(Rewrites throughout with industry reaction, details)
BRASILIA, July 25 (Reuters) - Brazil unveiled plans on Tuesday to raise revenue from mining royalties by 80 percent, the latest measure to shore up government finances, and cut red tape in attempt to attract more foreign investment amid a weak economic recovery.
President Michel Temer, at the policy launch in the presidential palace, said that this fit into his broader plans to modernize regulation across sectors to draw investment and boost the economy.
"We are just scratching the surface here," Mining Minister Fernando Coelho Filho said, touting Brazil's potential to grow as a mining powerhouse if the government reduces red tape.
"These measures will be fundamental to speed up the growth of the Brazilian economy," he added, defending changes to outdated royalties and clearer rules for mining investors.
While some in the sector voiced support, mining industry body IBRAM, which counts Brazil's largest miner Vale as a member, criticized the policy, saying there was no way to cut costs enough to offset the higher levies.
"Mining companies feel pressured to pass on this new cost increase to the industrial production chain," it said in a statement. "This new condition will increase the risk of loss of competitiveness in the international market for ores."
Brazil's slow economic recovery has weighed on tax revenue, forcing the government to find new sources of funding. Last week, the government said it would raise taxes on fuel and increase a public spending freeze by 5.9 billion reais ($1.9 billion) this year.
Temer announced the first changes to the mining code since the early 1990s via a temporary presidential decree, which will require approval from Congress within 90 days. The royalties would go into effect in November, if approved, while other rule changes take effect immediately.
Royalties will increase by a set rate on diamonds, gold and other materials, while iron royalties will increase in tandem with the price of the mineral, gradually rising from 2 percent if the market price is less than $60 per tonne to a maximum of 4 percent if the price rises above $100 per tonne.
Raw materials used directly in construction would see royalties fall to 1.5 percent.
The royalties will be calculated on gross sales revenue, rather than net sales previously, significantly raising the base of calculation.
The government will also create the National Mining Agency to replace the National Department of Mineral Production that officials said would increase transparency and reduce bureaucracy.
Environmental licenses to miners are issued in four years in Australia but 10 years in Brazil, Coelho said, giving an example of red tape that must be reduced.
The reforms could help attract billions of dollars in venture capital to Brazil's mining sector by creating an investor-friendly environment, said Ana Cabral-Gardner, a board member at miner Sigma Lithium and veteran mining banker.
"Previously a deadly regulatory combination of arcane rules, lack of transparency and opacity discouraged large established global investors," she said.
The measures would also increase fines for environmental damage up to a ceiling of 30 million reais ($9.47 million) and expressly require companies to clean up degraded areas. Brazil is still recovering from the 2015 Samarco mining disaster, in which a tailing dam burst and unleashed enough mud to fill 12,000 Olympic swimming pools.
(Reporting by Anthony Boadle and Jake Spring; Additional reporting by Alexandra Alper and Guillermo Parra-Bernal; Editing by David Gregorio and Cynthia Osterman)