The Argentine government is seeking to increase the country’s mining production to improve foreign exchange earnings, with the introduction of a set of new incentives for the sector.
As the maturities of its heavy foreign debt loom on the horizon – and amid negotiations with the International Monetary Fund to refinance the record $57 billion loan it received in 2018 – the Alberto Fernández administration is turning its towards a diverse range of minerals as a means of reviving its economy.
However, the new incentive system faces questions about the socio-environmental aspects of the expansion of the sector, due to the impact of its activities on local communities. The most recent episode was the approval of mining in areas of Chubut province, which sparked massive protests and led the government to finally reverse its decision.
On the other hand, the renewed momentum comes in a context of energy transition, and increasing global demand for minerals essential to many technologies. According to the International Energy Agency, the demand for minerals is expected to double or even quadruple by 2040, depending on the degree of adoption of new technologies.
The sector in figures
According to data provided by Argentina’s Mining Secretariat, nine metal mining projects are currently underway in the country. The main products are gold, silver, lead and zinc, as well as the much talked about lithium, for which there are two projects in operation and one under construction. Operations are concentrated in the provinces of San Juan, Santa Cruz, Catamarca, Salta and Jujuy.
In recent years, these minerals have been extracted by a number of companies with high foreign capital investment and local subsidiaries. These include: Canadian company Barrick Gold and Chinese company Shandong Gold, which make up Minera Andina del Sol; AngloGold Ashanti of South Africa which operates the Cerro Vanguardia gold and silver mine; Newmont – the world’s largest gold mining company – and its Argentinian subsidiary, Oroplata; multinational giants Glencore and Yamana, which operated the Minera Alumbrera copper-gold mine, alongside Newmont; and Minera Santa Cruz, operated jointly by the British company Hochschild and the Canadian McEwen Mining.
The local mining sector operates on the basis of concessions granted by the provinces, which own the resources. Mendoza, Chubut, Córdoba and San Luis all currently have legislation limiting or prohibiting mining activity, due to social pressure against its development.
Large-scale mining has been boosted since the mid-1990s by low taxation, fiscal stability measures, and the ability to settle legal disputes in international tribunals. Indeed, the sector practically pays no value added tax (VAT) and benefits from a special income tax regime.
In 2020, affected by the Covid-19 pandemic, the value of mining exports fell to $2.6 billion, compared to $3.2 billion in 2019. But the contribution of the mining sector in terms of value added is well lower than its weight in exports: its contribution to Argentina’s GDP is only 0.6%, according to official data provided to Dialogo Chino. In terms of employment, direct jobs recorded in the sector amounted to 9,681 in 2019, or 0.15% of formal employment in the country. These are the numbers the government hopes to see grow with its new set of incentives.
Alberto Fernández’s government has set out to increase annual mining exports to more than US$10 billion over the next 10 years, with investments of US$25 billion from the country’s 34 mining investment projects which are at a more advanced stage.
To provide additional incentive, export taxes for the sector were reduced from 12% to 8% in October 2020; for 2022, the government is considering an even more flexible system. In addition, last April, the offshore transfer of profits and dividends was relaxed for exporters investing more than US$100 million.
The new incentives are part of the Strategic Mining Development Plan (PEDMA), the official presentation of which has been delayed for several months, although many details have already been announced. This program offers a new approach to mining intended to be linked to sustainability and dialogue with various actors in society, as well as a series of additional benefits and incentives for mining companies.
“The tax burden [in Argentina] is even higher than in the countries with which it competes in terms of mining production,” explains Luciano Berenstein, executive director of the Argentine Chamber of Mining Entrepreneurs (CAEM). The industry is calling on the government to further reduce withholding taxes on employee wages, speed up VAT refunds and expand access to the foreign exchange market.
Daniel Schteingart, director of the Center for Production Studies (CEP XXI), which reports to the Ministry of Productive Development, says that mining in Argentina is, along with hydrocarbons, the sector that pays the highest salaries and has the highest rate of formal employment. employment in the economy.
“Mining leaves a lot more in the country than is generally indicated,” adds Schteingart. He says that between 12% and 14% of his sales remain in the form of taxes – mainly Social Security and withholding taxes – 30% of purchases from suppliers and between 11% and 12% of payroll. In addition, part of the sector’s profits are reinvested.
The government welcomed the recent announcement by the Canadian company Lundin to invest US$4.2 billion to produce copper, gold and silver in the province of San Juan. According to company estimates, it will generate 2,500 jobs and US$1.7 billion in annual exports. It is expected to start operations in 2026 and have a useful life of up to 19 years.
Elsewhere, Canada’s Barrick Gold and China’s Shandong Gold have announced investments to extend the life of Veladero – Argentina‘s biggest gold mine – until 2030, while the Lindero mine, operated by the Canadian company Fortuna Silver Mines, began operating this year. It became the first open-pit mine in the province of Salta.
Meanwhile, investments are underway to expand lithium mining at existing projects operated by Orocobre-Toyota, an Australian and Japanese partnership, and US-based Livent, as well as the upcoming launch of Cauchari-Olaroz, operated by Minera Exar, a joint venture of the Canadian group Lithium Americas and the Chinese Ganfeng Lithium. The French company Eramet has also invested to build the Centenario – Ratones project from 2022.
Despite government claims of the program’s commitment to sustainability and consultation, environmental organizations do not foresee much change from the way the sector has developed in the past.
“We see a horizon of growing conflicts with communities, as large-scale mining has traditionally caused all kinds of waste over the past two decades,” says Pía Marchegiani, director of environmental policy at Fundación Ambiente y Recursos. Naturales (FARN). “Civil society is organized and governments have repeatedly failed to listen and manage conflict.”
For Marchegiani, the main problems relate to the use of water, since the projects are located upstream of the basins that are used by the downstream communities. “There is competition for the resource,” she says. “This is happening in a context of lack of information, lack of community participation, institutional weaknesses and criminalization of protest. As a result, when it comes to decisions, there is usually no other option than total rejection.
A turning point came in 2015, when the largest accident in national mining history occurred at the Veladero mine in San Juan, operated by Barrick Gold. Five rivers in the province have been contaminated with heavy metals from a broken valve.
“It has reopened the debate on the uncertainty inherent in this type of project, not only in terms of environmental impact, but also in terms of the transparency of information and the ability of public authorities to control. [these activities]says Lucrecia Wagner, researcher at the government science and technology agency CONICET.
Marcelo Giraud, a member of AMPAP, an organization fighting for drinking water in the province of Mendoza, says that although miners’ salaries are above average, these jobs are generally not intended for natives of the provinces, but local and international migrants. “It is not entirely accurate to say that metal mining makes a substantial contribution to local labor demand,” he added.
Just as it demands workers, large-scale mining can also jeopardize the continuity or viability of other sources of employment, says Giraud. “Therefore, where it is clear that society does not grant ‘social license’ to mining projects, job creation is by no means a convincing argument to counterbalance the impacts and risks involved”, adds he.
For Nicolás Gutman, head of the environmental section of the Center for Economic and Social Studies (CESO) Scalabrini Ortiz, “it is a mistake to think that facilitating business and transmitting mineral wealth will generate development”.
“There is no control capacity from the provinces and companies do not develop local suppliers in the industrial zone because they can bring in machines for free that they have stopped using in other parts of the country. world,” he added.
Despite concerns and challenges from civil society groups, the Fernández administration is expected to push ahead with the new agenda and its incentives, with the official presentation of its strategic plan, PEDMA, due to arrive early this year, after stagnating in 2021. say that the government will seek to reach consensus with civil society before the presentation.
* This article is reproduced with the kind permission of the publishers. Visit dialogochino.net for more information.
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