Watch Bolivia For Developments On the Country Risk Front

By: Ian Campbell | Thu, Aug 30, 2012
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Why read: Because country risk is increasingly important, and because the Bolivian Government has been very proactive, particularly of late, in its interactions with the Bolivian Mining Industry.

Commentary: Bolivia has long been known to be rich in minerals, is said to already levy some of South America's highest mining taxes (37% on income and 5% - 7% royalty taxes), and as a country sees mining as being very important to it, where mining is said to currently:

In the past three months the Bolivian Government has nationalized a silver mine and a tin/zinc mine. It is now contemplating building smelters to process gold, silver, zinc and other ores in Bolivia through an existing state-owned mining company.

For more detail you might want to read the referenced article. Suffice to say that Bolivia likely is being watched not only by those with direct and indirect stakeholder interests in the foreign companies currently operating there, but by other developing countries.

Going forward, it will be important to closely monitor what countries do by way of increasing royalties, taxes, joint venture rules, partnership rules, development of common processing operations, and so on - all aimed at keeping more of the discretionary cash generated by miners 'in-country' for the benefit of the Governments and residents of those countries.

Simply put, the difficult line:

These may prove in many, if not most, cases to be tasks of herculean proportions, such that as country risk escalates resource company-specific risk may result in some companies simply not being able to obtain funding - or some countries simply not being able to find companies willing to invest in their resources sector.

Topical Reference: Bolivia Says It Wants Greater Role in Key Mining Sector, from Fox Business, from Dow Jones Newswires, Martin Arostegui, August 24, 2012 - reading time 4 minutes.

 


 

Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
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Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at icampbell@srddi.com.
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