Central America’s Cold War

As big powers fight for commodities dominance, scrutiny turns to Russia’s mining interests.

The total volume of Russia’s foreign direct investment in Latin America – Brazil being the prime recipient – is less than 1% of the country’s worldwide total. The exception to this in Venezuela – Rosneft, the state-controlled Russian oil company has loaned more than USD 10 billion to the Venezuelan oil sector since 2015 while controlling a 49% stake in Citgo, its most valuable subsidiary. Attention now turns to Central America where Moscow could be looking to develop lucrative mining interests and new trade partnerships.

Several operational challenges could make this easier said than done. A former Guatemalan presidency official and adviser to several foreign business groups said, “The conflict in Ukraine has meant Central America is an attractive alternative to markets now difficult to access because of sanctions. Logistics are the main challenge – Russia is thousands of miles away, how efficiently can goods be transported between our regions given maritime and air restrictions?”.

“The conflict in Ukraine has meant Central America is an attractive alternative to markets now difficult to access because of sanctions.”

Former presidency official, Guatemala

Investment from the United States, Mexico, Brazil and EU countries is much higher in Guatemala and the region. However, mining before the war was emerging as a niche of opportunity for Russian mining companies that have now paused their return to developing investment projects as sanctions hit hard.

The adviser explained, “There is the new electromobility race and minerals such as nickel are essential. For many, mining investment in Latin America is a dirty war between Canadian and US mining companies to snatch those investments, and it is natural that now with the war in Ukraine, governments like Guatemala will have to think twice about whether to keep Russian investments flowing or look to stem them. At the moment, there is speculation that a looming US-funded modernisation of the Guatemalan military is putting political pressure on the administration to cut commercial ties with Moscow.”

“With the war in Ukraine, governments like Guatemala will have to think twice about whether to keep Russian investments flowing or look to stem them.”

Former presidency official, Guatemala

Russia naturally is looking to guarantee imports including supplies of tropical fruits both in traditional presentation and in the process of agribusiness in concentrates, coffee, cardamom in which Guatemala is a global leader alongside materials like natural rubber.

Moscow has turned its attention to the potential for tapping substantial uranium reserves across the region. Russian technicians are already in Mexico and Guatemala undertaking feasibility surveys. The Russian approach to Guatemalan nickel could be an approximation for those Russian mining companies to study areas for other valuable minerals.

China, which is the other big player, is pursuing the same objective in Central America and clearly it would be tough competition for the US and Canada to be able to displace investments from Moscow or Beijing if they are not capable of establishing more lucrative trade relationships. So long as Russia continues to supply weapons, tourists and purchases the region’s commodities, Moscow is unlikely to turn its back anytime soon.

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