Friday, February 11th 2011 - 18:38 UTC

Brazil tightens mining legislation focused on local processing and jobs

Brazil announced an overhaul of the management of its mineral resources and booming mining industry geared to end what it describes as “reverse specialization” based on the export of raw unprocessed minerals with minimum benefit for local labour and processing industry.

Mines and Energy minister Edison Lobao

The policy is contained in the National Mining Plan 2030 which anticipates investments totalling 350 billion US dollars to expand production that will more than triple output of iron ore, copper, nickel, alumina and other metals.

“It is clear there is a need for change in the management of our mineral resources,” Minister for Mines and Energy, Edison Lobao, said at the launching of the plan.

Brazil is entering a phase of “reverse specialization”, or increased exports of raw, unprocessed minerals, with an ever smaller proportion undergoing local processing before shipment, the document said.

The Brazilian government seeks to promote greater processing of ores into higher-value final products such as steel to increase industrial employment, tax revenue and social development.

There is growing concern among the Brazilian political class that its commodities-heavy economy is not creating enough jobs and is subject to the whims of its main client, China.

Government leaders in recent years have pressured mining companies, particularly the massive iron miner Vale to add more value to their minerals before exporting by investing in processing facilities such as steel mills.

According to the 2030 Plan iron ore output will jump 58% by 2015 to 585 million metric tons, before rising to 795 million mt in 2022 and then to about 1.1 billion mt by 2030, the Energy and Mines ministry said in its National Mining Plan 2030. Brazil is already a world leader not only in iron ore but bauxite, manganese and alumina and a top producer of copper and nickel.

But China's iron ore imports in 2010 were valued at 12.2 billion USD, compared with Brazil's total iron ore exports valued at 29 billion for that year.

The release of the report comes as the government moves ahead with plans to rewrite the country's 1968 mining code. The rewrite is aimed at increasing state control and revenue from commodities as world demand and prices rise.

Legal changes to be proposed by Brazil's government include changes to an exploration concession system that allows companies to get rights to explore an area for 30 years without requiring the company to produce.

The new legislation, if passed, will give mining companies five-year concessions with minimum exploration requirements renewable for longer periods if efforts are made to put the area into production.

Existing concessions will not be changed, though the government intends to review all mining agreements to make sure their terms are being adhered to, and will seek compensation or seek to annul those deals that are not being honoured by their holders, ministry officials said last year.

Brazil also plans to create a national mining council to guide national policy.

Much of the planned legislation is similar to Brazilian oil legislation passed over the last decade and a half. That legislation, revised last year to boost state control of offshore resources led to a boom in oil production and the transformation of Brazil from a major importer into a net exporter of petroleum products.

Brazil is the world's third-largest producer of iron ore and the largest exporter of the main steelmaking ingredient. If iron content of ore is considered, it produces more iron than any other nation. It is also the world's second-largest producer of alumina, a refined form of bauxite used to make aluminium. The National Mining Plan outlines major expansion of output for several metals.

Copper output will more than double to 500,000 metric tons in 2015, from about 220,000 mt today, then reach 700,000 mt in 2022 and rise further to 1 million mt in 2030, the report said.

Nickel output will triple by 2022 to 80,000 mt, before rising to 132,000 mt in 2030, the ministry said. Raw steel output will double to 77.9 million mt in 2022, then hit 116 million mt in 2030, the report said.

Nevertheless the report also points out that the high cost of Brazilian energy could reduce competitiveness in the production of aluminium, which requires large amounts of electricity, and eventually force the country to rely on imports.

Paulo Camillo Penna, head of Brazil's mining industry association Ibram, said the plan was a good start but that Brazil needs to focus on improving infrastructure, lowering taxes, and training workers for the industry.
 

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