China’s drive to acquire minerals triggers Brazilian countermeasures

28th January 2011 By: Keith Campbell - Creamer Media Senior Deputy Editor

JOHANNESBURG (miningweekly.com) – The Brazilian government is planning to put limits on foreign investment in the country’s mining industry, the newspaper O Folha de São Paulo reported on Wednesday. The paper stated that Brasília was becoming concerned at the increasing foreign ownership of the country’s mineral resources.

Although the administration of new President Dilma Rousseff does not want to prevent or discourage foreign investment in general in Brazilian mining, it is concerned at the dramatic expansion of Chinese involvement in the sector in recent months, and wants to limit future Chinese ownership of, in particular, iron ore deposits. The Brazilian Presidency has refused to comment on the story (which means they have not denied it).

According to the newspaper, the proposed new mining legislation will be sent to the Brazilian Congress in June, and President Rousseff wants it passed before the end of this year.

It reported that the new law will restrict foreign investment in mining by means of “various mechanisms” that it will introduce. These could include giving the government the power to limit foreign involvement in mining projects on the grounds of the “investors shareholding profile”.

Moreover, the new law might give the State the ability to impose domestic supply quotas on mining companies, or, alternatively, impose lower royalties on sales to industries operating in Brazil.

Although such measures would have no direct bearing on foreign ownership of mines, they would ensure the supply of ores to Brazilian-domiciled industries (whether locally or foreign owned).

The newspaper also stated that another feature of the new legislation would be to require companies seeking exploration permits to bid for them at auctions, instead of, as at present, receiving them after submitting an application.

Last year Brazil enacted a law forbidding foreign companies from buying property with an area greater than 5 000 ha; although obviously directed against large-scale purchases of agricultural land, this was also, at the time, seen as a first step in restricting foreign participation in the country’s mining sector.

Apart from this limit on land purchases, there are currently no restrictions on foreign investment in mining in Brazil.