Argentine Law & Business – A Pitfall for Mining

LAWFUEL – International Business Law –

As part of its strategy to maintain a budget surplus, the Argentine Government taxes commodity exports. Oil & gas, agro, dairy and other commodity producers have all felt the increasingly outstretched hand of the government, which taxes anywhere from 5% to 45% of export sales revenue. Until recently, the Argentine mining industry believed itself immune to the risk of increased taxes. This has recently changed. Read on to find out why.

Tax Stability Benefit under the Mining Investment Act
In the early 1990s, the Argentine Congress enacted various laws to promote capital-intensive investment in mining projects. Thus, it revamped the 1886 Argentine Mining Code and, perhaps even more importantly, introduced the Mining Investments Act.2 Among other things, the Mining Investments Act provides tax benefits for entities registered under the law. These benefits include a 30-year tax stability provision for qualifying mining projects. The tax stability provision, which begins to run at the time of filing a feasibility study on the relevant mining project, guarantees the beneficiary that the existing fiscal burden of federal and provincial taxes on the project will not increase and exempts the beneficiary’s project from the effects of any future taxes that may otherwise affect its assets and revenue.

The Tax on Exports

After the precipitous devaluation of the Argentine peso in 2002, the Argentine Government boosted its coffers by implementing a tax on commodity exports, the applicable rate of which ranged between 5 and 10%.3 At that time several mining companies had already qualified their projects for the tax stability provision under the Mining Investments Act and, as a result, the federal mining authorities directed the Argentine Customs Bureau to deem these companies exempt from the export tax.

Last month, however, the Argentine media reported that the federal mining authorities have reversed their stance. According to these reports, undisclosed letters sent to the customs
1 “Argentine Business Law Watch” is a periodic news service provided free of charge to clients and friends of Negri & Teijeiro Abogados. To read past editions of “Argentine Business Law Watch,” please visit our website at

2 Law No. 24,196 (officially published May 24, 1993).

3 Resolution 11 issued March 4, 2002 by the Ministry of Economy and Infrastructure (officially published on March 5, 2002).

authorities by the Secretariat of Mining and the Secretariat of Commerce have stated that these companies are not exempt from the export tax.4
Few official pronouncements have been made and no laws or regulations issued to clarify the government’s official position. According to media sources, the policy reversal affects as many as 14 current mining projects. Although not affecting new investments—which would take into account this and all other existing taxes in the stability provision—the change in interpretation represents a first step toward a new tax regime on mineral exports.

Both the mining industry and the government have been reluctant to fix rigid official positions. In the battle for public opinion, it would appear that the government is moving toward treating mining participants in the same way that it has treated the oil & gas industry. This does not bode well for the burgeoning mining industry. While costs and profit margins are different from those of its oil & gas brethren, mining companies are keenly aware that the government’s taxing of the oil & gas industry has led to a significant decline in investment incentives and exports.

Government stand-ins argue that high prices for precious and semi-precious metals have generated huge profit margins for an industry that employees few but leaves a huge environmental footprint. Exempting the mining industry would, according to this point of view, unfairly benefit a small group of mostly foreign investors. Nonetheless, the government knows that it must act with caution. Media sources have reported that several of the affected companies are already threatening to file claims to challenge the reversal of their exemption and a disregard of the Mining Investments Act could lead to international arbitration claims brought by a powerful industry. That, of course, would only lead to more bad press for an administration already considered hostile toward foreign investment.

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