the advantages of continuing as a member of ALBA and might not have withdrawn. The coup government's precipitous action on ALBA tells me that it was very important to the U.S. and its multinational corporations to inflict this harm on ALBA (withdrawal of a member), and here's why:

I just found out that MacDonald's and Burger King pay no taxes in Honduras, while small local businesses are required to pay taxes. These are the kind of unfair practices that multinationals require when they are dealing with local rich elites who are running the government. THEY hold the power--given to them by local rich elites--to dictate TO the government, or else. The "or else" is that they won't fill Honduras with MacDonald's on every corner, if they have to pay taxes or decent wages or abide by local environmental regulations, or whatever. When rich elites are governing and/or when the country is on its own, with no like-minded neighbor countries to band together with, to insist on fair practices--and with a few bribes here and there (or a lot of bribes), the rich elite NEVER THINKS that Honduras might be better off WITHOUT McDonald's on every corner, that it would be better to support and develop LOCAL business (not to mention better food), or they never think that it might be much better to grant concessions only to companies who DO agree to fair practices--i.e., paying their fair share of social costs. Give smaller companies a chance. Get companies competing to give Honduras the best deal.

The U.S. wants ITS multinationals to get max profits at little or no expense for social responsibility, so it imposes "free trade for the rich" deals on "third world" countries that are bad deals for most of the people who live there, and they don't want an uppity group like ALBA telling them otherwise, and demanding fair taxation, fair wages and other requirements for doing business.

The U.S. and its multinationals would very much like Venezuela and Bolivia to go away. They don't like there being examples of "third world" countries standing up to them. But, you know what? A country asserting its sovereign power to protect its people, its workers and its environment, and to insure that its resources and business concessions benefit the people--governments acting in the interest of their people against the powerful and the wealth-- is RIGHT. It's how things SHOULD be. That is the right balance of power. Multinational corporations being able to evade taxes, while small local businesses have to pay them, is a prescription for anarchy--for the wreckage of local businesses and communities, for civil unrest, and egregious unfairness, and ultimately for failure. Poorly paid workers with no health care, eating a diet of MacDonald's hamburgers, is a prescription for social ruin, and the multinational corporate culture we saw at work last year--collapsing markets, collapsing banks, looming Depression, billion dollar bailouts--is a prescription for economic ruin.

Mining companies who want to do business in Peru should absolutely have to re-invest in Peru as a requirement of doing business in Peru, and if they don't like it, they can lump it. That's how it should be. That's how it CAN be. That is the best for everybody--including for multinational corporations who are too big and too stupid and too drunk with power and greed, and too larcenous, to prevent their own global economic collapse.

[Peace Patriot]

4. "...can just take their profits elsewwhere." Not so for Exxon Mobil in Venezuela.

The Italian company, ENI, gets the profits from the oil because they agreed to play by the rules--the 60/40 split for Venezuela's social programs. Evo Morales is cutting similar deals for Bolivia--on its gas, oil and lithium resources.

These leaders are saying "F__ You!" to multinational giants that don't agree to fair terms for these big concessions and that try to bully their way out of social responsibility. They are not needed. There are plenty of companies who will agree--who behave responsibly toward the countries where they do business, not to mention behaving responsibly to their stockholders who want them to get the business.

So, what do you say to this, Bacchus39? Why can't Peru say "F_ You!" to this mining company, if they won't reinvest their profits in Peru, not as a tax break but as a requirement of doing business in Peru?

You seem to have this "Wall Street" mentality that businesses exist to loot and plunder national economies, public services, workforces, and the earth's resources, sucking every last dime out of every enterprise, often looting the businesses themselves, and sucking the creativity and the very life out of the capitalist system, which is dependent upon a well-educated, healthy, large middle class purchasing consumer items from competitive businesses, to exist in its proper form. Well-educated means taxing profits. Healthy means taxing profits. Creating a large middle class means paying decent salaries and taxing profits. Creating an acceptable environment for a large middle class means environmental regulation. Creating confidence in the future means not looting savings and loans institutions, and creating reliable banks, through regulation.

The "Wall Street" mentality--the "free trade for the rich" mind set--has severely attacked regulation and severely cut any tax responsibility for the rich and the corporate--and is thus literally killing the capitalist system.

The right balance of things is for Peru to say: 'No, you don't get a tax break. You want to profit from our resource? Reinvest here with no tax break, or we will give the concession to somebody who will.'

What do you say to this, Bacchus39? How about creating a world in which "we can take our profits elsewhere" is passe, and means no profits at all? How about we SAVE the capitalist system from itself, and require companies to take responsibility for the societies that give them the chance to get rich? How about we create a civilized society?

It CAN be done. We did it here once. European countries have done it. Some Latin American countries are now trying it. Society is the premise for business. Society must come first. And any business that won't pay its dues to society can go jump in a lake.

What do you say?