Publish in Special Reports - Wednesday, March 5, 2014
The Dominican Republic's mining policy is inconsistent and confusing, mining companies complain. Here the presidential palace. (Photo: Dominican Government)
improves most, Chile remains the leader.
BY LATINVEX STAFF
The Dominican Republic saw the worst decline in Latin America on the latest annual global survey of mining executives from the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
“The Dominican Republic fell the most between survey years…reflecting lower ratings for trade barriers (-19 points), the legal system (-13 points), and uncertainty concerning the administration, interpretation, and enforcement of existing regulations (-13 points),” the institute said.
The Dominican Republic now ranks in 97th place among 112 nations worldwide – a dramatic drop from 60th place a year earlier.
“Mining policy is simply inconsistent and
confusing, which discourages investment,” a producer company with less than $50 million in revenue
said in the survey.
In February 2013,
Dominican president Danilo Medina
shocked local business leaders and foreign investors when he gave a state of
the union speech attacking Canada-based Barrick Gold, the largest foreign
investor in the country.
Unless it agreed to renegotiate its contact with the government, he would impose a new tax on the company, he threatened. “The market may be starting to re-evaluate its mild preference for the ruling party after the taste it seemed to show for resource nationalism this week,” the Financial Times wrote after the speech. “This sends a very negative signal to current and potential investors in the Dominican mining sector,” William Malamud, executive vice president of the American Chamber of Commerce in the Dominican Republic, told Latinvex.
In the end – in August -- Barrick agreed to a new contract whereby it paid an additional $1.5 billion to the Dominican government.
“Canadian investors prize predictability and stability,” Ken Frankel, chair of the Canadian Council for the Americas (CCA), told the Inter-American Dialogue’s daily Latin America Advisor recently. “This has become a challenge for the Canadian mining sector which has experienced modifications of investment and royalty rules and contracts well after massive amounts of money have already been sunk into the ground.”
The $4 billion Pueblo Viejo mine – which is 60 percent woned by Barrick Gold and 40 percent owned by Goldcopr -- is the largest foreign direct investment in the Dominican Republic and has resulted in the Dominican Republic becoming the fastest-growing Latin American exporter to Canada, according to a Latinvex analysis of data from Statistics Canada.
Gold output at Pueblo Viejo jumped from 67,000 ounces in 2012 to 488,000 ounces last year. This year, Barrick expects to see between 600,000 and 700,000 ounces. The mine is expected to reach full capacity in the first half of 2014 following completion of modifications to the lime circuit, Barrick said in its latest earnings release.
Meanwhile, Glencore Xtstrata’s Falcondo operations have also run into problems. The Dominican national assembly in October declared the Loma Miranda area a national park, calling into question future plans to develop a major mine that will add another 20 years. It is still awaiting environmental approval for the new mine. Dominican government officials have sent mixed signals on the approval, although the latest indication is that it will be approved.
In addition to Pueblo Viejo and Falcondo, a third significant project, the Cerro de Maimon gold and copper mine, is being developed by Cormidorm, a joint venture between two companies from China and Australia.
Dominican officials say that the country has proven mineral and metal reserves worth a total of $60 billion.
PANAMA IMPROVES MOST
The average Policy Perception Index score for the rest of Latin America and the Caribbean Basin was almost unchanged from 2012/2013 despite the new addition of Nicaragua (ranked 80th) and Uruguay (82nd) to this year’s survey.
Chile remains the top-ranked jurisdiction in the region, ranking 30th (of
112) in 2013, and a decline from 23rd (of 96) in 2012/2013 despite a small increase
in its PPI score. Venezuela is again the lowest ranked at 111/112 in 2013 (from
94/96 in 2012/2013) and drop ping its PPI score as a result of lower infrastructure
ratings (decreased by 8 percentage points).
Panama improved its score and ranking most for the region, climbing to 58th (of 112) from 63rd (of 96), reflecting better ratings for uncertainty concerning environmental regulations (+22 points) and regulatory duplication and overlap (+13 points).
This was followed by Peru which moved from 58/96 in 2012/2013 to 56/112 in 2013 with improved perceptions for labor availability and skills (+8 points) and labor regulations/employment agreements and labor militancy/work disruptions (+7 points).
The average PPI score for Argentina declined significantly in 2013, reversing
a notable increase in the 2012/2013 survey year. All of the Argentinian
provinces lowered their PPI scores this year, with the exception of Jujuy and
Salta which had higher scores than in 2012/2013. Argentina dropped from 39th to
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