February 4, 2011 / 2:54 PM / 9 years ago

Exclusive: Brazil not curbing foreign mining investment

BRASILIA (Reuters) - The Brazilian government has no immediate plans to limit foreign investment in the mining industry and could delay plans to hike royalties, a senior government official told Reuters.

A leading Brazilian newspaper reported last week that the government was planning to create hurdles for foreigners buying into Brazilian mines, creating widespread concern among potential investors.

“There is no such discussion. It’s absolutely false,” a government official with direct knowledge of mining policy discussions said late on Thursday in reference to the report.

Growing international investment in Brazil’s mining sector over the past year set off alarm bells among some business and government officials, though the sector remains dominated by Brazil’s Vale VALE5.SA — the world’s largest producer of iron ore.

The government is detailing a legislative proposal that would boost government control over mineral projects to ensure concession holders invest rather than speculate, though this would apply to both foreign and private capital.

President Dilma Rousseff, who took office on January 1, wants the mining industry to create more jobs and technical expertise at home rather than just exporting raw materials, but government leaders insist they welcome foreign investment and want Brazil to remain internationally competitive.

Plans to possibly hike royalties that mining companies must pay may be delayed due to difficulty in reducing taxes that would offset the higher operating costs, the source said.

“It’s a difficult equation. Even with off-setting tax reductions, I don’t see much room for a significant hike in royalties,” the source said.

Finance ministry officials disagree with the mining ministry’s proposal to provide miners processing raw materials domestically a discount on royalties they owe.

Mines and Energy Minister Edison Lobao said last month the government wanted to present the bill and a separate proposal on royalties in the first half of the year.

Lofty metal prices have stoked investor interest in Brazil’s vast mineral deposits.

Last year companies requested nearly 21,000 mineral prospecting licenses, up from 16,000 the year earlier.

Brazil’s mining sector is expected to draw investments of roughly $62 billion between 2010 and 2014, according to private sector estimates.

Reporting by Raymond Colitt; Editing by Brian Ellsworth

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