Mining in Latin America – opportunities for British businesses

 

Mining is a very controversial sector in Latin America, mainly for its environmental and social impact. The sector is unevenly developed across the continent; quite advance in countries like Chile and only incipient in countries like Uruguay. We recommend studying each market individually not only because of the technical/geological aspects but mainly because of the legislative and political ones. An overarching understanding of national and regional policies is also important when assessing opportunities and forecasting potential growth.

So where are the opportunities for British businesses? Five areas we have selected for you are

  • Machinery and equipment
  • Energy: mines are huge power consumers and most have their own (sub) station
  • Services: from environmental impact studies to native community engagement projects
  • Water-related products and services
  • Safety equipment and products

In most cases, it will be key to either have a local presence or a reliable distributor. Some important mining trade shows to explore if you are interested in these markets are:

We will now focus on three countries: Chile, Mexico and Ecuador. The idea is to show you one positive about the potential of the sector in each country, with “something else” to make you think of the risks... Even if you are not taking the risks of mining itself, your business strategy needs this intelligence to develop over time and work out how reliant you want your business to be in this industry in these countries.

MEXICO’s mining sector is summarised by UKTI: “Mexico is a top 10 world producer for silver (world 1st), fluorite, gold, bismuth, celestite, sodium sulphate, wollastonite, lead, molybdenum, diatomite, cadmium, graphite, baryte, salt, gypsum, manganese and zinc. Currently, Mexico has a US$7.8 billion surplus in the mining trade balance, and an estimated US$7.65 million is being invested in 2012. It is expected that by the end of 2012, investment in Mexican mining will have reached US$21 billion in only five years.”

But at the same time... “Foreign mining companies are likely to cut their investments in Mexico in half due to the double whammy of a proposed 5% royalty and steep falls in gold and silver prices” (BN Americas, April 19 2013)

CHILE’s industry is well summarised by The Economist (27th April 2013)... “The mining industry has enriched Chile. But its future is precarious.” The FT also reports on this dilemma (11th April 2013).

ECUADOR has huge potential for mining, despite being a country often tricky to deal with. UKTI states that “Ecuador has metal reserves worth approx. USD 220 billion. Several mining projects will be commissioned soon. There are good opportunities for mining providers to touch base with this market. Ecuador has metal reserves including gold, copper, silver, nickel, and several non-metallic minerals which are worth approx. USD 220 billion. In the next few years, Ecuador is expected to receive $3.5bn foreign investment in the mining sector considering that several projects have already been and many others will also be commissioned.”

On the other hand... “Canadian gold-mining company Kinross Gold Corp. (KGC, K.T) is awaiting government reforms in Ecuador to develop its Fruta del Norte project, which will require an investment of at least $1 billion to build the mine” (Fox Business News)

If you supply to the mining industry, here are our top tips:

  • Research each market carefully – doing business in Argentina is not the same as doing business in Peru (for many reasons)
  • Linked to the above, understand the decision-making processes as well as local requirements (for example, in terms of registrations). Decision-making can also be spread between the mine itself (if you are selling maintenance supplies, for example), the country’s head office (often in a capital city) and even the international head office for larger corporations.
  • Have a local presence, whether of your own or through a distributor.  There are highly experienced and professional distributors of products and services to the mining industry in each market, the question is to find them, and not to rely on the ones with fluent English, since this will narrow down your choices. Finding these distributors can often be tricky since the more hand-on ones with the better contacts in the mines themselves can spend long periods travelling and in very remote areas, so you might only get one chance of “selling” your service or product to them...
  • So, again, do your preparatory work (from translations to pricing), since it pays off, and be prepared to travel.
  • Keep up-to-date with sector developments in the market(s) you are interested in since they can affect your business enormously – I personally try to read from a wide range of sources, not just the media or export-promoting agencies, which are both biased

And if you have any questions, or would like to explore things further, just get in touch!

Based in Uruguay but with 13 years in the UK, Gabriela Castro-Fontoura specialises in making it easier for British businesses to do business with Latin America. Since she established Sunny Sky Solutions (www.sunnyskysolutions.co.uk) two years ago, Gabriela has helped many UK companies (from nursery products to electrical engineering, from food and drink to marine engineering) understand and make the most of opportunities in her native Latin America. Her key services include market intelligence and partner recruitment. Gabriela has also recently published an ebook on Latin America, which you can buy here.

 

 

Written on 15th August 2013 by Gabriela Castro - Fontoura, S&H LLP Associate Director at Sunny Sky Solutions (http://sunnyskysolutions.co.uk/)

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