New Consumer Protection Law ready for first debate

In Ecuador, on March 6th, 2012 the final draft of the new Consumer Protection Law was presented before the National Assembly (Congress), in order for its President to call for a first debate on it, and have all Assemblymen give their input on this important piece of legislation.

Many changes are present in this project, in comparison with the current legislation; although the spirit of the norm remains similar.

Nonetheless that the final law, when and if approved, will probably be vastly different form this project, we have been able to spot several major improvements and forward steps in the consumer protection area, in accordance with the current legislations worldwide.

What first strikes the view when glancing at the law project is its size when compared to the current Law, as this has a mere 95 articles, when the project proposes 231, which signals its thoroughness.

The most important changes and additions revolve around several commercial relations where the consumer has been usually in a disadvantage position against the supplier, mainly: construction and housing, public and private education, air transportation, e-commerce, banking and insurance, public services, among others.

Also, the tutelage mechanisms have been overhauled, in order for the authorities to be of better help to the consumer, as the current mechanisms are not only slow, but can be ineffective unless the consumer itself is pushing the procedures.

Finally, a better treatment of all items related with advertising law is included, therefore aiding in the protection of consumers, regarding not only abusive or misleading advertisement, as is the case with the current legislation, as the new Law project includes articles on violent and discriminating advertising.

The date for the first debate has not been set yet as the Assembly is currently preoccupied with the Communications Law, which has been give major priority by the Executive Power, and is due for a final debate on the following days.

It will be important to track the changes proposed after the first debate on the Consumer Protection Law, as there still are ways of improving the current project, but it will be wise to target such after the polished project is presented for a final debate.

Juan José Arias

Calculation of Royalties and Benefits of the Metallic Mining Activity

In the Official Gazette No. 657, of March 9th, 2012, the Instructions for the Audit, Calculation of Royalties and Benefits of the Metallic Mining Activity were published. In this Official Gazette it is specifically settled down the way of calculating the royalties that the State acquires by the signature of a contract of mining exploitation. According to what is set forth by the Constitution of the Republic of Ecuador, royalties are part of the economic profits for the State, and for that reason these Instructions settle down, by means of a formula, the way in which are calculated the royalties that will be surrendered to the State, considering certain status of the market, as the International Price, in which, for example, the official price established by the London Metal Exchange-LME institution is used, in the case of the copper.

These Instructions also establish the calculation and payment of the royalty to the State, which is checked by officers of the Agency of Mining Regulation and Control and of the Service of Internal Incomes. Additionally, in tributary issues, the payment of the royalty will be considered as an expenditure deductible of the Income tax, based on what has been received and not based on the payment or paying-off of the anticipated royalty, according to the instructions. Likewise, the Instructions for the Audit, Calculation of Royalties and Benefits of the Metallic Mining Activity enlighten the payment of the anticipated royalty, which can be agreed by the parties in the contract of mining exploitation, besides the settlement, the refund and the retention of the anticipated royalty based on the current tributary regulatory scheme.

The benefits for the State and the Sovereign Adjustment are also included in these Instructions, in which it is directed that the Agency of Mining Regulation and Control will determine the difference that the mining concessionary will have to pay to the State, in case the benefits of the mining concessionary were higher than those corresponding to the State. As well as in the case of the royalties, the economic benefits of the mining concessionary will be calculated by means of a formula and the values that these may present and that could alter the Sovereign Adjustment will be liquidated previous inspection of the benefits and of the amount to be paid, which will be carried out by the Agency of Mining Regulation and Control, accordingly with the norms of the Constitution of the Republic.

Finally, the Instructions for the Audit, Calculation of Royalties and Benefits of the Metallic Mining Activity deal with the auditing procedures, inspection and control that will be carried out by the Agency of Mining Regulation and Control, also with specialized firms, previously qualified by the Agency, under its supervision. These processes should be in accordance with the Constitution of the Republic, with the effective Mining Laws and Regulations, with the contractual obligations acquired by the signature of a mining exploitation contract, with the tributary Laws and with the International Norms of Internal Audit (NIAI).

Cecilia Falconi Pérez

Copper mining on a large scale in Ecuador

The government of the Republic of Ecuador will start operation a large-scale copper mining process through a contract between the state and the company “Ecuacorriente”, a Canadian subsidiary of “Corriente Resources” in turn controlled by the “Chinese Tongling Nonferrous Metals Group” and “China Railway Construction”. The company will invest 400 million dollars over the next five years. This exploitation of copper is based on an open pit operation which will allow the extraction of 60 000 tons of material daily, with the help of about three thousand one hundred workers. According to some studies in the field Mirador, Ecuador could become the sixth largest exporter of copper worldwide. The Government considers gaining about four thousand four hundred fifty-eight million dollars in profits.

Ecuacorriente makes estimates indicating that in the prospecting area, between the provinces of Zamora Chinchipe and Morona Santiago, there are five billion pounds of copper which is distributed in the reserves. The Natural Nonrenewable Resources Minister, Wilson Pástor, announced that once obtained the relevant permits from all relevant government institutions such as the Ministry of Environment, National Water Secretariat, the National Institute of Cultural Heritage, the company may initiate civil works and facilities for open-pit mine. It is estimated that production will start in late 2013 by means of this contract that is valid for 25 years. The core of this contract is the insertion of the state in the mining activities, which can’t be less than 52 percent. This puts the Ecuador “at the forefront of mineral rents in the world” according to Minister Wilson Pástor.

Gains from the increase in the base price of a pound of copper will increase profits for Ecuador immensely. Additionally, Ecuacorriente will deliver upfront royalties of one hundred million dollars to the state, payment that will be divided into three installments. This money will be used for social development in the parishes of Zamora Chinchipe.

Mario Ruiz Fernández