Critical minerals in Latam: opportunities and challenges

  • As competition for access to critical minerals hots up between China, the US and the EU, investor attention is turning increasingly to Latin America’s vast resources of lithium, copper, nickel and rare earths.
  • These minerals are crucial for the global energy transition and for new technologies such as electric vehicles (EVs), and electricity-intensive artificial intelligence operations and data centres, but Latin America will need to attract huge international mining investments to ramp up production and fulfil its development potential.
  • Most countries in Latin America suffer from poor infrastructure and relatively high operational risk, but large and unexplored reserves, coupled with low levels of geopolitical risk (due to the region’s location away from global conflict zones), make it an attractive destination for investors seeking reliable partners along the supply chain.
  • Within the region, the preparedness of resource-rich nations to take advantage of investment opportunities in critical minerals varies significantly. According to EIU’s analysis, presented below in a critical-minerals readiness heatmap, the three Latin American countries that are best prepared to attract investments in this area are Chile, Argentina and Brazil. In contrast, Bolivia, Cuba, Guatemala and Panama perform poorly, with little scope for improvement in the near term.

Reflecting the sector’s attractiveness, the International Energy Agency (an intergovernmental organisation) forecasts that demand for critical minerals will increase by more than 6% per year on average until 2030. Investment in mining projects in Latin America will be crucial to satisfy this growing demand. The region is home to more than half of the world’s reserves of lithium, more than a third of its copper and nearly one-fifth of nickel and rare-earth metals, but its share of global production has been diminishing in recent years amid lacklustre investment in mining projects compared with some other regions.

The disparity between these bountiful reserves and low levels of investment can be traced back to an unstable regulatory environment in many countries in the region, as well as episodes of labour and social unrest and prevalent corruption. However, our comprehensive assessment of the business environment for critical minerals shows that the region’s huge, unexplored reserves largely compensate for these shortcomings, making many Latin American countries more opportune choices for investors than other major producer nations elsewhere in the world.

In our critical-minerals readiness heatmap, all of the region’s five major producer countries perform well. Chile comes out on top, owing to strong confidence in the sector, firm commitment to the rule of law, and high-quality labour and infrastructure. In terms of regulations, however, there is some cause for concern; permitting processes are onerous, and the current government’s more statist approach towards critical minerals (especially lithium) weighs on our assessment. Argentina, Brazil, Mexico and Peru are also positioned well. They each have their own shortcomings, but there is still substantial potential for growth.

Investors may be less confident in tapping opportunities in Colombia, the Dominican Republic and Ecuador, where significant political commitment to improve the regulatory environment for investment in critical minerals is needed and is unlikely to materialise within our 2024‑28 forecast period. A high risk of labour and social unrest is also a major deterrent to investors in these countries.

Guatemala, Panama, Cuba and Bolivia are poorly positioned to receive critical-mineral investments. In Cuba and Bolivia, this reflects hostile policies towards private investment, which are likely to remain in place for the entire outlook period. Meanwhile, Panama’s government is embroiled in a major dispute with a Canadian operator over its huge, mothballed copper mine, causing the country’s score to suffer.

The complete analysis featured in this summary article can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.