The Brazilian House of Representatives has approved a provisional decree that changes the country’s iron ore royalty rate.
The approved bill increases the rate from the current 2 percent to 3.5 percent. The bill will now go to the country’s Senate for a vote.
The House of Representatives said the iron ore producing states, especially Minas Gerais and Para, have asked the iron ore royalty rate to increase to 4 percent, so they could increase the states’ revenues.
While deciding the matter, the House’s vice-president, Fabio Ramalho, urged policy makers to approve the 3.5 percent rate. Otherwise, the topic would not come up for a vote.
Initial discussions proposed the rate to be 4 percent, with legislators later proposing that the rate vary from 2 to 4 percent depending on the commodity’s price in the international market. More recently, politicians discussing the bill proposed the rate at 4 percent for most iron ore producers, and 2 percent for the smaller miners in some specific cases.
Media reports said Vale lobbied to diminish the rate to 3.5 percent.
Vale said hiking the iron ore royalty rates would compromise the company’s ability to keep high-cost mines. That, in turn, would hurt its ability to compete as the world’s largest iron ore producer.