In light of high resource prices, deep fiscal deficits caused by COVID relief and lockdowns and the specter of rising political populism, the rise of resource nationalism will come as little surprise to veterans of Latin American mining. Three countries stand out in this new political battleground: Mexico, Peru, and Chile.
On Tuesday, November 16th, our Mining Coffee Chat focused on what form resource nationalism may be taking shape in Mexico, Peru, and Chile, and how mining investors may be impacted. John Price (Managing Director, Americas Market Intelligence) and Arthur Deakin (Energy Practice Co-Director, Americas Market Intelligence) were joined by three experts, Luis Miguel Inchaustegui Zevallos (Former Minister of Mines, Peru), Rony Zimerman (Partner, Lembeye Abogados), and Jorge Sanchez (Partner, Haynes & Boone) in a fascinating discussion of the region’s mining sector.
Among the key highlights of the Chat:
- Minerals related to the “green economy” will boom in the next two decades. The mining world is far behind the necessary scale needed for the green revolution. Some examples of these minerals that will enjoy a surge in demand include lithium, graphite, nickel, copper, and zinc. These are pushed by the demand for EV batteries, energy storage batteries, solar panels, and wind turbines.
- Mining is becoming a center of interest for political discussions and is viewed as a source of income as Latin American governments attempt to balance their budgets, following the assumption of great deficits during the pandemic.
- Chile’s onerous royalty proposal would create an impossible situation. The proposal passed the lower house of Congress in May 2021, but the Senate is highly unlikely to pass the bill in its current state unless the extreme left takes control of the Senate during the upcoming elections.
- Mexican President Andrés Manuel López Obrador plans to introduce legislation that will no longer allow for the approval lithium exploration and mining licenses for private companies, likely intending to create a Pemex-like entity to control lithium in the country. The eight existing concessions will remain untouched.
- The issue of resource nationalism is much broader than originally defined, with an increased pressure on governments to becoming more activist in changing the game of the mining industry, whether through increased taxation or increased policing. Broad goals include the reduction of carbon dioxide emissions, working within the principles of the circular economy, and the prioritization of indigenous rights.
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 the panel 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 whitepaper on 7 key risks and our analysis articles, which cover topics such as industry outlooks, political risk, operational risk, reputational risk and more.