Argentina\u2019s government is seeking to grow the country\u2019s mining output to improve foreign exchange earnings, with the introduction of a set of new incentives for the sector.<\/p>\n
As due dates on its heavy external debt arrive on the horizon \u2013 and in the midst of negotiations with the International Monetary Fund to refinance the record US$57 billion loan it received in 2018 \u2013 the Fern\u00e1ndez administration is looking to a diverse range of minerals as a means to boost its economy.<\/p>\n
However, the new incentive scheme faces questions over socio-environmental aspects of the sector\u2019s expansion, due to the impact of its activities on local communities<\/a>. The most recent episode was the approval of mining in areas of Chubut province, which sparked massive protests<\/a> and led the government to ultimately reverse its decision.<\/p>\n On the other hand, the renewed impetus comes in a context of energy transition, and increased global demand for minerals that are essential to many technologies. According to the International Energy Agency<\/a>, demand for minerals is set to double or even quadruple by 2040, depending on the degree of adoption of new technologies.<\/p>\n According to data provided by Argentina\u2019s mining secretariat, nine metal-mining projects are currently operating in the country. The main products are gold, silver, lead and zinc, along with the much-talked-about lithium<\/a>, for which there are two projects in operation and another under construction. Operations are concentrated in the provinces of San Juan, Santa Cruz, Catamarca, Salta and Jujuy.<\/p>\n In recent years, these minerals have been extracted by a number of companies with strong foreign capital investment and local subsidiaries. These include: the Canadian firm Barrick Gold and China\u2019s Shandong Gold, which make up Minera Andina del Sol; South Africa\u2019s AngloGold Ashanti that runs the Cerro Vanguardia gold and silver mine; Newmont \u2013 the world\u2019s largest gold mining company \u2013 and its Argentine subsidiary, Oroplata; multinational giants Glencore and Yamana that operated the Minera Alumbrera copper-gold mine, alongside Newmont; and Minera Santa Cruz, jointly operated by British firm Hochschild and Canada\u2019s McEwen Mining.<\/p>\n US$2.6 billion<\/p>\n The Argentine mining sector operates on the basis of concessions granted by provinces, which own the resources. Mendoza, Chubut, C\u00f3rdoba and San Luis all currently have legislation limiting or prohibiting mining activity, as a result of social pressure against its development.<\/p>\n Large-scale mining has been boosted since the mid-1990s by low taxation, fiscal stability measures and the possibility of settling its legal disputes in international tribunals. In fact, the sector pays practically no value added tax<\/a> (VAT) and has a special regime for income tax.<\/p>\n In 2020, affected by the Covid-19 pandemic, the value of mining exports fell to US$2.6 billion, down from US$3.2 billion in 2019. But the mining sector\u2019s contribution in terms of value added is much lower than its weight in exports: its contribution to Argentina\u2019s GDP is just 0.6%, according to official data provided to Di\u00e1logo Chino. In terms of employment, direct registered jobs in the sector amounted to 9,681 in 2019, representing 0.15% of formal employment in the country. It is these such figures that the government hopes to see grow with its new set of incentives.<\/p>\n The government of Alberto Fern\u00e1ndez has set out to increase annual mining exports to more than US$10 billion over the next ten years, thanks to investments of US$25 billion from the 34 mining investment projects in the country that are at a more advanced stage.<\/p>\n To provide a further incentive, export taxes for the sector were reduced<\/a> from 12% to 8% in October 2020; for 2022, the government is considering an even more flexible scheme<\/a>. In addition, last April, the transfer abroad of profits and dividends was made more flexible<\/a> for exporters that invest more than US$100 million.<\/p>\n 34<\/p>\n The new incentives are part of the Strategic plan for mining development<\/a> (PEDMA), whose official presentation has been delayed for several months, though many of its details have already been announced. This programme proposes a new approach to mining supposedly linked to sustainability and dialogue with various societal actors, as well as including a series of additional benefits and incentives for mining companies.<\/p>\n \u201cThe tax burden [in Argentina] is still higher than in countries that it competes with in terms of mining production,\u201d says Luciano Berenstein, executive director of the Argentine Chamber of Mining Entrepreneurs (CAEM). The sector is calling on the government to further reduce withholding taxes taken from employees\u2019 wages, speed up VAT refunds and increase access to the foreign exchange market.<\/p>\n Daniel Schteingart, director of the Centre of Production Studies (CEP XXI), which reports to the Ministry of Productive Development, argues that mining in Argentina is, together with hydrocarbons, the sector that pays the highest wages, and has the highest rate of formal employment in the economy.<\/p>\n \u201cMining leaves much more in the country than what is usually stated,\u201d Schteingart adds. He says that between 12% and 14% of its sales stay in the form of taxes \u2013 mostly social security and withholdings \u2013 30% of purchases from suppliers, and between 11% and 12% in the wage bill. In addition, part of the sector\u2019s profits are reinvested.<\/p>\n The government welcomed the recent announcement<\/a> by the Canadian company Lundin that it will invest US$4.2 billion to produce copper, gold and silver in San Juan province. According to company estimates, it will generate 2,500 jobs and US$1.7 billion in annual exports. It is due to start operations in 2026 and have a useful life of up to 19 years.<\/p>\n Elsewhere, Canada\u2019s Barrick Gold and Chinese company Shandong Gold announced investments to extend the life of Veladero \u2013 Argentina\u2019s largest gold mine \u2013 to 2030, while the Lindero mine, operated by the Canadian company Fortuna Silver Mines, started operating this year. It became the first open-pit mine in Salta province.<\/p>\n Meanwhile, there are investments to expand lithium extraction<\/a> at existing projects run by Orocobre\u2013Toyota, an Australian and Japanese partnership, and by US company Livent, along with the upcoming launch of Cauchari\u2013Olaroz, operated by Minera Exar, a joint venture from Canada\u2019s Lithium Americas and China\u2019s Ganfeng Lithium. There has also been investment from French firm Eramet to build the Centenario\u2013Ratones project from 2022.<\/p>\n Despite the government\u2019s claims on the scheme\u2019s commitment to sustainability and consultation, environmental organisations do not foresee many changes from how the sector has developed in the past.<\/p>\n \u201cWe see a horizon of increasing conflict with communities, because large-scale mining has traditionally provoked all kinds of rejection over the last two decades,\u201d explains P\u00eda Marchegiani, director of environmental policy at the Fundaci\u00f3n Ambiente y Recursos Naturales (FARN). \u201cCivil society is organised, and governments have repeatedly failed to listen and manage conflicts.\u201d<\/p>\n For Marchegiani, the main problems relate to the use of water, since the projects are located at the headwaters of the basins that are used by the communities downstream. \u201cThere is competition for the resource,\u201d she says.<\/p>\n \u201cThis is taking place in a context of lack of information, lack of community participation, institutional weaknesses and criminalisation of protest. As a result, when it comes to decisions, there are usually no options other than total rejection,\u201d she adds.<\/p>\nThe mining sector in numbers<\/h2>\n
\nThe value of Argentina's mining exports in 2020, with the Covid-19 pandemic a factor in the decrease from US$3.2 billion in 2019.
\n\n <\/div>\n <\/div>\nNew commitment to mining<\/h2>\n
\nThe number of mining investment projects at an advanced stage in Argentina. The government hopes these may contribute to a US$7 billion increase in the value of annual mining exports in the next ten years.
\n\n <\/div>\n <\/div>\nSocial conflicts<\/h2>\n