Latin America has the planet’s largest reserves of copper, lithium and silver, with vast gold reserves. With modest local demand, the region comprises less than 10% of both world population and GDP. Nobody doubts Latin America’s geological wealth, and its natural exporter role. But its political instability is worrying mining investors. This is a long-term industry, where investors say they need stable regulations and taxes over a project’s lifetime – 30 years or more. Latin America’s made great progress from its ‘forgotten decade’ in the 1980s, when war, dictatorships and default made long-term investing hard. It now boasts what industry executives consider is some of the world’s best mining jurisdictions. Unrest began in Ecuador, when an uprising of indigenous groups and students was triggered by a proposal to cut fuel subsidies forced the government temporarily to flee the capital. Soon afterwards in Chile, Latin America’s most-developed country, planned Metro price hikes were met with a campaign of arson followed by mass protests. In early November, violent protests forced Bolivia’s left-wing president from power. And towards the end of the month, Colombia had joined the fray with a general strike and mass protest that also turned nasty. We investigate how the political turbulence could impact mining.
The biggest shock came from Chile, Latin America’s most developed economy. Long seen as an oasis of stability in the region, it is the world’s largest copper producer and has a large and sophisticated mining industry. The initial spark for the unrest, was an increase to Metro fares, but they spread to include the legitimate grievances of the working and middle classes in a country that has the highest inequality in the OECD and a rigid social and educational hierarchy that keeps most of the best jobs for a small upper class. To quell the protests the president had to replace the entire cabinet and agree to rewrite the constitution. Ecuador’s protests broke out against the government’s decision to remove fuel subsidies. A powerful alliance of indigenous communities and students persuaded President Lenin Moreno to back down, reversing course. In itself the subsidy isn’t that important to international investors. It raises fears that the government could struggle to implement its IMF reform program. In turn that could threaten the government’s other market-friendly initiative – mining.