March 25th, 2014


One of the most important sources of wealth in Brazil, mining currently accounts for 3 - 5% of the Gross Domestic Product. However, this sector has been facing a number of legal barriers which prevent further development of its potential.

The Brazilian Mining Code (Decree-Law No. 227/67) is in force since from the time of the military regime and a new proposal for its modernization (Draft Law No. 5.807/13) joins several other bills that have been analyzed for a while now by the Brazilian House of Representatives.

Among the items handled by the new wording, the main ones are the transformation of the National Department of Mineral Production (DNPM) into a regulatory agency of the sector and the increase of the royalties paid to States and Municipalities where the mining occurs through the Financial Compensation for Mineral Exploration (CFEM).

Nevertheless, the topics are not unanimous. There have been constant meetings between parliamentarians and the Federal Government to get a common denominator and, apparently, the differences are being resolved.

It is known that only 3 points of disagreement remain, and they are: (i) the form of concession for mineral exploration - bidding, public call or the maintenance of the current priority scheme (where whoever applies first have the research request granted); (ii) the form of adjusts in tax rates charged from the companies which operate in this sector (CFEM), where the Federal Government intends to adjust these rates by presidential decree, arguing that this is the most efficient way to respond to changes in the mining market. On the other hand, parliamentarians understand that the percentages of the taxes levied should only be adjusted by law, therefore allowing a prior discussion on the subject; (iii) the form of the transition from the current to the new code.

About to enter into force, the New Mining Code is not unanimous, but it is hoped to meet the needs of the companies, workers, producers and State and Municipal governments.