Revamping Fiscal Decentralization to Secure Peru’s Position as a Leading Critical Mineral Exporter: Peru

Selected Issues Papers, June 17, 2025

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Peru’s mining wealth "holds the promise to substantially accelerate potential growth."
Many mining projects "have been stalled for several years due to conflicts with local communities that feel excluded from the benefits."
Local governments receive "nearly 2 percent of GDP in natural resource revenues per year" and "comprise over 40 percent of public investment," but "poor execution and institutional challenges limit their impact."
To secure Peru’s future as a critical mineral exporter, the fiscal decentralization framework needs amendment to ensure that "mining dividends translate into greater development for all citizens."

Distribution and use of resource-based revenues are currently insufficient to prevent local conflicts and to support inclusive development.
A large share of public investment is executed at the subnational level ("over 40 percent of public investment"), yet execution quality and institutional capacity are weak.
Fiscal transfers to subnational governments are often discretionary, undermining predictability and accountability.
Central government oversight of subnational spending and investment is limited, contributing to inefficiencies in public investment.

If the fiscal decentralization framework remains unchanged, stalled mining projects and local opposition could continue to impede Peru’s ability to become a leading critical mineral exporter.
Improved allocation and management of resource-based revenues is central to translating mining wealth into broader development outcomes and to reducing project stoppages caused by local conflicts.

Improve the distribution of resource-based revenues to ensure more equitable and transparent sharing of mining dividends with local communities.
Replace discretionary transfers with rule-based transfers to increase predictability, reduce discretion, and strengthen fiscal accountability at the subnational level.
Strengthen central government oversight of subnational fiscal management and public investment to improve execution and efficiency.
Increase capacity and coordination at the subnational level to support public investment efficiency and better translate revenues into quality public services and infrastructure.

Economic sectors; Environment; Expenditure; Expenditure efficiency; Fiscal federalism; Fiscal policy; Mining sector; Natural resources; Public investment spending.

Revamping Fiscal Decentralization to Secure Peru’s Position as a Leading Critical Mineral Exporter: Peru — Selected Issues Paper No. 2025/080.