Brazil's New Mining Code

[ocpagu]

Brazil has been drafting a new mining code that is aimed at increasing state control over the industry. President Dilma Rousseff is expected to present various bills to Congress that would hike royalty rates, create a new mining regulatory body, curtail speculation and change the licensing policy.

Markets are factoring in a 4% royalty rate on revenues, which is already causing a dispute between mining companies and the state. Shares for Vale have taken a 22.5% hit this year on the NYSE as investors plan for reduced profits in its home country of Brazil. The mining giant derives nearly two-thirds of its revenues from Brazilian iron ore. It is also in a $4.7 billion tax dispute with the National Department of Mineral Production.

Read more:
http://www.businessinsider.com/brazil-new-mining-code-impact-on-vale-2011-9#ixzz1XT85SPdw
http://en.wikipedia.org/wiki/Vale_(mining_company)

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Vale S.A. is the 2nd largest mining company in the world and the largest producer of iron ore and pellets. Vale was founded as a public company by the Brazilian Government in 1942 and has always been one of the most important tools for Brazilian industrialization process and economic progress as a whole.

Unfortunately, in 1997, during the government (sic) of the neoliberal puppet Fernando Henrique Cardoso, the company was privatized. It was sold by the pathetic amount of US$ 3.14 billion - only a ridiculous small fraction of the company's market value - to a bunch of lobbists responsible for funding Cardoso's ellection campaign. The company was sold with basis in the underestimate value of its infrastructure, only. The company's reserves of minerals at the time were literally given to the new owners.

There's almost a consensus, at least among Brazilian left-leanings, that the company's privatization was unconstitutional, since the Brazilian constitution states that the iron reserves are strategic for the country's sovereignty. Several proeminent figures of Brazilian judiciary system also considers the company's selling to be illegal, because of the transfer of reserve's ownership.

It is known that reacquiring control of Vale S.A. has been one of the long term objectives of Brazil's Workers Party. I'm glad that Dilma is taking the first steps.