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Mining Industry Structure

Control of the extraction of natural resources in Bolivia had alternated between public and private control for decades. Bolivia's 1952 Revolution, led by the Nationalist Revolutionary Movement, was a turning point in the country's history. The government nationalized the mines of the three great companies — Patifto, Hochschild, and Aramayo — and distributed land to the campesinos. The revolution remained incomplete and lost momentum, however, when the government's policies produced a virtual bankruptcy of the economy.

In 1952, a process of nationalizing the mineral industry took place as the Government monopolized the export and sale of all minerals, which was administered by the state-owned Mining Bank of Bolivia. COMIBOL was then created to administer state-run mines. Mines belonging to the three major tin companies were nationalized, but the country’s medium-size mines were not. In the process, two-thirds of the mineral industry was turned over to COMIBOL.

The nationalization of the mines had a negative effect on the economy. The mines of Comibol produced at a loss because of the lack of technical expertise and capital to modernize the aging plants and nearly depleted deposits of low-grade ore. Declining tin prices on the world market contributed to the economic problems in the mining sector. Nevertheless, workers in the management of Comibol increased salaries and the work force by nearly 50 percent.

The rise of tin prices resulted in the first profit for Comibol in 1966 and contributed to increased production in the medium-sized mines that had remained in private hands. Minerals dominated the nation's economy; tin accounted for 40 percent of exports and 15 percent of government revenues as late as 1980. Mining dominated the economy from colonial times until the 1985 crash of the international tin market. Natural gas replaced tin and other minerals in the 1980s as the leading export and was the hub of future development strategies.

By 1985, the mineral industry in Bolivia had collapsed owing to the combined effects of political and economic conflicts (including political revolution and alternating civilian and military rule), decreased global prices for Bolivia’s mineral commodity exports, and economic hyperinflation in 1984 and 1985.

Victor Paz Estenssoro's third presidency (1985-89) was notable for his successful, albeit economically harsh, efforts to bring hyperinflation under control and to restore a measure of economic and political stability. Acting on the advice of a Harvard professor and several Chilean economists, Paz Estenssoro quickly applied orthodox free-market policies to cure Bolivia's sick economy, which was choking from decades of state intervention. He implemented an austere stabilization program, the New Economic Policy (Nueva PoHtica Economica—NPE), which laid off thousands of workers at inefficient state-owned companies, including three-quarters of the miners employed by Comibol (about four-fifths of its work force). He also enacted a state of siege to deal with the resulting labor unrest.

For the first time since 1952, the country's medium miners, small miners, cooperatives, and other producers, which made up the rest of the mining sector, produced more minerals in 1987 than Comibol. The medium miners consisted of Bolivian and foreign mining companies in the private sector that were involved in the production of virtually every mineral, especially silver, zinc, antimony, lead, cadmium, tungsten, gold, and tin.

The 1992 Privatization Law (Law 1330), the 1994 Capitalization Law (Law 1544), and the 1997 Mining Code (Law 1777) and related regulations together establish the mining industry’s regulatory framework. The Ministry of Mining and Metallurgy delineates general policies and guidelines, with the Superintendent of Mining, part of the National Sectoral Regulatory System (SIRESE), regulating and granting mining concessions after the Mining Technical Service (SETMIN) completes administrative and technical procedures.

The Bolivian Mining Corporation (Comibol), formerly the country’s largest producer, became the sole administrator of mining properties nationalized in 1952. According to the Bolivian Constitution, these may not be sold or privatized. Comibol administers and leases the properties by calling for tenders and signing fixedtime exploration and exploitation joint venture contracts. Comibol also administered properties acquired after 1952, leasing or selling them to Bolivian or foreign investors and leaving exploitation to others.

The private sector in 2006 was comprised of medium and small companies and approximately 500 independent miners’ cooperatives. The Medium Miners Association has nine associated mining and smelting companies which together employ an estimated 5,000 miners. Small firms are associated with relevant departmental mining chambers, which in turn are associated with the National Mining Chamber.

Over 500 mining cooperatives encompassing an estimated 45,000 miners are registered with the National Federation of Mining Cooperatives (FENCOMIN), a group that has grown steadily with the gradual closure of mines over the fifteen years 1990-2005. The organization in 2006 had 109 mining cooperatives mining base metals in the departments of Oruro and Potosí, 21 cooperatives mining ulexite and other non-metallic minerals near the Uyuni salt flats, and 376 cooperatives mining alluvial gold, tin, and tungsten in the department of La Paz.

Approximately 17,000 former Comibol employees and salaried miners employed by private companies were members of the Bolivian Miners Union (FSTMB), a fragmented and relatively radical group that by 2006 had become an increasingly influential player in Bolivia’s mining industry.

In 2006, COMIBOL began operating under a framework of natural resource recovery and mineral industry reactivation with responsibility for the direct management of the Nation’s state-owned mining centers.

Bolivia’s mining collectives mined deposits that were explored and prepared for COMIBOL and pay 1% of the marketed value of extracted minerals to operate on their concessions. The income generated by cooperatives typically amounted to modest salaries for members, but as the prices of metals have remained high in recent years, the cooperatives have developed into a significant economic and social power. Bolivia’s mining collectives are subsidized by the state in several ways — primarily by being exempt from paying income taxes. In the case of gold, the collectives paid five times less in royalties than mining companies, and the majority of mining cooperatives functioned as gold miners. The cooperatives received donations of equipment and other inputs in order to operate and benefit from financial entities that were created exclusively for the benefit of the collectives and have their own mineral traders that are funded by the state along with other benefits.

The mines often employ children as assistants to carry equipment, control drill air pressure, and load dynamite into drillholes. Children also work as beasts of burden, carrying ore on their backs or pushing ore cars. As veins thin out, children are sometimes employed at the farthest reaches of the tunnels, their small size allowing them to enter into the most dangerous areas of the mine. Some children work in family operations, helping out before or after school. Other children take their fathers' place when their fathers are incapacitated or killed in the mines. With no social safety net, the cooperatives often view this employment of children as a type of 'widows and orphans fund': without the mine income, the family would often be unable to feed itself.

Economics suggest that cooperative mining is a comparatively good option in Bolivia, despite the inherent hazards. To buy a partnership in a cooperative, individuals must generally invest at least USD2000 (roughly twice the average annual salary in Bolivia) to gain "ownership" of a vein or section of a mine. Reportedly some partners are currently making over USD3000 per month. Drillers can earn over a thousand dollars a month (out of which they pay their young assistants), partially because their job requires skill and experience, but partially because it bears the highest risk of lung disease and roof-falls, and the salary reflects this danger.

In early 2014, about 100 mining cooperatives were understood to have partnered with private companies mostly working in Potosi and La Paz. By partnering with private companies, those cooperatives increased their earnings while remaining exempt from paying income taxes on the additional income, and the private companies benefited by gaining access to mining areas from which they had been restricted.

COMIBOL held dozens of mining properties in various stages of development or environmental remediation. Producing mines that were partially or wholly owned by COMIBOL in 2013 included but were not limited to the Coro Coro copper mine [jointly owned by COMIBOL (55%) and Korea Resources Corp. of the Republic of Korea (45%)]; the Cerro Rico silver, tin, and zinc mine (COMIBOL, 100%); the Huanuni tin mine (COMIBOL, 100%); the Bolivar lead, silver, tin, and zinc mine (a joint venture between COMIBOL and Sinchi Wayra S.A., with a 50% share each); the Colquiri silver, tin, and zinc mine (COMIBOL, 100%); and the Sinchi Wayra lead, silver, and zinc mine (joint venture between COMIBOL and Sinchi Wayra S.A. 50% each).

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Page last modified: 27-08-2016 15:33:00 ZULU