Bolivia’s new mining law to move forward after deal with cooperatives

Bolivia’s new mining law to move forward after deal with cooperatives

Bolivian mining cooperatives account for about 35% of the country’s mining output.

Bolivia’s government and cooperative miners have ended a conflict over proposed changes to the Mining Act that would have banned partnerships between locals and multinationals.

The bill, still going ahead, will replace a general law passed in 1997 and bring public and private mining companies operating in the country, such as Coeur Mining, Glencore Xstrata (LON:GLEN), Pan American Silver (TSX:PAA), and Sumitomo, in line with the 2009 constitution.

According to Free Speech Radio News, mining cooperatives will now be able enter into contracts with private companies by forming “mixed companies” with the state through the Bolivian Mining Corporation (Comibol). The law will also allow cooperatives to re-negotiate their existing contracts with private mining companies.

Other changes include a prohibition for private firms to register minerals as property, meaning those companies won’t be allowed to use them as collateral for loans or include them as assets in stock market filings. Concessions will be limited to 62,000 hectares, which could have an impact on Sumitomo and its San Cristobal open-pit silver, lead and zinc mine, Bolivia’s largest.

The law also creates a new government division to oversee the sector.

Rocky path

When presented in March, President Evo Morales was confident that the legislation would move quickly through the Congress, but the situation quickly went south. Miners began protesting at the end of the month, the government announced that it would suspend the bill before the Senate could debate it, and Morales ousted Mining Minister Mario Virreira on April 8.

The modified bill is now back in Parliament and should be passed before October, an election month in the Andean country.

Bolivian mining cooperatives account for about 35% of the country’s mining output. They are tax-exempt organizations and pay royalties at lower rates than mining companies. Negotiators from the cooperatives argue direct partnerships would allow them to acquire new technologies and know-how and to share risks in the event of major price drops in world markets.

Morales, South America's first indigenous President, has become an outspoken critic of the industrialized world. One of his first measures when taking office in 2006 was to raise mining taxes and nationalize the country’s key natural gas industry. He has also expropriated the telecommunications and electricity sectors, and seized and nationalized the assets of Vancouver-based South American Silver Corp. (TSX:SAC) two years ago.

Morales also made waves when defined the nation's mineral deposits as "blessings" in a 2012 law, aimed to protect the right of nature "to not be affected by mega-infrastructure and development projects that affect the balance of ecosystems and the local inhabitant communities".

Though rich in mineral and energy resources, data from the Unicef shows that Bolivia is one of the poorest countries in Latin America and the weakest economy in all of South America.