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Mining: get tough, get rich

Monday, July 16, 2012

Miners are angry about Guatemala’s plan to increase its share of profits from mining operations to 40%, from the current level of 30%. They would be angrier, if Guatemala demanded half, which it probably should. The same applies to the other countries in the region.

At the same time, governments need to do a better job of producing a more favorable image of the mining sector among each country’s people.

In terms of an increased share of profits, the financial reality of mining in Central America has changed in recent years, insofar as the value of the ore involved in almost every project has increased significantly. Since costs have not kept pace with revenues, profits are up. In this case, the industry has more money, which it can share with local people.

Nor should miners think that a demand for a better division of profit is extortion, since in return they get a commitment from the state, to let them operate in a climate of judicial security.

Currently, mining is prohibited in both Costa Rica and El Salvador, while Guatemala has been the scene of extensive protests.

For their part, governments should use an increased share of mine earnings to ensure that operations live up to effective environmental standards. They also should prove that they are spending these funds wisely.

A prohibition on mining ensures that there are no environmental protests, or disputes about land.

On the other hand, it also means living up billions of dollars of income in poor countries.