Terms of Trade and the Structural Sustainability of the Mining Sector in a Resource-Dependent Economy

This study investigates whether external terms of trade (TOT) and mining-sector GDP in Peru share a stable long-run relationship. Although mining has played a central role in the country’s growth trajectory, its performance remains highly exposed to international price cycles, raising questions about its structural sustainability under persistent external shocks. Using quarterly data for 2001–2024, the analysis applies Johansen cointegration techniques and estimates a bivariate Vector Error Correction Model (VECM) to evaluate long-run co-movement and short-run adjustment dynamics. The results identify a single cointegrating relationship in which mining GDP acts as the primary adjustment variable, gradually correcting deviations from long-run equilibrium, while short-run TOT shocks do not exert direct contemporaneous effects on mining growth. The estimated speed of adjustment is low, suggesting a prolonged convergence process consistent with the capital-intensive and rigid structure of the mining sector. Robustness exercises—including estimation with heteroskedasticity and autocorrelation consistent (HAC) standard errors and an extended specification incorporating gross fixed capital formation—confirm the stability of the long-run relationship. These findings indicate that the structural sustainability of mining output depends on the interaction between external price dynamics and the sector’s capacity to adjust to persistent international shocks. The study concludes that, in the Peruvian case, structural sustainability in the mining sector is not determined solely by global price trends, but is also conditioned by domestic productive and institutional factors that govern the speed of adjustment in the presence of sustained external volatility.