Vale’s $2 Billion Tax Break Plea Denied by Argentina, Perez Says

Vale SA (VALE3), the mining company that halted construction at a potash project in Argentina, won’t get as much as $2 billion in tax breaks from the Latin American country as it negotiates terms to resume work.

Argentina rejected the tax deferrals, which Rio de Janeiro- based Vale requested after costs for its $5.9 billion Rio Colorado project rose to “complicated” levels, according to Francisco Perez, governor of Argentina’s Mendoza province, where the mine is located.

Vale is selling assets and canceling projects as profits are expected to fall to a three-year low. It’s negotiating with a potential partner for the potash project and cut the venture’s 2013 budget to $611 million from $1.08 billion last year. Work has been suspended indefinitely while it reassesses Rio Colorado.

“Vale asked for deferring the VAT tax during the construction phase -- we are talking about between $1.5 billion and $2 billion,” Perez said today in an audio file e-mailed by the province’s press office. “The Argentine president already told the Brazilian president that’s a lot of money.”

The company’s deadline to submit plans for restarting the project was extended until the end of this month. Vale’s press office in Rio de Janeiro declined to comment when contacted by Bloomberg News today.

Argentina’s national and provincial governments will continue negotiations with Vale about restarting the project after authorities met Chief Executive Officer Murilo Ferreira and Brazil’s Industry & Trade Minister Fernando Pimentel in Buenos Aires yesterday, Perez said. The government suggested cheaper rail alternatives and bringing in partners, he said.

“The ball is now in Vale’s court,” Perez said.

Vale declined 1.7 percent to 38.10 reais at the close in Sao Paulo.

To contact the reporters on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net; Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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