CHAPTER 15 MINING IN LATIN AMERICA

• Jurisdiction: United States

International Minerals Acquisition and Operations
(Oct-Nov 1974)
CHAPTER 15
MINING IN LATIN AMERICA
Antonio Martinez-Baez, Jr.
Vice President and Secretary of the Board of Directors Compania Minera de Cananea
Mexico City, Mexico

Table of Contents

SYNOPSIS

Introductory Remarks

General Foreword

Historical Notes

Legislative Background and Antecedents

Mining Legislation Roots

Current Legal Framework in Mexico

Mexican Federal Mining Law

Mexicanization

Nature and Requirements of Mining Concessions

Acquisition of Mining Rights

1. Issuance of Concessions to Mexicanized Companies

2. Other Acquisition Methods

a) Purchase of Shares

b) Assignment of Rights

c) Lease Contracts for less than 20 years

d) Lease Contract for a period exceeding 20 years

e) Lease Contract with purchase option

Rights of Mining Concessionaires

Obligations of Mining Concessionaires

Mineral Reserves

a) National Reserves

b) Industrial Reserves

Coexistence of Concessions and Assignments

Mining Taxation

Legal Structure in Latin American Countries

Argentina

Bolivia

Brazil

Chile

Peru

References 15-29

Bibliography

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INTRODUCTORY REMARKS

I deeply appreciate the kind invitation extended to me by the Rocky Mountain Mineral Law Foundation to speak this afternoon at this Institute on the subject of Mining in Latin America.

The title of my presentation is deceptively simple, as in most minds, the thought of Latin America evokes only the much publicized sleepy carefree attitudes of a "maana" way of life; the excitement of carnival nights south of the border; social and political turmoil in a particularly restless area of the very unstable world.

Latin America is much more than that. As the term is generally understood, Latin America comprises the entire Continent of South America, Central America, Mexico in North America, as well as numerous islands in the Caribbean or the Antilles. The area under consideration includes independent states, as well as British, French, Netherlands and U. S. possessions and dependencies.

Latin America extends from the border between Mexico, my country, and the United States of America, to the vast wastelands of Patagonia at the South of Argentina and Chile. The distance separating these two extremes spans more than 7,000 miles. The area comprised by Latin America is nearly 8 million square miles, more than twice the area of the United States of America. More than 300 million people inhabit Latin America, greatly surpassing the population of the United States.

Latin America — perhaps Iberic America might be a more appropriate designation for this part of the world, since it specifically indicates the area's predominant Spanish and Portuguese influence and heritage — is formed by 20 independent, democratic republics in the Continent, with widely different, although perhaps related similar social and economic problems; with very diverse economies and generally common national aspirations, most nations united by common bonds of Spanish or Portuguese historical heritage, language and ethnic roots, but also with a very strong indian influence and with quite diverse racial composition.

The economies of Latin American countries, as well as their degree of industrialization, prosperity and diversification differ greatly They range from mostly agricultural countries in the Central American area, devoted mainly to tropical export crops such as coffee, cacao and bananas, among others, to the more industrialized countries in the area such as Argentina, Brazil and Mexico, with

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widely diversified industrial production and existence of a large variety of natural resources.

Mining activities occur in most Latin American countries, at different levels of production and with varying degrees of impact on the economies of the countries involved. On one extreme are situated most Central American republics with small and relatively unimportant mineral deposits, mainly of gold and silver, as well as a modest mining resources potential. On the other extreme are countries like Bolivia, Brazil, Chile, Mexico, Peru and Venezuela, well known in the area and in the world for the extraction of precious and industrial metals; as well as Colombia, Ecuador, and particularly Venezuela, for the extraction of mineral fuels, carbon, oil and gas.

GENERAL FOREWORD

The scope of this subject is of such magnitude and there are so many aspects that can be dealt with, that because of the limitations imposed upon me by the time available, I shall attempt to outline the principles governing mining legislation applicable in Latin American countries, concentrating specially in Mexico which is my country and referring to the most interesting differences or similitudes prevailing in the most important mining countries in this area.

Also due to world-wide concern for nationalism and to continued growing government intervention, mostly in the area of basic non-renewable resources, legislation concerning mining activities throughout most of the western world — and Latin America is no exception — is changing rapidly and adapting itself to varying political and economic considerations. In this sense, mining legislation is variable and dynamic and therefore, extremely difficult to keep pace with. The difficulties of this task are greatly enhanced by unwritten government policies and official criteria that may be applied to different situations, perhaps the scope of the projects undertaken, possibly their need or opportunity, the areas of industrial development under consideration, etc. In this respect, it has been quite a problem to provide what I feel is current information on the legislation in force in the various countries under consideration, as well as to try to interpret such existing data against the virtual lack or difficcult access to current information regarding policies, practices and day-by-day application of the law.

HISTORICAL NOTES

Mining in Latin America predates the discovery, exploration and conquest of the Western hemisphere under Spanish and Portuguese rule. Gold was perhaps the metal most widely known and used by native americans, from the islands in the Caribbean to the mainland from Mexico through Central America and as far south as

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Colombia, Peru and Ecuador.¹ In addition to gold, silver, copper, tin and lead were also known and mined in Mexico and in territories now corresponding to Peru, Bolivia, Chile and Argentina.² To some and perhaps a very important extent, the discovery, colonization and development of most Latin American countries were due to the early findings of mineral wealth which induced the Spanish conquerors to imagine, in view of the manner in which indians exploited and utilized gold and silver, that they were before "El Dorado", a promised land in which they visioned an incalculable abundance of precious metals.³

Mining during the Colonial period began in America in the year 1521, the same year the Conquest of Mexico ended, when Hernan Cortes became the first miner in New Spain to undertake the operation of silver mines in the district of Taxco.⁴ During the first two decades following the conquest, hard rock mining was confined to small placer and superficial operations. The eagerness to find new and larger deposits, together with the Catholic evangelical zeal, drove the conquerors to penetrate and explore nearly all of the territories under their domain, widening the extension of conquered lands and colonizing the rest of their newly acquired territories. Spain and Portugal, like all the great powers of Europe, needed precious metals to finance their policy of territorial expansion and to meet their growing commerce. Mining was a patriotic duty as well as an individual enteprise. To the Crown, mining held a great fiscal interest and the miners were regarded as agents of the Royal Treasuries. The Crown provided also tools and supplies, it subsidized and protected mining, feeling that it was too important to be left entirely to individual initiative.⁵

Notwithstanding enormous transportation difficulties, rude and early mining and metallurgical techniques, discoveries throughout Latin America followed each other with surprising celerity and before the end of the 16th Century, the mines of Guanajuato, Zacatecas, Real del Monte, Pachuca and Taxco, among others in Mexico; Huancavelica, Cajamarca and Cuzco in Peru; Confines and Quilacoya in Chile; Popayan, Antioquia and Cauca in Colombia; La Paz, Porco and Potosi in Bolivia, were discovered and became famous in the world.⁶

Mexico and perhaps to a same extent, Peru, were the "Mine and Mint of Spain". Their wealth might have been plundered by the European conqueror. But had it not been for mining, our roads, cities, cathedrals and universities would not have been built. Having nothing to trade with Europe, our life and culture would have not emerged from semi-rural subsistence levels, as has been the case in certain areas of Central America, lacking mineral deposits of the variety and importance of the ones located in the traditional mining countries in our Hemisphere.⁷

At the present time, Latin America contributes in a very important manner to the extraction and treatment of many of the most important

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precious and industrial metals in the modern world. Latin America production represents a substantial percentage of the world's total production of antimony (26%), bauxite (37%), bismuth (44%), copper (14%), fluorspar (23%), lead (14%), silver (27%), tin (14%) and zinc (14%). Taking as reference 1973 world production figures, Bolivia is the second producer of antimony and tin after South Africa and Malaysia, respectively, and it ranks third in the production of bismuth. Chile is the third most important producer of copper in the world. Jamaica, followed closely by Surinam and Guyana, leads the world in the production of bauxite. Mexico...