Argentine government will have to get tougher with anti-mining provinces if it wants industry to fulfill potential

BUENOS AIRES, Oct 23 (Reuters) - Argentina's fledgling mining industry has grown fast under President Nestor Kirchner, but the next government will have to get tougher with anti-mining provinces if it wants the sector to fulfill its potential.

Argentina is a newcomer to mining when compared to many of its South American neighbors, though high metals prices, lower costs and a legislative reform in the 1990s have given it impetus in recent years.

However, fierce environmental opposition and provincial government mining bans have put the brakes on investment in several provinces such as the Andean wine-growing region of Mendoza and the Patagonian tourist destination of Chubut.

"For the mines that are successfully operating at the moment the regime is fine legally wise. It's the application that's the problem," said Christopher Ecclestone, an analyst from the New York-based Hallgarten and Co consultancy.

Federal laws take priority over provincial rulings under Argentina's mining code, but that has not been respected in relation to the bans, said HSBC mining analyst Victor Flores.

The center-left government of Kirchner, whose senator wife is expected to win an Oct. 28 presidential election, has not intervened in the provincial conflicts even though he has declared himself a "defender of mining."

"The federal government has shown no interest in ticking off the provinces when issues have come up because it's obviously not important enough," Flores said.

BANS LOSING STEAM?

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