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http://www.ecuadorminingnews.com/news.php?id=111
Ecuador Approves Law, Mining Ban Lifted
By Silvia Santacruz*
Washington D.C. January 14, 2009 – Ecuador’s interim legislature overwhelmingly approved the country’s long-awaited mining law last Monday night, permitting mining companies to resume operations following a nine-month ban issued by the former Constituent Assembly last April 2008. The bill passed despite fierce opposition from the vocal indigenous umbrella organization CONAIE, which requested that the Congresillo members table the law while threatening to demonstrate on January 20th.
The mining law was approved by 50-15 vote with minor changes from the draft text sent by the Ministry of Mines and Petroleum (MMP), and later amended by President Rafael Correa, who is expected to ratify it in the next 10 days. Although the law is no panacea, it opens the door for large-scale firms to develop the industry in the only Latin American country lacking industrial mining operations. The law passed as an ordinary one rather than an organic one as originally proposed. Making the law an organic one would have given it the power to supersede all other bills related to mining activity such as the tax one, and a water usage bill, the latter yet to be issued.
After the law is published, the MMP has four months to issue mining regulations to complete the industry’s legal framework. But firms whose concessions have not been revoked can restart operations as soon as the law is made public. After the April mandate, the government took away 75 percent of 4,112 mining concessions throughout the country in a move to clean house from testaferros, or land speculators, and mining authorities’ relatives. The newly approved law requires the auction of all new concessions, according to Art. 29, including those revoked with no preference for firms that lost them.
Meanwhile, Kinross Gold Corporation, Corriente Resources, IAMGOLD, and International Minerals, the four companies with most advanced projects in Ecuador, will be the first ones to sign individual exploitation contracts with the MMP. The document will set the terms, conditions, and deadlines for mine construction, from its assembly to minerals marketing and sales, according to Art. 41. Also, such contracts “will set the base price to apply the current tax law,” or more specifically, to apply its Art. 166, which creates a 70% windfall profits tax (WFT). Unless mining law regulations – to be issued by the MMP – exempt the industry from the WFT, the harsh tax will apply to the industry at a moment when international metallic minerals prices are most depressed, as a consequence of the global economic downturn. Read Silvia's Op-Ed vs. the WFT
“We are optimistic about the mining law, although we have a lot of work to do advising the MMP while issuing the new regulations. We will suggest [among other things] that they review the windfall profits tax, or at least postpone its application, let’s say a 6-month truce, until the markets recover,” stated the Ecuadorian Mining Chamber’s new Executive Director, Santiago Cordovez.
CONAIE has mainly held protests regarding water usage. Jorge Jurado, National Water Secretary was recently quoted, in an Ecuadorian newspaper, criticizing CONAIE’s extreme position, which prioritizes water usage for agricultural irrigation. “They forget that the country is more than the indigenous people. They are not the only ones who need water. We all need it. And as any other extractive industry, mining needs water, especially large-scale mining operations.”
For its part, the legislature's Economic Development Committee president, Irina Cabezas, underscored that the industry would create 300,000 new jobs, and will boost small communities' economies by pouring 60% of the confirmed 5% new royalty into them. MMP minister Derlis Palacios also stated that mining will bring development to poor communities in the country.
A common worry among miners is the rumor that CONAIE’s political arm, Pachacutik, may run with former MMP minister and former Assembly's president Alberto Acosta – a mining critic – in the upcoming presidential elections to be held in March. To date Ecuadorians strongly support President Correa, who will seek re-election, with a 70% approval rating according to the latest CEDATOS survey. Go to the survey
Mining companies will face a challenge to develop a responsible industry with strict environmental rules and more agency oversight, but they are certainly in a better position than with halted operations. The issuing of the mining law is the first chapter of the development of a vibrant industry, which will change the course of Ecuador’s economy, and importantly, deliver prosperity to its poorest communities.
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