Argentina - Mining sector review

Report No. 11704-AR Argentina Mining Sector Review June 30, 1993 Latin America & the Caribbean Region Country Department IV (LA4) Trade, Finance and Private Sector Development Division FOR OFFICIAL USE ONLY r --'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~5 ~~ 4-~~1 - 2 _ ' - '. S'' - . A - ~ietrkie4btrbutonand may-be used by recipients ~of ~fic~1 duties. its contents may riot ot.wise ,+ w X s | , X - ; _-L ' on  ARGENTINA MINING SECTOR REVIEW ACRONYMS AND ABBREVIATIONS APT Additional Profits Tax BANADE Banco Nacional de Desarollo BGS British Geological Survey BRGM Bureau de Recherches Geologiques et Mini4res, France BHP Broken Hill Proprietary (Australia - USA) CFM Consejo Federal de Minerfa CNEA Comisi6n Nacional de Energfa Atomica CONICET Consejo Nacional de Investigaciones Cientfficas y Tecnicas CPM Provincial Mining Corporation CRA CRA Group, Australia CRAS Centro Regional de Aguas Subterraneas DEP Directorate for Studies and Projects DEY Directorate for Mineral Deposit Evaluations DNM National Directorate of Mining EEC European Economic Community FM Fabricaciones Militares GDP Gross Domestic Product GOA Govermnent of Argentina GTZ Gesellschaft fur Technische Zusammenarbeit, Germany HIPASAM Hierro Patag6nico de Sierra Grande S.A. Minera (FM) INPRES Instituto Nacional de Prevencion Sfsmica IPEEM Instituto Provincial de Exploraciones y Explotaciones Mineras JICA Japanese International Cooperation Agency LAC LAC Minerals Company, Canada LAN Local Area Network MIS Management Information System MDF Mining Development Fund (Fondo de Fomento Minero) NDM National Directorate of Mining NGO Non-Governmental Organizations NOA N.W. Argentina Cooperation Plan RTZ Rio Tinto Zinc Mining and Exploration Limited, UK SGN National Geological Service / National Geological Service Directorate (as of Jan. 1993) SM Federal Secretariat of Mining SOMISA National Steel Company SPM Provincial Secretariat of Mining SRNAH Secretariat for Natural Resources and the Human Environment UK United Kingdom UN United Nations, New York UNDP United Nations Development Program, New York USGS United States Geological Survey  FOR OFFICIAL USE ONLY VAT Value Added Tax YCF Yacimientos Carbonfferos Fiscales YMAD Yacimientos Mineros de Agua de Dionisios YPF Yacimientos Petrolfferos Fiscales Au gold Ag silver Cu copper Fe iron K potassium Ma magnesium Mo molybdenum Pb lead Sn tin U uranium W wolfram Zn zinc This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   ARGENTINA, MINING SECTOR REVIEW PREFACE ....... .............................................. EXECUTIVE SUMMARY AND IDENTIFICATION OF KEY ISSUES .ii BACKGROUND, SCOPE AND OBJECTIVES OF STUDY .viii 1 SECTORAL BACKGROUND .1 Role of Mining in the Argentine Economy .1 Past Performance of Mining .1 Structure of The Mining Industry. 3 Mining Development Strategy. 4 2 MINERAL EXPLORATION AND GEOLOGICAL POTENTIAL .... ....... 6 Actual Exploration and Required Level of Effort ...................... 6 Present low level of exploration .............................. 6 Required level of exploration investment ........................ 7 Geological Potential, Production Prospects and the Data Base .... .......... 8 Geological potential ............ .......................... 8 Geological information .......... .......................... 10 Prospects for future production .............................. 11 3 ATTRACTING INVESTMENT INTO MINING .12 Local and Foreign Investors .12 The Key Factors Determining Mining Investment .13 The Experience of Other Countries .14 4 THE MINING POLICY FRAMEWORK .16 Economic and Sector Policies .16 The Role of the State .17 Development of an Effective Mining Sector Strategy .18 5 FISCAL POLICIES AND INCENTIVES .20 Taxes and Incentives in Mining Development .20 Mining Promotion Schemes in Argentina .21 Current Mining Taxation in Argentina .23 New Government Initiatives .24 The Proposed Mining Taxation Package .27  6 THE REGULATORY FRAMEWORK ............................. 31 The Mining Code and Regulations . ............................... 31 Mining Investment Agreements . ................................. 32 Provincial Mining Reserves and Privatization ........ ................. 34 7 INSTITUr ONAL STRUCTURE ................................ 37 Background ................................. 37 Present Federal Organization ................................. 38 Present Provincial Organization ................................. 40 Other Institutions ................................. 41 Institutional Restructuring Requirements . ............................ 41 Federal Secretariat of Mining ............................... 42 National Directorate of Mining ............................... 44 National Geological Service ................................. 45 Provincial Organizations ................................. 48 8 INFRASTRUCTURE AND ENVIRONMENT ........ ................. 51 Infrastructure Issues of Mining in Argentina ........ ................. 51 Environmental Issues ...................................... 53 CONCLUDING STATEMENT ..................................... 56  TABLES: 1.1: Mineral Production, 1970-1991 2 1.2: Mineral Exports, 1970 - 1990 3 1.3: Principal Mining Production of Six Provinces 4 2.1: Estimated Exploration Expenditure 7 2.2: Exploration Investment in Relation to Value of Production 8 5.1: Comparison of Incentives Provided by the Mining Promotion Law of 1979 and the New (1993) Mining Investment Law 25 FIGURES: 7.1: Proposed Organic Structure of the Secretariat of Mining 43 7.2: Proposed Organic Structure of the National Directorate of Mining 44 7.3: Proposed Organic Structure of the National Geological Service 47 7.4: Proposed Organic Structure of the Provincial Organizations 50 LIST OF ANNEXES 1: Overview of the Mining Code and Regulations 2: Issues of Small- and Medium-Scale Mining 3: Situation of Mining in Selected Provinces 4: Main Metal Mining Operations 5: Mining Sector Institutions Map, Argentina: Geological Outline, Location of Selected Mineral Deposits Inside back cover   - i - PREFACE This study is the product of a cooperative effort between the World Bank and the Government of Argentina. The Government of Argentina is currently taking a series of new initiatives in an effort to develop the mining industry. Many aspects and issues concerning the sector changed considerably from the time when the main analytical work was done (late 1992) to the time of the completion of this document (May, 1993); this should be kept in mind by the reader. Much of the information used in the preparation of this report was gathered and compiled during an approximate 3-week mission to Argentina in August 1992. The mission was led by E. Bolte (AFTIE - now IENIM) 1' and included Alfredo Dammert (LA4TF), Leo Maraboli (AFTIE - now IENIM) and Fred Barnard (consultant). Bilateral assistance was provided and comprised of technical teams representing the Geological Survey of Finland, which reviewed private sector mining, and Swedish Geological International (SGAB International AB), which focussed on sector institutions. A second mission by Peter Fozzard (Task Manager) and Alfredo Dammert took place in April 1993, during which the results of the study were discussed with the Government. The support of Federal Government authorities (principally the Secretary of State for Mining, Angel Maza and his staff) and Provincial Government authorities in Catamarca, Chubut, Jujuy, Mendoza, Salta and San Juan was of particular value to the team. The Bank missions express their thanks to all government and private individuals, mining companies and the participating and contributing Governments of Finland and Sweden. Final report preparation was carried out by Peter Fozzard (IENIM) and processing and compilation by Veronique Allain (IENIM). Notwithstanding the collaborative nature of this study, the conclusions and recommendations are ultimately the responsibility of the Bank team. Paul Meo, Division Chief of the concerned Country Department, LA4TF, guided this study throughout. 1/ Under a January 1, 1993 partial reorganization of the World Bank's functional structure, mining sector specialists, previously housed in AFrIE, were incorporated into a new Industry and Energy Department, Division of Industry and Mining (IENIM).  - ii - EXECUTIVE SUMMARY AND IDENTIFCATION OF KEY ISSUES Present Situation 1. Mining is currently not a major economic activity in Argentina. The sector only accounts for about one-half of one percent of GDP. In 1991, the total production value of the sector was estimated at US$490 million, a decline from US$870 million in 1980 (in constant prices) largely due to a recession in the national construction industry. The value of mineral exports reached US$78 million in 1990, about 0.6 percent of all Argentine exports. Mineral imports were US$665 million in the same year, of which iron-ore and alumina were the most important, Argentina is deficient in these minerals. 2. Production in the mining sector output, particularly with regard to exportable products, is far below the country's potential. Three relatively small mines, by international comparison, account for over 80 percent of the country's metallic minerals production and two others, also relatively small operations, account for 75 percent of gold production. The six major "mining provinces" are Catamarca, Chubut, Jujuy, Mendoza, Salta and San Juan. Numerous, close to 400, small mining operations exist in these provinces. Most are involved in the non-metallic (industrial minerals) sector. 3. Argentina, because of its structural geological history, may not have the same enormous geological potential for mineral discoveries as some of its neighboring countries, e.g. Chile. However, it still has large areas of very favorable geology which are largely unknown due to the paucity of high-quality exploration activity. This in turn is due to an overall lack of investment in the mining industry. The present level of annual investment in exploration does not exceed US$10 million. In order to achieve the sector's growth potential through discoveries of new mines, historical data demonstrates that over US$45 million must be invested annually in exploration. Most of this investment must come from foreign private investors. 4. The poor performance of the mining sector in Argentina has resulted from a combination of primarily internal factors. In particular, holdings of large reserve areas by provincial governments present a continuing major obstacle to attracting private investment. 5. In addition to problems related to govermment intervention, the regulatory framework, comprised of a frequently amended federal code 1', which has been enabled and administered by a mix of provincial mining and fiscal regulations, is so diverse, outdated and complicated that potential investors have found it very difficult to do business and have been provided with few guarantees. There have been some federal mining promotion efforts such as the Mining Promotion Law of 1979 and a Mining Development Fund, both suspended in 1989, which led to the creation of subsidized mining operations that are not economically viable and have resulted in considerable fiscal losses. Since suspension of these schemes some provinces have established their own incentive schemes including, again, tax exemptions and reductions of royalty payments (mining royalties are collected by the provinces). / The Mining Code of 1986  - iii - 6. In addition to the fact that large areas of land are tied up by federal and provincial reserves and hence not easily available to private investors, the complex structure of the land concession management system (the mining cadastre) and the weaknesses of the provincial governments have resulted in a situation whereby other prospective areas are being tied up for many years without any work being performed. It is also very common in most countries, Argentina being no exception, for land speculators, including government organizations, to overvalue land holdings hence making it difficult to negotiate with investors. In an active (minerals) investment market it is essential that land be readily available for investment, initially for exploration, at a fair cost and for the turnover of land holdings to be enforced so that land becomes immediately available to subsequent investors once it is no longer being properly used. 7. On the fiscal side, the general income tax has not been a major problem, but some provinces have levied royalties of up to 10 percent; this is generally considered as unreasonably high. The imposition of elevated royalties leads to sub-optimal investment and mining decisions. In effect, royalties at any level are ad valorem taxes and reduce the amount of ore which can be mined - they increase the so-called cut-off grade for mineral deposits. Recently, many provinces have suspended collection of royalties. This may be an extreme shift. However, Chile imposes no royalty fees and Argentina must compete with Chile for investment. 8. An adequate public institutional structure is essential to support sector administration and development. In Argentina the institutional structure at both federal and provincial levels has been inadequate, inefficient and unfocussed. There has been a notable lack of inter-institutional cooperation and duplications of effort are noticed. The Secretariat of Mining, recently upgraded from an Undersecretariat, has many regional offices which have been largely idle and staff at Headquarters in Buenos Aires have recently been concerned with planning of restructuring and developing more recent legislative incentives. No geological surveying work has been done for a considerable time and there is a resulting lack of technical data available to investors. Furthermore much important technical data is disseminated throughout various institutions and is in danger of being lost. In most of the provinces the situation is even worse. Many of their critical sector support activities such as the licensing and administration of mineral rights, technical work, provision of technical assistance to small-scale miners, collection of land rentals and royalties and monitoring and enforcement of health, safety and environmental matters, have virtually ceased. Most of the Provincial mining corporations are ineffective and should be largely privatized or dismantled. 9. A further constraint to mining development in Argentina is the general lack of infrastructure, particularly as present and potential future mining areas are located in remote mountainous areas. The major industrial centers and ports are also far removed from these mining areas making transport of many bulk products extremely expensive even if adequate transport infrastructure exists. However, many of the mining areas are close to Chile and hence closer to Chilean entry and exit routes. This situation must be taken advantage of. In addition to transport, existing energy costs are very high and provision of adequate water for some operations in the arid mountainous and plateau regions will represent further limitations. Generally, therefore, mining operations will be expensive to install and maintain. 10. On the positive side, the Government is in the process of taking new initiatives aimed at attracting new investment into the sector. These new initiatives include a Mining Sector Restructuring Law, a Mining Investment Law which guarantees tax stability over the long term and a Federal Mining Agreement which promotes closer Federal-Provincial collaboration. In addition, a Presidential Decree of late 1992 considerably improved the sector institutional arrangements, one  - iv - of the positive results being the resumption of geological map compilation activities to provide investors with basic data. 11. Environmental, health and safety issues are new to the Argentine mining sector. There is no national environmental law although a draft code is currently being processed through the legislature. The existing federal mining code provides for few provisions in these critical areas. Some provinces have taken the initiative and established their own frameworks for environmental protection but this process is not coordinated at the national level. However, many provinces are not presently concerned with these issues and one of the most recent mining agreements negotiated by a province with a foreign investor takes no account of environmental protection measures. This is detrimental to the investor as well as the country. The recently revitalized Secretariat for Natural Resources and the Human Environment is not yet competent enough to perform the enormous tasks of establishing specific regulations and standards. Sector specific norms, regulations, standards and their enforcement must be uniform across the country as health, safety and the environment in mining is very much of national concern. Key Issues for Sector Development 12. Numerous issues have to be carefully addressed by the Government at the federal as well as provincial levels to enable the mining sector to increase its contribution to the economy and develop in a sustainable and environmentally sound manner. This report considers the following as the most crucial issues: WI Mining sector policy and strategy. The Government is urged to develop and publish a carefully designed mining sector policy and strategy that sends the right signals to investors. It must be consistent with the liberalization and deregulation policies in place at the macroeconomic level. It must encourage foreign private investment. This sector policy document should address all key issues and use as a basis the recent initiatives being developed and adopted. *D1 Cooperation between the federal and provincial governments. Government should make every effort to continue improving this relationship so that each level of government has clearly defined responsibilities. This positive association must recognize the fact that the Provinces are the owners of the mineral resources. The current arrangement, which consists of a Federal Mining Code administered by differing Provincial enabling regulations has proven to be a failure in the past. The government may need to consider moving toward a system of total Provincial autonomy, whereby each Province develops its own Mining Code as well as Regulations. M New mineral legislation. Instead of making piecemeal improvements and amendments to the Mining Code through the enactment of new laws, Government should consider taking steps to design and promulgate new modern mineral legislation. Enabling Provincial regulations and federal regulations (particularly those concerning environmental, health and safety issues) must be developed in parallel. The legislation and regulations should provide for clear, simple procedures that are easy to enforce in order to build confidence on the part of the investors that they will not be subject to arbitrary or unfair treatment. Approvals for exploration and mining licences  v should be based on explicit criteria and should involve minimal discretion on the part of the authorities 3/. Es Institutional restructuring. Restructuring and strengthening of the sector federal and provincial institutes is of considerable importance to support and administer sector growth. At both federal and provincial levels this should be done along the lines of the simple models proposed in this report. Provincial institutional restructuring should include divestment of the provincial government and quasi-government mining companies and particularly the release of reserve areas through auctions or other methods so they become available to the private investor. i| Formation of an independent Geological Survey. The sound formation of an independent Geological Survey organization is of particular importance and its first priority task must be to retrieve and collate existing information before it becomes dispersed during the privatization of state-owned companies such as Fabricaciones Militares. Very recent initiatives (see below) have been taken in order to resolve this issue. Es Special sector promotion schemes. It is strongly recommended that governments, federal and provincial, do away with specialized sector promotional schemes which generally waste scarce fiscal resources. The eventual guaranteed fiscal package must aim at fair revenue sharing of generated value added rather than maximizing public employment. is Health, safety and environmental Issues. The Government should place considerable importance on the development of health, safety and environmental regulations standards and procedures. Considerable progress can be made in this area by including norms and procedures in the proposed new Mining Code. Recent Iniiatives 13. In July 1989, the government initiated a reform of economic policies involving stabilization and deregulation of the economy and the privatization of public enterprises. The privatization program includes the sale and divestment of federal public mining sector enterprises. These macroeconomic policy changes are having a favorable effect on the sector, but investors are awaiting similar divestment and privatization at the provincial level of government. 1I A small number of countries have been successful in attracting new mining investment by foreign companies in recent years. A study of the Mining Legislation in six jurisdictions, namely Chile, Papua New Guinea, Indoncia, Botswana, Ghana and the State of Nevada, U.S.A. (Comparative Study of the Mineral Laws and Relative Investment and Fiscal Laws of six Selected Countries, Duncan, Allen and Talmage; Washington D.C.; July 1990) was prepared for the World Bank. This study will bc made available to the Argentina authorities. The study outlines the common principles underlying the mining legislation for these six jurisdictions. I also ilustrals some of the different approaches taken to ensure good access for potential investors for exploration of prospective land.  -vi - 14. Mining Investment. The Mining Investment Law contains a number of important improvements over the failed Mining Promotion Law of 1979. It envisions the establishment of agreements between the federal and provincial governments on mining taxation and incentives. Many of these changes, including long-term guarantees that taxation will not be changed throughout the life of a mining project, represent a change for the better. By agreement with the provinces a general royalty level of 3 percent is proposed which is also more reasonable. It also ensures some direct rent collection by the provinces. However, there are some aspects of the new law which may be inconsistent with Argentina's macroeconomic policies. 15. Mining Sector Restructuring. The Mining Sector Restructuring Law makes provisions for the way in which geological mapping is carried out, formally creates a Federal Mining Council comprised of Provincial delegates to advise the Federal government on national mining policies and concerns, changes levels and types of concessional land rentals and seeks the establishment of mining sector duty-free zones. 16. In late December 1992, a Presidential Decree brought about positive sector institutional restructuring by forming, as a major Directorate of the Secretariat of Mining, a National Geological Service Directorate and bringing other relevant sectoral institutions under the overall administration of the Secretariat; this initiative included the consolidation of a new National Institute of Mining Technology. This report still urges Government to consider following the institutional models presented and in particular giving greater autonomy to the Geological Service. 17. An additional very recent initiative (May, 1993) is the formulation of a Federal Mining Agreement which makes an effort to bring about greater cooperation between the Federal Government and the Provinces. All the recent initiatives are considered to be positive steps in the right direction and demonstrate considerable resolve by the present administration to improve the way the mining sector operates in Argentina. It will be interesting to see what influence these modifications will have on increasing the level of investor interest. One of the reasons that the Mining Code of 1886 is so complex is because of the numerous partial reforms it has been subjected to. This report therefore recommends that a fresh start should be made to sector legislative reform, underpinned by the proposed mining sector policy and strategy document. Sedor Development Strutegy 18. This report proposes that the core of a mining sector development strategy is the creation of a mutually beneficial partnership between the federal and provincial governments on the one side and private mining investors on the other. Historically, this partnership has never been achieved in Argentina and is possibly the primary reason why development of the sector has lagged behind most of Argentina's neighbors and many other developing countries around the world. 19. The report proposes a strategy, sub-sector by sub-sector, which carefully and systematically addresses all identified issues. The Government has two main options for bringing about sectoral reform: * Making a totally new beginning * Continuing a program of incremental adjustments  - vii - It is recommended that the Government adopt the first option. Recommendations are made in the report with respect to attracting private investors into Argentina, phasing out of government intervention in productive activities, establishing the roles of the federal and provincial authorities and organizations, the key elements of fiscal policies and, particularly ensuring that the tax package balance the requirements of the federal and provincial authorities with those of the private investor. Clarification and simplification of the regulatory framework is considered essential for success as is institutional reform. It is recommended that the government set out its strategy in a sector policy paper. This can be a very important medium for establishing the foundation to the required, mutually beneficial partnership essential for success. Then, environmentally sound and sustainable mineral resource development can contribute to the country's economic development in line with its very good potential.  - viii - BACKGROUND, SCOPE AND OBJECTIVES OF STUDY 1. An initial analysis of the performance of the mining sector was made by the World Bank at the request of the Government in late 1989. In early 1992 when overall economic reform was seen to be well underway, the Government of Argentina and the Bank agreed that an in-depth study of the mining sector was necessary. In August 1992, a Bank mission was mounted incorporating experts from Finland and Sweden, bilaterals that had demonstrated a keen interest in assisting the GOA in the development of its mining sector. The combined Bank-bilateral mission completed its main work at the end of August 1992 and discussed with the GOA the main findings of the sectoral analysis through a detailed Aide Memoire. Finnish mining specialists coordinated by the Geological Survey of Finland presented a separate report entitled "Review of Argentine Private Sector Mining (September 1992) and Swedish experts of Swedish Geological International presented a report entitled "Instit ttional Framework within the Mining Sector of Argentina" (September 1992). Selected findings from these reports have been incorporated into this Bank sectoral analysis. 2. The scope of work was as broad as possible. Generally, it focussed on the status of private exploration and mining activities, public sector (mainly provincial) involvement in land holdings and mine development, the roles of the federal and provincial governments, geological potential for mineral development and the adequacies of sectoral institutional arrangements to support sector growth through private investment. Section 2 of the report examines the mineral potential, Section 3 focuses on means of attracting investment into mining, Section 4 the mining policy framework, Section 5 fiscal policies and incentives, Section 6 and Annex 1 the regulatory framework, Section 7 the public mining institutions, and Section 8, infrastructure and the environment. Annexes to the report deal more specifically with the situation regarding the current sector legislation, small, medium and principal mining operations and mining development in specific Provinces. 3. The main point of coordination for this mining sector analysis was the Mining Seci etariat of the Ministry of Economy, Public Works and Services. At the federal level, meetings were also held with the Mining Commissions of the Senate and Chamber of Deputies. At the provincial level, visits were made to six Provinces: Catamarca, Chubut, Jujuy, Mendoza, Salta and San Juan. The overall objective of this comprehensive study was to analyze the various components of the mining sector in an effort to determine why it is under-performing and to propose a course of action which could lead to its orderly and sustainable growth. In general, such a course of action would be aimed at simplifying the way that the sector operates and lifting numerous cumbersome restrictions which hamper doing business in a country with, otherwise, reasonably attractive mining potential which has to compete for investment on a global scale and with attractive neighbors such as Bolivia, Chile and Peru. 4. While this sector study was underway, the GOA was proceeding with partial sectoral reform largely through the design and promulgation laws of Mining Sector Restructuring (Reordenamiento Minero) and Mining Investment (Inversiones Mineras) laws. Both proposed laws ask for cooperation from the Provinces. The mission commented on some of these draft legal projects and generaly advised that more in-depth analysis was required of all key issues. The draft laws were submitted to Congress by Minister Domingo Cavallo on January 25, 1993, and the Mining Investment Law was ratified in April 1993.  1 SECTORAL BACKGROUND Role of Mining in the Argentine Economy 4' 1.1 Mining is currently not a major economic activity in Argentina. The sector accounts for only about one-half of one percent of GDP. In 1991, the total production value of the sector amounted to an estimated US$490 million. This is detailed in Table 1.1 below, which shows the value of production of main minerals from 1970 through 1991. Construction materials, mainly limestone, granite, marble and onyx, account for the highest share, over 609%, of the value of mining production. Production of construction materials is performed in most provinces while mining of other minerals is concentrated in the mountain provinces. Mining of metallic minerals is not significant and is concentrated in a small number of operations producing zinc, silver and lead, and gold and silver. The total value of production of metallic minerals amounted to about US$59 million in 1991. Non-metallic mineral production, of which borates were the most important, was US$93 million in 1991, and other minerals, such as coal, semi-precious stones and uranium accounted for US$36 million. l 1.2 Mineral exports reached US$78 million in 1990, about 0.6% of Argentine exports. Lead and zinc concentrates and refined products accounted for two-thirds of this value, and borates for most of the remainder. Mineral imports were much more significant at a value of US$665 million, or 16% of Argentina's total imports in monetary terms. Iron ore imports were the most important category wi;h US$126 million. Alumina imports for the aluminum smelter in Chubut amounted to US$70 million. The other most significant imports were: sodium carbonate for the glass and detergent industries (US$31 million), refined copper, mainly for electricity supply (US$27 million), and titanium oxides for manufacturing of paints and pigments (US$25 million). Past Performance of Mining 1.3 Mining activities in Argentina increased during the 1970s but declined during the 1980s. The value of mineral production increased from an estimated US$740 million in 1970 to US$870 million in 1980 (in 1991 prices). This increase can be attributed mainly to the development of borate mining to supply local and Brazilian markets, and to increases in production of construction materials in order to meet the demand of the strongly growing domestic building industry. The decline to US$490 million in 1991 is mainly due to the crisis of the construction industry in Argentina, which significantly affected the production of limestone, granite and other construction materials. The increase in gold production between 1980 and 1991 was mainly due to the development of the YMAD gold mine in Catamarca and the Mina Angela in Chubut. Production of iron ore by HIPASAM in the province of Rio Negro came to a halt in 1990. The world tin crisis caused the closure of the tin 4/ Thc statistical information for mining in Argentina is incomplete. P. oduction statistics used in this report refer to the major mining provinces, which are: Catamarca, Chubut, Jujuy, Mendoza, Salta, and San Juan. They account for about 70% of Argentina's minerl production. If construction materials are included (not traditionally part of the mining sector), this share is reduced to 37%. This report is based mainly on findings in these six provinces, but the conclusions and recommendations are considered representative for the country as a whole.  - 2 - mine in Jujuy in 1991. Among non-metallic minerals, production of borates declined as markets shrunk both domestically and in the main foreign market, Brazil. Table 1.1 MINERAL PRODUCTION, 1970-91 (US$ million of 1991)*/ 9% Change Mineral 1970 1980 1991 1980/91 1970/91 Metal' c Minerals