Dollar clamp measures hit Argentine mining industry and exports are “at bare minimum”
Mining companies in Argentina have sharply reduced exports because they are unable to meet a new government rule forcing them to cash in the proceeds within 30 days, the head of an industry group said.
President Cristina Fernández has imposed a series of rules on trade and foreign exchange over the last year in an effort to bolster the supply of dollars, which her government needs to pay the public debt.
Last month, her administration put new measures in place aimed at accelerating the arrival of export proceeds. Argentine mines produce copper, gold, silver and other products.
Mining companies used to have 360 days to cash in the earnings, but are struggling to meet the new time limit, prompting them to dramatically reduce shipments, said Martin Dedeu, head of the Argentine Mining Industry Chamber (CAEM).
Exports are being kept to a bare minimum, Dedeu said this week, adding that he planned to meet government officials to discuss the situation in the coming hours.
Dedeu said it was difficult to close export deals within 180 days and that failing to cash in proceeds within the new 30-day window puts executives at risk of sanctions.
We hope the matter can be resolved and we're fairly optimistic that a solution will be found, he said.
The chamber represents the local operations of global miners including Xstrata, Barrick Gold Corp and AngloGold Ashanti. Mining exports reached 6 billion dollars last year and expected to be at least the same level in 2012.
The administration of Cristina Fernández also tightened controls on imports of equipment and supplies by mining companies last month, forcing miners to get prior approval for overseas purchases and submit import plans 120 days in advance.
Compared with neighbouring Chile or Peru, Argentina's mining industry is relatively undeveloped. That has drawn interest from global companies in recent years and overall investment reached a record 2.6 billion dollars in 2011.
Soon after her re-election last year the Argentine government ordered energy and mining firms to cash in export revenues in the local market and ordered tax officials to approve dollar purchases on a case-by-case basis.
Both measures were designed to counter galloping capital flight and bolster the Central Bank's foreign currency reserves, which the government has earmarked for debt repayments for a third straight year.