According to a recent study, companies that carry out mining activities in the country, operate with a profit margin of 22% before paying taxes.
The report prepared by Central American Business Intelligence (CABI), details that companies in the mining industry operating in Guatemala can achieve extraction costs of up to 55%.
The miners of construction aggregates oppose the increase of 1% to 10% on mining royalties and propose that the tax should be proportional to the volume and type of material extracted.
The Mining Association of Guatemala (AMG) wants royalties to remain at 10% for gold and silver, while for limestone, sand, plaster and other building materials for them to be reduced to 3%, negotiable.
The mining union is opposed to the increase from 1% to 10% for precious metals and the elimination of voluntary royalties to municipalities contemplated in the 2015 budget.
Besides the new tax on the distribution of bags of cement and telephony, increased royalties for the exploitation of minerals and construction materials are also part of the new fiscal package which comes with the 2015 budget.
The Guild of Extractive Industries would accept the increased royalties as agreed at the start of the Pérez Molina administration.
An article in Prensalibre.com reports that Mario Orellana, president of the Union of Extractive Industries, said "... The initiative proposed by the Ministry of Energy and Mines (MEM) is embodied in the agreement that we voluntarily accepted at the start of this government.
From these revenues the mine gave the State of Guatemala 4.25% in royalties.
The Marlin mine in San Marcos generated these revenues during the first half of 2013. "The cost of gold mining in San Marcos is $182 on average and is still the lowest of the 11 companies of which Goldcorp owns or has interests in in the continent," noted an article in Prensalibre.com .
The Guatemalan Nickel Company (CGN by its initials in Spanish) has reported that it will pay voluntary royalties semi-annually amounting to 2% of its commercialized mining product.
Under ministerial agreement 009-2013 signed on the 6 of December, the company CGN has agreed to pay a voluntarily contribution of 2% to the state and municipalities.
"Of that 2 percent, 1 percent is to be distributed equally to the State and the municipality of El Estor. The other 1 percent is to be split between the municipalities of Amates, Puerto Barrios and Livingston, in Izabal, and Panzós , in Alta Verapaz, and the Ministries of Environment and Energy and Mines.
The Constitutional Court of Guatemala has received allegations from indigenous groups regarding the constitutionality of the Mining Act which has been in force for 15 years.
Concerns about a possible court ruling in favor of the constitutional motion filed by the indigenous people was demonstrated by the presence of entrepreneurs in the courtroom.
According to an article in Siglo21.com "the first to make their arguments were the proponents of the constitutional motion, via their lawyer Lucia Xiloj, who explained that the mining law, as determined by the CPO, is unconstitutional because it was approved 6 days after the ILO Convention 169 took effect, which stipulates in Article 6 the right to prior and informed consultation. These arguments were refuted by Mario Fuentes Destarac, representing the Chamber of Industry. "
The bill also deals with the distribution of royalties, the formation of a Mining Council, and the creation of environmental insurance.
A bill has been presented in the Guatemalan Congress to amend 30 articles of the Mining Act. Among the changes is the creation of a state mining company which may participate in public or mixed investments.
"If Congress approves the amendments to the Mining Act, the voluntary agreement will legislate to increase royalties on mining companies which currently stands at 5 percent for the exploitation of gold, 4 percent for silver, 3 percent for nickel and 1 percent for construction materials", reports Elperiodico.com.gt.
The agreement signed by 22 companies in the extractive industry will mean an increase in annual revenues from mining royalties of about $64 million.
Having previously paid 1% in royalties, gold and silver mining companies will pay the Guatemalan state a rate of 4%, said the President Otto Perez Molina.
"In the case of base metals, nickel and zinc, among others, the rate rises to 3 percent, while for non-metallic minerals, construction materials, the level will remain at 1 percent, as established by the law", informed PrensaLibre.com.
The establishment of the royalties paid by mining companies will not be subject to law, but the product of voluntary agreements between the government of Guatemala and those companies.
After negotiations with the industry, officials from the Ministry of Energy and Mines signed agreements with mining companies to increase royalty payments.
The agreements are part of the so-called "Framework Agreement for the Implementation of Voluntary Royalties." The royalties will go from the current 1% to 3% or 5%.
While waiting for the new mining law, the future Minister of Energy and Mines is negotiating a increase in payments to the State, which currently stand at 1%.
Erick Archila, the newly appointed Minister of Energy and Mines of the government of President-elect, Otto Perez Molina, who will take office on January 14, said that they are holding meetings with various sectors, including the Extractive Industries' Guild, with whom they will negotiate the royalties.
The Peruvian Congress has passed a law which will raise the taxes on mining profits by six times its current value, equating to about $1,100 million annually.
The reform, driven by nationalist president Ollanta Humala, aims to reduce the high rate of poverty in the country which is rich in natural resources.
An Article in Reuters reports, "Peru's mining sector, the second largest producer of copper and silver, is vital to the local economy as it contributes to nearly 60 percent of export earnings."
Mining in Guatemala pays 1% in royalties. In Colombia, the royalties are 4% and in Chile's mining industry pays the state 14% of gross sales.
In the past five years, exports of silver and gold have increased from $14.6 million in 2005 to $528 million in 2010.
The most recent announcement made by the Canadian mining Goldex Resources Corporation, revealed preliminary results of testing of the first seven out of twelve drill holes, on its flagship property, the El Pato Project, in Chiquimula. "The mining company said it has found high-grade mineralization of 12.4 grams of gold per ton", reported Alexis Batres in an article in Elperiodico.com.gt.
The lead candidate in the polls for president, Otto Perez Molina, has said that the percentage paid by mining companies to the State should be between 7 and 10%.
The rate currently being charged by the country as royalties for the extraction of gold, nickel and silver is 1%, the lowest in Latin America.
"Guatemala's mining industry has become a hot political issue in the Central American nation ahead of the presidential elections on 11 September, in which Pérez Molina ranks highest in the polls", reported Reuters.com.
The Canadian company Minera Panama, SA announced that it will only pay a 2% royalty on profits to the Panamanian State.
The official response from the company was given last week, after several months of discussion with the current government, including after bringing up in the reform of the Mineral Resources Code (last February) the possibility of upgrading the royalties from 2% to 4%.