Argentina: An opportunity for mining business Environment.pdf · Dirección de Economía Minera Dirección Nacional de Promoción Minera Argentina is a Federal country formed by 23

Argentina: An opportunity for mining business

The new investment framework

May 2018

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



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



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



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



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



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




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




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




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.



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 %



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



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



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



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

http://www.ejapo.mrecic.gov.ar/

Documents

Argentina: An opportunity for mining business Environment.pdf · Dirección de Economía Minera Dirección Nacional de Promoción Minera Argentina is a Federal country formed by 23