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SANTIAGO — Natural resource companies are growing increasingly skittish about Latin America, a region that until recently was one of the world’s most powerful magnets for foreign investment.
In Brazil, the country’s recent move to sell interests in its vast Libra oilfield highlighted growing friction over national resources. Brazilian social activists say the government of Dilma Rousseff “gave away” the country’s resources in the auction, where international energy giants Royal Dutch Shell PLC, Total SA and two Chinese oil companies joined with Brazil’s Petrobras as owners of Libra.
Protesters clashed violently with police near Rio de Janeiro last month. “The country’s strategic oil reserves should not be auctioned. Petrobras is perfectly capable of developing Libra,” said Ronaldo Leite, president of the Rio de Janeiro chapter of the Central Workers of Brazil (CTB).
The conflict over Libra comes amid an accelerating drive by governments across Latin America to reserve a bigger slice of their mineral and energy resources for their own citizens.
A law in Brazil would raise the mining royalty rate to 4 per cent of gross revenue, from 2 per cent of net revenue currently. The lower house of Parliament is expected to vote on the bill this week.
In Mexico, the Senate just passed President Enrique Pena Nieto’s fiscal reform, which includes a new mining levy of 7.5 per cent on EBITDA for base metals and another 0.5 per cent gross royalty for precious metals miners.
(EBITDA represents earnings before interest, taxes, depreciation and amortization.)
“This royalty will completely take Mexico out of the game in terms of competitiveness,” said Rosalind Wilson, president of the Canadian Chamber of Commerce’s mining task force. “We are very disappointed with the outcome, but it comes as no surprise because it had been in the pipeline for a while now. For all miners, regardless of their nationality, this will have a huge impact on their bottom line.”
The new royalty in Mexico will encourage investors to look at other investment jurisdictions, said Tim Haldane, senior vice-president for Latin America of Toronto-based Agnico Eagle Mines Ltd..
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