Led by John Price, AMI’s Managing Director and leader of AMI’s Mining Practice, this Mining Coffee Chat discussion from December 1, 2020 focused on regional risk trends and a deeper look at eight of the region’s top mining jurisdictions, forecasting the political risk trends in each and how they may impact the mining investment climate.
Key highlights included:
- The fiscal costs of fighting COVID are alarming. In Latin America, nearly every country went into lockdown, curbing government income. Governments in the region are particularly reliant on sales taxes. Avoiding sovereign debt downgrades will require dramatic policy adjustments.
- Brazil, Chile, and Peru were able to distribute financial aid at great costs. Income distribution will worsen in countries lacking fiscal resources, particularly in Mexico, Argentina, and Colombia, being unable to fund counter-cyclical spending. In Colombia, people are starving—marking their doors to receive food from the government. This is likely to result in more populist politics, a trend that will follow across the region.
- Lockdowns were politically popular but are no longer as economic implications have superseded health concerns. Operating costs will remain low in Argentina, Brazil, and Colombia as regional currencies weaken.
- Governments are turning to the mining sector for revenue. Due the social and economic crises, the governments of Chile, Argentina, and Peru are likely to increase taxes on the mining sector. In Chile, the process of writing a new constitution in a political backdrop of rising populist anger against the political and economic elite could also lead to more onerous regulations for miners. In Mexico, the AMLO administration has begun to take a pro-mining stance, after alienating certain sectors and provoking massive capital flight, estimated at USD 100 billion over the last two years.
- New political leadership in Guyana and Suriname remain pro-mining in posture. High gold prices will continue to attract illegal miners from Brazil to both countries and foster an informal sector which contaminates and tarnished the reputation of mining.
- In Central America, miners face the reputational risk of working with corrupt governments like the Ortega administration.
In addition to these main points, the Chat also focused on questions from the audience. Click below to see the full Mining Coffee Chat, including detailed, insightful answers from John to audience questions.
Mining Coffee Chats are monthly meetings in which AMI explores important topics affecting the mining industry. The Chats are held via Zoom during the first Tuesday of every month at 11 a.m. ET (New York) time, usually featuring expert speakers and always allowing for attendees to obtain answers to the challenges that face them during COVID-19 and beyond.
If you have not already registered for Mining Coffee Chats, please click here to do so.
To find out more about AMI’s consulting work in the area of risk management for mining in different areas, please explore our recent webinar on rebuilding sustainable operations post COVID-19, case studies, our whitepaper on 7 key risks, and our analysis articles, which cover topics such as industry outlooks, political risk, operational risk, reputational risk and more.