With worldwide commodity prices on the increase, Latin America’s mining sector has been on the rise for some years. Foreign investors from all corners of the globe are entering into the market to capitalize on its vast natural resources and low-cost labor market. In 2019, the sector is expected to continue its positive growth trend. The mining sector has shown to be a reliable source of investment over the last decades.
Learn about the leading Latin American mining economies in 2019, and where business opportunities lie for foreign investors.
The four largest mining economies ranked
As mining sectors are on the rise, multiple new economies like the Argentinian, Brazilian, and Bolivian have set up its markets. However, these fledgling mining markets have some way to go to stack up against long-established mining traditions in place in the other powerhouses. Latin America houses four leading mining economies. They are ranked in the following order:
- Chile. Due to the resources in the northern Chilean areas, Chile has been able to grow its sectors for years. This has led Chile to become the biggest mining economy in Latin America.
- Peru. For many years, the Peruvian government has had a pro-mining and pro-business mentality. This has created exciting commercial opportunities for companies involved in the mining sector.
- Mexico. The country is one of the largest metal and mineral producers worldwide. Along with its vast gold resources, Mexico has a very diversified mining portfolio.
- Colombia. Because of its geographic location at the top of the Andean mountain range, Colombia possesses a territory rich in mineral resources. These mineral resources, in turn, provide a unique emerald sector.
Chile’s mining success
Chile is globally renowned for its abundance of natural resources, making it a mining powerhouse both locally and internationally. Some notable statistics include:
- 28% of the world’s copper production originates from Chile
- 54% of the world discovered lithium reserves are located in Chile.
Historically, mining law has played a very important role within the legal order. This is evident in the mining code that is currently enforced in Chile. Since mining has always been perceived as the backbone of the economy, the law has historically prioritized the interests of the mining industry.
The government supports a high-level activity within the mining sector. Consequently, the mining sector enjoys favorable, respected institutional and legal conditions for national and foreign investors with experienced mining lawyers in Chile. For example, the process of creating a mining concession can now be done online instead of actually going to the judge. This has created smoother business operations for any mining company interested in starting up.
Consequently, this well-developed legal framework allows for smooth business operations. Chile’s dominance in mining and well-established legal framework is, therefore, a key advantage to starting or expanding your mining business in Chile.
Pro-mining attitudes in Peru
After ranking as the world’s 28th most attractive destination for mining investment in 2016, the Fraser Institute Annual Survey of Mining Companies recently announced Peru has consolidated its position. Now ranking within the top 20 mining countries, Peru’s mining investments are expected to reach approximately US$6 billion in 2019. This is an increase of 30.4% compared to investments in 2018.
Moreover, the Peruvian government is boosting mining investments. Foreign investors can obtain investment guarantees through legal stability agreements. Specific to foreign investors, the following guarantees are granted to foreign mining companies:
- a stable income tax regime
- free remittance of profits, dividends capital, and other income
- favorable exchange rates in the marketplace
- equal treatment between foreign and domestic investors.
Along with Peru’s growing market, these legal stability agreements pose an attractive market for foreign investment. Consequently, Peru distinguishes itself from Chile as a fast-developing destination for mining.
Mexico goes for gold through diversification
Out of Latin America’s major and developing mining actors, Mexico’s mining industry is one of the most reputable for international investment. This is due to its vast amount of precious minerals and metals. Mexico is the largest silver producer in the world, accounting for nearly 20% of silver production worldwide. The mining giant is also the 8th largest gold and 12th largest copper producer in the world.
Thanks to its favorable geology, Mexico is home to many minerals and metals. Mexico is one of the top 20 mineral-rich countries in the world.
These metals include fluorite, zinc, lead, bismuth, and sodium.
Furthermore, the Mexican government has been supporting the sector for some time now. For example, recent tax reforms see a huge opportunity for the mining business. Moreover, the method of tax deduction of exploration expenses was changed to be more than 10 years. This is on a straight-line basis compared to the total investment being deductible in the year it occurred.
Consequently, this diversified offer of minerals to mine makes Mexico a very interesting destination for foreign investment. Companies looking to diversify their mined minerals mined should therefore always consider the opportunities available for doing so in Mexico.
Last, but not least: Colombia’s emeralds
Colombia’s mining economy has grown to top-mining status due to its superior emeralds. Colombian emeralds possess a high quality that is acknowledged worldwide, regarding the constitution of the emerald and its bright color. Colombia’s emerald quality sits above Zambia and Brazil, for example.
Emeralds from Colombia contain less iron and fewer impurities and fractions than emeralds from other emerald countries. This drives up the retail price of Colombian emeralds, making for a lucrative mining market. Some of the most expensive and rarest emeralds in the world came from Colombia’s emerald mines.
Furthermore, Colombian emeralds have maintained or even increased in value over the last few years. Where emeralds once had the value of $40,000 per carat, nowadays they can reach almost $90,000.
Over the last few years, the government’s position in emerald mining has softened. This became more transparent and traceable after multinationals started to invest in the emerald mining field, supporting positive growth. Those investments increased the production of Colombian emeralds and also made it possible to source emeralds with more modern equipment.
Whether Chile’s stability or Mexico’s diversification sparks your interest, Latin America provides different mining options for investors to choose from. As the continent offers many larger and infant mining industries with varied conditions for business, your expansion becomes a matter of preference. However, we recommend you seek help in understanding local legislation and requirements.
Biz Latin Hub has specialized mining lawyers who can provide you with customized services and expertise to invest in mining. We have offices in each of the region’s biggest mining countries, and we’re ready to help.
Get in touch with us at [email protected] to find out more.