Brazil’s rejects iron tax but that isn't the problem

Brazil's lower house mining and energy commission has rejected the 6633/09 bill, which establishes a 10% export tax on all iron ore and concentrates exported by local miners, but Standard & Poor warns that permitting and infrastructure issues are threatening the country’ iron ore expansions.

In a statement, congressman Luiz Argôlo said the rejected levy could have easily frightened Brazil’s major customers, including China and Japan, pushing them into the arms of other suppliers, such as Australia and India.

According to data from the Brazilian Mining Institute (IBRAM), the country is the second largest producer of iron ore, after China, with 467 million tons produced in 2011.

The entity said today it expects a 5% increase in domestic iron ore production this year. Last year, the industry reported a record growth of 25%.

José Fernando Coura, president of IBRAM, expressed concern about the worsening economic crisis in Europe since it is affecting China, Brazil’s largest buyer of agricultural and mineral commodities.

However, he also stated that the forecast for investments of $75 billion in the mining sector in Brazil from 2012 to 2016 remains unchanged, despite the gloomy forecasts.

Rinaldo Mancin, IBRAM director for environmental affairs, accused the country’s government of freezing new mine prospecting licenses for seven months. According to Geologo.com, Mancin added the government might be acting this way “because of the uncertainties over the new mining legislation that will be sent to Congress”.

The executive said no official document was sent to IBRAM about the question.

Last Monday investment bank Standard & Poor released a report warning about project delays in Brazil, specially new iron ore ventures.

According to the study, a surge in global iron ore demand has spurred a major expansion in Brazil's mining industry as the country's iron ore exports now account for about 33% of the global seaborne iron ore market.

S&P Primary Credit Analyst, Rafaela Vitoria, said Brazil's iron ore production is expected to grow beyond the world's largest iron ore mining company, Vale . Several other producers are also expanding iron ore mining operations and will boost Brazil's iron ore exports in the next few years.