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MINING IN BRAZIL

MINING IN BRAZIL. ADVANTAGES – MINING IN BRAZIL. favorable ecology. political stability. improving economic situation. well developed mining culture. availability of highly qualified personnel, especially in the South and Southeast regions.

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MINING IN BRAZIL

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  1. MINING IN BRAZIL

  2. ADVANTAGES – MINING IN BRAZIL • favorable ecology • political stability • improving economic situation • well developed mining culture • availability of highly qualified personnel, especially in the South and Southeast regions • no resource nationalism suppression of former preferential access to Brazilians of 1988 Constitution by 1995 amendment Mining in Brazil

  3. DISADVANTAGES – MINING IN BRAZIL • Long time to obtain environmental licenses • Lack of personnel and structure at agencies: • DNPM (Departamento Nacional de Produção Mineral) and IBAMA (Instituto Brasileiro de Meio Ambiente e Recursos Renováveis) well equipped in their main offices in Brasília • Lack of qualified personnel and structure in each State Mining in Brazil

  4. DISADVANTAGES – MINING IN BRAZIL • Lack of personnel and structure at State authorities: • delay in grating of licenses by State authorities (research/“previous license”/“ installation license”/“operation license”) • applications increasing • agencies losing personnel to private companies due to low wages Mining in Brazil

  5. DISADVANTAGES – MINING IN BRAZIL • Conflicting legislation • environmental regulation x 1967 Mining Code • conflicting Requirements from Federal, State and Municipal authorities • conflicting Public Attorney's Office opinions with requirements from environmental authorities; • Lack of high qualified technicians • qualified technicians on the South and Southeast regions • only large companies have high-qualified personnel in sufficient number Mining in Brazil

  6. DISADVANTAGES – MINING IN BRAZIL • Lack of Governmental policy and regulation • lack of regulation on indian territory – bill of law under discussion → indians request 3% on net income plus indemnification for damages • mining in the border → restrictions to foreign investments • mining in caves • no policy by Brazilian Federal Government since the decade of 80 to stimulate local production of non-ferrous metals Mining in Brazil

  7. DISADVANTAGES – MINING IN BRAZIL • Potential barriers due to social and environmental responsibility • Equator Principles standards guiding bank’s investments in developing countries • over 80% of global finance investment capacity covered by the Principles • World Bank (IFC) investments subject to Equator Principles • barrier for companies from less stringent countries • competitive advantage for companies investing in social responsibility Mining in Brazil

  8. DISADVANTAGES – MINING IN BRAZIL • Lack of geological data • small number of areas available to exploration with quality geological data • areas with quality geological data are usually controlled by a few large companies • data on extensive areas of the country are scarce • Tax issues • “Environmental Compensation” – current legislation (Law No. 9.985/2000) sets out a minimum of 0,5% of the total investment cost, but sets out no cap • Law does not prevent Federal, State and Municipal Government from fixing a cap; the State of Bahia sets out a cap of 0,5% and the State of Minas Gerais 1,1% Mining in Brazil

  9. DISADVANTAGES – MINING IN BRAZIL • “Brazil Risk” in general • Tax bureaucracy • Difficult access to financing at adequate interest rates • Transport-related costs (mainly highways) • Port-related costs • Customs bureaucracy Mining in Brazil

  10. BIODIESEL

  11. BIODIESEL IN BRAZIL • Biodiesel is the biofuel deriving from renewable biomass or animal fat used in transportation, power generators or generators for cogeneration of power and heat, engines etc • Wide range of oilseeds: • castorbeans • soybeans • palm oil • sunflower • babassu palm • cotton Biodiesel

  12. BIODIESEL IN BRAZIL • National Program for Biodiesel Production and Use (PNPB) December 6, 2004 • Rationale behind the PNPB: • growing demand for fuels from renewable sources • captive market • expansion of internal and external markets • Brazilian potential to meet part of demand • foreign exchange Biodiesel

  13. BIODIESEL IN BRAZIL • continuation - rationale behind the PNPB: • addition of value to agricultural activities – competitive advantage to Brazil • uninterrupted growth of demand for agroenergy, as opposed to most agrobusiness products • sustainable development of Brazil’s poorest regions • social inclusion – engagement of small farmers of Brazil’s poorest regions in the biodiesel value chain • reduction of regional inequalities Biodiesel

  14. TAX MODEL • cap on Federal taxation on biodiesel – taxes on mineral diesel • granting of total or partial Federal tax exemptions (CIDE, PIS/PASEP and COFINS) to biodiesel producers that support family farmers • reduction up to 100%in Federal taxes- purchasers from family-based producers of: • palm oil in the North Region • castor oil in the Northeast and in the semi-arid region • reduction up to 68% – Biodiesel producers that acquire raw material from family farmers (anywhere in Brazil) • reduction up to 31% - producers not family farmers Biodiesel

  15. SOCIAL FUEL STAMP • Social Fuel Stamp = Certificate issued by the Ministry of Agrarian Development • Entitlement to: • certification of origin/brand name of Biodiesel • total or partial reduction of Federal taxes • participation in purchase auctions (four auctions were held – 840 million liters of biodiesel purchased) Biodiesel

  16. SOCIAL FUEL STAMP • purchase of minimum percentages of raw materials from family farmers • 10% from North and Mid-West regions • 30% from the South and Southeast regions • 50% from the Northeast and de Semi-arid regions • entering into contracts with family farmers • provision of technical assistance to family farmers • Requirements: Biodiesel

  17. MANDATORY MIX • from January 2008 – “B2 mix” – 2% biodiesel and 98% diesel • from January 2013 – “B5 Mix” – 5% • higher percentages up to B100 (pure biodiesel) – authorization by ANP – Petroleum, Natural Gas and Biofuels National Agency • Europe: 10% biofuel (biodiesel or ethanol) until 2010 Biodiesel

  18. LINES OF CREDIT • Funding for equipment/plants or planting of raw materials at reduced rates, longer grace and amortization periods • BNDES (National Bank for Economic and Social Development) • PRONAF (National Program for the Strengthening of Family Farming) • Banco do Brazil – “BB – Biodiesel line of credit” • other official or private banks Biodiesel

  19. AUTHORIZATION • Production and sale of biodiesel in Brazil require: • Authorization from ANP (National Agency for Petroleum, Natural Gas and Biofuel) • Registration with the Federal Revenue Secretariat (SRF) of the Ministry of Finance Biodiesel

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