Mining-related investments in Argentina increased a whopping 72% in 2012 compared to the previous year, said local consultancy firm IES Online on Tuesday.
Despite mounting government interventionism in the industry, foreign and local investors spent a total of $3.8 billion and the firm expects this trend to continue this year, with planned investments already amounting to more than $4 billion (or $20bn Argentine pesos).
Whether these investments will be actually carried out and whether the Argentine mining sector can attract more ventures in 2013 is something the consultants did not talk about it, especially considering the socio-political risks the country poses.
Since Argentina recovered from the 2001/2002 currency crisis, the country has relied on an export-based economic growth model, which has made it increasingly dependent on Asian demand for commodities such as soya or beef.
President Cristina Fernandez de Kirchner – who succeeded her late husband Nestor Kirchner – has become infamous for her unorthodox economic approach and monetary policy, inherited from her predecessor. Government intervention in the economy, explains the UK Trade and Investment office in a report published earlier this year, has become increasingly common and her administration has struggled to protect a shrinking trade surplus by implementing import restrictions.
Miners have been particularly affected by Fernandez’ measures. Vancouver-based Pan American Silver (TSX: PAA), for instance, had to halt investment in its Navidad project, the richest undeveloped silver deposit in the world, last year after local authorities submitted a draft law that would significantly increase the economic burden on mining companies.
And on Monday, after Brazil’s Vale (NYSE:VALE) announced it was temporarily suspending its $6 billion Rio Colorado potash project in the Argentine province of Mendoza, the provincial government reacted by sending Vale an ultimatum. As reported by local newspaper Los Andes (in Spanish), the authorities told the Brazilian miner it had five working days to present a new timeline or the concession could be revoked.