Curse or blessing? The mineral rent used by the larger mining cities in Brazil

One of the rare consensus among the different resources-base economic analytical approaches concerns to the strategic role of the mineral rent, as a decisive tool to assure that the temporary wealth generated in the present can turn into permanent income in the future. For this reason, the evaluation, distribution and use of the mining rent plays a central part in the mining city’s development process. The Brazilian legislation assures to the mining cities participation of the financial results of mineral extraction through the financial compensation for the mineral exploration (CFEM). CFEM is a kind of royalty ad valorem, which taxes varies to 0,2 % until 3% of the liquid revenue from mineral production. The legislation does not determine how those resources should be used therefore there are a wide variation in this among Brazilian mining cities. Undertaking a study from a sample of the 15 largest mining cities in eight Brazilian states allowed an identification of two main patterns in regards to the use of CFEM that were denominated "sustained use" and " the pitfall of the single treasury ." In that sense, the article discusses the pressuring factors that contribute to the patterns, as well the institutional arrangements that may be more favorable to inducing a sustained use of CFEM. Key-words: municipal districts of mining base – Brazil – royalties – CFEM mining rent