CHAPTER 12 RECENT DEVELOPMENTS IN LATIN AMERICAN MINING LEGISLATIONS (ENGLISH VERSION)

• Jurisdiction: United States

Mining And Oil & Gas Development In Latin America
(2001)
CHAPTER 12
RECENT DEVELOPMENTS IN LATIN AMERICAN MINING LEGISLATIONS (ENGLISH VERSION)
Juan Luis Ossa
Ossa & Cía Ltda
Santiago, Chile

[Page 12-2]

1. INTRODUCTION

A little over three years ago, in November 1997, the Rocky Mountain Mineral Law Foundation -the institution which gathers us today in Santiago- held in this same city a seminar to analyze several aspects of the mining legislations in Latin America. At that time we had the opportunity to deliver some ideas concerning the general trends then observed in the modernization of those legislations. We now propose to update and complete that exposition and to point out the changes which have since then been introduced or which probably will be introduced in the mining legislations of several countries in the region.

What did we say three years ago?

In 1997 we stated that the protectionist model, reluctant to foreign investment and with strong statist trends, which was typical of many Latin American countries, started to change in the 80's. In fact, during those years several governments in the region began to accept that mineral resources should not remain immobilized, that it was necessary to actively exploit them and that the intervention of private entrepreneurs in this process -obviously including foreigners- was indispensable. In the course of the same decade the globalization of the economy started; it then became evident that the State is an inefficient administrator and that the market is the best allocator of resources. It was also acknowledged that Latin American countries were

[Page 12-3]

already exposed to international competition, including different mining sectors of each country and furthermore, that those sectors had a definite possibility of competing advantageously with the mining industry of more developed countries.

We also added on that occasion that as a consequence of the above mentioned phenomena numerous governments in Latin America had understood that their mining legislations constituted a valuable instrument of their economic policy, which was insufficient by itself to attract mass investments to mining but in any case it was an essential prerequisite: it is well known that an evaluation of the mining laws of a country is the third most important factor considered by foreign investors at the moment of making investment decisions, immediately after geological and political stability considerations. Thus, we added, modernization had been introduced in the mining legislations of Peru (1981, 1991), Chile (1983), Guyana (1989), Ecuador (1991), Mexico (1992) and Bolivia (1997). On the other hand, Argentina had gradually and quite successfully improved its legislation, while Colombia and Cuba had respectively approved in 1988 and 1995 certain mining regulations which proved unsatisfactory for the mining industry. Finally, at that time neither Brazil nor Venezuela had introduced substantial reforms to their legislations, which dated back to 1967 in the first case and to 1945 in the second.

The key factors of success

How did we explain three years ago the success achieved by some legal reforms? The keys to that success were, in our view, the fact that beyond the good intentions of legislators and the pressures of bureaucracies, it had already become evident that what promotes the exploitation of a mine or provokes its closure, are the laws of the market. That is why each mining legislation must be competitive and must be based on private enterprise whether it is national or foreign. However, it was also accepted that it was necessary to make mining development compatible with respect for the

[Page 12-4]

environment and for the secular habitat of the indigenous people in each country.

Now, then, what has happened in these three years and a bit which have gone by since November 1997? Have there been any new developments, whether of progress or set back and if so which are they? This is what we intend to summarize here.

2. CHANGES DURING THE LAST THREE YEARS

Let us first remark on that the difficulties which faced the development of the mining sector in relation to the environment and the indigenous peoples have become much more intense. It is not necessary to give specific examples as they are evident to everyone. Let us just point out that there has been a growing process of increase in the magnitude and depth of the regulations to protect the environment and to favour the indigenous populations, to a degree that very often the market laws, which as we know are the best instrument for decisions making, have been subordinated to these considerations.

2.1. CHILE, PERU AND BOLIVIA

Apart from the problem described above, which is a generalized phenomenon, there are a few countries where there have been no major changes nor are there any predicted for the foreseeable future.

This is the case of Chile, except in that the rules against overlapping of concessions of exploitation were strengthened even more. Besides, a short time ago a differentiated patent or license fee was introduced, which transitorily favors a few small and artisanal miners; in our opinion, they should be assisted by means of direct development measures and not by exceptional discriminatory legal dispositions, of little significance for them and which, we trust, will not set a precedent for further future discriminations. On the other hand, and although in strict terms it is not intrinsic to their mining legislations as such, the Mining Integration and

[Page 12-5]

Complementation Treaty recently implemented by Chile and Argentina is an innovating and auspicious event which could eventually serve as inspiration to reach other similar agreements in the region.

Peru, as it is well known, started in 1981 the modernization of its legislation and in 1991 had become a pioneer in the introduction of the innovating concept of the "mining square" as a surface unit and form of location of the mining concession. Now then, apart from some deficiencies noted by the specialists and to the introduction of more specific and demanding requisites imposed on the holders of mining concessions by law N°27,431, there have been no major modifications to its General Mining Law.

In Bolivia, something even better can be observed: its 1997 Code -which for many of us is the most advanced in Latin America- has not suffered any alterations nor has it faced any important difficulties.

Substantial modifications, on the other hand, have been introduced or are expected in most of the mining regulations of the region.

2.2. URUGUAY, COSTA RICA AND ARGENTINA

Uruguay, for example, is engaged in the elaboration of a draft decree intended to unify, improve and fill the gaps observed in the regulation governing the 1982 Mining Code.

A similar situation prevails in Costa Rica, the government authorities of which together with the private sector have participated in the preparation of a new Mining Code regulation.

Argentina perfected its legislation some years back, by means of laws on Mining Reorganization, Federal Mining Agreement, Mining Investments, Mining Updating and Environmental Protection for the Mining Activity,

[Page 12-6]

amongst others. There is currently an ongoing debate about the idea of introducing further modifications, and on the other hand the provincial legislatures have not approved yet the unified code of mining procedures. Whatever the outcome of the present situation could be, it is hoped, however, that the country takes the final step through the drafting of a new Mining Code which definitely replaces the old 1886 Code, thereby...