Strong governance in South America’s mining sector will advance sustainable, responsible and transparent resource management, while promoting economic development and reducing social and environmental impacts, says field research professional services firm Southern Pulse operations director Caitlin Klemme.

This includes adhering to legal and regulatory frameworks, transparency in reporting, ethical conduct and regular engagement with stakeholders to safeguard the long-term sustainability of the mining industry in South America.

More work can be done by South American mining stakeholders, she says, to ensure that the sector ably responds to the changing global commodity demand landscape, especially as it pertains to the global energy transition and electric mobility.

However, Klemme notes that there is a tendency for governments in South American countries, such as Peru and Mexico, to act bureaucratically regarding certain commodities. This is coupled with several South American mining jurisdictions, such as Brazil, Colombia, Ecuador and Venezuela, facing serious security concerns such as extortion, forced displacement of communities and environmental damage.

These incidents are attributed to the rise of illegal gold mining, which is often linked to organised crime and illicit activities.

“Often, criminal development around the commodities follows an inability [of] . . . governments to properly respond to the changing landscape of commodity demand, and there are some governments in Latin America that are not responding to the commodity demand in an effective way,” adds Klemme.

These two aspects, she notes, create reasons for concern about the long-term viability of demand in South America.

However, the factors also present a “huge opportunity” for South America at a time during which global demand for critical minerals is high, with demand for gold, copper and lithium being at the centre of the minerals boom.

Further, governments in South America are eager to take advantage of the attention they are receiving from the surge in commodity prices.

However, they remain cautious in opening up their economies for mining investments, owing to concerns about environmental impacts, social conflicts and the potential for the “resource curse” – where rapid resource extraction can lead to economic instability and the unequal distribution of benefits, says Southern Pulse research director Nicolás Prados.

On a positive note, he highlights that Argentina President Javier Milei’s efforts to deregulate the country’s economy are attracting significant mining investments, owing to Milei’s economic reforms and the Large Investment Incentive Regime. The regime offers tax exemptions and other incentives to attract large investments, with mining companies leading the way in taking advantage of these opportunities.

There is also a need to balance economic growth with social inclusion and ecological integrity while ensuring that mining activities are sustainable and responsible.

“I think companies are eager to take advantage of this demand and they’re pushing for measures that allow them more flexibility and freedom in working in the minerals sector,” Prados adds.

However, he also notes that governments remain cautious and are wary of committing the same mistakes perceived to have been made in the past, barring exceptions, such as Argentina, whose government has decided to fully promote investment into mining.

Although several mining companies’ engaging in joint ventures with governments of South American countries can be interpreted as a normal occurrence, the stability of these relationships is challenged and compromised by radical shifts in governments in accordance with election cycles. This creates concerns regarding the long-term viability of mining investments, he adds.

Technology, Global Markets Perspective

Technology – such as AI, automation and data analytics – is enhancing South America’s mining industry, boosting efficiency, improving safety and reducing costs, while global markets influence demand and prices, says Klemme.

Many companies are trying to integrate their supply chains to own and, therefore, guarantee, their supply of minerals through the full and partial strategic ownership of properties.

“Mining is a very high-risk sector, so if companies are accustomed to guaranteeing their supply through strategic vendor relationships as a way of making investments themselves, it would represent a big change in terms of how operations look and how the risk profile will evolve,” he adds.

Further, Prados highlights that there has been concerted investment activity by countries such as Argentina and Chile in lithium research and development so that they can become major global lithium producers.

This investment aims to secure a larger share of the lithium market, increase economic activity and potentially diversify economies beyond traditional sectors, he concludes.