With worldwide commodity prices on the increase, Latin America’s mining sector has been on the rise for some years, with foreign investors from all four corners of the globe entering into the market to utilize its vast natural resources and low-cost labor market. In 2019, it is expected that the sector will build on its positive trend, with markets including Brazil selling off mining areas to raise capital, boost employment, and drive foreign direct investment (FDI).
Below, we share an overview of the Latin American mining sector in 2019 and beyond, and offer guidance to entrepreneurs and mining investors ready to get involved in the industry.
Table of Contents
Latin American mining areas up for grabs
As a sign of the times, Brazil announced back in December 2018 that it would auction off around 20,000 areas for mining exploration in 2019. Brazil’s government had taken back the sites after permitting processes were stalled and will sell the new areas with mining permits and permissions for international businesses to explore them and utilize their resources.
A new government agency, known as the National Mining Agency (ANM), has also been launched to encourage more autonomy in the sector. The package includes a hike in mining royalties for the country, as well as changes to the country’s mining legislation.
Brazil is already home to one of the world’s largest source of reserves and important metals, including aluminum, iron ore, and nickel, and the country is the world’s largest producer of metals such as gold. Its sector compromises around 7% of its GDP, with more than 8,000 companies in the country competing for resources and export contracts with manufacturers.
There are several companies that dominate its mining sector, with Vale taking charge of 80% of total mining sales, and Namisa, which is owned by Companhia Siderúrgica Nacional (CSN) and Japan, the second-largest in the country, generating billions in annual revenues.
For businesses of all shapes and sizes, entering into the market enables you to prosper and take advantage of its mining resources, infrastructure, and talent. Whilst the high levels of competition and fluctuating mineral prices may prove to be a risk, significant long-term profitability awaits for organizations with the right resources and mining strategy.
Governments generating opportunities
Mexico’s new president, Andres Manuel Lopez Obrador (AMLO), caused concern when he was elected in 2018, having previously vocalizing his ambitions to nationalize the country’s natural resources. The good news, however, is that he has since retracted some of those statements and has since announced plans not to raise mining taxes in the country, offering mining investors in the country a sigh of relief and a reason to increase their investment in the country. The move will also encourage others to incorporate companies in the country.
There are still challenges in countries like Mexico, however, with security risks in the mining sector one of the biggest concerns. Indeed, extortion, harassment, kidnapping, and theft are all common in the country, causing millions of dollars in damage to mining companies. As an entrepreneur, it is important to understand the issues and implement security features to reduce the risks of such incidents happening on your premises.
Crackdowns on illegal mining
In 2018, the Colombian Armed Forces dismantled illegally exploited mining sites across the country in the village of Tarapacá and in the city of Leticia. As one of the leading causes of deforestation in the country, illegal gold mining is something the government has been trying to clamp out, and ensure that only licensed professionals to extract gold and metals from its earth. That’s great news for investors, as the removal of corrupt mining organizations offers access to mining sites and increased demand for long-term contracts and quality metals.
A month after the dismantling of several illegal sites, a Colombian tribunal ordered the government to suspend new mining licenses in the country until it can establish protected areas on the grounds of environmental concerns. With vast reserves of coal, gold, emeralds, and nickel, the banning of new licenses will no doubt cause a headache in the country, and as an entrepreneur, this may cause challenges should you choose to enter into the country in 2019. As always, it makes sense to understand the conditions of your permit in your chosen Latin American country, and have necessary protections in place to prevent against closures and demonstrations from environmentalists and local residents in the area.
Peru’s mining permit system is one option to consider, as it grants holders the ability to develop mineral exploration or exploitation operations on their allocated site, as well as the processing, transportation, and work on those materials once they have been extracted.
Wider market opportunities
As well as entering into the Latin American mining sector to extract precious metals, there are other market opportunities to consider. Of course, those who choose to extract are often the front-runners in their niche, but small and medium-sized enterprises can benefit from the investments of huge multinational firms who have money to spend on increasing efficiency.
In the Peruvian mining sector, for example, there are a whole host of new opportunities for businesses who provide mining equipment, technology, and services that can aid extraction. Whilst these companies do not involve themselves in the mining process, their products and services are utilized by larger corporations and enable them to grow as part of the sector.
Other sectors that the Latin American mining sectors could benefit from in 2019 include manufacturing, recruitment, sales, marketing, logistics, and import and export businesses. Spotting a gap in the market and being able to take advantage of strong market conditions and low raw materials costs is vital.
Enter the Latin American mining sector with Biz Latin Hub
With so many mining opportunities for businesses across Latin America, such as in Chile, which is expected to see more than $60 billion pumped into its economy over the next ten years, there has never been a better time to get involved.
No good market entry would be complete without the assistance of an experienced back office company, which is why we offer our services here at Biz Latin Hub. Get in touch with our experienced team today when you’re ready to get started.
Learn about our team and expert authors.
Latin America offers a great environment for foreign mining companies. Check out the video below to discover commercial opportunities in the various Latin America mining jurisdictions.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.