Just as the clean energy transition is driving demand for copper higher, political risks are also rising in Chile and Peru, two of the top copper producing jurisdictions in the world.

In Chile, the lower house of congress recently passed a system of progressive taxes on copper sales that could push royalty rates as high as 75 percent if the price of copper exceeds $4/lb. Chile is also overhauling its constitution.

In Peru, Pedro Castillo, a left wing candidate for president has vowed to nationalize a major gas field and capture more mineral profits to fund social spending, and he added a tax on copper sales to his platform.

These political winds of change leave mining companies such as BHP and Anglo American vulnerable to tougher rules and regulations in addition to higher tax rates.

“Some 42 percent of world copper mining production is under political uncertainty that could entail risks on future production,” Juan Carlos Guajardo, head of the Chilean consulting firm Plusmining told Reuters.

The COVID-19 pandemic has driven a spike in poverty in Chile and Peru, propelling measures to unlock and redistribute wealth as many struggle to stay afloat amid lockdowns and high healthcare costs.

That has put mineral resources in focus, given the outsized role they play in the region's economic engine.

Castillo has pledged to keep 70 percent of mining profits in the country and stop foreign firms' “plundering,” and has warned he could nationalize some resources. He leads in opinion polls ahead of the June 6 vote, though right-wing Keiko Fujimori is gaining ground.

The convergence of risks is creating the most uncertain backdrop in years, although the region has long been volatile, with frequent political changes, protests and strikes.

Mining executives said that some of the risk may be tempered as those seeking the boldest changes came up against political opposition and were forced to water down their plans.

Diego Hernandez, head of Chile's mining industry group Sonami, said the opposition-led mining royalties bill would likely get amended in the upper house before being given the green light.

“I do not think the project will be approved as it is today in the Senate because it would be very irresponsible and reckless,” he told Reuters. He warned earlier in May the bill would be a vote in favor of “no more mining.”

“In a period where we all have to worry about the economic recovery, dispensing with or strangling mining does neither of these countries any good. In the end, one hopes that common sense will prevail.”

Peru has a slate of some $56 billion in mining investments. Long running community opposition has already paralyzed some projects, including Southern Copper’s Tia Maria project and a $5 billion gold project by Newmont and local firm Buenaventura.

In Chile, Plusmining’s Guajardo said miners' focus on existing “brownfield” projects meant production levels would dip if new investments weren’t made to upgrade them.

“If you don’t make those investments you will have to manage an asset that is going to have a tendency to decline in its grades and variables,” he said. “That will be reflected in lower production.”