Drilling into the Regulatory Framework
A complex landscape in search of clarity
Mining in Brazil is federally regulated, but with environmental matters, federal, state and municipal regulations can apply. Federal and environmental regulations do not always align, leading to inconsistencies in interpretation and enforcement of regulations at the permitting stage. Adriano Drummond Trindade, mining partner at Mattos Filho Advogados, explained: “This challenge is so prominent that the previous administration had to implement the “pro-strategic minerals policy” aimed at improving coordination among the various agencies, both at federal and state levels, that get involved in permitting a mining project.”
Brazil’s regulatory landscape is a maze, with mining companies required to navigate the municipal, state and federal governments. A variety of federal institutions are present in the mining industry, including the Ministry of Mines and Energy (MME), the National Mining Agency (ANM), and the Geological Service of Brazil (CPRM). This overlapping layer of institutions is supplemented by the multitude of other government players that regulate the industry’s labor, environmental and safety activities.
The National Mining Agency (ANM) was created in 2017 to take the place of the National Department of Mineral Production with the aim to modernize the industry’s regulatory framework. The ANM is also responsible for ensuring compliance with the mining regulatory standard, managing the mining registry and granting mining titles.
The creation of the ANM is viewed as a notable improvement on the previous regulatory landscape. In addition to offering greater streamlining and clarity, the agency has provided more transparent management of mining titles. The result has been a more collaborative approach to regulation. Frederico Bedran Oliveira, Mining Partner at Caputo, Bastos e Serra Advogados, elaborated: “The ANM is relatively new and there is still room for further development. However, the management of mining titles today is much more transparent. Today, there is social participation, where the private sector and law firms work together with the ANM to build the regulations.”
"In 2020, a regulation was implemented which reinforces the prohibition of the use of upstream dams for tailing ponds."
Manuel Fernandes, ENR Regional Co-Leader for Americas, KPMG
In order for investment to flow into Brazil, investors must have a clear regulatory and legal framework and strong institutions. The ANM supports the mining industry by creating a greater sense of stability and clarity. “In the regulatory and governance areas, the ANM is doing an excellent job,” said William Freire, founding partner of William Freire Advogados. “The national mining agency understands the necessity of mining for the country.”
The mining agency has benefited from the digitization trend sweeping the globe, with electronic files introduced in 2015. The agency invested significantly in the digitization of processes, thus speeding up permitting. For example, applications for exploration permits are now handled electronically and take a little over 30 days. However, the digitization of operations has not sufficiently compensated for understaffing and limited resources at the agency. There are still over 100,000 applications awaiting approval by ANM. “There should be 2,000 employees nationwide, but the agency has only 600,” said Marcelo Mendo, partner and head of the mining practice at Cescon, Barrieu, Flesch & Barreto Advogados. “Such limitations hinder the ability to implement new policies and regulations, but we expect the Federal Government to come to ANMs aid in the near future.”
"Mining in Brazil is considered a public utility activity, which is vital because it enables the mining companies to solve complex challenges."
William Freire, Founding Partner, William Freire Advogados
Environmental licensing adds a layer of bureaucracy and complexity to the already complicated concessions and regulatory landscape. At the federal level, the Ministry of the Environment develops policy, and the National Council of Environment (CONAN), implements the directives of the NMA. Mining companies entering the Brazilian market must obtain licenses at three points during the development process: A preliminary environmental license, an installation license before construction begins, and an operational license before the projects initiate operations. This process can take as long as 12 years.
The regulatory landscape remains in flux. On December 29, 2022, Law No. 14,514 was approved, extending terms for mineral exploration licenses for up to four years, and allowing every mining right to be used as collateral in financing transactions. The latter provides junior companies with improved access to capital markets. However, the government’s decision to change the “first-come-first-serve” system for exploration leases to an auction system has been challenging for juniors due to their limited capital. It will, nonetheless, benefit the broader mining sector.
Image by likilia at Adobestock