Brazil´S New Mining Code In The Making
The Federal Government has finally given indications that the much-awaited new Mining Code is about to be enacted.
Since February 2011, when Minister of Mines and Energy Edson Lobão, published the National Mining Plan 2030, domestic and foreign investors have been anxiously awaiting the new Code, which would overhaul the existing, out-dated, 1967 Mining Code.
A few days ago, it was announced that the Ministry and Chief of Staff Gleisi Hoffmann, were conducting meetings with the governors of the States of Espírito Santo and São Paulo, to finalize the text of a Provisional Measure (“Medida Provisória”), to be sent to Congress, with a request for urgency.
Although a draft of the new Code has not yet been disclosed to the general public, it is expected that it will focus on promoting a favorable tax treatment for mining companies that export value-added minerals, rather than simply mineral commodities, without processing or transformation.
It was recently announced, for instance, that the new Code will contain incentives focused on the transformation of Brazil´s leading export, iron, into steel, for domestic consumption. Accordingly, the CFEM (the royalty due on mineral production) would be reduced to favor such value-added products, rather than being imposed at the same rate as that imposed on the sale of raw commodities.
Due to the complexity of such a Code and the many interests it will have to reconcile, the consensus is that it will take at least two months to reach a final draft suitable to be introduced as a Provisional Measure, which means the market will probably still have to wait until next May.
It is also doubtful whether the Government initiative will include regulation of mining activities in the vast areas covering indigenous lands. Although the 1988 Federal Constitution allows for such activities, its article 231, paragraph 3, expressly requires authorization from the National Congress. A Bill of Law addressing this matter has been under discussion since 1996 (PL 1610/96, filed by Senator Romero Jucá).
The Felsberg e Associados Mining Law team is closely following the developments and will keep our clients informed as to the proposed text of the mining code as soon as it is made available.
FELSBERG E ASSOCIADOS