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6/13/17

It's Federal Mining Agreement day in Argentina

This piece is from IKN421 last Sunday and is the latest in our coverage of the ongoing clownshow going on in the mining sector in Argentina. Today we get the signing ceremony of the Federal Mining Agreement in Argentina, the piece explains why it's a worthless piece of theatre.

Argentina: The Federal Mining Agreement to be signed this week
Last week we noted that Governor Urtubey of Salta said he would not sign the Federal Mining Agreement (FMA) and join the other main dissenter, Mario das Neves of Chubut. This week saw an emergency meeting between several provincial governors, led by the pro-mining Sergio Uñac of San Juan province, which changed the wording on a couple of the items and got Urtubey on board. With this, the government has decided to press ahead with the FMA without Chubut and will hold a fancy-dancy signing ceremony this Tuesday June 13th in Buenos Aires (10), with the main points of the agreement being that the nation will not impose a planned 1% royalty, that the provinces would limit regional royalties to 3% maximum, and provinces could impose a second tax to fund mining infrastructure of not more than 1.5%. In return the Macri government gets the “level playing field” with all provinces reading from the same rulebook, which will allow Argentina as a nation to attract more FDI, so they say. One the FMA is signed, it then goes to the national Congress in order to be made into law.

However, we once again stress that the fact Chubut has not signed on makes the initiative stillborn. For one thing, Argentina cannot claim “same playing field” when Chubut will not recognize the new law. For another and more practical reason, Chubut is the location of over $1Bn of the total $1.7Bn in projects now on the Argentina pipeline to production.

Expect a lot of trumpets and fanfares next week when the FMA is signed and when you hear them, remember this FMA is a DOA paper tiger of an agreement, it’s practically worthless and changes nothing of substance. Even outside of Chubut and in signee provinces such as Mendoza, Rio Negro and Salta with leery attitudes towards the industry, the anti-mining sectors will be able to block projects using the provinces’ constitutions and laws and the national government will not be able to push through a thing against the will of the regional governor. In short, the archetype Style-Over-Substance country gets the mining agreement it deserves.