The government of Ecuador intends to implement a harsh new mining tax that could do away with the exploration sector as it seeks to fill a fiscal hole. The administration of Daniel Noboa is seeking to raise US$229M through the Mining Inspection Fee (Tasa de Fiscalización Minera), which aims to strengthen technical and environmental control in the sector. The fee will apply to all levels of mining except small-scale mining. On the positive side, the government reopened the mining cadaster on June 16, which has been closed since 2018, which will allow companies to apply for exploration concessions. Initially, it will open for small-scale, non-metallic concessions, such as sand and gravel. Other elements will be reopened throughout the rest of the year.

Ecuador’s CME mining chamber slammed the new tax, “which has not been thoroughly discussed with the industry, and which we consider technically unfeasible for responsible and sustainable development of the sector,” it said. While recognising the need for greater state control and sector supervision, the CME criticized its structure. The tax will be levied per hectare, with differentiated rates depending on project stage. “In the case of large- and medium-scale mining regimes, and especially in the exploration phase, the proposed values are unfeasible,” said the CME, with the value of the tax likely to exceed the projected exploration investment. “This turns oversight into an obstacle, not a tool for regulation,” it said.

CME also criticized the additional financial burden it would place on non-revenue-generating exploration companies at the riskiest part of their development. “While we understand that, as an administrative fee, its issuance does not require a formal law, it must respect the constitutional principles of proportionality, reasonableness, and equivalence. In its current design, the fee bears no relation to the costs of the service provided or the economic capacity of the taxpayer, which generates a disproportionate impact on exploration activities,” said the CME. An analysis by the CME showed that the fee would make Ecuador less competitive for exploration than other Latin American countries. It said the cost per hectare to explore in Ecuador is $11.50, compared with $6.70 in Colombia, $4.50 in Chile and $3 in Peru. “Ecuador is the most expensive country in the region to explore, and this difference will be amplified with the new rate,” said the CME.

Mining lawyer Stevie Gamboa created a tool for companies to calculate the fee they could face. Click HERE to access it.