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BRAZIL: An Introduction to Brazil

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William Freire - Advogados Associados Logo
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Mining in Brazil

William Freire

Brazil is mineral rich and with a land area covering 8.5 million square kilometres, plus 4.4 million square kilometres of sea, the country is blessed with fantastic geodiversity.

According to information from the Brazilian Mining Institute (IBRAM):

The extractive part of the mining production chain alone accounts for 4.2% of the Brazilian Gross Domestic Product, generating 180,000 direct jobs and 2.0 million indirect jobs.

In 2018, sales in the mineral extraction industry reached US$34 billion, representing no less than 36% of the Brazilian trade balance.

Exports totalled US$29.9 billion, with more than 400 million tons moved through the Brazilian ports, with a predominance of iron ore.

The profile of Brazilian mining companies is quite interesting. There are 154 major corporations. There are 1,037 medium-sized companies, 2,809 small companies and 5,415 micro-companies.

Basis of the legal regime of mining in Brazil 

The legal regime governing mining in Brazil is set forth in the Federal Constitution, and is based on the following grounds:

i. The Union holds specific ownership over all mineral wealth, equivalent to sovereignty and control of the mineral resources.

ii. The Federal Constitution considers mining to be an activity that must be conducted in the national interest.

iii. Mining is an activity of public utility.

iv. There is legal separation between the ownership of the real property and the mineral resources it contains. Ownership of the land does not include ownership of the mineral assets contained therein.

v. The system of mineral asset development in Brazil is mixed, including the right of priority (first come, first served basis), availabilities (a type of bidding for those mining rights taken back by the National Mining Agency and put on the market again) and the National Reserves (special areas that can be reserved by the Government to develop specific projects).

vi. Miners are guaranteed ownership of the product of the mining.

vii. Mining requires prior consent from the ANM or from the Ministry of Mines and Energy.

viii. Only companies founded under Brazilian law, with headquarters and administration in Brazil, can mine in the country.

ix. There are no restrictions on the nationality of the capital or of the investors.

x. There are no limitations on the number of areas that can be held by the same company.

xi. Mining legislation protects miners against disturbance of their activities.

xii. Access to third party properties for mining is guaranteed by mineral easements or expropriations, through prior and fair indemnification to the owner or legitimate possessor.

xiii. The Union has the exclusive power to legislate on regulatory aspects of mining. The States and Municipalities do not have regulatory power over mining.

xiv. Mining conducted on indigenous land or in border zones is subject to special regulations.

xv. Mining projects are subject to prior environmental licensing and must recover the area where work was conducted.

Development of mineral substances in Brazil 

Brazil extracts and processes dozens of mineral substances.

There is a general consensus for the need to develop the production chains for the ores of the future, such as lithium, cobalt, vanadium and rare earths.

The mineral development regimes in Brazil are:

Authorization-concession regime 

The authorization-concession regime is applicable to exploration and extraction of any mineral substance (except those over which the Government has a monopoly).

Mining done under this regime accounts for more than 95% of Brazilian mineral production.

Mineral Licensing Regime 

This regime regulates the extraction of mineral substances for immediate use in civil construction.

The area is limited to 50 hectares.

Permissão de Lavra Garimpeira - PLG 

Permissão de Lavra Garimpeira is the regime that is characterized by the possibility of immediate use of a deposit of gold, diamonds, cassiterite, columbite, tantalite and wolframite, in the alluvial, eluvial and colluvial forms; of scheelite, other gems, rutile, quartz, beryl, muscovite, spodumene, lepidolite, feldspar, mica and others which, due to their nature, size, location and economic use, may have been mined independent of prior exploration work.

These minerals may also be mined under the authorization/concession regime. In this case, prior mineral exploration will be necessary.

Claimstake mines (Minas manifestadas) 

There are still some mines on private properties in Brazil, acquired before 1934, when the accession regime was in effect: the owner of the land was the owner of the ores contained therein.

This mineral development regime is moving towards extinction, as these mines are exhausted.

Mining in the Atlantic Ocean 

Brazil is a signatory of the United Nations Convention on the Law of the Sea, which defines and regulates the ocean's occupation, the limits of national jurisdiction and access to mineral resources.

Deposits have already been identified in the Brazilian exclusive economic zone of siliciclastic and bioclastic granulates, placers of heavy minerals and gems, phosphorites, coal, evaporites, and polymetallic nodules and crusts.

Brazil participates, with technical support from its National Geological Service (CPRM), in the South Atlantic Geology Project, designed to be conducted under the general coordination of the International Seabed Authority and in cooperation with several countries and institutions. The goal is to collect, gather, integrate and provide all the information and data available on the geology and mineral resources of the South Atlantic Ocean.

There are some 600 mining rights in effect over the Brazilian continental platform.

Favourable environment for the development of mining

After years of stagnation, Brazil now offers new bases for its economic development, with positive consequences for mining:

i. Political stability;

ii. Economic freedom;

iii. Legal certainty;

iv. Modernization of norms;

v. Administrative efficiency.

Political stability 

With a new political structure since 2018, a new business environment has arisen in Brazil, favouring the Rule of Law, economic freedom and legal certainty, with firm movement towards political stability.

Economic freedom 

In 2019, Law 13,874 was enacted, declaring economic freedom rights and establishing free market guarantees.

This law, which contains guidelines that are unprecedented in Brazil, is based on the following principles:

i. Freedom as a guarantee in the exercise of economic activities;

ii. The good faith of private parties before the Government;

iii. The subsidiary and exceptional intervention of the State over the exercise of economic activities;

iv. The recognition of the vulnerability of private party regarding the State.

The principal objective of this law is to eliminate the interventionist tradition of the previous governments. Although the law is relatively new, it has already altered the scenario of business in the country.

Legal certainty 

Legal certainty in the area of mining presents some elements that should be noted:

i. Quality of the long-term mineral policy;

ii. Quality of mining legislation;

iii. Quality of the entities that manage mining;

iv. Respect for mining rights and contracts;

v. Elimination of bureaucracy and uncertainty in relation to the Public Administration, favouring legality, efficiency, transparency, broad defence and reasonableness of administrative acts;

vi. Secrecy surrounding the documents in mining administrative proceedings that contain industrial secrets or business information that could represent a competitive advantage to another economic agent.

Access to land owned by third parties for mineral activity

In Brazil, the Constitution considers mining as an economic activity of national interest, and it is of public utility by law.

This normative understanding provides relevant support for development of the industry.

The legislation, doctrine and judicial precedents have already consolidated a position favourable to the possibility of accessing third party land enabling mining activity through the establishment of mineral easements. Recently, Law 13,575, of 2017, also introduced the possibility of expropriation in favour of mineral endeavours.

Modernization of the norms 

Although the Mining Code remains the same, important alterations were created by Law 13,575/2017 (which created the National Mining Agency), by the new Mining Code Regulation (Decree 9,406/2018, which revoked the previous Regulation, of 1968) and by the new norms on the safety of tailings dams in mining:

i. Creation of the ANM with administrative and financial autonomy;

ii. ANM Board of Directors with a term;

iii. Expanded definition of mining: exploration, extraction, mine development, beneficiation, sale of ores, use of tailings and waste and closing of the mine;

iv. In addition to mineral easements, mining companies now also have a possibility of expropriation of real property to implement mining projects;

v. Possibility that the ANM may mediate conflicts between economic agents in legal relationships involving mining.

Administrative efficiency 

The ANM presented its premises to the mining community, based on autonomy, transparency, social control, governance, rendering of accounts, efficiency, simplification, integrity, participation of the industry and initiatives designed to increase mineral production.

Although it has only been installed for a short time period, it is already possible to feel the positive changes brought to the mineral industry:

i. The procedure for access and management of administrative proceedings is now electronic, which brought significant gains in speed, transparency and efficiency;

ii. Several mining rights repossessed by the Government will be put back on the market through a modern bidding system;

iii. Review of the regulations to reduce bureaucracy and improve legal certainty in the industry.

Evolution of Mining Law legal doctrine 

There has been clear progress in the study and development of the regulations, doctrine and jurisprudence in Brazilian Mining Law.

The main points of these advances are:

i. Mining administrative acts are considered binding, not discretionary;

ii. There are several Mining Law principles recognized by legal doctrine and jurisprudence:

o Principle of sovereignty of the country over its mineral wealth;

o Principle of conducting mining in the national interest;

o Principle of legal certainty;

o Principle of public utility of mining;

o Principle of continuity of mining;

o Principle of priority (this of the structuring nature).

Naturally, in addition to these, there are the different General Principles of Law, which also apply.

The trend is towards an advance and consolidation of the doctrine and jurisprudence related to Mining Law and to Environmental Law.

Environment 

The legal regime of environmental protection in Brazil is based on the Constitution and several different environmental laws.

The legislation, doctrine and jurisprudence show a high degree of quality and maturity.

The Government has given special attention to improving the legislation and procedures in relation to mining tailings dam safety.

The government has been adopting measures to streamline the performance of environmental agencies, making environmental licensing proceedings quicker and more transparent.

The Brazilian Mining Institute (IBRAM), recently, signed an agreement with the Mining Association of Canada for the implementation of a sustainability standard developed by the Canadian institution, called Towards Sustainable Mining (TSM). With this, there is an expectation for significant advance in the standards of sustainability actions taken by mining companies in Brazil.

Conclusion 

Despite going through some difficult years, Brazil is still a major player in the global mining industry.

It is an exporter and global player in niobium (1st), iron ore (3rd), vermiculite (3rd), graphite (3rd), bauxite (3rd) and kaolin clay (5th).

Brazil also exports tin, nickel, magnesite, manganese, chrome, gold and natural stones.

With a new Administration and the new National Mining Agency, the Government has improved the mechanisms of economic freedom, de-bureaucratization, efficiency, transparency and legal certainty, that form the basis for development of the mineral economy in the coming decades.