Latin America Holds Opportunity, but Don’t Paint Region with One Brush

Interview conducted by Priscila Barrera; article text by Scott Tibballs.

Remi Piet, senior director of natural resources and infrastructure practise at Americas Market Intelligence, says there’s opportunity in Latin America, but investors must complete due diligence to get the full picture and understand the situation on the ground.

Speaking with the Investing News Network at Mines and Money Americas in Toronto, Piet shared his thoughts on investing in the region, from developments in national governments to how to approach local communities and prevent investments from falling over.

With elections on the horizon and new governments still making their mark, he said the continent, which is home to mammoth copper mines, huge iron ore projects and a burgeoning lithium sector, is an attractive prospect for anyone that wants to invest in mining.

Scroll down to read the whole interview with Piet. You can also click here to view our full Mines and Money Americas interview playlist on YouTube.

INN: Since it’s the first time we’re talking, can you let our audience know what your role is at Americas Market Intelligence? What do you do there? What’s your background?

RP: Of course. So basically Americas Market Intelligence is the leading consultancy for Latin American affairs. We have several practises, whether looking at the payment sector or healthcare sector, logistics sectors. I actually lead the practise on infrastructure, natural resources and energy.

In that specific practise, we take a more long-term analysis of political, socioeconomic elements to make sure to support businesses and investors in different countries. Our objective is for investors and companies in those sectors to understand the particularities of every single jurisdiction. See what risks they have to face — potentially political risk, economic, social, reputational risk — that might impact the value of their investment and also the value of the shareholding.

So that’s our angle here. And we cover every country in Latin America, even smaller jurisdictions such as Guyana, Suriname, which many companies don’t go to. We have a specific focus on all of those countries trying to provide value for our clients and support the sustainability on all aspects, both contract [and] financial. But also sustainability in terms of working with local communities, being accepted inside the countries without facing potential backlash or a potential local election that will slow down or block or halt the investments. That’s why we’re trying to provide that specific intelligence for people to be able to carry through and implement the right investment.

INN: We’re here at Mines and Money in Toronto, and you were part of a panel talking about Latin America and investments there. Have we seen a change of attitude towards foreign investments in the region?

RP: First of all, talking of the region as a whole is often an error that investors are taking, because each country is obviously different. Inside each country, each province actually operates by different rules. No, I’m not talking about regulation, which is fairly organized at the national level, but about different sets of risks and problems that you can find locally.

The main difference and main change over the last 10 years has been potentially at the national level. There’s more interesting policies and reforms to support the mining industry, such as political change in Colombia. I was there two days ago and [they are] implementing a series of reforms supporting the mining sector. We’re going to see more of the same thing in Brazil soon.

Another government, Chile, is very proactive in terms of supporting the mining industry. However, on the other side, we have a reinforcement of local opposition that is filled often by information that might not be very relevant and is sometimes financed by criminal organizations, or opponents of mining locally for different reasons. So you have an empowerment of local communities that might shut down some investments. We’ve seen this in Colombia with La Colosa. We see this across the continent with between 70 and 80 local referendums in the books.

So the idea here … is not to stop at the macro level and listen to governments that will always tell you, “we want a full jurisdiction for mining, we’ll support your investment.” But also to understand that [miners should] do their due diligence, [have a] clear approach to local communities so that they actually can get them on their side and not face local backlash down the road.

INN: In your opinion, what would be the best jurisdiction to invest in right now?

RP: I was fortunate to work in Africa, the Middle East and then Latin America. I believe that Latin America is the most favorable environment for investment over the next few years in the mining sector.

The best jurisdiction — there’s no such one best jurisdiction. Even in different countries, in different jurisdictions that might seem appealing, there are some regions where it’s complicated to do business and others are much more favorable. In other jurisdictions, they might be more challenging.

There are actually some very good opportunities to look at there. So you have to be more detail oriented. However, if I have to point out a key jurisdiction that is sometimes overlooked: the Guyana shield has obviously a geological interest with gold mining, and there’s strong potential in French Guyana with the Macron government in France favoring industrial mining. In the case of Suriname, there’s also an interesting approach to be taken if you mitigate some kind of political reputation or risk with the president in place. And in Guyana it’s also interesting with the development of mining there that’s really ramping up to a favorable investment environment.

There’s also traditional mining jurisdictions such as Mexico, Brazil, Chile, Peru. They are still very favorable if you actually mitigate and approach the local risk component. If you work with communities there’s clear best practises and how not only to develop your corporate social responsibility (CSR), but to approach communities. Sometimes it’s not more money. It can be less money, but doing it the right way with empowering local communities. It’s not making the error of using the government as your bridge to local communities.

For example, in Ecuador, if you go to Zamora-Chinchipe, Morona Santiago, they usually are very averse to the government. They see it as neocolonial behaviors, so if you find the backup of the government in those jurisdictions, you could antagonize them even more. So it’s more about understanding each [location]. It can be about water resources, it can be a protocol claim, it can be about territorial claim. All this needs to be well addressed, and then if you do so all jurisdictions can make sense.

Obviously Venezuela, Bolivia to a lesser extent are much more complicated. But we see very successful investment opportunities in all countries in Latin America today if you gather the right intel.

INN: Are there any countries that investors should try to avoid? Would you choose one, or is there a particular one they should try not to?

RP: Well, right now it’s more challenging to go to Central America, at least maybe in other countries in the region. I usually focus much more on the positive. We’ve seen Ecuador being a very interesting destination for the last two years, with Lenin Moreno being more open to having private investment in the extractive sectors. The minister of energy and mines is actually a former executive from Halliburton. It is really different from the Correa years.

We are also focusing on the Guyana shield. Brazil is interesting with the arrival of Bolsonaro, but also because of the history of mining there. There are some opportunities after the environmental damage at the Samarco dam … but still there’s an understanding of the importance of mining

All in all, what is interesting for Latin America is that most Latin American countries need US dollars. Most of the savings from Latin America … [are] usually left in American banks in Miami or in Canada or in Europe, and so there’s a real element of trying to generate US dollars through exports in commodities. It is the very easiest way to go.

As a result, you’re going to have very favorable policies from government to boost mining investment in those countries. If you’re able to also double this with the right local intelligence and understanding of a community’s needs, then you have the recipe for success in every jurisdiction of the continent

INN: Have you seen any change in regulations or any kind of changes in the countries themselves in terms of a commodity being particularly favored in Latin America?

RP: Definitely we have reforms and changing some laws. For example, coming back to Colombia, we’ve seen a big positive change in Colombia [with] the distribution of royalties. That was the key issue in Columbia — many little communities were adverse to mining because only 9.2 percent of the royalties were arriving in the municipalities that were actually producing the mineral. So as a result the communities would be against supporting mining because they would not get the benefit. Now we see a reform with 50 percent being pushed to those municipalities, the possibility to offset your taxes, investment that you’re doing for the communities. The possibility also to advance the royalties, which allows you to also make some more investment ahead of time.

All these are actually something that is positive, and we see this support in different countries. We see it in Peru with an interesting development on the political side. Vizcarra is doing a very good job, and the worry was the potential arrival of Keiko Fujimori, but that just doesn’t look to be a possibility in the future. Chile is stable, Brazil is interesting in the future.

So we see this now, in terms of minerals — I mean, if you just look at gold mining in Colombia, gold mining was often considered to [have a] very bad, let’s say reputation, because it was a way to launder for criminal organizations, for narco traffic. With the potential crackdown from the Duque administration on illegal miners we’ve actually strengthened that.

We also see in the different minerals, whether it’s iron, it’s nickel, it’s lithium. Lithium is interesting, especially Argentina in terms of investment environments. So those are opportunities. But know the minerals and know the country.

Again, I can’t stress it enough. It’s an understanding of what makes an investment possible and successful, how each company tackles those issues of not only CSR, but really community management for long-term investment, because we’re looking at expanding the lifetime of mines and the lifetime of investment. That will be the key to successful investment.

INN: My last question for you is looking into next year or the next five years, what are some of the challenges investors should pay attention to?

RP: So political risks are still going to be there, especially in countries such as Argentina with their elections next year. You also have issues potentially in Peru and so on.

The issue could be Guyana, the development resources in Guyana [where they discovered] 4 billion barrels of oil, so that might bring inflation there. You also always have issues of insecurity and corruption that are there, but that can always be mitigated. We do due diligence both on individuals and corporations.

That’s actually a reason you can mitigate, but you have to be always conscious about this. The situation in Brazil might be worrisome in terms of social stability, in case Bolsonaro doesn’t vanilla down his policies.

So those are elements to look at. The social component and the social sides will never go away, especially with the development of more social media, more interactions with international network associations. So that’s something you can’t believe is just an epiphenomenon. That’s something that going to be increasing down the road.

There’s key best practises — we’ve seen it in Ecuador, we’ve seen it in different countries — of ways to interact with communities. We’re more than happy to share this knowledge with different investors. For example, making sure that the company that you invest in actually has the right tracking of good practises, but also the know-how of how to operate on a daily basis with different communities. If you have this … then it is a recipe for success, but we have to really do due diligence on the company, on each operation. Understanding what are the political actors locally that you could upset or could try to prevent the development of mining operations.

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Securities Disclosure: Priscila Barrera and Scott Tibballs hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.