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

Peru’s mining wealth holds the promise to substantially accelerate potential growth. However, many mining projects have been stalled for several years due to conflicts with local communities that feel excluded from the benefits. Although local governments receive nearly 2 percent of GDP in natural resource revenues per year and comprise over 40 percent of public investment, poor execution and institutional challenges limit their impact. To secure the country’s future as a critical mineral exporter, Peru needs to amend its fiscal decentralization framework to ensure that mining dividends translate into greater development for all citizens. Efforts should focus on improving the distribution of resource-based revenues, replacing discretionary transfers with rule-based transfers, strengthening central government oversight, and increasing capacity and coordination at the subnational level to support public investment efficiency.