Can RIGI help Argentina’s mining sector compete with Chile and Peru?

The Incentive Regime for Large Investments (RIGI) could finally help Argentina achieve its mining potential, writes Elizabeth Lopez, director at Mendoza Mining Legal Solutions…

In Argentina, the Incentive Regime for Large Investments (RIGI), a key pillar of the Bases Law (Law 27.742), is the central bet of Javier Milei’s government to boost economic growth. This regime opens a unique horizon for investment by establishing a framework of predictability, stability, and competitiveness. Designed to attract large-scale investments, it fosters strategic sectors and implements measures that ensure a sustained flow of capital and development.

It is based on three fundamental pillars: first, regulatory and exchange rate stability, applied automatically rather than merely declaratively; second, a series of exchange, customs, and tax incentives; and finally, more efficient commercial arbitration regulations, granting investors the possibility of directly resorting to international courts for dispute resolution. All of this contributes to restoring confidence and improving international competitiveness.

RIGI applies to mining, forestry industry, tourism, infrastructure, technology, steel, energy, oil, and gas. Minimum investment amounts vary by industry, setting a threshold of $200million for mining, to be completed within the first two years after project approval.

To reinforce legal security, the new regime declares investments under RIGI as of national interest, under the progress clause of the Constitution. This ensures 30 years of stability in tax, customs, and exchange matters, providing certainty for investment planning and decision-making.

Is Argentina on the cusp of a mining boom?

Mining development requires a different approach from other industries. It is a long-term activity that demands stable policies to provide certainty for investors. It involves high capital investment, elevated risk, and long recovery periods.

Amid the current energy crisis and growing demand for critical minerals, Argentina faces a key opportunity in the energy transition. Its mining sector is attracting major international players, driven by political change, especially in Mendoza, where a new vision of mining and favorable economic factors has created an enabling environment for its development.

Regarding copper, Argentina has not yet begun production but has eight projects at different stages of development. Recently, the mining company "PSJ Cobre Mendocino" submitted an updated Environmental Impact Report on the San Jorge project that could soon become the country’s first new large copper mine since 1997.

Argentina versus Chile and Peru

Various mining jurisdictions across the region have incentive regimes to attract investment, overcome financial barriers, and promote large-scale projects. In the past, Argentina has implemented promotion schemes that facilitated major investments, though they were insufficient to guarantee sustained development.

Regarding copper, Argentina has not yet begun production but has eight projects at different stages of development

RIGI builds on these lessons, establishing clear rules and ensuring legal security and stability for 30 years. Its effects are already visible in the country’s increased competitiveness, positioning it as an attractive regional investment destination.

Reducing the tax burden is key. Under RIGI, Argentina’s effective tax rate in mining dropped from 47% to 38%, improving competitiveness compared to Peru, where the fiscal burden has fluctuated between 42-52%, and Chile, which raised its rate to 44.7% in 2023 with an increase in mining royalties.

Tax and customs incentives

RIGI guarantees the stability of existing taxes and rates, preventing increases in the tax burden on enrolled projects during the regime’s validity. If an increase is attempted, beneficiaries have the automatic right to reject it. Additionally, jurisdictions that do not adhere to RIGI cannot restrict, violate, or hinder its provisions. Key incentives include:

• Reduction of the Corporate Income Tax to 25%.

• Exemption from import duties for capital goods, inputs, and necessary project-related merchandise.

• Elimination of export duties from the third year, and for Long-Term Strategic Exports, from the second year.

• Ability to keep accounting records and financial statements in US dollars under International Financial Reporting Standards (IFRS).

• Foreign exchange management facilities, allowing the progressive free disposal of export revenues, reaching 100% after four years of project implementation.

• Unrestricted access to the foreign exchange market for loan repayments, investment repatriation, and dividend distribution, subject to prior foreign currency entry.

RIGI projects so far

To date, ten projects have requested enrollment in RIGI, with one already approved in renewable energy: Luz de Campo S.A. / YPF Luz, which will develop the "Parque Solar El Quemado y Anexos" in Mendoza with an investment of $211million. Nine more projects are awaiting approval.

Currently, key sector projects under evaluation include:

• Mining: Posco and Rio Tinto in Salta (Lithium) will expand their plants, investing $1billion and $2.5billion, respectively. Minas Argentinas S.A. in San Juan (Gold) will invest $1billion in Gualcamayo.

• Hydrocarbons: YPF leads "Vaca Muerta Sur" with an investment of up to $3billion to build an oil pipeline and port terminal in Río Negro.

• LNG: Southern Energy plans a production barge in the Gulf of San Matías, investing $2.9billion over 10 years and $7billion over 20 years.

• Steel Industry: Sidersa will invest $300million in a plant in San Nicolás.

• Renewable Energy: PCR and ArcelorMittal Acindar will build a 180 MW wind farm in Olavarría with an investment of $255million.