July 26, 2017 / 11:43 PM / in a year

Brazil mining reforms seen passing Congress despite opposition

BRASILIA/RIO DE JANEIRO, July 26 (Reuters) - Mining reforms decreed by Brazilian President Michel Temer are likely to pass Congress, a legislative leader told Reuters on Wednesday, despite opposition from an industry trade group.

The revisions to the mining code, announced on Tuesday, would raise government mining royalties. But officials said they would also cut industry red tape by creating a new regulatory agency and speeding up approvals.

Temer, who is under investigation for corruption, has argued that changes across many sectors of the economy are necessary to shore up government finances as Brazil emerges from its worst recession on record.

The mining reforms must be approved by Congress within 90 days to take permanent effect. Royalties would not rise until November.

“I don’t think the mining measures will be hard to approve quickly,” said Beto Mansur, deputy leader of the government’s coalition in the lower legislative house, a role akin to the majority whip in the U.S. House of Representatives.

“It’s a proposal for modernizing the sector, I think it will be a very positive thing.”

Deputies were unlikely to oppose the measures since 65 percent of royalty revenue goes to municipal governments, and members of Congress will rely on local mayors to campaign on their behalf going into the 2018 elections, Mansur added.

Analysts also predicted that the reforms would win easy approval.

The only possible hiccup would be if a second corruption charge is leveled against Temer, which could distract Congress when it would otherwise be considering the reforms, said Thiago de Aragão, Brasilia-based director for consultancy Arko Advice.

Temer is expected to survive a congressional vote set for next week on whether a corruption charge against him warrants a trial before the Supreme Court.

Frederico Marques, head of the Brazil-Canada Chamber of Commerce and a lawyer experienced on mining deals, said he opposed raising royalties although he supported the reforms in general.

Gil Clausen, chief executive of Canada’s Brio Gold Inc which owns three mines in Brazil, said the rise in gold royalties was an “unfortunate development” that would raise costs by the equivalent of $12.50 per ounce of the mineral at current prices.

The changes were long anticipated, however, Clausen told Reuters in an email.

“The commitment of the government to streamline and expedite the analysis and issuance of permits and licenses is positive,” he added.

The domestic mining industry body IBRAM has harshly criticized the mining measures, calling them inflationary and saying they would hurt the competitiveness of Brazilian minerals on the international market.

Brazil’s largest miner Vale SA, a member of IBRAM, declined to comment. (Reporting by Jake Spring and Alexandra Alper; Additional reporting by Nicole Mordant in Vancouver, Anthony Boadle in Brasilia and Marta Nogueira in Rio de Janeiro; Editing by Tom Brown)

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