Chile Revamps Mining Royalties Bill
Source: Reuters (9/16/10)
"Royalties will be raised to 5% to 9% starting in 2018."
President Sebastian Pinera's government reworked the bill after its center-left opponents shot it down in July, in a major challenge to his legislative agenda in the world's No.1 copper producer.
Under the new bill a sliding scale for royalties will be raised to 5% to 9% starting in 2018 from 4% to 9% initially.
The revamped bill guarantees around $300 million of the $1 billion raised over three years will go to Chile's regions.
Mining companies currently pay a royalty of between 4% and 5%.
Analysts say a rise in Pinera's approval rating for his handling of a rescue bid to save 33 miners trapped deep inside a mine in far northern Chile could help the bill's passage.
"If we don't manage to pass this bill, the funds will not be there for 2011," he added. "It's not the same if we have to turn to our savings, to break the fiscal savings piggy-bank."
Larrain is seeking to avoid having to repatriate more dollar savings from abroad to avoid stoking pressure on the peso, which is already trading around 8-month highs against the dollar.
The royalty revamp is part of a wider plan to finance the state's $8.4 billion share of reconstruction after the earthquake. The government has also issued around $1.5 billion in international debt, raised taxes on some goods and tapped copper boom savings.
However, the royalty would have to be voluntary because the country already has contracts with foreign miners that expire around 2017.