Argentina to Encourage Future Investment in Mining

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Argentina is making a play at bringing the nation’s mining sector to the forefront of the industry. The highly anticipated federal mining agreement is said to unify existing legislation across the country in an effort to boost investment in mining across Argentina. The country has fallen behind other countries in the region such as Peru and Chile despite rich mineral reserves of metals such as copper, gold, silver and zinc.

Investment in mining in the nation decreased over time as legislature made it more difficult to operate in the country’s 23 provinces, all with varying mining regulations. With both a highly regulated mining sector and diverse legislature from province to province, investors instead sought to fund programs in other countries.

President Macri, who took office in 2015, has adopted measures to change the perceptions of investors. In February of 2016 he eliminated the 5% tax on mining and energy. He has also revoked a prohibition on foreign mining companies sending profits made in Argentina out of the country. Now he is attempting to pass a nationwide mining law to entice investors to return to Argentina. President Macri hopes to double the investment in mining in the sector to $25 billion over the next eight years.

By comparison, during the previous president’s administration Argentina received $10 billion between 2007 and 2015. During that same time period, Chile received $80 billion and Peru $52 billion in mining investments. Analysts are now cautiously optimistic but warn that any shift away from the current president's business friendly reforms could deter new investments. There is also uncertainty leading into the third quarter due to mid-term elections which may delay some investors decisions. Furthermore, local opposition and political pressure could hurt Argentina's attractiveness as a market for mining investment.

“With 74% of employers foreseeing no change in their staffing levels, our study reflects that the hiring plans for the next 3 months are very cautious. This may be due to (the fact that) there are still no clear signs of the economy’s direction, so employers are willing to wait and see what happens before making more definitive payroll decisions”, explains Alfredo Fagalde, CEO of ManpowerGroup Argentina, while reviewing the Manpower Employment Outlook Survey (MEOS) for the second quarter of 2017.

According to the most recent MEOS the mining sector reports an improvement of 6 percentage points. However, the mining sector remains one of three sectors with the most cautious outlook of +2% Net Employment Outlook. While employers are cautiously optimistic about hiring in the mining sector in this market for the second quarter, more relaxed regulations for the mining sector will likely result in an increase in Net Employment Outlook for the third or fourth quarter of 2017. It may still be years before Argentina is a competitor with other regional giants who already receive large foreign investment in mining. This fact may offer potential investors leverage and a means to improve cost efficiency versus another country within the Americas region.

Recent reports suggest that lithium production in Argentina will reach 145,000 tonnes in 2022. Up significantly over the 29,000 tonnes produced in the market in 2016. This projection comes as a result of new investment plans approximated around $1.5 billion, as stated in a May 2017 report from the Energy and Mining Ministry. Lithium is a material in high demand for use in car batteries and mobile phones. Argentina currently produces around 16% of the global output, making them the world’s No. 3 global producer of the material.

This news is already driving new investment in the construction of new plants and additional investments in the hundreds of millions of dollars from four major global mining corporations. It is likely that both the construction and mining sectors will experience a boost in hiring and the result will be a skills shortage, as workers attempt to fill positions for which they may not have adequate experience or training.