Brazil mining sector preps strategy to influence tax reform

Brazilian mining association Ibram is readying opposition to certain provisions in the tax reform the lower house approved.

“Once the [July] recess of congress is over, we will make contact with [Eduardo Braga], the tax reform rapporteur in the senate, as well as with the senate president and other senators to reverse this,” Ibram head Raul Jungmann told a press conference in response to a question by BNamericas.

The reform is mainly aimed at simplifying the tax system by combining various taxes. While business leaders approve of this simplification, the provision to empower states to impose taxes on primary and semi-finished products to finance infrastructure and housing is seen as problematic.

"Article 20 is ambiguous, creates the possibility of different interpretations and goes against the initial idea of the reform that would be to generate a good business environment. In view of this, we are in partnership with other associations that respond to sectors that may also be impacted, such as [oil and gas association] IBP, [industries association] CNI and [agriculture association] UNICA," Jungmann said.

"At this stage, it is too early to determine the ultimate outcome of the tax reform proposals. Certainly, a proposal has been passed by the lower house that would allow states to impose taxes across a broad spectrum of industries, including mining, but it has yet to be considered by the senate, which is an important part of the process," Ero CopperCEO David Strang told BNamericas. 

REVENUES 

Sector revenues reached 120bn reais (US$20.7bn) in H1, up 6% year-on-year, according to Ibram. 

Revenues weren’t higher because prices of key export iron ore were 15% lower in the first half than in H2.

"It is difficult to estimate iron ore prices, but I think in the second half we’ll not see prices fall below US$100/t because China does not want to see a drastic reduction in steel production," Julio Nery, Ibram sustainability and regulations director, said in response to a question from BNamericas.

Iron ore represented 58% of revenues in H2, gold 9%, copper 7% and bauxite 3%.

INVESTMENTS 

2023-27 mining capex is expected to reach US$50bn, up from US$40.4bn in 2022-26, according to Ibram. 

Of the total, US$16.9bn is for iron ore, US$6.55bn for socio-environmental projects, US$5.22bn for fertilizer, US$4.96bn for bauxite, US$4.47bn for copper, US$4.4bn for logistics, US$2.85bn for gold and US$2.34bn for nickel.