Bolivia wants greater role in key mining sector

Martin Arostegui

LA PAZ, Bolivia--The Bolivian government wants to increase its role in the mining industry through state-run mining company Comibol and taxes that promote onshore processing of the country's mineral wealth, according to top officials. 

"The state will participate at all levels of the mineral production chain with a view to increase revenues and strengthen Comibol," Hector Cordoba, the company's president, said at a mining conference in La Paz.

In 2009, Bolivia changed its constitution to require miners to form joint ventures with the government mining company Comibol for all new projects. Mr. Cordoba, a metallurgical engineer, said Bolivia needs to focus on "industrializing" its mineral wealth. 

Comibol plans to build five smelters for silver, gold, zinc and other metals to process the ore in Bolivia, rather than shipping it abroad, he said. 

Bolivia's history is closely intertwined with mining. Silver mined from the Cerro Rico mountain in Potosi generated fabulous wealth for the Spanish crown during the colonial era. For much of the 20th century, tin was king in Bolivia, with tin baron Simon Patino thought to be one of the world's wealthiest tycoons at the time of his death in 1947. 

Today, mining accounts for 6.3% of Bolivia's gross domestic product and 37% of exports. Mineral exports are the country's No. 2 source of hard currency after natural gas. Bolivia's mining production was valued at $2 billion last year, up from just $430 million in 2005, while exports grew almost fivefold during that period, according to Comibol. 

Speaking at the same conference, Deputy Mining Minister Freddy Beltran said Bolivia needs to find ways "to gain more government revenues from mineral exports." Those measures might include higher taxes and creating incentives for the production of value-added products from minerals, he said. 

Bolivia already levies some of the highest taxes on mining in Latin America, said Humberto Rada, president of Coeur d'Alene Mines' CDE +1.18% Coeur South America, at the conference. 

Mining companies pay a 37% tax on their profits as well as royalties of between 5% and 7%, among other taxes, he said. 

President Evo Morales is expected to sponsor legislation and issue decrees in the next few months that will increase the state's role in the sector. 

Mr. Morales has already nationalized two privately-owned mines this year. In July, he seized South American Silver Corp's (SOHAF, SAC.T) Malku Khota mine after local communities invaded the mining site. The previous month, the government took over Glencore International PLC's (GLNCY, GLEN.LN, 0805.HK) Conliquiri zinc and tin mine. 

Mr. Beltran said the government didn't have a "predetermined policy of nationalizations" in those cases.

South American Silver lost its mine because of the conflict with local communities, while the government had been trying to renegotiate Glencore's concession since 2006, he said. 

Many foreign energy companies pulled up stakes following the nationalization. But the Morales administration has started to actively court foreign investors again, with YPFB hosting its second annual energy conference this year. 

Investment has started to return, enticed by government overtures and Bolivia's vast natural gas resources.

But the expropriation of foreign mining assets and the collapse of an iron-and-steel joint venture between the government and India's Jindal Steel & Power Ltd. haven't helped the investment climate. Mr. Cordoba fears the government's latest nationalization binge might scare away badly needed foreign investment. 

"We have serious deficits in two key areas; technology and trained personnel," he told The Wall Street Journal. "For this we need to associate with foreign companies." 

Mr. Cordoba also complained about what he described as the "excessive influence" that local communities and mining cooperatives have over mining projects. 

Bolivia's 100,000 cooperative miners have gained significant sway over the sector under the Morales administration. Those miners--together with indigenous communities, who under the constitution are the owners of the country's natural resources--have occupied several mines in Bolivia. 

Mr. Cordoba said he wants to expel representatives of the powerful national federation of cooperative miners, or Fencomin, from Comibol's management due to "conflict of interests". 

Mr. Beltran said that Fencomin and other grassroots sectors need to be included in the drafting of new mining legislation.

Republished from Marketwatch