Can the Rigi regime and Chile treaty unlock Argentina’s mining potential?

Argentina's mining sector is poised for growth with the implementation of the Rigi large investment incentives regime and binational efforts to bolster the Argentina-Chile mining cooperation treaty.

Despite the improving conditions, both Rigi and the treaty have a number of hurdles to overcome before the eagerly anticipated boost to the industry can take place.

The administrative commission of the bilateral treaty has been meeting in Chilean capital Santiago this week for the first time since 2019.

“Argentina and Chile are discussing ways to streamline customs, tax and immigration regulations, which are essential since project approvals are lengthy and complicated processes in both countries," Luis Lucero, Argentina's mining secretary, told BNamericas at the seventh bilateral mining meeting held on Thursday at the Argentine ambassador's residence in Santiago.

Lucero also said the treaty, signed in 1997, is not a supranational law overriding the two countries' domestic legislation, which adds complexity to any proposals that are made during the meetings.

"Navigating the treaty is complex because it requires planning and coordination from a multidisciplinary team, as well as engagement with strategic stakeholders like regional and provincial governments and local communities," Rolando Dávila, coordinator of the binational mining commission, said at the event, which was attended by industry players, union leaders and government representatives from both countries.

Lucero said the commission's mission is challenging, as it "involves the rights of both Chile and Argentina simultaneously." 

Binational projects such as Barrick's Pascua-Lama, McEwen Copper's Los Azules, Glencore's El Pachón, NGEx Minerals'  Los Helados, and Filo del Sol, a joint venture between BHP and Lundin Mining, are governed by the treaty, with expectations that various others, including Antofagasta Minerals’ Los Pelambres mine and initiatives in Mendoza province will also join.

Rigi

Several Argentine provinces with great mining potential are adhering to Rigi, which is part of the economic framework law passed by the government in July.

When asked about the national mining secretariat’s strategy for guiding new investments in the sector, Lucero said, “We're talking with the provinces, meeting with mining company executives and other areas of the economy ministry [of which his secretariat is a part] to understand each project’s infrastructure needs and to coordinate the legal framework and financing mechanisms for the necessary works.”

The lack of infrastructure to support growth in the mining industry is a major bottleneck, and Rigi's requirement to prioritize local suppliers might not be the most effective way to address this challenge.

“That restriction is a difficulty for provinces like Córdoba, Santa Fe or Mendoza that want to develop mining. We need different types of suppliers to develop infrastructure, and we still have to build that local supplier capacity in Argentina, which requires training people," Roberto Cacciola, president of the Argentine chamber of mining companies (CAEM), told BNamericas, emphasizing the importance of fostering the exchange of specialized labor and professionals between regions.

Mining royalties

The Rigi scheme also gives provinces the option to increase mining royalties from 3% to 5%. Regarding this point, Lucero stated, “The more stable the tax regimes, the better. Some provinces don't intend to raise royalties to avoid hindering the government's efforts to promote investments.”

That view is supported by Cacciola. [Provincial] governors need to work smartly to ensure projects move forward and that the royalties are manageable for the projects. In one case, the Santa Cruz government negotiated a 1.9% royalty with a company to avoid jeopardizing its business. We may see more of this,” he told BNamericas.

Santa Cruz is home to operating gold and silver mines such as Cerro Moro, Don Nicolás and Cerro Vanguardia.

Among the fiscal, customs and exchange rate benefits granted by Rigi for 30 years to projects meeting the US$200mn minimum investment threshold, the regime guarantees zero export duties on all exports from the registered projects.