The possibility of the Government raising mining royalties from the current 3% to 5% not only keeps the companies that operate in the sector awake at night. Also, the United States Chamber of Commerce in Argentina (AmCham) has just expressed through a statement its “concern” in relation to the modification of article 22 of Law 24,196 on Mining Investments, which refers to the ceiling of royalties received by the provinces.
The request is based on the weight that North American companies have in the local economy: The chamber brings together more than 717 companies of different areas that They contribute 24% of GDP, 39% of tax revenue35% of the country’s imports and 45% of its exports.
According to AmCham,”mining in Argentina has enormous growth potential, thanks to the existence in its territory of important reserves that are highly demanded in international markets, such as gold, silver, lithium, copper, among others. “, he pointed.
Regarding the dimension of the positive impact of the industry, the entity highlighted that it employs 100,000 people, with a salary 2.9 times higher than the national average salary; It is the 6th export complex in the country, reaching USD 3,858 million in 2022, and “80% of mining companies’ purchases occur within the country, strengthening the national value chain.”
In Argentina there are currently 119 mining projects in the portfolio, with gold, silver, copper and lithium being the most representative minerals. However, of this number, Today only 18 are producing.
“In the last 10 years, many projects that were in a position to be executed were paralyzed by the country’s economic decline, which would have injected US$8 billion into annual exports. If Argentina’s economic and regulatory context were favorable, the sector would go from exporting US$4 billion to US$12 billion,” according to the entity.
“The very characteristics of the activity, which involves exploration, construction and exploitation processes that involve enormous amounts of resources, and extended over time, make it The risks inherent in investments in mining are even greater than in other industries. Therefore, it is essential to guarantee the compliance and stability of current regulationsspecially in Fiscal issuesto allow investments to be made within a framework of predictability, regardless of the ups and downs of the economic, political and sectoral situation,” AmCham requested.
To take advantage of this potential for generating quality employment and foreign exchange from this activity, in line with other countries in the region, it is imperative to carry out policies that ensure the start of new projects and encourage the exploration of new deposits, they said.
According to the Chamber, “the modification of article 22 of Law 24,196 on Mining Investments, by which the ceiling of royalties that the provinces adhering to the regime can receive is raised from 3 to 5% of the “mouth mine” value of the mineral extracted, implies the change of conditions in the business models of our companies”.
“This modification goes against the objectives of the Large Investment Promotion Regime (RIGI), contemplated in the draft Base Law. In addition, it is another relevant factor that constitutes a significant increase in tax pressure on the activity (currently one of the highest in the entire region), further deteriorating competitiveness and adding to other negative elements such as the lack of appropriate infrastructure, transportation costs. logistics, bureaucratic rules, etc.”
For these reasons, AmCham asks that “the decision of the substantial increase in the current royalty cap is reviewed, guaranteeing the legal security necessary for the arrival of investments and avoiding hindering the future operation of the RIGI as a tool to promote the development of the activity,” the statement concluded.
