Highlights From The PwC Americas' Mining Centre Of
PwC's Mining Centre of Excellence (CoE) held an event on
March 6, 2012 to launch its Mining in the Americas publication,
bringing in industry experts to Canada to share their
Mining leaders from PwC's global network –
Fernando Gaveglio, PwC Peru's mining leader; Alan Hails, PwC
Colombia's mining leader; and Jaime Andrade, a tax partner at
PwC Brazil – were brought in to discuss the prospects for
their respective countries.
Christopher Garman, a director at Eurasia Group and the head of
its Latin America practice, and Fred McMahon, the vicepresident of
international research at the Fraser Institute, also discussed the
political risks and opportunities in Peru, Brazil, and
The issues that many of the countries share are related to a
lack of infrastructure and a complicated legal structure. But the
opportunities are numerous as the economies of all three countries
are growing at a faster pace than most industrialized nations.
Here's a review of the three countries discussed:
Peru is one of the world's producers of silver and copper.
The country is also Latin America's largest producer of gold,
zinc, tin, and lead. Its Ministry of Energy and Mines (MINEM)
recently reported that the total investment in mining last year
totaled US$6.1 billion.
The country's mining industry is currently second after
Chile in Latin America but it has the potential to become the
leader in Latin America because it has a vast array of commodities,
according to Gaveglio.
Garman highlighted some of the risks that need to be taken into
account, such as the possibility of policy reversal and a move
towards populism, which could increase during the election cycle in
2016. There are also widespread social protests, many of which will
McMahon said Peru is a global success story, but a temporary
reversal in the resource boom could lead to political risk and
instability. Still, gross domestic product per capita is
The country is the largest producer and exporter of coal in
Latin America. It is also a producer of gold, nickel and emeralds.
Hails said the outlook is positive as the country's credit
rating was recently raised to investment grade.
While the industry has a promising future, there are still some
issues that need to be resolved. Infrastructure is one of them,
according to Garman. The current roads and railways are inadequate
and can't be relied upon to import mining machinery or to
Security is another issue, said McMahon. There are still
problems with the Revolutionary Armed Forces of Colombia (FARC) and
organized crime, but they're not as bad as they once were. He
added that the Fraser Institute's mining survey didn't
receive any responses from companies doing business in Colombia
five years ago; but it is today, which is a positive sign.
The mining industry in Brazil is experiencing strong growth.
Mineral production jumped 28% to US$50 billion last year and the
growth rate is expected to increase 10% to 15% in the next three
years, according to Andrade. The country's biggest mineral
exports are iron ore, niobium, copper, and gold.
The government plans to modernize its mining code, which
hasn't been updated since 1940. There are two drivers behind
the reform, Garman explained. The tax take will be a bit bigger
than expected as the government will double royalties, change the
base of taxation and most likely levy a special participation tax.
And its industrial policy drive will seek to increase incentives
for domestic valueadded production.
Brazil is a very stable country, said McMahon. Its
infrastructure, however, is still an issue and the legal structure,
like other Latin American countries, is not like it is in other
Westernized nations. Despite this, the country is on a strong
growth path and its prospects remain bright.
How the CoE can help
The CoE aims to strengthen client service, improve efficiencies
in delivering consulting, deals, tax, and assurance solutions to
To help your company maintain a competitive position, our
Americas mining group offers services and specific solutions to
confront the most challenging industry issues, including:
Improved business performance through lasting cost savings
Enhanced enterprise value through sound execution of
transactions of significant assets or enterprises
Minimized tax costs related to mining activities in the
Better control of business processes using expanded internal
audit function, especially for capital projects
Improved stakeholder relations supported by independently
verified reporting on corporate social responsibility
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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