The Mineral Industry of Brazil in 2007

2007 Minerals Yearbook BRAZIL U.S. Department of the Interior May 2010 U.S. Geological Survey THE MINERAL INDUS T RY OF BRAZIL By Alfredo C. Gurmendi In 2007, Brazil continued to occupy a leading position in Government Policies and Programs the global production of the following mineral commodities: bauxite (third after Australia and China), graphite (third after The Mining Code (Decree-law No. 227 of February 27, 1967) China and India), iron ore (second after China), manganese governs the regimes from exploration to production and trade of (second after South Africa), niobium (columbium) (first Brazilian mineral resources and establishes the rights and duties followed by Canada), and tantalum (second after Australia) of the holders of mining rights. The Ministry of Mines and (Bray, 2008b; Departamento Nacional de Produção Mineral, Energy’s (MME) National Department of Mineral Production 2008d; Jorgenson, 2008; Olson, 2008b; Papp, 2008a, b). (DNPM) has competence in the management of mineral Brazil was the leading economy in Latin America and a resources and in the inspection of the mineral activity in the member of the Mercado Común del Cono Sur (MERCOSUR), country. The Decree-law No. 227 was amended by law No. 9314 which is the second largest trade association in the Americas and of November 14, 1996, which provides increased flexibility for the eighth worldwide. Exports were valued at $160.6 billion, investment in the Brazilian mining sector. Its Article 7 stipulates and imports, $120.6 billion compared with $137.8 billion and that the production of minerals will depend upon the exploration $91.4 billion, respectively, in 2006. Brazil’s mineral sector had a authorization permit granted by the General Director of the trade surplus of $8.9 billion compared with $11.8 billion in 2006 DNPM and the development concession issued by the Minister (Banco Central do Brasil, 2008a, p. 16; 2008b; Departamento of Mines and Energy. Licensing is a restricted system applicable Nacional de Produção Mineral, 2008a, p. 17; 2008d). exclusively to the production of industrial minerals. The Brazil’s FDI inflows increased to $34.6 billion in 2007 from DNPM is responsible for enforcing the Brazilian Mining Code $18.8 billion in 2006, or by 84%, and the country maintained and for implementing its legal provisions (Ferraz, 2007, p. 7; its large share of almost 84% of MERCOSUR’s FDI, which Departamento Nacional de Produção Mineral, 2008b, c). was mostly reflected in the high international prices of several Article 20 of Brazil’s Constitution (which was enacted on commodities, such as, in order of value, iron ore, petroleum, October 5, 1988) and Constitutional Amendments Nos. 6 and 9, lead, tin, and soybeans (Banco Central do Brasil, 2008a, dated August 15, 1995, allow the participation of the private p. 15-16; 2008b; Departamento Nacional de Produção Mineral, sector by means of joint ventures and privatization investment in 2008a, p. 18-19; Economic Commission for Latin America and the mining, natural gas, and petroleum sectors. The Government the Caribbean, 2008). allows Petróleo Brasileiro S.A. (Petrobrás), a state-owned firm, to enter into joint ventures with foreign investors and to Minerals in the National Economy invest overseas. The Agencia Nacional do Petróleo continues to issue exploration and production licenses and regulates the In 2007, Brazil’s economy benefited from floating exchange petroleum industry (Ferraz, 2007, p. 7; Departamento Nacional rates and interest rate increases by the Banco Central do Brasil de Produção Mineral, 2008b, c). to fight inflationary pressures. Inflation was 3.6% compared with The Brazilian import tax rates for minerals vary from 3% 4.7% in 2006. The financial system benefited from FDI inflows, to 9%; the rate for ores and concentrates is 5%, and that for high capitalization, and the strengthening of fiscal and monetary other mineral derivatives, 7%. The export tax does not apply discipline, which helped maintain a positive economic growth to exported mineral products, although there is a value added in 2007. Higher world demand for Brazilian mineral exports and tax. In most cases, the basis for assessment of corporate income higher mineral commodity prices contributed to the upturn in taxes is the net profit for the fiscal year; the tax rate ranges the country’s economy. For 2007 as a whole, Brazil’s real gross between 10% and 15% and is levied on the net profit. Profits domestic product (GDP) was 5.4%, which was up from 3.8% in can be expatriated. Equity ownership, which is allowed by 2006. The mining and mineral processing industries represented means of privatization or by direct acquisition, can be as high as almost 3% of the GDP in 2007. Brazil had a total labor force 100%. During 2006-07, the Concessions Law created additional of more than 99.5 million. The minerals (metal, industrial opportunities for the private sector in public utilities previously minerals, and fuels) sector employed about 5% (995,000) of the reserved for the Government (Ferraz, 2007, p. 7; Departamento industry total (19.9 million, or 20% of the total); this percent Nacional de Produção Mineral, 2008c). did not include the nearly 450,000 active garimpeiros. In 2007, The DNPM reported an investment of $400 million in according to the monthly employment survey, 1.8 million jobs mineral exploration compared with $284 million in 2006. The were created in the country and employment in the mining MME’s Companhia de Pesquisa de Recursos Minerais (CPRM) sector amounted to 90,000 (Ferraz, 2007, p. 3; Banco Central (the Brazilian Geological Survey) was developing programs do Brasil, 2008b; Departamento Nacional de Produção Mineral, for basic geologic mapping, geophysics, metallogenetic and 2008c). hydrogeologic mapping, and prospecting in areas of potential development. The CPRM was also creating and maintaining the country’s geologic database and the corresponding economic analyses, particularly for coal, copper, diamond, gold, kaolin, Brazil—2007 4.1 nickel, peat, and zinc, to assist investors in the mineral sector (5) Resolution No. 237 of December 19, 1997, provides the (Serviço Geológico do Brasil, 2007, p. 141, 152; Departamento procedures and guidelines used in environmental licensing. Nacional de Produção Mineral, 2008a, p. 22; 2008d). The Brazilian Environmental Policy (BEP) is executed at The Brazilian Financial Compensation for Exploiting Mineral three levels—Federal, State, and municipal. The coordination Resources—Federal Royalty (CFEM), was established by the and formulation of the BEP is the responsibility of the Brazilian Constitution in 1988 and instituted by law No. 7990 Ministério de Meio Ambiente (MMA). Linked to the MMA in 1989 to compensate municipalities, States, and the Federal is the Conseho Nacional de Meio Ambiente, which grants Government. The CFEM rate is no more than 3% of the net the environmental licenses that are required for all mining revenue of mineral sales. The prevailing rates are 3% for activities in Brazil. Law No. 6938 of 1981 had also established bauxite, manganese ore, potassium, and rock salt; 2% for the National System for the Environment, which comprises coal, fertilizers, iron ore, and other minerals; 1% for gold representatives of the Federal, State, and municipal governments (gold produced during prospecting is exempt); and 0.2% for and private foundations involved in environmental protection other precious minerals and precious stones. The collected and improvement. Article 225 of the Constitution stipulates royalties are allocated among the municipalities, States, and that mining operators must reclaim areas that they have the Federal Government in the proportion of 65%, 23%, and environmentally degraded. 12%, respectively. The Federal Government shares its 12% In Brazil, the environmental requirements applied to the CFEM fund with the DNPM (9.8%); the Fondo Nacional de mining sector are (1) an environmental impact study (EIA), Desarrollo Cientifico y Tecnologico (FNDCT), which is an (2) environmental licensing (LA), and (3) a plan for recovery of instrument for technological innovation for the benefit of all degraded areas (PRAD). An EIA applies to mining projects of Brazil’s productive sectors (2%); and the Brazilian Environment any mineral substance; an LA is mandatory for the installation, Agency (IBAMA) (0.2%). The CFEM collection increased expansion, and operation of any mining activity under the to $220.6 million in 2007 from $199.1 million in 2006, or by systems of mining concession or licensing; and a PRAD 10.8% (Ferraz, 2007, p. 7; Banco Central do Brasil, 2008b; requires suitable technical solutions to rehabilitate the soil and Departamento Nacional de Produção Mineral, 2008c). other aspects of the environment that might be degraded by In 2007, the States of Minas Gerais (52%), Para (30%), and mining operations. Resolution No. 10 of December 6, 1990, Goias (4%) were the major collectors of the CFEM; the main requires that all mining operations obtain LAs prior to the municipalities were Parauapebas (57%) and Oriximina (10%) granting of mineral rights by the DNPM (Departamento in the State of Para and Itabira (12%), Nova Lima (8%), and Nacional de Produção Mineral, 2008b, c). Mariana (6%) in the State of Minas Gerais. Both States and The MME enforces Decree No. 97632 of April 10, 1989, their respective municipalities were the main producers of iron which prohibits the use of mercury by the small and artisanal ore. The main mineral contributors to the CFEM were iron (garimpeiros) gold mining operations; it also, however, offers ore (51%), aluminum (10%), kaolin (5%), calcite (4.5%), and technical assistance through the use and implementation of the gold (4%). The State of Minas Gerais produced mainly (in U.S. Environmental Protection Agency’s (USEPA) Mercury order of value) iron ore, nickel, gold, and zinc, and the State Capture-USEPA Model. During 2006-07, the MME and the of Para produced mainly (in order of value) bauxite, iron ore, USEPA successfully installed eight mercury capture devices kaolin, copper, and others (Departamento Nacional de Produção for hoods in gold shops, first in Itaituba and then in Creporizao Mineral, 2008c, d).

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