COMMENTARY — Foreign ownership in Latin America

During the 1990s, control by national governments of mineral resources and operating mines in many Latin America countries will decrease markedly and the percentage owned and controlled by foreign mining companies will rise dramatically.

By the end of the decade, this may become a political issue is some countries, particularly if the remaining, higher-cost, nationally owned mines are forced to close sooner during metal price cycle downturns while lower-cost, foreign-owned mines continue operating and remitting profits abroad.

One can anticipate, under such circumstances, that some governments will be strongly tempted to capture more of the wealth being generated by their mineral resources. Countries whose trade balances are heavily dependent on the export of a few mineral commodities may be particularly sensitive about the loss of control over those industries.

Moreover, a market-driven, private-sector mining industry may mean, in some countries, that the percentage of local smelting and refining decreases while the percentage of unprocessed mineral exports increases. Whether, under such circumstances, governments will adhere rigorously to free-market principles remains to be seen. . . .

Environmentalism will become a growing presence in Latin America, particularly as mining companies from the U.S., Canada and Europe attract, in their wake, environmental activists from their home jurisdictions. Latin America has not yet begun to experience the full potential of environmental, non-governmental organizations. This flocking of the environmental movement to the region, if it occurs, will pose significant challenges to governments and to investing companies.

Mining will be under increasing pressure to demonstrate how an industry which depletes natural resources contributes to “sustainable development.” Sustainable economic development may eventually mean that mining should be judged, after orebodies are depleted, by what it leaves behind, both environmentally and socially.

In many jurisdictions, public acceptability of mining will depend on how much the industry contributes to improving environmental conditions, education, health, living standards and business activity, and how long beyond the life of the mine those improvements can be sustained. . . .

— From a speech by Placer Dome officer James Cooney at a conference earlier this year in Miami which focused on Latin America.