Keeping a Low Profile was the Wrong Decision
How has the mining sector evolved under your stewardship?
This team is the result of hard work since the crisis Argentina suffered in late 2001-2002. When we arrived we analyzed its source. Argentina’s development has always been based on a farming model in the pampa (prairie). The capital concentrates a high proportion of the population while some provinces in the interior are underpopulated and underdeveloped. We saw there were opportunities to halt the exodus from the provinces. The problem is many governments had never bothered to promote development in these provinces.
With Chile we share the second-longest political border, an Andean area that has allowed our neighbor to become the world’s largest copper producer. How is it that Argentina had not taken advantage of its huge mining potential yet? Three days after I took over as mining secretary we decided to go to the Prospectors & Developers Association of Canada’s conference to reassure investors. I asked them to give us six months grace to prove we would become a stable country. In this context Veladero was built and that was a turning point.
What were your main political initiatives?
In the middle of the institutional chaos of those months, we decided to focus on Toronto, New York and London, and think long-term rather than focus on the crisis. We also presented our mining strategic plan with five main guidelines: to reactivate the national production of the installed capacity; to create a stable set of rules for foreign investors; to strengthen the international cooperation; to democratize the public information; and to be present in the international markets.
With regards to the legal framework, some companies are not happy the 30-year tax stability approved in the 1990s was not respected in 2007 with taxes imposed on mining exports.
Argentina has made a great effort to help foreign investors. The 2001 crisis could have allowed us to do nearly anything. Yet in 2002-03 we implemented a number of measures looking at the long term that were incredibly difficult to defend at home in the middle of the economic storm, like the free availability of currency for mining projects. The strategy was to attract investments.
At the last G20 summit in Toronto, our president made it very clear we are strongly promoting the mining sector in Argentina and the rules of the game are not going to be changed. We have recently been in Shanghai with the same message. And we have worked strongly in the recent Mercosur summit where the presidents of the continent highlighted mining development as a key factor for growth in the region.
The Argentinean mining sector has expanded significantly over the last years. What is the potential for more growth?
In the middle of the subprime crisis, when some multinationals were shedding thousands of jobs, we assured everyone the Argentinean mining sector would continue growing. Some laughed at that idea, but the truth is we inaugurated four projects during 2009. Argentina has the resources for sustainable growth because the demand for minerals will remain strong.
In 2009, we launched the first bi-national mining project in the world. It was a huge challenge to harmonize the regulatory frameworks of two countries to make this project possible. Together with Chile, we have sent a message to the world. In 2009 we also advanced the Río Colorado potash project in Mendoza. Both are investments worth billions of dollars. While Toronto, New York and London will continue to be very important markets for us, we have also realized the BRIC economies will play an increasing role in our growth. Vale’s investment in Río Colorado is the first development in this respect.
Argentina has enormous potential, but some provinces see mining as a undesirable industry. What is your view on this issue?
Argentina is a federal country formed by the union of its provinces. The last reform to the Constitution was in 1994, when article 124 was reformed. This gave the provinces the right over the natural resources. Some of the provinces that had an anti-mining legislation have now changed their approach, like La Rioja; and in the provinces that are still hostile to mining there are projects that will make politicians change their mind. I believe Mendoza will be the best example of that.
Argentina does not have a tradition of big mining. In this context, there are some industries that have based their success on the availability of cheap labor. When in these areas the mining sector offers better paid jobs under better working conditions and with no informality, the impact is enormous. Those workers who enjoy the benefits of joining the formal economy never go back to informality. This explains in some instances the anti-mining campaigns falsely based on environmental arguments. The problem is the mining sector in Argentina has not been proactive enough in communication initiatives. Companies have been wrong to keep a low profile because we have nothing to hide.
What is your prediction for the future of Argentinean mining?
These are the times of Latin America because this continent has a number of resources the world needs. The world’s agenda is actually quite reduced: food, water, energy and minerals, and Latin America has all of them. Argentina should become the world’s key mining player by 2025 after receiving investments of $30 billion, with a protagonist role in the production of copper, gold and silver, as well as lithium and borates; also it will be a key producer of potash.