Bolivia passes mining law that bans partnerships with multinationals

While no with privates, Bolivians can now associate with or through the state mining agency, Comibol.

After three years of negotiations, followed by six weeks of at times violent debate, Bolivia approved last week a new mining law, which denies cooperatives the right to partner with private companies, whether domestic or foreign.

The law, the first major overhaul of the country’s mining sector since 1997, also bans private firms from registering minerals as property, which means they can’t use them as collateral for loans or include them as assets in stock market filings.

Bolivians, however, can now form mixed business enterprises with or through the state mining agency, Comibol.

Until now, some of Bolivia’s largest mines had operated as partnerships between exchange-listed multinationals and small local cooperatives. The new mining law, while bringing the sector in line with the 2009 constitution, will have an important impact on those operations, including Sumitomo’s San Cristobal open-pit silver, lead and zinc mine, Bolivia’s largest.

One of President Evo Morales’ first measures when taking office in 2006 was to raise mining taxes and nationalize the country’s key natural gas industry.

Under the revised regulations, which create a new government division to oversee the mining sector, all pre-existing contracts will be respected, though concessions will be limited to 62,000 hectares. Those whose terms and conditions do not conform to the new law can be renegotiated over 12 to 18 months.

Mining is deeply embedded in Bolivia’s national identity. During colonial times, so much silver was shipped from mines in the southern region of Potosi to Europe that people used to say a bridge of pure silver could be built from the top of Cerro Rico Mountain to the royal palace’s entrance in Spain.

But that boom came at an extremely high price tag — an estimated eight million slaves died in Potosi alone between 1500 and 1800 AD.

By the time mining was nationalized after the 1952 national revolution, tin had long since ousted silver as the main mineral product. In the 1980s a sharp fall in commodity prices led to a shutdown of the government mines, displacing 25,000 salaried miners.

The industry was privatized again 1990s under neoliberal structural adjustment policies that ended up destroying Bolivia’s miners-led revolutionary trade union movement, once the most combative in Latin America.

Morales touch

When presented in March, President Evo Morales was confident that the legislation would move speedily through the Congress, but the situation quickly went south. Miners began protesting at the end of the month, the government announced that it would suspend the bill before the Senate could debate it, and Morales ousted Mining Minister Mario Vieira on April 8.

Bolivian mining cooperatives account for about 35% of the country’s mining output. They are tax-exempt organizations and pay royalties at lower rates than mining companies.

Morales, South America’s first indigenous President, has become an outspoken critic of the industrialized world. One of his first measures when taking office in 2006 was to raise mining taxes and nationalize the country’s key natural gas industry. He has also expropriated the telecommunications and electricity sectors, and seized and nationalized the assets of Vancouver-based South American Silver Corp. (TSX:SAC) two years ago.

Morales also made waves when defined the nation’s mineral deposits as “blessings” in a 2012 law, aimed to protect the right of nature “to not be affected by mega-infrastructure and development projects that affect the balance of ecosystems and the local inhabitant communities”.

Though rich in mineral and energy resources, data from the Unicef shows that Bolivia is one of the poorest countries in Latin America and the weakest economy in all of South America.

Images from Flickr