Argentina, a country rich in natural resources, has long been recognized as a potential hotbed for Canadian mining investment. Its diverse geology is abundant in mineral deposits, from precious metals to base metals to lithium. However, the allure of Argentina as a mining destination has long been tempered by numerous political, legal and economic challenges that have made investing in Argentina daunting. As a result, Argentina's mining sector has not reached the level of development seen in similarly endowed countries.
However, in the year and a half since Javier Milei assumed Argentina's presidency, the government has made noteworthy headway in tackling some longstanding Argentine macroeconomic problems. In addition, several Argentine provinces have emerged in recent years as solidly pro-mining jurisdictions, where responsible projects stand a good chance of receiving mining permits. In fact, three provinces – Salta, San Juan and Jujuy – now rank as the top Latin American entries on the Fraser Institute's annual review of the world's mining jurisdictions. This has naturally been accompanied by a marked uptick in Canadian miners' interest in Argentina.
So, is now the time to invest in mining in Argentina? The answer, as to so many questions, is "it depends." Like any country, Argentina has its strengths and weaknesses. Developments in the coming year or two will reveal whether Argentina is able to build on its strengths or whether remaining political and economic weaknesses will cut short its progress. In short, the durability of Argentina's attractiveness as a destination for Canadian mining investment will depend on how effectively Argentina manages its vulnerabilities and how determinedly it capitalizes on its advantages.
Strengths
Argentina boasts an abundant variety of mineral resources, including copper, gold, silver, lithium, uranium and zinc. The country's geology is particularly conducive to significant lithium and copper deposits, positioning it as a global contender in these markets. Argentina is, in fact, the world's fastest growing lithium producer, and many areas of Argentina have yet to be explored for copper, offering a high potential for new discoveries.
In recent years, the Argentine government and several provincial governments have taken steps to foster a favourable environment for mining investment. Policies have been implemented to streamline permitting processes and reduce bureaucratic hurdles. Argentina stands out, in fact, within Latin America, for its relatively liberal regulatory environment for mining (although some provinces are exceptions). Furthermore, in the last year, the federal government has introduced a broad program of legislation to make the country more business-friendly in general. The so-called "Law on the Bases and Starting Points for the Freedom of Argentines" (Ley de Bases y Puntos de Partida para la Libertad de los Argentinos, or "Ley de Bases" for short), passed by Argentina's Congress in mid-2024 includes a wide range of important free-market economic reforms.
Furthermore, Argentina is competitive when it comes to the taxation of mining. Mining royalties are capped at 3%, much lower than in Chile and Peru. And various studies show that the all-in effective tax rate for mining is lower in Argentina than in several neighbouring jurisdictions.
Importantly, the aforementioned Ley de Bases established Argentina's new RIGI investment promotion scheme (Régimen de Incentivo para Grandes Inversiones). This allows Canadian and other foreign companies with large mining investment projects (USD 200 million or more) to obtain tax breaks, customs preferences and exemptions from capital controls, while also promising stability on these matters for 30 years. The tax incentives include, among others, a reduced corporate income tax rate of 25% (as opposed to the ordinary 35%), accelerated depreciation, reduced withholding tax rates on dividends and special VAT incentives. The customs preferences include the right to import capital goods without duties, as well as exemptions from other export and import restrictions. The foreign exchange incentives address some of the disincentives that Argentina's capital controls otherwise create for foreign investment. Among other things, the RIGI scheme exempts participants from the requirement (which would otherwise apply) to use Argentina's official foreign exchange market to convert payments from foreign buyers of mineral products into Argentine pesos (the exemption increases from 20% of export revenues to 100% over a period of four years from the time a project enters into production). The scheme also guarantees access to the foreign exchange market for debt and dividend payments.
RIGI comes on top of other preexisting mining incentives, such as Argentina's Mining Investment Law (Ley de Inversiones Mineras) and Foreign Investment Law (Ley de Inversiones Extranjeras), which already offered some similar tax, customs and foreign exchange privileges. However, the RIGI regime goes beyond the other laws, and is buttressed by the right to take disputes with the government to international arbitration under the rules of the International Chamber of Commerce (ICC) or the Convention on the Settlement of Investment Disputes (ICSID). (Canada and Argentina also have a bilateral investment agreement, which is a further strength of Argentina as an investment destination for Canadian miners.)
Finally, addressing the fact that many of Argentina's most promising mineral deposits are located close to the border with Chile, the Binational Mining Treaty between Chile and Argentina (Tratado sobre Integración y Complementación Minera entre Chile y Argentina) establishes a favourable legal framework to facilitate mining in the border area, allowing Canadian or other investors to build truly cross-border mining projects.
Weaknesses
However, Argentina also presents vulnerabilities as a destination for mining investment.
Argentina's greatest weakness is its fragile economic stability. Although the Milei government has brought hyperinflation under control and balanced the national budget, Argentina has a long history of hyperinflation, currency devaluations, untenable fiscal deficits, capital flight and crushing external debt – the accumulated results of which place continued pressure on its economy.
The government is engaged in the delicate exercise of trying to attract sufficient foreign investment (i.e., sufficient foreign currency) to remove capital controls but, as of now, such controls remain in place. And any sudden adverse event could harm the prospects of controls being removed, or even plunge Argentina back into economic disarray. To shore up the economy, Argentina has just returned to the International Monetary Fund for a loan. Argentina is already by far the Fund's largest debtor and the government had previously forsworn seeking new loans.
The RIGI scheme is designed to draw foreign currency into Argentina, stabilizing its currency and supporting the removal of currency controls. It aims to do so in part by granting foreign investors an important measure of exemption from such controls, as described above. However, the RIGI scheme does not provide a blanket exemption for all of the conceivable foreign exchange requirements of a business, and RIGI protection is moreover subject to conditions, including a 2026 deadline for companies to apply for RIGI protection, a requirement that 40% of an applicant's qualifying investment be made in the first two years after its RIGI application is approved by the government, and technical requirements concerning financial ratios and other matters. Not all projects may qualify, and new prospective investors that have only recently turned their attention to Argentina may struggle to present a complete project application before the deadline (although there is the possibility that it will be extended by a year).
President Milei has announced that he wishes to remove currency controls by 2026, but a lot must occur, including in terms of sufficient foreign investments arriving under the RIGI scheme, for this to happen.
Additionally, despite Argentina's efforts to create a stable regulatory environment, the country's political landscape remains unpredictable. Changes in government have in the past led to dramatic shifts in policies, which may affect mining investments. The RIGI scheme will provide valuable protection for some investors, but others should be prepared for potential policy reversals that could impact their projects. In recent weeks, the Milei government has seen significant increases in its unfavourability ratings in public surveys, with almost two-thirds of Argentines reporting that the country is on the wrong path. Therefore, a political shift may be coming (midterm elections will take place in October).
Argentina also suffers from endemic corruption and is ranked poorly by bodies such as the World Bank on metrics focussing on the strength of its institutions, respect for the rule of law and overall government effectiveness.
Finally, Argentina is a federation. Although there is a national mining code, there is also a large provincial role in mining regulation. Unlike Salta, San Juan and Jujuy, some provinces are very skeptical of mining and are at or near the bottom of the Fraser Institute's annual ranking. Some haven't signed up for the RIGI scheme (a crucial aspect of the scheme is its requirement for
provincial approval), or have conditioned it, like the Province of Chubut, where the scheme has been modified to exclude many mining projects from qualifying.
Conclusion
In conclusion, Argentina currently presents a compelling case for Canadian mining investment, based on its rich mineral resources, exploration potential, government support and stabilizing economy. However, potential investors must take into account the potential for a return to economic instability, as well as pronounced political risks, which Argentina has not yet left behind, among other weaknesses.
The RIGI scheme provides very useful insurance against some of these weaknesses for qualifying projects. The aggregate volume of new investment driven by the RIGI regime will partly determine whether Argentina is able to keep its finances stable and remove capital controls, which would create better conditions for all mining companies, including those that miss out on the RIGI scheme.
Argentina has had several flashes of economic opening in recent decades, but has failed to adequately translate its potential into long-term financial stability, and has instead relapsed into hyperinflation and related problems. This time may well be different. If the current government can lead the country decisively away from the problems that have bedevilled the country in the past – including by leveraging Argentina's abundant mineral resources and its regulatory strengths – we may well be standing at the threshold of a new era, and now may indeed be the time to invest in mining in Argentina.
* * *
McCarthy Tétrault's Global Metals & Mining Group is very active in Argentina, having advised on numerous M&A and financing transactions in Argentina in recent years. Argentina and the broader Latin American region represent an area of focus for the firm, and the firm is unique among Canadian law firms in having permanent representation in Latin America.
To view the original article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
