Latin American Mining Sector: Review of Current Trends and Prospects.

Transcripción

1 Latin American Mining Sector: Review of Current Trends and Prospects Jean Acquatella PhD Energy and Natural Resources Unit United Nations ECLAC Economic Commission for Latin America and the Caribbean Santiago, Chile UNECE IAEA UNFC Workshop, 9-12 July 2013, Santiago, Chile

2 2013 CONTENTS 1. Production, Reserves, Exploration investments. 2. Increase of Mining Rents during the price cycle, and State participation ( %, govt. take ). 3. How did governments share in mining wealth? 4. Analysis and comments. Different responses of mining and oil sector to price boom. Fiscal treatment of mining. Discussion of prospects.

3 In Latin America the productive structure remains concentrated in primary sectors LATIN AMERICA AND THE CARIBBEAN: EXPORT STRUCTURE BY TECHNOLOGY INTENSITY, a (Percentages of the total) Source: ECLAC, on the basis of United Nations Commodity Trade Database (COMTRADE). a Cuba and Haiti not included. Data for Antigua and Barbuda refer only to 2007, and data for the Bolivarian Republic of Venezuela only to 2008; data for Honduras do not include 2008; data for Belize, Dominican Republic, Saint Kitts and Nevis, Saint Lucia, Suriname and Grenada (exports only) do not include 2009.

4 FDI trends reinforces productive specialization in primary sectors ( except. Mexico and Brazil) LATIN AMERICA AND THE CARIBBEAN: FDI BY DESTINY SECTORS AND REGION a/ (Percentages) Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a/ Estimate

5 Resource Export Dependence (2007 peak year for mineral/oil prices before global financial crisis)

6 Fiscal Dependence on Resource Revenues

7 Latin America s Metal Exports as % of total Exports increase during LAC Mineral Exports / Total LAC Exports (%)

8 LAC countries share (%) in world production of metals: Metal Top 3 producers Bauxite Brasil, Jamaica y Suriname Aluminum primar Brasil, Argentina, RBVenezuela Copper mine Chile, Perú y México Copper refined Chile, México y Perú Gold [Ton] Peru, México y Colombia Silver [Ton] México, Perú y Chile Tin mine Perú, E.P Bolivia y Brasil Tin refined Perú, EP Bolivia y Brasil Iron [Mton] Brasil, México, RB Venezuela Molibdenum mine Chile, Perú y México Nickel mine Brasil, Cuba y Colombia Nickel refined Brasil, Colombia y Cuba Lead mine Perú, México,EP Bolivia Lead refined México, Brasil y Argentina Zinc mine Perú, México, EP Bolivia Zinc refined México, Perú y Brasil Source: World Bureau of Metal Statistics, Gold Fields Mineral Services, Intierra Raw Material Database, UNCTAD.

9 LAC countries share (%) in world production of metals: Metal Top 3 producers Bauxite Brasil, Jamaica y Suriname Aluminum primar Brasil, Argentina, RBVenezuela Copper mine Chile, Perú y México Copper refined Chile, México y Perú Gold [Ton] Peru, México y Colombia Silver [Ton] México, Perú y Chile Tin mine Perú, E.P Bolivia y Brasil Tin refined Perú, EP Bolivia y Brasil Iron [Mton] Brasil, México, RB Venezuela Molibdnum mine Chile, Perú y México Nickel mine Brasil, Cuba y Colombia Nickel refined Brasil, Colombia y Cuba Lead mine Perú, México,EP Bolivia Lead refined México, Brasil y Argentina Zinc mine Perú, México, EP Bolivia Zinc refined México, Perú y Brasil Source: World Bureau of Metal Statistics, Gold Fields Mineral Services, Intierra Raw Material Database, UNCTAD.

10 LAC countries share (%) in world production of metals: Metal Top 3 producers Bauxite Brasil, Jamaica y Suriname Aluminum primar Brasil, Argentina, RBVenezuela Copper mine Chile, Perú y México Copper refined Chile, México y Perú Gold [Ton] Peru, México y Colombia Silver [Ton] México, Perú y Chile Tin mine Perú, E.P Bolivia y Brasil Tin refined Perú, EP Bolivia y Brasil Iron [Mton] Brasil, México, RB Venezuela Molibdnum mine Chile, Perú y México Nickel mine Brasil, Cuba y Colombia Nickel refined Brasil, Colombia y Cuba Lead mine Perú, México,EP Bolivia Lead refined México, Brasil y Argentina Zinc mine Perú, México, EP Bolivia Zinc refined México, Perú y Brasil Source: World Bureau of Metal Statistics, Gold Fields Mineral Services, Intierra Raw Material Database, UNCTAD.

11 LAC metal reserves as % of world reserves: CHL ARG BRA BOL BRA BOL BRA JAM GUY SUR VEN CHL PER ARG MEX PER CHL PER MEX CUB BRA PER BRA BOL BRA VEN MEX BRA MEX CHL PER MEX BRA CUB COL DOM VEN CHL BRA PER MEX PER CHL MEX BOL PER MEX BOL MEX BRA CHL CHL PER MEX PER MEX BOL Source: USGS Geological Service data, with elaboration from DRNI ECLAC.

12 Regional share (%) in total world investment in Mining Exploration Investment by Region MM US$ Europe 5.7% 11.0% 10.5% $ 77.0 Latin America 29.5% 32.0% 28.6% $ North America 12.6% 15.3% 19.9% $ Oceania 18.6% 14.4% 16.5% $ Africa 18.6% 14.2% 14.4% $ Asia 15.0% 13.0% 10.2% $ 75.0 Total 100.0% 99.9% 100.0% Total [MMUS$] $ 86.0 $ $ Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures, and data from Trends in Worldwide Exploration

13 Annual investment in Mining Exploration increases in Latin America from 0.56 Billion US$ to 3.1 Billion US$

14 Major countries capturing the new investments in Mining Exploration within Latin America. Country shares as percentage of total Mining Exploration Investment in the region (%)

15 2013 CONTENTS 1. Production, Reserves, Exploration investments. 2. Increase of Mining Rents during the price cycle, and State participation ( %, govt. take ).

16 State participation (govt. take) in Mining Sector Rents during the price cycle 500 PRIMARY COMMODITY PRICE INDEX, (January 2003=1) Petróleo, gas natural y carbón Metales Different performance : sector rents and % State appropriation, investment and production dynamics are different across sectors and countries.

17 Mining Sector : Economic Rent Refined cooper prices London Metals Exchange and average production costs LAC * ( USD cents per lb.) 400 International Price Net profits (appropriated by mining industry) Extraction Cost At mine head. Tax payments (appropriated by States) Factor payments beyond extraction phase (labor, sale costs, debt service.) ,000 45,000 40,000 35,000 30,000 25,000 Mining sector Economic Rent for selected countries (Millions US$, year 2009)** Precio Cu (BML) Costo de producción (promedio América Latina)** 20,000 15,000 10,000 5,000 Source : based on data from COCHILCO* Average production costs refers to direct and indirect mining costs, interest payments and depreciation, minus proceeds from sale of indirect products, (C3, according to Brook Hunt terminology), ** Costs for period reflect only Chile.. 0 ** World Bank ( WDI) World Development Indicators Database Mineral Rent ( % GDP)

18 Mining Sector Rents increase in Latin America vs. world Mining Sector Rent: rises 4 x to % GDP regional avg % GDP regional avg. 100,000 90,000 Mining Sector Rent by region, (US$ Millions 2005) LAC 80,000 70,000 60,000 East Asia & Pacific 50,000 40,000 30,000 East Asia & Pacific LAC North America 20,000 10, Norteamérica Asia del Este y el Pacífico* America Latina y el Caribe Source:ECLAC based on, World Development Indicators. Statistic: Mineral Rent ( % GDP) defined as international price unitary cost of production for a basket of 10 minerals.

19 Mining Sector profitability reaches unprecedented levels in Latin America 30.0 LAC: Profitability over assets 500 largest companies, 2010 (% profit/assets) Fuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de información estadística de América Economía, diciembre 2011 (

20 Extractive Sector combined rents (% GDP ) in individual countries. 35 Latin America (selected countries ): Mining and Hidrocarbon ( Oil/Gas) rents (% GDP) Bolivia (Est.Plur.de) x 3 renta x 10 Brasil Chile Colombia Ecuador Honduras México Perú Venezuela (Rep.Bol.de) Hidrocarburos Minería Fuente: Banco Mundial Fuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de información del Banco Mundial, World Development Indicators. Nota: *El dato del año 2009 de Asia del Este y el Pacífico corresponde al año 2006.

21 País MINING SECTOR RENTS (% GDP) OIL& GAS RENTS (% GDP) MINING FISCAL terms, REVENUE but (% total Fiscal revenue) OIL& GAS FISCAL REVENUE (% total Fiscal revenue) Argentina 0.05 x Bolivia x n.d Brasil 0.64 x x Chile Relative performance (GMP-10+CODELCO) 6.47 x Mining vs. Oil/Gas: Chile (sólo minería privada GMP-10) Economic weight of Oil & Gas (% GDP) Colombia 0.17 x x continues 0.9 to be 2.1 larger than 9.4 Mining Sector Ecuador x Guatemala1/ n.d. n.d But n.d. Mining Sector 0.3 rents are increasing Guyana much faster ( high profitability). Honduras 0.25 x Jamaica 3.43 x Oil & Gas Sector facing investment lags México x and reduced profitability, due 30.0 to rising Nicaragua 0.07 x Production costs Perú República Dominicana Suriname Venezuela, RB x4 x2 América Latina Australia Canadá Estados Unidos Sudáfrica Fuente: Elaborado sobre la base de datos de COMTRADE, UNCTAD, Banco mundial y CEPAL. Oil/Gas rents are larger in absolute Mining sector rents are growing much faster.

22 Fiscal Impact of increase in Mining Rents. País MINING SECTOR RENTS (% GDP) OIL& GAS RENTS (% GDP) MINING FISCAL REVENUE (% total Fiscal revenue) OIL& GAS FISCAL REVENUE (% total Fiscal revenue) Argentina Bolivia n.d x == Brasil Chile (GMP-10+CODELCO) x Chile (sólo minería privada GMP-10) Colombia Ecuador = 29.4 Guatemala1/ n.d. n.d n.d. 0.3 Guyana Honduras x Jamaica = México Nicaragua Perú x4 = República Dominicana Suriname Venezuela, RB x4 x2 América Latina Australia Canadá Estados Unidos Sudáfrica Fuente: Elaborado sobre la base de datos de COMTRADE, UNCTAD, Banco mundial y CEPAL. x9 x2 x1.5

23 2013 Mining Rents increase during the price cycle. How did governments perform? State share (%) in Mining Rents during :

24 State share in sector rents Countries included the analysis Metals Mining Sector Bolivia, Chile, Colombia, Guatemala, Honduras, Perú Oil and Gas Sector Brasil, Ecuador, Colombia, México, y Venezuela Countries selected based on availability of information: in particular disaggregated fiscal revenue payments at sector level.

25 Chile Taxes and other fiscal revenue paid by Mining companies*, relative to Mining Sector rent. absolute values (US$ millions each year) 40,000 35,000 35,000 M 30,000 25,000 20,000 15,000 14,000 M 10,000 35% 5, % > Ingresos tributarios totales (Gobierno central) Rentas mineras totales Tributación y aportes totales de la minería (sin impuesto específico) Impuesto específico declarado por GMP-10 Fuente: Elaboración propia sobre la base de datos de COCHILCO, CEPAL, Banco Mundial, FMI y Banco Central de Chile. Notas: * Los ingresos tributarios son del Gobierno Central. Los datos fueron tomados de CEPAL y del Banco de Chile. ** La tributación y aportes totales de la minera incluye los dividendos de CODELCO y los excedentes de ENAMI.

26 Chile Taxes and fiscal payments by Mining Companies as percentage of total Mining Sector Rent each year (%) 45% 40% TOTAL 35.7% 35% 30% 25% CODELCO 22.1% 20% 15% GMP % 10% 5% <5% 0% Aportes de las empresas privadas CODELCO ENAMI Tributación minera total (incluye royalty) In , total fiscal revenue from mining reaches 35.7% of total sector rent. Fiscal contribution from State company CODELCO is 22% ( 2/3 of total ), even though CODELCO only controls 1/3 of total cooper production. Fiscal revenue contribution of Private Mining Companies reaches 13.6 % of sector rent. In Private Mining fiscal contribution is less than 5 % of sector rent except for

27 Perú Taxes and other fiscal revenue paid by Mining companies*, relative to Mining Sector rent. absolute values (US$ millions each year) 25,000 20,000 15,000 10,000 12,000 M 5, ,500 M 14.2% 2.9% > Ingresos tributarios Tributación minera total Rentas mineras Regalías Fuente: Elaboración propia sobre la base de datos de Superintendencia Nacional de Administración Tributaria (SUNAT), Banco Mundial y FMI. Notas: * Los ingresos tributarios son los del Gobierno Central. Incluyen: Impuestos a la renta, a la producción y consumo, a la importación y otros ingresos como impuesto a las transacciones financieras, temporal a los activos netos, a las acciones del Estado, etc. ** Los impuestos pagados por las empresas mineras incluyen el 100% del impuesto a la renta minera.

28 Peru Taxes and fiscal payments by Mining Companies as percentage of total Mining Sector Rent each year (%) % 29% % Tributación + Regalías Tributación Regalías State rent appropriation has been decreasing from 35% in 2004 to 19.5% en Fiscal contribution from Mining Companies during peak price year ( 2007) reached 29% of sector rent. In 2007 the contribution of Mining to total Fiscal Revenue in Perú peaked at 19.4%.

29 Guatemala Taxes and other fiscal revenue paid by Marlin Gold Mine, relative to Mining Sector rent. absolute values (US$ millions each year) Rentas mineras totales Impuestos sobre la Renta Regalías Gob/Mun Fuente: Elaboración propia sobre la base de datos de Instituto de Desarrollo Global y Medio Ambiente, FMI y World Bureau of Metal Statistics.

30 Guatemala Taxes and fiscal payments by Mining Companies as percentage of total Mining Sector Rent each year (%) % Total de aportes mineros al fisco Impuestos sobre la Renta Regalías Gob/Mun Fuente: Elaboración propia sobre la base de datos de Instituto de Desarrollo Global y Medio Ambiente, FMI y World Bureau of Metal Statistics.

31 Honduras Taxes and other fiscal revenue paid by Mining companies*, relative to Mining Sector rent. absolute values (US$ millions each year) 160, , , ,000 80,000 60,000 40,000 20, % Estimación Rentas mineras Impuestos a la renta (estimación propia) Regalías Fuente: Elaboración propia sobre la base de datos de la Secretaría de Finanzas de Honduras, Banco Central de Honduras, Banco Mundial y CEPAL. Nota: * Estimación propia según el impuesto empresarial del 10%, sobre las cifras de rentas mineras del Banco Mundial.

32 Mining : State appropriation of sector rent vs State participation in sector rents, and fiscal contribution of mining as % of total fiscal revenue País State participation (%) Mining sector rent (anual avg. for period) Fiscal contribution Mining Sector (%) total fiscal revenues (anual avg. for period) Before Before Total period Total Period Bolivia (datos CEPAL) (*) (*) (*) 0,9 3,0 2,6 Bolivia (datos PIEB) Bolivia (sin COMIBOL, datos PIEB) Chile (cobre, GMP-10+CODELCO) Chile (CODELCO with dividends) Chile (10 largest private mining GMP-10) Colombia Guatemala Honduras Perú (*) 27.4 (*) Australia (minería metálica) Canadá 38,6 10 largest Mining multinationals Taxes paid globally (% gross rents.) Fuente: Elaborado sobre la base de datos de COMTRADE, Banco mundial y CEPAL. Calculado como el promedio de los porcentajes de participación anuales (utilizando precios nominales). Los datos PIEB para Bolivia se tomaron del estudio de Rolando Jordán (PIEB, 2010). (*) No se pudo calcular el porcentaje de participación en estos períodos por errores estadísticos.

33 Mining Sector Rents multiply x 4 State appropriation < 33% (benchmark int l) Guatemala, Honduras < 13% of total rent appropriated by State Private concesion regimes, State participation the exception. Use of traditional fiscal instruments ( corporate income tax and royalties) Need to introduce PROGRESSIVE INSTRUMENTS i.e. Resource Rent Taxes (RRT) etc. Price cycle generates investment boom, growing production. POLICY CHALLENGE: How to achieve more progressive fiscal regime? Under current contract rules.

34 Mining Sector Oil&Gas sector Rents multiply x 4 State appropriation < 33% (benchmark int l) Guatemala, Honduras < 13% of total rent appropriated by State Private concesion regimes, State participation the exception. Use of traditional fiscal instruments ( corporate income tax and royalties) Need to introduce PROGRESSIVE INSTRUMENTS i.e. Resource Rent Taxes (RRT) etc. Price cycle generates investment boom, growing production. POLICY CHALLENGE: How to achieve more progressive fiscal regime? Under current contract rules. Rents multiply x 2 State appropriation 45-65% Aparent Regressivity of rent appropriation during boom??? State Oil companies are the rule. Use of progressive fiscal instruments for rent capture ( windfall taxes, contratos PSC, participación directa) Price cycle does not generate investment boom Decreasing production /consumption ratios and reserves Rising production costs. POLICY CHALLENGE: How to mobilize required investment to meet energy demand???

35 international metal price cycle broke the previous trend of decreasing real prices between Persistency of current price cycle???

36 Fiscal competition between Mining exporting countries: reduction of Corporate Income Tax rates

37 Remarkable rise of Chile as major world producer of Copper Mine Copper production by major producing countries (Thousand Tons per year ) 5000 Chile USA Peru Chile Peru China U.S.A. Indonesia Australia Source: own elaboration with World Bureau of Metal Statistics, and UNCTAD data.

38 2013 CONTENTS 1. Production, Reserves, Exploration investments. 2. Increase of Mining Rents during the price cycle, and State participation ( %, govt. take ). 3. How did governments share in mining wealth? 4. Analysis and comments. Different responses of mining and oil sector to price boom. Fiscal treatment of mining. Discussion of prospects.

39 2013 Prospects 1. Correction of expectations and rationalization of announced investments projects Cost increases, in particular energy costs. Expectations of downward adjustments in world metal prices. Impact of European financial crisis. Increasing number of socio-environmental conflicts. 2. Social impact of increased rents? Earmarked use of Mining and Oil/Gas fiscal receipts? Indirect: Improved fiscal balances enable increased social spending? Indirect: Improved macroeconomic stability, debt reduction? vs. currency appreciation? Increased investment in Mining and Oil/Gas associated with increasing socio/environmental conflicts in the region.

40 Indice 2000=100 Oil prices rise, but investment in drilling activity falls. Production/consumption ratio and reserves fall Oil Price boom, but production costs also rise. ALC Price WTI -- Cost investment Costo operation Mundo ALC Mundo ALC Mundo ALC Mundo ALC Mundo World drilling activity rises in response to price boom, not so in LAC ( exceptions Brazil and Colombia) ALC Mundo ALC Mundo ALC Mundo ALC Mundo ALC Mundo ALC Mundo Oil drills in activitiy Upstream investment lag in LAC is worrisome and jeopardizes the region net exporting position as supplier of oil & gas in world markets. Fuentes: Baker and Hughes 2012, BP 2011, AIE 2011, IHS CERA 2012 Nota: Datos sin escala

41 Net Fiscal position has historically been a deficit: -Low saving rate -Low tax burden

42 Fiscal Dependence on Resource Revenues

43 Resource Export Dependence (2007 peak year for mineral/oil prices before global financial crisis)

44 Lower tax burden relative to other regions. Within Lat. America resource exporters tend to lower tax burdens.

45 Back to business as usual after 2009?

46 Reserves / Production ratio is falling accross the region, except in Venezuela ( shows decreased investment in upstream 80 Lat. America exploration) Lat. Am. w/o Venezuela 70 Gas Reserves fall 4x VEN VEN Oil Reserves fall 2.5 x Gas Natural Petróleo Petroleo&GasNatural Gas Natural Petróleo Petroleo&GasNatural Total ALC Total ALC s/venezuela Fuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de BP2011.

47 Mineral and Metal price index after 2009 Source: World Bank commodity indexes 2011

48 Mining Sector Oil&Gas sector Rents multiply x 4 State appropriation < 33% (benchmark int l) Guatemala, Honduras < 13% of total rent appropriated by State Private concesion regimes, State participation the exception. Use of traditional fiscal instruments ( corporate income tax and royalties) Need to introduce PROGRESSIVE INSTRUMENTS i.e. Resource Rent Taxes (RRT) etc. Price cycle generates investment boom, growing production. POLICY CHALLENGE: How to achieve more progressive fiscal regime? Under current contract rules. Rents multiply x 2 State appropriation 45-65% Apprent Regressivity of rent appropriation during boom??? State Oil companies are the rule. Use of progressive fiscal instruments for rent capture ( windfall taxes, contratos PSC, participación directa) Price cycle does not generate investment boom Decreasing production /consumption ratios and reserves Rising production costs. POLICY CHALLENGE: How to mobilize required investment to meet energy demand???

49 Increasing socio-environmental conflicts to project development Economic sector impacted 3% 3% 2% 2% 90% AGRICULTURA PESCA GANADERIA COMERCIO TURISMO Elaborado con la información del Observatorio de Conflictos Socio-Ambientales en América Latina (OLCA)

50 2013 Thank you very much!!!! ANNEXES Jean Acquatella Ph.D. Energy and Natural Resources Unit United Nations ECLAC Economic Commission for Latin America and the Caribbean Santiago, Chile.