Mining troubles

Latin America is one of the world’s mining epicentres, but it faces a litany of challenges.

Latin America’s mining industry has grown over the last two decades, with international companies exploiting the region’s vast natural resources and low-cost labour market. The region will be crucial to meeting demand for the critical minerals that are essential for the global energy transition (lithium, copper, cobalt, and nickel). Despite this growth and future potential, mining companies operating in Latin America are facing an increasing number of old and new challenges from a diverse range of stakeholders.

A mining executive in Peru explained, “Latin America could play a key role in the energy transition, if we can get our act together. Chile, Peru, and Mexico have something like 40% of global copper reserves, Argentina, Brazil, Colombia, and Ecuador have reserves too. Over 60% of the world’s lithium reserves are in Latin America, mostly in Argentina, Bolivia, and Chile but also in Brazil, Mexico, and Peru. Brazil has 17% of global nickel reserves and the region even has some small cobalt reserves too.”

“Latin America could play a key role in the energy transition, if we can get our act together.”

Executive, mining company, Peru

Unfortunately, so far, most countries in the region have been unable to implement successful natural resource governance and policy. Consequently, opposition to mining projects can be severe and is mostly rooted in the environmental impact, inadequate community engagement and the perception that the socio-economic benefits from mining are not distributed equally. Successive governments across Latin America have tried to respond but are increasingly hamstrung by polarised political pressures, divided legislatures and general economic instability. Understandably, international mining companies are reluctant to invest heavily in the region without exhaustive political, regulatory, operational, environmental, tax and legal assessments and sometimes even that isn’t enough.

Social attitude towards mining is also changing rapidly across Latin America and protests against mining activities are increasing in number and intensity. In recent years, protests from local communities have hindered multiple mining operations across the region, particularly in Peru. Such protests have increased as both governments and corporations struggle to establish fluid communication channels with the public in general and local communities in particular. Due to their representative nature, governments play a key role in liaising with indigenous communities, which often lack infrastructure to develop other economic activities, and live in constant fear of the environmental damage caused by mining operations. At the same time, international companies are growing reluctant to invest in areas with social disputes, as their highly capital-intensive projects require stability and safety guarantees.

A regional general counsel of a multinational mining company, active in several Latin American countries, believed that a more considered approach was required, “It’s clear that we can’t rely on governments to be trusted partners anymore and we need to tread carefully. Consideration of environmental and social matters is increasingly top of mind but to have a deep understanding of these issues is difficult –  various stakeholders will tell our local team one thing and then go off and do something completely different. This is where a discreet, trusted, independent observer really helps us to see around corners: they can ask questions that the company can’t because whenever we ask a question a new negotiation starts and alarm bells start ringing. You might think you’ve done all the due diligence and preparatory work but people change and you have to keep an eye on all stakeholders.”

“This is where a discreet, trusted, independent observer really helps us to see around corners: they can ask questions that the company can’t because whenever we ask a question a new negotiation starts and alarm bells start ringing.”

General counsel, multinational mining company

To address these concerns, governments need to prioritise security, education and dialogue with local groups instead of adopting a reactive approach to occasional outbreaks. This includes strengthening the powers of law enforcement agencies to crackdown on illegal mining which damage protected areas, environmental biodiversity and endangers the living conditions of local communities – a particular problem in Bolivia at present. If governments cannot address these issues through better natural resource governance and policy, conflicts are likely to increase, particularly if demand for critical minerals begins to surge.

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