Ecuadorian Mining Sector Heats Up: New Mining Law Now in Place

Ecuador is taking steps to get back into the mining business, just more than 12 months after the government cancelled nearly 500 mining claims.

According to the July/August 2009 issue of LatinFinance, the mining ministry is busy evaluating claims by international firms:

"Concessions are being offered under a new mining law approved in January.  The law limits concessions to 25 years and 5,000 hectares.  No limits existed in the earlier law.  It also calls for a minimum five percent royalty on sales, but unlike neighboring countries, will set conditions in individual contract negotiations with companies instead of instituting a sector-wide policy.  The law also calls for strict adherence to environmental norms written into the 444 article Constitution, possibly the greenest in the world if fully applied, which was approved in a September 2008 referendum."

The Ecuadorian government's default of 2012 and 2030 bonds has raised concern among many potential investors. As a result, "The government is going to have to go out of its way to make investment opportunities attractive," Alberto Bernal, a mining analysis in the country, told LatinFinance.

The matter of resource nationalization is likely to loom ever larger in the future as countries -- such as Ecuador -- seek to benefit from international investment while protecting the property rights of their own citizens.