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Argentina: An opportunity for mining business
The new investment framework
May 2018
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
Argentina is a Federal country formed by 23 provinces:
At a National level:
• Dictate the Mining Code. • Establish civil, commercial, tax, environmental and labor laws nationwide. • Grant tax and fiscal stability to mining projects.
At a Province level: • Grant mining rights requested by individuals (exploration and exploitation), • Grant permits and monitor compliance.
For important minerals such as: gold, silver, copper, lithium, iron, zinc, uranium, among others, mines belong to
the discoverer, or who buys them.
Property rights: granted to perpetuity, as long as there is mineral to be extracted. To keep the current concession, an anual fee must be paid, and the committed investment plan must be executed. This is submitted to the granting authority at the time of submitting the request, either to explore the territory or to operate a mine.
Undersecretary of Mining Development
LEGAL AND INSTITUTIONAL FRAMEWORK
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
WHAT ARE THE INFLUENTIAL FACTORS IN THE RADICATION OF DIRECT FOREIGN INVESTMENT (FDI) IN MINING PROJECTS?
•Political & economic stability
•Institutional strengthening
•Transparency
•Efficient legal framework
•Social concensus
•Tax incentives
•Tax stability •Tax burden
•Financing
•Cost management
•Productive efficiency
•Market efficiency
•Macroeconomic environment
•Natural Resources
•Geological potential
•Mineral grade •Comparative advantages
Key factor for the reception of the foreing investment
THE GEOLOGICAL POTENTIAL AND THE INVESTMENT CLIMATE.
RESOURCES ALLOCATION
ECONOMICS & MARKETS
INCENTIVES POLICIES
INSTITUTIONAL
FDI
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
MINING, A RISK ACTIVITY. HOW COULD PUBLIC POLICIES CAN MITIGATE IT?
ECONOMIC AND POLITICAL
GEOLOGICAL OPERATIVE FINANCIAL
-Geological database and information transparency
-Exploration incentives
-Investment in infrastructure -Reduction of barriers to trade - Ease of doing business - Competitive Customs
- Capital market development - Pub/Priv Partnership (PPP) - CRIRSCO
- Free access to foreign currency - Clear and stable regulatory framework - Tax stability
Prospecting studies
Exploration
Feasibility Studies Resource management
Adequate financial structuring
- Advance sale contracts - Period of exploitation - Greater profitability for projects
Type of Risk
Mitig
atio
n
From business
management
From public
policies
Investment decisions involve a long period of maturity and a high risk
•Macroeconomic
•Institutional, political and legal
•Tax
Stability •Infrastructure
•Free competition
•Access to trade and technology
Competitiveness
•Institutional Framework
•Protection of private property
•Transparency
Trust
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
ECONOMY
COMMERCE EXCHANGE
RATE
FINANCING
ARGENTINA IS IN THE PATH OF NORMALIZING ITS MACROECONOMICS VARIABLES
Holdouts’s agreement
Trade barriers removal (export duties)
Return to international credit markets
Unification and liberalization of the exchange rate
Libre acceso al mercado de cambios
Restoration of bilateral and multilateral trade relations
Return of access to capital goods (operability and
investments)
Fiscal balance program 2017-2021
1 digit inflation target (Inflation Targets policy)
Under way
Under way
Free access to the foreign exchange
market
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
Primary Result (% GDP)
-5.4%
-3.9%
-3.2%
-2.2%
-1.2%
0%
2015 2017 2018 2019 2020 2021
The primary deficit is being reduced converging to the fiscal balance
ARGENTINA IS IN THE PATH OF NORMALIZING ITS MACROECONOMICS VARIABLES – REDUCTION OF FISCAL RED
Source: Ministerio de Hacienda
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
31.0%
39.0%
24.8%
19.0%
10.0%
5.0%
2013-2015 2016 2017 2018* 2019** 2020**
Annual Inflation rate
* Projected by the IMF ** Projected by the Ministerio de Hacienda
Inflation will continue to fall with a ‘one digit’ goal in 2020
ARGENTINA IS IN THE PATH OF NORMALIZING ITS MACROECONOMICS VARIABLES – INFLATION TARGET PROGRAM
Source: Ministerio de Hacienda
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
Tax burden (% GDP)
32.0%
31.3%
30.4%
29.8%
2015 2016 2017 2018
Argentina seeks to lower the tax burden
ARGENTINA IS IN THE PATH OF NORMALIZING ITS MACROECONOMICS VARIABLES – TAX BURDEN
Source: Ministerio de Hacienda
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
Reduce tax burden
Improve Investment level
Improve the Economy competitivenes
Reduce tax evasion rate
ARGENTINE TAX
SYSTEM REFORM
OBJECTIVES
ARGENTINA IS IN THE PATH OF NORMALIZING ITS MACROECONOMICS VARIABLES – NATIONAL TAX REFORM
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
Dirección Nacional de Promoción Minera
Subsecretaría de Desarrollo Minero
PROMOTIONAL INCENTIVES THAT CONSIDER PARTICULARITIES OF MINING ACTIVITY
Competitiveness
(until December 2015)
Fiscal and tax stability guaranteed for 30 years (from presentation of definitive feasibility study).
VAT refund on exploration. Double deduction of exploration expenses. Accelerated amortization of capital investments.
Competitiveness
(since January 2016)
Elimination of export duties. Since 2016= 0% Unified currency exchange rate. Expedited currency
accreditation. Access to imports of mining equipments and parts. Free currency flow, without legal banking reserves. VAT refund for mineral export in a timely manner. Free transfer of profits abroad. Availability of loans in the local market.
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
Subsecretaría de Desarrollo Minero
TAX REFORMS TO ENCOURAGE INVESTMENT IN ARGENTINA
Competitiveness
2018
Competitiveness
Value Added Tax. Return of favourable Balance VAT over construction investment
Tax credits originated in the purchase, construction, manufacture or importation of fixed assets:
VAT refund after 6 months
For goods destined to these activities The term is computed from the investment
Income Tax. Main modifications year 2018 Reducción de Alícuota a las empresas en forma progresiva
Reduction of income tax rates to companies progressively
Year Income tax
corporate rate
Tax on dividends
Earnings up to 2017 35% 0%
From 01.01.2018 and until 31.12.2019 30% 7%
From 01.01.2020 onwards 25% 13 %
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
PILARES DE COMPETITIVIDAD EN ARGENTINA
ARGENTINA HAS IMPROVED ITS COMPETITIVENESS BETWEEN 2015 AND 2017
Fuente: Dirección de Economía Minera en base a WEF – Banco Mundial
#113
#81
#138
#133
#101
#66 #78
#72
#135
#87
#139
#132
#69
#93
2015:#
106 2017:#
92
In the Global Competitiveness ranking prepared by the World Economic Forum, Argentina is ranked 92 of 137 countries in 2017, moving 14 places forward since 2015
Institutions Infrastructure Goods Market Labor Market Technology Ease Doing Innovation Efficiency Efficiency Access Business
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
3.6
3.7
2.4
1.9
3.3
3.2
2.6
2.7
2.4
2.8
2.8
3.6
2.9
3
1.9
1.6
2.9
2.4
1.7
1.5
2.2
2.7
2.3
3
INSTITUTIONS PILLARS IN ARGENTINA Score 1-7 (better)
2017 2015
INSTITUTION´S QUALITY IMPROVEMENT
Source: WEF – World Bank
Property rights
Intellectual property protection
Diversion of Public funds
Public trust in politicians
Irregular payments and bribes
Legal Independence
Favoritism in decisions of officials
Efficiency of public expenditure
Burden of government regulation
Efficiency of the legal framework in settling disputes
Efficiency of the legal framework
Transparency of gov. policymaking
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
Bajo la
Alumbrera Catamarca May 2017 December 2018
Pirquitas Jujuy March 2016 December 2017
Manantial
Espejo Santa Cruz December 2016 December 2017
Casposo San Juan The closure was avoided, extended to
December 2019
156 158
15 16 22
40
51 59
82
92 98
93 95
84 86 94
98 106
114
125
138 141
158 158 153
142
124 124
0
20
40
60
80
100
120
140
160
180
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
AUSTR
ALIA
38%
CANAD
A
50%
CHILE
3%
CHINA
3%
MEXICO
3%
USA
3%
Fuente: Dirección Nacional de Inversiones Mineras – Datos preliminares
+32 Mining companies settlement
in the country
A FIRST SIGNAL: PROJECT’S LIFE EXTENSION UNDER WAY AND MORE COMPANIES SETTING UP IN THE COUNTRY
Dirección de Economía Minera
Dirección Nacional de Promoción Minera
300
240
133
280
336
515
292
157
124.5 140.4
159
0
100
200
300
400
500
600
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Exploration mining budget and investment - MMUSD
Exploration investment Exploratory budget
Total Exploration Investment
ALONG WITH THE IMPROVEMENT OF MINING EXPLORATION INVESTMENT
Source: Exploration Budget: SNL Metal & Mining. Exploration investment: Dirección Nacional de Inversiones Mineras – Ministerio de Energía y Minería
You are welcome to visit the Argentine Embassy´s website: www.ejapo.mrecic.gov.ar You can download the following documents on today´s Seminar: - Business Environment - Mining Offer – Advanced Pojects - Opportunities for Exploration
Thank you