Hacienda Virtual Realty Argentina - HVRA
Mining Law
The Argentine Mining Code dates back
to 1886; since then it has undergone various amendments mainly to bring it up
to date with technological advances, the most recent one being that instituted
by Law 22,259 enacted in August 1980.
While special regimes exist for oil, gas and nuclear minerals (with foreign
investment allowed in all three), the basic approach taken by the Mining Code
is that in the case of most minerals, the owner of the surface is not the
owner of the mineral deposits below.
These belong, in a very special sense, to the State. The right may best be described
as one of "eminent domain".
The State is legally bound to grant to whoever discovers a new mine a mining
license, which in fact is a fee except that the owner must comply with three
conditions (payment of an annual canon, investment of a minimum of capital and
reasonably intense exploitation), and if he fails to do so, the license is forfeited
and ownership reverts to the State.
Upon forfeiture, the mine is declared vacant and persons interested in obtaining
a license therein may apply for it, subject to the same three conditions. Contracts
covering the exploration and exploitation of large mining areas are limited
to a maximum of 36 years; five years for exploration, one to opt for exploitation,
and thirty for carrying it out.
Foreign investments are quite welcome in Argentina in the mining business (including
nuclear minerals such as uranium and torium) and both national and provincial
laws aim at attracting them and encouraging the development of mining by private
parties.
The National Government is forbidden to exploit mineral fields itself and may
only undertake exploitation on an exceptional basis through State entities operating
on a private enterprise basis, many of which are being privatized.
The Mining Code includes rules aimed at attracting leading companies to engage
in mining operations through public tenders. Large scale production may also
be carried out through regular prospecting permits.
There are no restrictions on foreign companies being involved in mining activities
and owning mining properties, nor any discrimination against them as regards
the procurement of local source financing in dollars or local currency.
Furthermore, there are no export duties on mining products. Law N¼ 24,196 (published
in May 1993) instituted a new system for mining investments, to be eligible
for this system, individuals and corporations must be domiciled in Argentina
and register with the National Mining Department.
Those registered as above may submit to the National Mining Department a chronological
schedule of tasks and surveys to be conducted, indicating the investments involved.
Each year, the aforementioned department will either directly or through whoever
it may designate, verify that the work done is in line with the schedule previously
submitted.
Mining Law Highlights
• Guaranteed tax stability (as regards taxes and rates) for 30 years.
• Stable exchange and customs treatment (except as regards exchange rates
and tax reimbursements, drawbacks and refunds connected with exports).
• The ability to recognize a deduction for income tax purposes for the
full amount of prospection and exploration expenses, as well as expenses connected
with other work for determining the technical and economic feasibility of mining
operations (notwithstanding the ability to deduct the expenses themselves as
such or recognize them as depreciable investments).
• The ability to deduct an environmental conservation allowance up to a
maximum of 5% of the operating costs for extraction and smelting, on the miner's
income tax returns, provided such allowance is eventually used prior to the
completion of the productive cycle.
• Accelerated depreciation rates for income tax purposes for investments
made for carrying out new mining projects or extending the productive capacity
of existing operations, in line with the following guidelines: Infrastructure
works (civil works, energy, equipment, access roads, dwellings, and so forth):
60% in the year they are put into service and 20% in each of the next two subsequent
years. Machinery, vehicles, facilities, and so forth: one third in each of the
first three years as from the year they are put into service.
• Income tax exemption for profits stemming from capital contributions
involving mines and mining rights.
• Exemption from import duty, statistical taxes and other taxes on the
importation of capital goods, equipment, spare parts, and so forth (excluding
rates charged for services). Foreign or domestic private parties will soon be
authorized to explore and extract nuclear minerals such as uranium and torium,
an activity once reserved to the government.
• The National Atomic Energy Commission -formerly the only entity vested
with the power to explore and exploit nuclear mineral beds- has been earmarked
for privatization, along with atomic energy plants active and in construction.
A bilateral investment treaty providing for national treatment of American investors
in all mining activities has recently been approved by Congress and is nearing
ratification.
Oil
and Gas Laws
Oil and gas fields belong to the State.
Until very recently Y.P.F. (the National Oil Company) held the exclusive right
to prospect, drill and operate in certain "reserved areas", and Gas del Estado
(the National Gas Company) held the exclusive right over natural gas and its
transport and distribution.
The Government could grant prospecting rights to private concerns in "non-reserved"
areas, but the discovery of oil or gas did not automatically entitle them to
any further operating rights. Exploration and operating permits were granted
to private companies only as a result of special tenders called by the Executive
Power, and the refineries located in the country were required to use oil extracted
in Argentina unless there were technical reasons that called for the use of
imported oil, besides which the Executive Power set crude oil prices.
Starting in 1989, however, the Government has gradually been deregulating the
oil and gas industry through various decrees which among other things have:
• Allowed crude oil to be marketed freely.
• Granted licenses in secondary areas, freed old licenses and in general
deregulated exploration.
• Lifted controls over oil prices.
• Eliminated restrictions on the setting up of refineries.
• Eliminated restrictions on the setting up and ownership of service stations.
• Done away with restrictions on imports and exports and largely suppressed
customs duty.
• Deregulated Y.P.F. pipelines, with free access to them at international
market rates.
• Privatized Y.P.F., now a private corporation which stock is quoted in
New York in the over the counter market.
• Gas del Estado was privatized at the end of 1992 after being split up
into various area companies and a Gas Regulatory Body created following U.S.
practice.
• Gas prices will be freed as of January 1, 1995 (prior to this date the
producers may only sell to Y.P.F., Gas del Estado and the companies succeeding
them following privatization).
As a result of the deregulation process, the private sector now controls 100%
of the transportation and distribution of gas and 47% of the production of oil
and the distribution of its byproducts.
Laws Regarding Other Natural Resources
Domain over natural resources, such as forests, water resources, fishing and
wildlife corresponds to the provinces.
The National Government holds sovereignty over maritime fishing rights and is
responsible for granting permits for fishing within Argentine territorial waters
(200 miles offshore).
Fishing is a promoted industry to which special loan facilities are available.
Fisheries operating South of the R’o Colorado are entitled to more favorable
treatment than those operating North of it.
The National Fishing Service is responsible for administering and controlling
matters concerning fishing. In general forestry operations require a license
and are carefully supervised, both as regards the area in which trees may be
felled, and the obligation to reforest.
The National Forestry Institute is responsible for the promotion of all aspects
of the forestry industry.
There is a special tax incentive system for investments in afforestation plans
that merit the approval of the National Forestry Institute. It consists basically
in the granting of fiscal credits - in the nature of subsidies - that are transferable
to third parties and may be used for paying any national taxes, so they are
of equal interest to all potential investors, regardless of individual tax brackets
or situations.
The credits are determined on the basis of a fixed sum per hectare set annually
by the Economy Ministry depending on the species of trees planted and the geographical
area involved; this amount varies between 20% and 70% of the updated afforestation
costs estimated by the Institute, without taking into consideration the actual
costs incurred by each producer.
Credits take the form of certificates issued and delivered to the recipients
by the Institute based on their fulfillment of the afforestation plans. Amounts
received in respect of these fiscal credits are exempt from all national taxes
and are not subject to any expense apportionment.
The same law provides for the updating of the plantation costs deductible for
income tax purposes upon sale of the timber, based on the wholesale price index.