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Mining Sector Update: Peru, Argentina, and Chile.

Peru

Peru set to see US$7.3bn of mining projects start construction. Six mining projects will begin construction next year in Peru and another two will follow in 2021.

According to the latest data from the energy and mining ministry (Minem), investments of US$3.93bn are expected next year with the construction of four brownfield projects, namely the optimization of Inmaculada, the expansion of Pachapaqui, and the integration of Coroccohuayco and Yanacocha Sulfuros, as well as greenfield projects Corani and San Gabriel.

In 2021, construction of the Pampa del Pongo and Zafranal projects in Arequipa region is expected to start with combined investment of US$3.35bn.

Currently under construction is the US$110mn Santa María expansion project, which is operated by Compañía Minera Poderosa in La Libertad region.

Tailings B2 San Rafael (US$209mn) and Mina Justa (US$1.6bn), both belonging to Minsur, are also under construction, as is the US$300mn Quecher Main of Yanacocha. 

Political Landscape:

According to analysts, the political crisis generated by the confrontation of the government of President Martín Vizcarra and the opposition-controlled congress – which erupted when Vizcarra tried to dissolve Congress – is not likely to impact investments in mining projects that are under construction nor those that are set for execution in 2020 and 2021.

Argentina

President Mauricio Macri faces long odds to hold onto his position. He has done slightly better in polling since he made some changes to his platform based on his poor showing in the August’s primary elections. However, opposition candidate Alberto Fernández is likely to be the winner.

Fernández appears more moderate than Cristina Fernández, but he shares with her a vision that encourages industrial production, protects local businesses from foreign competition and involves large fiscal spending and a framework of high taxes. Not a great sign for foreign investors.

With that being said, he has shown support for the mining industry.

“Exporters are my allies,” he said during a meeting with mining executives and representatives from mining chambers in San Juan province. 

Fernández thinks “the mining business is a key factor to help Argentina overcome the crisis.” This was the second time in two months that  Fernández met sector representatives to present his prospective investment policies and hear their requests

“For many years we ignored Argentina’s mineral wealth and lost a big opportunity…To reach [economic] recovery we need to reactivate production, we need to export everything we can, and the mining industry plays a fundamental role in that,” Fernández said, referring to the need to obtain foreign currency to pay debt.

Chile

Chile’s mining ministry will invest 2.6bn pesos (US$3.6mn) in a project evaluation program in 2020 in order to guide investors through the environmental evaluation process and community relations.

“The mining industry must play an active role in community and environmental matters and currently we have a team that helps project owners before they send documents to the environmental regulator,” mining undersecretary Ricardo Irarrázabal told BNamericas. 

The official said the objective is to seek an early approach between mining companies and communities, so they can be informed about project details and if any change is needed, it could be made before the environmental evaluation process starts.

Chile Mining Service Providers:

Despite Chile’s reputation as an export-oriented country, only 5.6% (478 of 8,577) of local mining suppliers are currently exporting their products and technologies.

In 2018 these companies exported mining products to Brazil, Argentina and Mexico for US$81mn, US$39mn and US$30mn, respectively, while US$24mn in products and services went to Canada and US$20mn to the US.

According to a report from government investment promotion agency ProChile, mining providers exported overall US$554mn – a 10% year-over-year increase – in products and goods last year to 80 countries, as 83% of exports went to Latin America. 

Vásquez said Chilean product quality is globally recognized and local companies meet international standards. But more firms should leave their comfort zone.

Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Peru, Bolivia, Ecuador, Brazil, and Argentina. Over the last 18 years, we have been supporting foreign companies with their growth in Australia and Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com