According to a report carried by Brazilian Newspaper O Folha de Sao Paolo, the Brazilian government is planning to cap FDI in the country’s mining industry, amidst concerns over the growing number of Brazilian miners falling into foreign hands. The paper cited Brasilia’s concerns regarding the increasing foreign ownership of the country’s mineral resources, both miners and mining projects.

The paper indicated that even though the new Brazilian president, Dilma Rousseff, is keen on encouraging FDI in general, the government is concerned at the rapid expansion of Chinese involvement in country’s mining sector in the last few months.  As such, the administration wants to limit future Chinese ownership of, in particular, iron ore deposits in Brazil.

According to the reports, the Rousseff administration is yet to comment on the publication, signaling there might be such plans underway. According to the newspaper, the proposed new mining legislation will be sent to the Brazilian Congress in June, and President Rousseff wants it passed before the end of this year.

O Folha de Sao Paolo reported that the new law will restrict foreign investment in mining by means of “various mechanisms” that it will introduce. These could include giving the government the power to limit foreign involvement in mining projects on the grounds of the “investor’s shareholding profile”.

Moreover, the new law might give the State the ability to impose domestic supply quotas on mining companies, or, alternatively, impose lower royalties on sales to industries operating in Brazil. Although such measures would have no direct bearing on foreign ownership of mines, they would ensure the supply of ores to Brazilian-domiciled industries (whether locally or foreign owned).

The newspaper further indicated that another feature of the new legislation would be to require companies seeking exploration permits to bid for them at auctions, instead of, as at present, receiving them after submitting an application.

Last year Brazil enacted a law forbidding foreign companies from buying property with an area greater than 5 000 ha; although obviously directed against large-scale purchases of agricultural land, this was also, at the time, seen as a first step in restricting foreign participation in the country’s mining sector.

Apart from this limit on land purchases, there are currently no restrictions on foreign investment in mining in Brazil. Such a move may be targeted chiefly at curtailing aggressive Chinese FDI in the country’s mining sector, with particular interest in Iron ore deposits.