Potential of Argentina attracts foreign miners

Recent events in Argentina have convinced many Canadian companies that South America’s exploration potential is not restricted to Chile.

Argentina is the second-largest country in South America, occupying 2.8 million sq. km. And with a population of about 33 million, it ranks as the continent’s fourth-most populated country. Almost one third of its citizens live in the sprawling city of Buenos Aires, with only 3% inhabiting the windy plains that make up much of the country’s land mass.

Argentina, which was previously handicapped by rampant inflation and military-dominated governments, has undergone substantial, widespread reforms that are attracting foreign investment.

Since becoming elected in 1989, President Carlos Menem and his Justicialista party have initiated a comprehensive privatization program, selling many government-controlled businesses in major industrial sectors.

Inflation, which during the 1970s ran as high as 4,000% annually, has been dramatically reversed, with recent monthly figures showing deflation of about 0.4%.

The key to Menem’s economic turnaround was the passing of a law that states that the Argentine peso must be backed 100% by either foreign currency or gold bullion. Today, one peso is equivalent to US$1.

The government continues to attract foreign investment, with several automotive makers, including Fiat and Ford, having recently announced plans to construct plants in the country.

Mining previously accounted for only a minute amount of the gross national product. However, with the revision of the national mining code and renewed interest in the country’s geological potential, the industry is poised to expand, perhaps considerably.

The code now allows private exploration on mining claims (or cateos), which vary in size, depending on the type of deposit sought. Large, 10-by-10-km cateos are available for bulk-tonnage deposits, whereas smaller claims are set aside for vein-type deposits.

Exploitation rights are granted by the government in the form of pertenencias. A pertenencia for a bulk-mining target is typically 1 by 1 km, and smaller for vein deposits.

Argentina’s mining code offers a host of incentives to foreign mining interests. Among them are:

* a corporate tax rate of 30%;

* a tax holiday in the early years of production;

* guaranteed tax rates for 30 years;

* absence of provincial or dividend repatriation taxes;

* duty-free import of equipment;

* 100% writeoffs for exploration expenses;

* a 3% net smelter return royalty;

* a tax-deductible environmental reserve fund; and

* full convertibility of currency.