SANTIAGO, April 11 (Reuters) - Ecuador could remove a hotly debated windfall tax on the mining sector this year, its mining minister told Reuters on Wednesday, as the cash-strapped South American country seeks to boost foreign investment and diversify away from oil.
The tax, which went into effect in 2009 under former leftist President Rafael Correa, is generating no income for the government, mining minister Rebeca Illescas said in a telephone interview during the CRU/CESCO mining conference in Chile.
The tax applies only to large mines in full-scale production, which Ecuador does not have. But its existence has spooked potential investors.
"It's more an issue of marketing in mining than an economic issue," Illescas said, noting that Ecuador boasts some of the lowest operational costs in the region and attractive geology.
"We have no fiscal impact from this tax ... it creates more noise than benefit," she added.
Illescas, who was named by President Lenin Moreno in February, said the government has drafted a bill to boost investment that includes a provision to eliminate the tax.
"I think that this year ... that law will be approved and possibly the elimination of this tax will be considered in a bid to attract more investment," she said.
The legislative proposal still needs the president's approval but will be submitted for consideration soon to Congress, where Moreno does not hold a majority.
However, lawmakers have indicated that they are eager to support legislation that could bring more dollars into the economy, which faces a liquidity crunch.
(Reporting by Alexandra Alper in Santiago, Additional reporting by Alexandra Valencia in Quito, Editing by Rosalba O'Brien)