Mining investors await clarity as Milei's 'omnibus' bill stumbles

While the administration of Argentine President Javier Milei was making inroads with the European Union on creating an added-value roadmap for critical minerals such as lithium and copper, the government's omnibus bill suffered a major setback in congress that threatens to derail the implementation of a new incentive regime for large investments, particularly in mining.

The bill promotes the development of projects with a variety of tax, customs and exchange rate benefits for investors. But in a blow to Milei, approval of his flagship bill was reversed after lawmakers surprisingly sent it back to the legislative drawing board.

In an interview with German TV broadcaster DW earlier this week, Argentine mining secretary Flavia Royón said approval of the omnibus bill would be a great boost to the mining industry as it would improve conditions for investors.

Marina Pera, Southern Cone analyst for global consulting firm Control Risks, told BNamericas that Milei's bill could favor mining investments by repealing land law No. 26,737, "thereby scrapping limits on buying and selling of rural land to foreigners and allowing multinational companies to acquire larger tracts of land.”

The analyst also mentioned that the Milei government promised to maintain the export duty on lithium compounds at 4.5% and even “amend the glacier protection law to allow more exploration projects.”

The potential amendment has had environmental groups up in arms, claiming the changes would "authorize mining in currently protected areas, where there are glaciers and a periglacial environment, leading to their destruction," said a group of NGOs, including Greenpeace and the Argentine association of environmental lawyers, in a statement on Monday.

Other controversies sparked by the omnibus bill include delegated powers that would have allowed the president to govern by decree in certain circumstances.

These proposals and articles addressing the reform of the State and important changes to the organization of the national administration, which would pave the way for the privatization of state companies, were key sticking points in congress, where Milei's LLA party does not have a majority and must compromise to advance legislation.

Lawmakers' rejection of these articles, coming after the initial general approval of the bill by congress on February 2, has now created a division in Argentina between those who support the package of emergency measures to reactivate the economy and those who fear that Milei's shock therapy and transformation of the State have gone too far.

In the midst of this polarization, mining has become something of a political football. In 2023, the country’s mining exports surpassed US$4bn, accounting for 6.1% of total exports, with foreign lithium sales reaching US$835mn, up 20.2%, according to a report from the government's mining secretariat.

EU ROADMAP

Meanwhile, Argentine mining officials agreed on a roadmap with the European Union to create a value chain based on critical raw materials like lithium and copper.

In Europe, Royón, together with other government figures and the governors of important mining jurisdictions Salta, Jujuy, Catamarca and San Juan provinces, reinforced a bilateral cooperation agreement originally reached with the EU in June 2023, to create innovative projects, particularly in lithium.

The agreement also promotes investment in Argentine mining and promises support from the government, with benefits for investors such as 30 years of fiscal stability under the mining investment law and the export promotion regime to guarantee access to foreign currency.

The officials also highlighted the autonomous role of the provinces in managing mining projects and the potential of Argentine territory for the discovery of new mineral deposits.

The accord includes collaboration in geological exploration, hydrogeological studies, research, innovation, ESG criteria, renewable energies and new water management systems for mining projects with financial support from EU entities.