Mining leads investments in Brazil

By Flavia Agnello – Photo by Votorantim (Fortaleza de Minas,MG)

The mining sector will be responsible for the greatest private investment boom in Brazil during the 2011- 2015 period, with contributions amounting to $68.5 billion, according to a study carried out by the Brazilian Mining Institute (Ibram) on Brazilian mining companies. Investments in iron ore reach approximately $45 billion, as it is the key export in its sector. Ibram´s president, Paulo Camillo Penna says that increased interest for mining projects is due to an increase in demand for the product, in addition to an increase in prices. “It is believed that strong demand will continue”, says Penna.

The domestic market has excellent perspectives. Specialists add that urban development programmes such as housing construction, basic sanitation, the World Cup and Olympics in Brazil will keep mining products in high demand.

This scenario makes Ibram believe that until 2013 Brazilian mining production will increase 10 to 13% each year. This growth could be even higher; however it is hindered due to a shortage of skilled labour. Data from the National Confederation of Industry shows that Brazil trains approximately 30 thousand engineers per year in comparison to 300 thousand in China.

Jones Belther. the director of Votorantim Metais Mineral Exploitation states, “We are experiencing a significant shortage of specialised labour in this country and there is no doubt that for us to grow at the expected rate, we will have to seek out professionals abroad.”

Mineral research constitutes another challenge for the mining sector. Brazil is one of the countries that invest the least in this study. In fact, Brazil is represented by only 3% while Chile and Peru represent 5% respectively. These low numbers are due to the lack of basic geological research.

Resources allocated by the government for geological surveys registered a significant increase. The Geological Service of Brazil (CPRM) reports that $84 million was spent between 2005 and 2008, while between 2000 and 2004, only $8 million was spent. The president of GEOS Geology for Mining, Elmer Prata Salomão guarantees that Brazil is headed in the right direction and that increases will be felt gradually. He states that “We need to increase resources for research but also improve data analysis conditions, improve laboratories, professional qualifications, as well as other needs.”

In order to overcome these and other obstacles and assure strong competitive mining, the Brazilian government launched the National Mining Plan 2030. The programme shall guide the activity for the next 20 years. Activities foreseen include the consolidation of the new Mining Regulatory Framework, as well as a new policy regarding financial compensation for mineral resource exploration, the sector’s royalties, increasing the duty to reduce other charges to assure compensation.

In addition to the issue regarding royalties, discussions on the new mining regulatory framework should also follow a more technical discourse. For Paulo Camillo Penna, the government initiative meets the sector’s expectations and he adds “for the first time in Brazil, a national mining policy has been created, but we need to be cautious about change”.

The current Mining Code has allowed Brazil to get to where it is today, holding the status of a large mineral producer. Specialists defend that current legislation needs some adjusting rather than an entire reform. The president of J. Mendo Consultoria, José Mendo says “We do not need to change the law, rather manage it more efficiently.”

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