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BRAZILIAN GROWTH Seeing that it could no longer service its debt, the Brazilian government declared a debt moratorium in 1987. The country entered in a period of economic stagnation and hyperinflation. A new phase began in 1994 with the Real Plan and the creation of a new currency, explained Maurício Novis Botelho, former chairman for Embraer, which together with other strong healing measures, put an end to the unbridled inflation that corroded the economy and brought an enormous uncertainty and damage to the Brazilian society. Botelho spoke to the group at Liebherr's recently restored aerospace facility. A mechanical engineer educated in Brazil, he worked his way to the top of Embraer. Botelho was president and CEO of Embraer from September 1995 to April 2007, where he was responsible for the company's reorganization involving the introduction of a new corporate culture oriented to customer satisfaction that repositioned Embraer as one of the world's leading aircraft manufacturers. In March 2006, Embraer was the first major Brazilian corporation to go public. From March 2006 to January 2012, he served as chairman of the board of Embraer. The Real Plan adopted and implemented crucial measures to re-establish a solid economic and financial base, including infla- tion targets with a floating currency exchange system. "Also, the national financial system reform implementation and banking regulation actions, together with the promulgation of the Fiscal Responsibility Law, were of fundamental importance for the success of the economic reform," Botelho said. The law holds elected officials responsible for budgets liable. During the years of hyperinflation, the Brazilian people lost their way, Botelho explained. "Every day they saw prices climb and they lost touch with the true value of goods and services," Botelho said. "The Real Plan placed a fixed value on good services that the people could relate to. It gave them something tangible." With a stable financial structure and taking advantage of the world's appetite for raw materials, the government was able to stimulate growth, increase foreign trade and create jobs, Botelho explained, promoting a social migration of great relevance. "About 50 million people have left their poverty status migrating to middle class since 2003," Botelho said. As E&MJ; is reporting this month (See Leading Developments, p. 4) Vale, the world's second largest mining company by market capitalization, has budgeted $16.3 billion for capital expenditures during 2013. Iron ore projects account for $4.9 billion (48.4%) of Upcoming Changes for the Brazilian Mining Legal Frame By Affonso Aurino Barros da Cunha The market has been closely following the discussions between the private and public ends of the mining sector in Brazil with regards to the proposed changes by the government for the country's mining legal frame. Many believe these changes will finally be submitted to the National Congress during the first half of 2013. It is a unanimous understanding that the Brazilian Mining Code is outdated and the country needs a clear and coordinated policy that brings security to the private players, so as to enable the inflow of more investments in the sector. Even though a draft text has not been formally disclosed yet, information released by the government indicates the path it wishes to follow. The changes would comprise three umbrella themes: • The revision of the collection system of the royalties paid by mining companies, known as CFEM, probably with the increase of rates; • The implementation of a different system for the concession of mining tenements (leases), similar to public auctions, as well as the modernization of the Mining Code and the creation of the National Council of Mineral Policy (CNPM); and • The transformation of the DNPM (the government body linked to the Ministry of Mines and Energy that supervises mining activities in Brazil) into a regulatory agency. Each one of such subjects shall be addressed by a specific Law Project, but www.e-mj.com shall be taken into consideration as a whole by the Congress, once the government wishes to submit them all at the same time. And, this is at least one of the reasons for the delay in the process. While the three Law Projects are being analyzed by staff members of several Ministries, the Law Project on the DNPM is also causing the federal authorities some difficulties. Currently, the DNPM has its performance impaired by the lack of personnel, as well as the lack of financial and administrative autonomy. While the government's plan to transform it into a regulatory agency seems ambitious in a positive way, it has proven to be more expensive than first calculated. Just to begin, such transformation would entail the increase of the salaries of DNPM's employees, so they match the remuneration of other regulatory agencies' staff. This along with the modernization of all DNPM's structure exceed the federal budget for the project. In any case, the planned transformation would mean an essential step for the modernization of the Brazilian mining sector, bringing transparency and decreasing the level of bureaucracy. In the new regulatory agency (to be called National Mining Agency or ANM), its president shall have more autonomy from the federal government, decisions shall be taken by collegiate boards of directors, and terms of office shall have pre-determined expiration dates. Its performance shall be completed by the activities of CNPM, which shall be composed of representatives from several Ministries to conceive and coordinate the implementation of a national mining policy. Obviously, in practical terms these changes will mean nothing if the ANM is not fully equipped to face the tasks to be incumbent upon it, and Brazil's federal government ought to find a way to finance it. After all, the market expects that the country's mining industry shall receive around US$68 billion until 2015. The sector is far too important not to undergo this modernization and the government is certainly aware of it. Affonso Aurino Barros da Cunha is a partner with the Brazilian law firm Siqueira Castro Advogados. He specializes in mining law, mergers and acquisitions, and foreign investment. For more information visit: www.siqueiracastro.com.br. JANUARY 2013 • E&MJ; 81