Bolivia plans to hike mining royalties

Carlos Alberto Quiroga

LA PAZ— Reuters

Bolivia’s leftist government plans to raise mining royalties to take advantage of high global metals prices and to bolster the state’s role in the industry, Deputy Mining Minister Hector Cordova told Reuters.

President Evo Morales, a close ally of Venezuelan President Hugo Chavez, has steadily increased state control over natural resources in the mineral- and natural gas-rich country, which is home to one of the world’s largest silver mines, San Cristobal.

“Our intention is for the state to get a larger share in the profit generated by mining,” Mr. Cordova said in an interview late Wednesday, citing strong demand for Bolivian metal exports that are set to hit a record $3-billion this year.

“The bigger the profit, the bigger the state’s share should be in those earnings,” he added.

Mr. Cordova heads a committee made up of government officials, industry leaders and small-scale, independent miners, that is putting the final touches on a mining reform bill.

In order to comply with a new constitution that came into force in the Andean country in 2009, the government must adjust current mining and energy legislation. The reform should pass easily through congress, which Mr. Morales’ allies control.

Bolivia’s metal exports reached $1.68-billion (U.S.) in the first half of the year and the state got $82-million in royalties.

Mr. Cordova said the reform would raise the current average royalty of 4 per cent of the international price to a maximum of 7 per cent for gold, 6 per cent for silver and 5 per cent for zinc, tin and lead.

“The new table of prices and extraordinary royalty percentages still hasn’t been determined, but it will be agreed by the sectoral committee that is studying the new law,” he said.

The new mining legislation, which the government hopes to have on the statutes by Oct. 31, will not alter the 37.5 per cent earnings tax paid by miners.

Bolivia’s drive to increase levies comes as the new leftist government in neighboring Peru negotiates with mining companies to increase their contribution to state coffers.

The Bolivian bill being drafted would also replace mining concessions with shared-risk or service-provider contracts, giving the state majority control in all metals projects, Mr. Cordova said.

A similar reform was carried out in Bolivia’s energy industry, which Mr. Morales nationalized soon after taking office in 2006.

The new mixed public-private partnerships would also be forced to present regular investment plans. “We will ensure the private partners get their investment back and decent profits,” Mr. Cordova said.

Foreign companies with operations in Bolivia include Japan’s Sumitomo Corp, which owns San Cristobal, U.S.-based Coeur d’Alene, global commodities trader Glencore and Canada’s Pan American Silver (PAAS-Q33.49-0.09-0.27%).

Mr. Cordova said the planned shake-up would “obviously affect companies operating in the sector, but shouldn’t cause serious damage.”