POLITICAL ECONOMY

Argentina tightens trade restrictions screws on mining operators

In an effort to protect local industries and businesses, the Argentine Mining Ministry is steadily increasing the regulatory trade burden on mining operators doing business in the country.

RENO (MINEWEB) - 

Argentina's Mining Ministry this week ordered mining companies to prioritize the purchase of local products and services, as well as seek prior government approval 120 days before making overseas purchases of goods and services.

Since February of this year, Argentina has subjected the import of all goods to a pre-registration and pre-approval regime, called the Declaración Jurada Anticipada de Importación. More than 600 product types must now obtain an import license, such as mining machinery and chemicals.

The European Union estimated the import license affected EU exports worth about EUR 500 million last year.

As of this week, mining companies will have to submit quarterly estimates of their purchasing needs, which will be approved by a special working group at the Mining Ministry.

It is feared the government review process could delay the deliveries of mining inputs by an additional six months. Since February companies have had to obtain approvals from a number of government agencies before they can import goods or buy offshore services.

Mining companies must also create a separate purchasing department dedicated to substituting imported goods and services with Argentinian products and services. Currently it is estimated that as much as 70% of inputs used by the mining industry are imported.

Argentina's government has also insisted that mining companies use local transportation companies for exports.

However, the Argentine newspaper La Nacion reports a political fight has sprung up between the Secretary of Mining and the Minister of Energy, each eager to impose its own plan of import substitution.

Argentina also requires that importers not transfer revenues abroad. McEwen Mining says Argentina's repatriation law could impact the company's internal funding model for the El Gallo Project in Mexico.

Repatriation requirements for McEwen Mining's San Jose mining joint venture with Hochschild Mining in Argentina is expected to have an annual pre-tax cost of $2 million for the partnership. Once the metal from San Jose is sold, the funds will be repatriated to Argentina and converted into pesos. McEwen executives are uncertain if the Argentine regulations will prevent the flow of the converted funds out of Argentina.

Despite the aforementioned concerns voiced by mining companies, the government insists that the mining controls are necessary to preserve Argentine manufacturing, create new job opportunities and improve the process of import substitution.

The administration of Argentine President Cristina Fernández de Kirchner estimates that replacing imported goods will increase the country's trade balance by US$1.5 billion.

However, the European Union is challenging Argentina's import restrictions, seeking the opinion of the World Trade Organization. Under WTO procedures, the EU must first request consultation with Argentina in an effort to have these measures-"which negatively affect the EU's trade and investment lifted."

"Argentina's import restrictions violate international trade rules and must be removed," said EU Trade Commissioner Karel De Gucht. "The trade and investment climate in Argentina is clearly getting worse. This gives me no choice but to challenge Argentina's protectionist import regime and ensure that the rules for free and fair trade are upheld."

Argentina's restrictions have mining companies reconsidering projects in the country, partly because of concerns of political uncertainty related to import control and the country's recent nationalization of Spanish energy company YPF. Reuters reports that Vale is reviewing the $5.9 billion Rio Colorado potash project in the country.

Other major mining companies active in Argentina include Pan American Silver, Coeur d'Alene Mines, Agnico-Eagle, AngloGold-Ashanti, Anglo American, Barrick, Goldcorp, Rio Tinto, Xstrata and Yamana, among others.

iPad Version: Picture - Argentine President Fernandez delivers a speech at the Government House in Buenos Aires: REUTERS/Enrique Marcarian