Tuesday, September 30, 2008

Manaos, a hundred hurricanes and royalties

Lula, Evo, Muffin and Hugo all got together for a "mini summit" in Manaos (North Brazil, Amazon, overrated tourist trap par excellence, Lonely Planet sucks) today. No doubt they were planning some secret plan to take over the world or some such, but they made plenty of public statements about the US financial crisis. Here are four snippets from the dudes in question:

Lula said, "We all have the same forecast; the crisis is very serious and so deep that we don't yet know its size. Maybe it will be the biggest in the history of the world."

Hugo said, "I hope they find a formula to get out of the crisis and so that it doesn't keep expanding around the whole world like a fire, like a spectre....it could cause more damage (to South America) than a hundred hurricanes."

Studmuffin said, "These crises don't terrorize (South American countries) like they did before.....Hopefully the day will come for Latin America when it's irrelevant what happens in the United States, probably that's when we would have achieved our true sovereignty."

Evo said, "Capitalism is not the solution for the people that inhabit this planet...We nationalize so that the people have money, while the USA wants to nationalize the debt and the crisis of people who have money."

I guess the real pisser for you guys up there is to realize they're either right, or at least making sense. It certainly fits in with something that happened to me today. This afternoon I got a mail about the post on Ecuador this morning. In that post I floated the idea that a 10% royalty on Ecuador mining wouldn't be a project killer for KGC, IAG, DMM, CTQ (though it may well affect the very early stage projects). The mailer today was worried that incakolanews would get read by people in the Ecuador gov't and give them bad ideas. It was all "10% royalty?? Aiii, nooooooooo! Don't give them ideas...they might just do it!"

My correspondent is making a fundamental mistake. You guys really think I'm on the side of the Canadian capital markets and the rip-off merchants that populate 70% (and that's being conservative) of junior miners?

What have you dudes up there done for us down here lately?

It's about time you see that things are fundamentally different now, and if you try and foist any old deal on the region รก la 1990s you'll just get sent packing. It really hasn't sunk in that you can't take the lion's share of profits and leave crumbs any more, has it? In the case of Ecuador, that's going to mean splitting the gross profits around 50/50, not "pay some of the income tax, avoid the rest and squeal over a 3% royalty" like the mining industry did in Peru in 2005 (and still does today, in fact). It's payback time. If you don't like it, don't come. If you don't come that's ok, because you're unlikely to be missed.