LatAm mining sector facing persistent uncertainty due to upcoming elections

Uncertainty in key economic sectors such as mining has increased in Latin America as result of polarization, popular discontent with economic models, and the pandemic, among other factors.

Oliver Wack, consulting firm Control Risks' general manager for the Andean region, told the Elami 2022 mining event, organized by various regional business associations, that leftist governments face greater tensions in dealing with pressure from their constituents. To this pressure add fiscal problems and fragmented congresses in which ruling parties don’t hold majorities, creating a gap between policymaking ability and campaign promises.

“There is no doubt that political polarization, the way in which various rulers in the region came to power and the clashes they face with the Legislative and with civil society will mark the debate on the mining sector and its contribution in the medium term on issues such as the energy transition,” said Wack.

He highlighted that although Peru and Chile have new presidents, uncertainty will continue in the region, especially due to the upcoming presidential elections in Colombia (May) and Brazil (October). Left-wing candidates are frontrunners in both countries.

If Gustavo Petro wins in Colombia, he will seek to eliminate tax incentives and increase royalties, while in Brazil Inacio Lula da Silva could increase taxes if he becomes president again, Wack said.

"The reality of the leaders when they come to power and see the fiscal economic situation is that they are forced to change their discourse to a certain extent," Wack said. "More for the governments of the left than for those of the right, the challenge is how to manage the relationship with their constituents, with whom they handled a much more radical discourse against the mining sector."