Member Article

Argentina has great geological potential and a very attractive regulatory framework that provides mining companies with important incentives, such as a 30-year fiscal stability period and several tax exemptions.

 

However, in 2010, the Argentine mining industry faced certain issues prompted by regulatory trends in order to address social, environmental, and economic concerns towards mining. Despite that situation, last year the mining activity continued developing significantly, and mining exports increased by more than 43 per cent.1

 

The purpose of this article is to: describe some of the regulatory approaches recently adopted by both the federal and provincial governments regarding mining; as well as discussing issues and courts’ decisions in connection with said approaches. Within that context, this article intends to provide useful information to investors and companies on the current mineral investment situation in Argentina.

 

Analysis

 

In 2010, the national and many provincial governments enacted legislation that had an impact on mining, such as land use laws ‘sterilising’ some lands from mining activity and stringent environmental regulations forbidding the mining activity under certain circumstances.2

 

Although these regulations have generated some issues for mineral development, the mining industry continued growing steadily in the country. Indeed, pursuant to the Mining Secretariat, the gross value of mining production increased by 63.8 per cent between 2008 and 2010.3 Further, last year major mining projects such as Pascua-Lama in San Juan and Potasio Río Colorado in Mendoza started with their construction phases.

 

Despite this news, mineral investors shall focus their view on these new laws, and also on the court precedents derived from them, since they provide for new regulatory conditions for mining in Argentina. Below, there is a revision of some of the most recent developments in regulations and case law applicable to mining.

 

Environmental protection: regulation of

Glaciers

 

In August 2010, the National Congress passed Law No 26,639 on Minimum Standards for Glaciers Protection (the ‘Glaciers Law’). Among other things, the Glaciers Law provides for definitions of ‘glaciers’ and ‘peri-glacier environments’, prohibiting in such areas the development of any activities that may negatively affect their natural condition, including but not limited to mining exploration and exploitation activities. Regulatory details are yet to be seen in order to determine the actual impact of this legislation.

 

 

In the province of San Juan, the Glaciers Law was challenged by many participants engaged in the mining business (such as the Mining Labor Union, mining companies, and mining companies associations) on grounds that it would not only affect existing mining operations within the territory of San Juan, but that it would also threaten the development of new projects, in clear contradiction with several constitutional rights (ie, the right to work and to perform lawful industrial activities).4 Plaintiffs also argued that the Glaciers Law created uncertainty regarding the powers of provinces to regulate all matters in connection with the exploitation of their mineral resources.

 

In this sense, in AOMA et al v National Government (2 November 2010),5 the Federal Court No 1 of San Juan issued a precautionary measure in order to prevent the application of several sections of the Glaciers Law within said province. The Court found that, although the provinces had delegated to the National Congress the specific power to enact minimum standards legislation for environmental protection,6 such power could not alter the faculty of provinces to regulate the exploitation of natural resources located in their territories.

 

In this context, the court stated that this Law generated uncertainty to mining companies, since it would prima facie violate their rights to exercise a lawful industrial activity.

 

Furthermore, in similar decisions, the same court issued precautionary measures precluding the application of the Glaciers Law within the boundaries of the Veladero7 and the Pascua-Lama8 mining projects, both of them located in the province of San Juan. It is important to note that before the National Congress passed the Glaciers Law, some provinces had already enacted provincial legislation towards the protection of glaciers located inside their geographic boundaries. In this sense, the Legislative Branch of San Juan passed Law No 8,144.9 Moreover, the province of Jujuy enacted Law No 5,647.10 Said laws, among other things, state that glaciers belong to Jujuy and San Juan and that, therefore, these provinces have the power to provide for the environmental protection of said glaciers.11

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