Participation of mining royalties in the budget of the municipalities of Minas Gerais

Abstract

Purpose: This article analyzes the financial participation of mining royalties in the budget of municipalities belonging to the state of Minas Gerais, which received such resources in the period from 2009 to 2018. Methodology: Using techniques of descriptive analysis of the data, it was identified the the representativeness of mining royalties in the composition of the municipalities' budget, especially in view of taxes collected by the company. In addition, opinions from the Minas Gerais State Court of Auditors (TCE-MG) were analyzed, which examined the receipt and application of resources from mining by the municipalities. Main findings: The study indicates that although royalties contribute to the increase in budget revenues, they also tend to increase the degree of financial dependence of governments in relation to their resources, reducing the fiscal effort. This effect most evident in municipalities that have received greater transfers of mining royalties and have a smaller population. As for the largest mining municipalities in Minas Gerais, the reports of the State Audit Court indicated low commitment to implementing policies to diversify the local economy. Academic contributions: The survey presents data on the financial dependence of Minas Gerais municipalities in relation to mining royalties, especially those with the smallest population and which received the largest transfers. Practical contributions: Members of executive and legislative branches of mining municipalities, as well as of Courts of Accounts, will be able to identify the representativeness of mining royalties in the municipal budget, as well as verify the self-sustainability of governments, in the absence or reduction of mining activity.