Fiscal Aspects of Negotiating Third World Mineral Development Agreements

Third World countries have lately taken a variety of actions to improve their revenues from the development of their mineral resources. Increasingly, their governments seek to negotiate production agreements on the basis of feasibility studies and discounted cash flow projections. Developing countries are now more selective in giving incentives to encourage investment in the mining sector. They recognize the value of their contributions to mining projects by way of guarantees and the provision of infrastructure. Third World governments now seek to participate in the basic decision making which determines profitability, such as loan-equity ratios, plant capacity, and processing and sales arrangements. They are alert to the benefits of large-scale development and appreciate their risks. They seek to increase their benefits from foreign exchange earnings and the multiplier effect of mining projects. New forms of arrangements are being used to insure that the mining sector is developed in harmony with the national objectives of the Third World.