The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) announced that mining accounted for 6.1 percent of Latin America’s gross domestic product (GDP) in 2011. This is an increase from 4.3 percent in 2001. In value terms, mining activity more than tripled from $90.1-billion to $305.8-billion last year, according to ECLAC.
The Centre for Social Responsibility in Mining at Queensland University’s Sustainable Minerals Institute reported that if the upward trend continues, based on the realization of various projects in the pipeline, the figure will top $400-billion a year by 2020, representing an unprecedented 12.5 percent contribution to Latin America’s GDP by the mining sector.
The countries that have seen the strongest growth include Chile, Colombia and Bolivia. In Chile mining has gone from 5.2 percent of GDP in 2001 to 15.2 percent last year. Colombia saw mining grow from 4.9 percent to 11 percent in the same period, while Bolivia saw mining jump from 6.3 percent to 15.5 percent.
Mexico saw mining grow from 6.1 percent to 9.9 percent in the past decade. Brazil, Latin America’s largest economy, has also seen strong growth, although mining remains a small part of its economy. Mining accounted for 3.5 percent of its GDP last year, nearly three times more than the 2001 level of 1.3 percent.
Meanwhile, Argentina only saw a small increase – from 2.5 percent to 3.1 percent in the decade.
“Mining has gained relevance in virtually all of the Latin America economies since the commodities super cycle started to emerge in the early 2000s,” a leading expert on Latin American economies and head of research at Bulltick Capital Markets Alberto Bernal told Creamer’s Mining Weekley.
“This sector of the economy accounts for the bettering of the regional fiscal accounts, and for the increased capacity of the region to consume, since foreign exchange rates have appreciated thanks to the higher commodity prices.”
The expected growth in mining in Latin America will be spurred by continued demand from China and expanded exploration in the region. “It will remain very relevant for as long as China's urbanization process remains present,” Bernal said of mining’s impact on Latin American economies in the future.
New developments like the Puebla Viejo mine in the Dominican Republic will also help boost mining’s share of Latin America’s GDP. The mine, a joint venture between Barrick Gold and Goldcorp, started its first gold production last month and could account for as much as 2.9 percent of GDP within the next decade, according to the Queensland University institute’s report. That compares with a mining impact of only 0.4 percent of GDP last year.
Bernal warned against wasting the opportunity mining represents. “Some governments are doing the right thing, via assuming that the wealth effect will not be permanent,” he says. “Some other governments - like the Venezuelan one - are squandering the opportunity.”
Venezuela’s government nationalized mining in August 2011 and had for years blocked the development of Las Cristinas, one of the world’s leading undeveloped gold mines.
Crystallex planned to develop it after winning a contract in 2002, but had its contract cancelled last year. Venezuela announced that China International Trust and Investment Corporation will be developing Las Cristinas.