PDAC 2018: Ecuador mines minister hopes to eliminate windfall tax

Rebeca Illescas, Ecuador’s new minister of mines, says she hopes to persuade the government of President Lenin Moreno to abolish the windfall profits tax.

“I’ve talked about this in Ecuador but it could be news to foreign mining companies,” Illescas told The Northern Miner in an interview at Toronto’s annual Prospectors & Developers Association of Canada convention in early March. “It still has to be evaluated inside the government, but I would like to see it put into law.”

Illescas, who replaced Javier Cordova, Ecuador’s previous mines minister, after his resignation from the post in February, said that “the best-case scenario is that we get rid of it,” while “the worst-case scenario would be that it is maintained in the law, but mining companies won’t have to pay it for four years after they recoup their investment.”

The new mines minister said she couldn’t say if or when the windfall tax will be abolished, but said she believes Moreno, who was elected president last year, is keen to develop the mining sector and may agree that the windfall profits tax does more harm than good.

“I do believe he will support it because he realizes the importance of the mining sector, so I think he’s going to look very carefully at that,” she says. “The president has talked about the importance of private investment because the country needs private investments.”

The camp at Lumina Gold’s Cangrejos gold project in Ecuador’s El Oro province. Credit: Lumina Gold.

President Moreno also recognizes that Ecuador needs to diversify its economy away from its heavy reliance on revenues from oil and gas, she says.

“That is a priority for us over the next few years,” she says. “We need another important sector for the economy of Ecuador. I’m very positive about that and I think the mining sector will become the second biggest driver of our economy over the next few years.”

But she also said that President Moreno has been “emphatic and clear that Ecuador will have responsible mining, and that’s good for everybody.”

The new minister, who served as the deputy minister under Cordova, also noted that a national referendum in early February that supported banning mining near urban centres or municipalities would not affect foreign mining companies, only smaller, local companies and artisanal miners.

In addition, Illescas pointed to Ecuador’s attractiveness as a mining jurisdiction.

“Only a very small part of the country has ever been explored,” she says, “and we have excellent geology, infrastructure, and competitive prices for electricity and water. We also have good relations with the communities, which receive royalties.”

Illescas also explained that the closure earlier this year of the national mining cadaster and the granting of new mining concessions was only a temporary measure, while the government sorted out the system in an effort to “clean it up and organize it better.”