In Latin America, risks offset rewards for mining sector

Gavin Strong, Control Risks’ head analyst for Latin America and the Caribbean, shares a quick take on the outlook for the region’s mining sector:

Given the region’s vast mineral wealth – most notably, but not exclusively, in Brazil, Chile, Mexico and Peru – LatAm is (nominally) well placed to take advantage of elevated global commodity prices. Regional mineral mainstays such as gold, silver and copper – among others – have experienced price hikes of late, with the World Bank projecting that metal prices will increase 16% in 2022.

However, although companies and investors in Latin America are poised to benefit from the favorable commodity market, they will continue to face a complex risk landscape. Those with interests in the region can expect:

  • Regionwide political instability due to economic concerns and inflationary fears, not to mention elections, the redrafting of constitutions, and/or executive-legislative conflict
  • Policy uncertainty and regulatory unpredictability
  • Resource nationalism in some key mining jurisdictions
  • Prospective royalty rises/windfall taxes
  • Insecurity, which represents a particular challenge for exploration activities
  • Supply chain disruption and consequently heightened operational costs
  • Intensifying scrutiny of their environmental, social and governance (ESG) footprint, implying significant security, operational and reputational risks. 
  • ESG and security risks are manageable but will require careful consideration and mitigation planning. The region is littered with myriad examples of mining projects that act as cautionary tales in this respect. As activity increases with the current commodities boom, it will be key for investors and operators to engage in thorough risk assessments, stakeholder mapping and engagement (including managing heightened expectations), and threat monitoring.

    Stay informed about the Latin American operating environment in a critical election year