New Brazilian government closes door for foreigners in mining

In another move that demonstrates govenrment fears about a wholesale take-over of domestic industries by the Chinese, the Brazilian govenrment is moving to restrict foreign participation in mining, having already imposed restrictions on land ownership. While not exactly slamming the door, proposed legisaltion leaves the door more-or-less ajar. Up to now, foreign investors have enjoyed the same rights as Brazilian investors in mining, except in border zones.

The proposed legislation will only encourage foreign investors when they agree to add sundry investments outside the pure extraction of minerals. It will introduce auctions for mining rights and perhaps lower royalties on companies that process ore within Brazil rather than just export it.

The measure is seen as an attempt to prevent Chinese companies, who are starting to arrive in Brazil in force, from limiting operations to extraction as they have done so ruthlessly in areas such as soy. China's Wuhan Iron & Steel bought a 21% stake in miners MMX  Mineração e Metálicos last year for $400 million, and took over Passagem Mineração, with plans to invest $5 billion in iron ore in the latter. MMX has an annual capacity of 10.70 million tons of iron ore

Wisco and MMX are said to be close to signing a second agreement to explore an iron ore mine in Santo Antônio de Leite in central Minas Gerais, according to Belo Horizonte paper Diário de Comércio. The project includes sinter and pellet plants. The plant is a world class mine with up to 68% purity. The project may require $4-5 billion in investments, depending on whether a steel plant is included in the plans. Wisco recently signed an agreement with LLX, the logistics sister company to MMX, with plans to build a steel plant in Porto do Açu in São João da Barra in Rio de Janeiro state. Anglo American has a 49% stake in the port project too.

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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