July 9 (Bloomberg) -- Guatemala Finance Minister Pavel Centeno ruled out a government seizure of stakes in mining or other natural resource companies as part of a series of proposed constitutional changes.
Existing investors won’t be affected by the proposed changes, which would allow the government to have as much as a 40 percent stake in natural resource companies, Centeno said in an interview today in Guatemala City. Shares in Reno, Nevada-based mining company Tahoe Resources Inc. and Goldcorp Inc. trimmed losses following the comments.
“We are not going to expropriate, we don’t want to expropriate, this would be counterproductive,” Centeno said from his 18th floor office in the capital. “We don’t want to manage them. We don’t want to interfere in the business of natural resource exploitation.”
Guatemalan business leaders, including the country’s chamber of commerce, said yesterday they oppose President Otto Perez Molina’s plans to change the constitution. The government is open to talks over the proposals, which seek to diversify tax revenue, reduce the size of the legislature and strengthen the justice system. Perez Molina will send his final proposal to congress in August, Centeno said.
Shares in Tahoe Resources, which has its Escobal silver mine southeast of Guatemala City, fell 2.2 percent to $13.75. Shares had fallen as much as 4.6 percent earlier. Tahoe’s stock price tumbled 23 percent June 28 after reports of the proposal surfaced. Vancouver-based Goldcorp declined 0.4 percent to $37.62 in New York trading.
“We’re pleased that the latest comments clarifying this situation are consistent with our own understanding,” Jeff Wilhoit, a spokesman for Goldcorp, said in a telephone interview.
Perez Molina’s proposal would allow Guatemala to partner with businesses and diversify the tax base, Centeno said.
“We want to have a mechanism to generate state funds that aren’t via tax collection,” Centeno said.
Bond Sale Next Year
Central America’s biggest economy will grow 3 percent this year after growth of about 4 percent last year, Centeno said. Gross domestic product expanded 3.4 percent in the first quarter from a year earlier, while consumer prices rose 3.5 percent in June from a year earlier, the slowest pace since Feb. 2010.
Guatemala’s 10-year dollar bonds, the country’s first global notes since 2004, have returned 6.2 percent since they were sold on May 31, compared with 2.5 percent for El Salvador’s 2023 notes and 3.1 percent for Panamanian bonds, according to JPMorgan Chase & Co.’s EMBIG index and data collected by Bloomberg.
Another global bond sale abroad is likely in 2013 as the government seeks to lower borrowing costs by selling less debt domestically, Centeno said.
Guatemala’s Agricultural, Business, Industrial and Financial chamber opposes the constitutional reforms, the association said in a statement yesterday on its website. The chamber, known as Cacif, said that other legislation, such as transparency laws, should take priority, the statement said.
Guatemala’s BB credit rating from Standard & Poor’s, two levels below investment grade, puts the country of 15 million in the same category as Turkey and Portugal and one level below Costa Rica. Insecurity in Guatemala, where drug gangs have ties to Mexico’s most violent cartels, is too high and hinders the country’s economic growth, Centeno said.
More than 95 percent of crimes committed in Guatemala go unpunished, said Luis Pedro Alvarez, legislator for the Encuentro Por Guatemala party. The constitutional reforms would strengthen the justice system and work to reduce that figure, Centeno said.
“Guatemala is a country that is showing investors a new face,” Centeno said. “We are offering clear rules that allow investors to consider the country for the long term and not the short term.”
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