SANTO DOMINGO (miningweekly.com) – Bolivia’s mining exports will likely decline by 20% this year, partly as a result of reduced private investments amidst regulatory uncertainty, experts say.
“The value of Bolivian mining exports will probably fall around 20% in 2012,” says Henry Oporto, a leading expert on Bolivian mining and the co-author of a new book Los dilemas de la minería (The dilemmas of mining). The mining sector as a whole fell 6.7% during the first half of the year.
“The decrease is due to a fall in production by private mining companies, small mining companies and state mining companies,” Oporto says. The decrease in each sector ranges from 8% to 10%.
At the same time, the international prices of most of the mining products exported by Bolivia have declined, with gold being the exception.
Another worrisome trend is that the share of private companies is falling – from 60% of total mining exports in 2011 to 48.7% during the first half of the year and a further decline expected, Oporto says. “The prospects are bleak,” he says.
Apart from the falling prices on key minerals, the sector is seeing reduced investments owing to the constrictions imposed on the private mining companies through nationalisation and expropriation; occupation of mines; the unilateral cancellation of exploration and exploitation contracts and, the uncertainty and lack of guarantees for mining investors, Oporto argues.
Mining officials also complain about the tax system. “The actual tax regime in Bolivia is the highest in the region compared with Peru, Chile and Argentina,” Minera San Cristobal spokesperson Javier Diez de Medina said. Minera San Cristobal is the largest mining company in Bolivia and a unit of Japan-based Sumitomo Corporation.
“That takes out some competitiveness of the mining sector in Bolivia.”
The government of President Evo Morales is planning to implement a new mining law, which could improve the outlook for the sector if it can abolish the constitutional mandates such as the required transfer of concessions for contracts, the ban on listing awarded mining deposits on stock exchanges, the required prior consultation with local indigenous populations, the tax regime and other restrictions on the private sector, Oporto says.
However, the signals from the government are not positive, he points out. They include possible plans to increase taxes further, increasing royalty fees from today’s level of 6% and doubling the dividend tax from today’s level of 12.5%. All in all, the government takes a whopping 67%, according to estimates by Oporto.
“If taxes rise above this level, you put at risk the continuity of the mining operations and it will be very difficult to attract new investments for mining projects,” he says.
The new mining law and a separate one on investment that also will impact the mining sector are still under discussion and it is unclear how they will end up and when they will be implemented. “Without the new rules, it’s difficult to be thinking about the future,” Diez de Medina says. “We expect a year of plenty of challenges.”