Looking at current events, a renewed round of ”resource nationalism” could be in the offing, amid speculation that Brazil is most likely to follow Australia’s lead by imposing a major tax on its mining industry.
Just less than two weeks after the Australian government made public the details of its revised mining tax, a report from Brazil shows a tax of up to 25 per cent is being considered for that nation’s mining industry.
Although reports (about tax) have been thought to be unconfirmed; but still, the tax looks imminent as the talks have followed more than a year of consultation between the government and miners over reform of the sector.
According to the Folha de Sao Paulo newspaper, projects that are owned by Brazilian iron ore giant Vale are among those that would be impacted by a ”special participation tax”
In the meanwhile, the other country which relies heavily on mining business – Australia–by comparison, would impose an effective tax of 22.5 per cent on iron ore and coal miners that make yearly profits above $50 million.
As the world’s largest iron ore producer, Brazil is a key mining country and any plan to increase taxation could affect the numerous international -listed companies (mainly Australia) that have ventured here, including BHP Billiton and Rio Tinto.
Although the share prices showed no ill effects from the speculation of increased taxes, both companies have exposure to aluminum in Brazil, and BHP Billiton is a joint venture partner with Vale in the gigantic Samarco iron ore pellet project.
Besides, numerous Australian junior miners that includes Centaurus Metals and Crusader Resources – are developing projects in Brazil, however the report suggested the tax might be focused on large-scale projects.
In the recent past, governments in Australia, Chile, China, Canada, Namibia and Bolivia have altered taxation, exploration or takeover laws to develop the public share of mining wealth – a measures that were already announced as warnings by Rio Tinto boss Tom Albanese last year that a wave of ”resource nationalism” was about to sweep around the world.
Meanwhile, UBS commodities analyst Tom Price said many resource-rich nations had been watching and waiting for the appropriate moment to set up their own tax laws.
”All these governments around the world are waiting for someone else to make a clear run on the industry … whoever goes first is going to get burnt first,” he said.