The recently approved Large Investment Incentive Regime (RIGI) reflects continuity in a premise upheld by successive Argentine governments regardless of political affiliation: that large extractive companies must be granted tax, foreign-exchange, and customs benefits under the promise of job creation and economic development.
This incentive regime, which applies to sectors such as mining, adds to a series of existing benefits, such as those provided by Law No. 24,196 on Mining Investments, enacted in 1993, which has resulted in major losses for the public treasury. Meanwhile, job creation and economic development have yet to materialize.
A clear example is MINERA DEL ALTIPLANO S.A., a subsidiary of LIVENT, which operates in the Salar del Hombre Muerto in the province of Catamarca. The company has been registered since 1993, has been extracting lithium since 1998, and has enjoyed fiscal stability since 2008. Under the implementation rules of RIGI, it could register its plant expansion project as a VPU, benefiting from another 30 years of the same tax advantages, while also gaining additional foreign-exchange and customs privileges.
RIGI once again appears under the narrative of a “promise of development.” However, in practice, MINERA DEL ALTIPLANO S.A. has caused ecosystem damage by drying out the Trapiche River wetland and is now requesting larger volumes of water from the Los Patos wetland. It is the same company that has been found to have under-invoiced exports in order to pay fewer taxes.
If we were to take stock, the concrete outcome of these benefits has been environmental damage that affects local populations through reduced water availability, displacement, and violations of their rights. At the same time, it has failed to generate quality employment, fiscal revenue, or infrastructure. In fact, proven cases of customs fraud exist.
How much revenue did the national government forgo under the Mining Investment Law in 2022 and 2023?
In 2023, the State forewent a total of ARS 28.9 billion. This amount represents approximately 0.02% of the country’s GDP for each year and is more than double the budget allocated to the National Administration of Medicines, Food, and Medical Technology (ANMAT).
According to the National Budget Bill for Fiscal Year 2024, submitted in September 2023, tax expenditures for 2024 were calculated based on an inflation estimate of 69.5%. However, in just the first six months of the year, accumulated inflation reached 79.8%, and market expectations project an annual inflation rate of 127.4%.
In the context of an inflationary process that nearly doubles the rate used to calculate tax expenditures, it is evident that the estimated spending allocated to promoting mining investment will represent an even higher share of total tax expenditure. This leads to a systematic underestimation of its real value and exposes the lack of rigor and balance in the evaluation criteria used to assess the socioeconomic impact of mining activity.
Even knowing that the projected tax expenditure for 2024 to promote mining investment is underestimated, it is equivalent to 96% of the budget of the Subsecretariat of Environment and 79% of the budget of the National Parks Administration. With 82% of the more than ARS 55 billion projected as tax expenditure for 2024, the budgets of both the Subsecretariat of Environment and the National Parks Administration could be maintained in real terms.
In addition, this tax expenditure under the mining promotion regime is equivalent to more than 4.5 times the budget allocated by the National Treasury to the National Fire Management Service; more than seven times the budget allocated to renewable energy; and more than eleven times the budget of the National Cancer Institute, responsible for developing and implementing public health policies.
Who benefits?
The benefits of the Mining Investment Law reach 829 mining companies and an additional 94 service companies. These include traditional mining firms such as BARRICK EXPLORACIONES ARGENTINA S.A. (local subsidiary of Barrick Gold Corporation) based in San Juan; MINERA ALUMBRERA LIMITED and MINERA AGUA RICA LLC (ARGENTINA BRANCH), both operators of the MARA project in Catamarca owned by Glencore; CERRO VANGUARDIA S.A. (subsidiary of AngloGold Ashanti) operating in Santa Cruz; and POSCO ARGENTINA S.A.U. in Salta, among others.
It is worth noting that beneficiary companies also include MINERA DEL ALTIPLANO S.A., which operates the Fénix lithium mining project as a subsidiary of Livent Corporation (now part of Arcadium Lithium). In 2023, the company was fined ARS 5.3 billion for under-invoicing lithium carbonate exports in more than 400 transactions carried out between 2018 and 2019. That same year, the company spilled more than one thousand liters of hydrochloric acid.
Also appearing is RINCON MINING PTY LTD, which operates the Salar del Rincón project in Salta and belongs to Rio Tinto. The latter has a long history of complaints worldwide, including allegations of labor precariousness, sexual harassment in its facilities, destruction of Indigenous sacred sites, and pollution.
What is new among the list of beneficiaries is the emergence of companies linked to lithium mining projects that are subsidiaries of major oil sector players. For example, Pluspetrol, Pan American Energy, and Tecpetrol (Techint Group) have entered the lithium extraction race through subsidiary companies.
In this context, ALPHA LITHIUM ARGENTINA S.A., belonging to Techenergy Lithium, a subsidiary of the oil company Tecpetrol and part of the Techint Group, appears alongside LITHIUM S CORPORATION (Pluspetrol) and LITHOS MINERALES DEL NORTE S.A. and LITHOS ENERGÍA S.A., both part of the Pan American Energy Group.
These companies already receive a range of benefits for their activities in the hydrocarbons sector, such as fossil fuel supply subsidies linked to the Gas Plan, which constitute direct transfers from the national government to companies and, unlike demand-side subsidies, do not reduce consumer tariffs. These benefits are compounded by others such as preferential exchange rates and free availability of foreign currency.
In 2023 alone, supply-side subsidies for hydrocarbons exceeded ARS 140 billion, three times the budget allocated to the former Ministry of Environment and Sustainable Development. Now, through their lithium mining projects, these companies also receive tax benefits under the Mining Investment Regime.
The entry of these new actors into lithium mining also allows them to deploy a narrative linked to the energy transition, portraying themselves as promoters of that transition.
Why is this alarming in environmental and human rights terms?
Another premise consistently upheld by successive administrations is that environmental regulations must be relaxed to achieve economic development. In the case of the RIGI, a clear example is that the regime requires subnational governments to guarantee the provision of inputs to beneficiary companies, such as water and energy, thereby prioritizing corporate access over that of the population.
This is particularly concerning given that the RIGI seeks to promote, among other activities, large-scale mining, which consumes vast amounts of water and energy in areas where these resources are scarce, while generating significant environmental and social impacts.
There are many examples. On September 13, 2015, Barrick Gold spilled more than one million liters of cyanide-contaminated water at its Veladero mine in San Juan, contaminating five rivers. In 2023, Livent spilled more than one thousand liters of hydrochloric acid at its Fénix project in Catamarca. The same company is accused of having dried up the Trapiche River wetland. Likewise, the Josemaría project in San Juan and the MARA project in Catamarca violate Argentina’s Glacier Law by affecting debris glaciers and periglacial environments, according to their Environmental Impact Assessments and reports from the provincial Mining Secretariat, respectively. These are just some examples of the impacts of mining activity and its difficulties in complying with environmental regulations.
The arrival of oil companies Tecpetrol, Pan American Energy, and Pluspetrol, through their subsidiaries, in the salt flats of northern Argentina takes place in a context of increasing relaxation of environmental and human rights standards promoted by local governments.
Indigenous communities in Salinas Grandes and Laguna de Guayatayoc, in the province of Jujuy, have for more than ten years denounced violations of their right to free, prior, and informed consent. Around 38 Indigenous communities rely on economic activities such as tourism, salt commercialization, agriculture, and livestock. They also claim their right to water and to a healthy environment in the face of the advance of lithium mining in their territories. Despite repeated requests for information, legal actions before provincial courts, and favorable rulings, these communities continue to lack information about the companies seeking to operate in their territories and the environmental impacts of their projects.
The State not only refrains from engaging with communities and allows companies to attempt to replace its role, but has also enacted regulations that reduce or illegally eliminate obligations related to consultation, participation, and other rights. This directly violates the mandates of international instruments designed to guarantee consultation processes with communities, such as the Escazú Agreement and ILO Convention No. 169, among others.
In this context, companies should redouble their efforts to ensure compliance with international regulations, which have higher legal hierarchy than the Mining Code and provincial procedural decrees governing environmental impact assessments, as well as national environmental and human rights legislation. Additionally applying to the UN Guiding Principles on Business and Human Rights, especially when receiving economic incentives for extractive activities.
However, far from complying with these mandates, companies pursue their interests by breaking collective consultation agreements and offering benefits in exchange for approval. Clearly violating existing regulations and community agreements.
For its part, the State should ensure that companies receiving these tax benefits not only refrain from tax evasion (as in the case of Livent), but also do not violate human rights, as alleged in the Tecpetrol case, among others.
How do we know all this, and what information is still missing?
On May 20, 2024, FARN submitted a request for access to public information under Law No. 27,275 to the National Budget Office, the governing body of the Budgetary System. The request focused on the fiscal benefits granted to mining activity and sought detailed information on the funds that the State, at its different levels, had foregone as a result of this incentive regime. It also requested an estimate of the tax expenditures this represents for the public treasury, as well as a list of the companies benefiting from the Mining Investment Law.
After various departments within the Ministry of Economy intervened, having reviewed the administrative file and once the extension deadline had expired, a response was received from the Undersecretariat for Administrative Management of Productive Affairs and the Bioeconomy.
Some information is clear and has been reflected above. Other aspects, however, remain unanswered. For example, we still do not know the breakdown of how much revenue the State expects to forgo in 2024 as a result of subsidizing mining activities. When asked for the calculated values of tax expenditures for the promotion of mining activity in 2024, disaggregated by Income Tax, Import Duties, and Fiscal Stability, the Secretariat of Mining responded that it does not yet have the requested information to provide a comprehensive answer.
They indicated that this situation is partly due to the fact that a new head of the Secretariat took office on April 4 of this year and is currently engaged in compiling and processing the statistical information contained in the sector’s records. This is compounded by the change in administration, which implies modifications to government structures, effectively disregarding the principle of the legal continuity of the State.
Although access to this information was not possible at this time, it is “encouraging” to know that the newly appointed Secretary is working, among other tasks, on processing the statistical information of the agency. The combination of this effort and the expertise of the Secretariat’s technical and professional staff offers hope that the available data can be processed in a timely manner and subsequently published and/or made accessible to civil society through a new request within a reasonable timeframe.
It is also unknown how much each company benefits individually from the tax exemptions provided under the Mining Investment Law. In response to a request for a breakdown of exemptions by company, authorities clarified that the information is obtained from tax returns submitted to AFIP and is therefore protected by tax secrecy under Article 101 of Law No. 11,683, and excluded from the right of access to public information under Law No. 27,275. As additional information, they noted that, except for the benefit provided under Article 21 of the Mining Investment Law, the remaining benefits are estimated based on the fiscal year prior to the submission of the corresponding tax return.