The Fraser Institute publishes an annual list of the most and least risky jurisdictions for mining investments. The index combines political and geologic attributes: New Jersey is a great place to invest, but there are not a whole lot of mineral resources.
Number one is Saskatchewan, followed by Manitoba, Western Australia, Nevada, Finland, Quebec, Arizona, Sweden, Ireland, and Queensland. Not a whole lot of surprises there.
But the bottom? The worst ... uhhh ... counting up from the bottom, the worst are Jujuy, Neuquén, Venezuela, Chubut, Afghanistan, La Rioja, Mendoza, India, Zimbabwe, and Mozambique. Fully half of the jurisdictions on the list are Argentine provinces.
Whoa.
But it turns out that the issue really isn’t national. Salta, for example, performs ok, a little better than Colorado and Alberta. Ditto San Juan, and Santa Cruz is respectable. So what is with the underperformers?
Well, the issue seems to be environmental regulation. Consider Chubut. It banned the use of cyanide in open-pit mining in 2013. Then a petition put a bill to prohibit uranium and thorium mining on the legislative agenda. What came out was a bill that putting mining in the hands of local governments. Mining companies were less than thrilled.
Mendoza has a similar ban on the books since 2007. Neuquén is considering one: a Chinese proposal for a copper mine was voted down by Loncopué county in a vote of 2,125 to 318. La Rioja repealed its anti-mining laws in 2008, but mass demonstrations in 2012 forced the governor to suspend the operations of a Canadian gold mine. (That sounds terrible ... but note that the Canadians could have taken Argentina to arbitration under this 1993 treaty but chose not to do so.)
It makes complete sense why mining authorities would hate this, but it is the not the same thing as the expropriation risk faced in Venezuela. It is just good old-fashioned democratic politics in action.
The Macri administration is trying to convince the provinces to loosen their restrictions. The Argentine constitution is a bit vague on mining laws. Article 7, Section 12, gives Congress the power to write a mining code, “without such codes altering local jurisdictions.” Article 124 gives the provinces control over natural resources; but Article 126 prohibits them from enacting mining laws once Congress has enacted a federal law. In practice, this means the new laws will be negotiated with the provinces, which can of course use environmental or health laws to close unpopular operations. Foreign miners expect a bill this week; we will see if it happens.
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