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Guatemala seeks 40% stake of all mining companies

Guatemala has jumped on the wagon that has been running through most of Latin America this year by proposing an increase of control over its natural resources.

President Otto Perez Molina is pushing the Constitutional reform that will make possible for the government to acquire up to 40% of the mining and exploration companies operating in the country.

The intended reform to 55 articles of the Constitution includes a proposal to change the current mining law, in place for the last 15 years. The document aims to “increase the country’s revenue and achieve equitable distribution of national income,” said  Erick Archile, Minister of Energy and Mines, as quoted by local paper Prensa Libre.

Some of the most important changes include the redistribution of royalties, the creation of a mining council and a mining fund, and improved regulation for mine closures.

In its Morning Coffee report writes that, Canaccord Wealth Management finds that the new legislation is positive as it formalizes the existing royalty structure established through negotiation between industry and government.

Currently, gold and silver miners are voluntarily paying royalties of 4%, base metal miners pay 3%, and miners of industrial minerals pay 1%. The document presented by Perez Molina doesn’t address whether those rates will change.

“When a country like Guatemala introduces new royalties, the associated headlines are rarely well received by the market,” wrote Canaccord.

“The amendments also demonstrate progress within the Ministry of Mines, which he [a Bay Street analyst] believes could pave the way to final permitting of new projects,’’ it said.

Former military leader Otto Perez Molina was elected in November last year. He is the first former army member to become president in Guatemala, Central America’s largest economy, since the country restored democracy in 1986.

In the last eight months, Otto Perez has been focused on looking for ways to reduce severe poverty rates affecting more than half the population.