The Net-Zero Circle

Latin America-USA Synergy: a call for collaboration in Critical Minerals

In the dynamic landscape of global trade and resource dynamics, Latin America finds itself in a pivotal position, supplying the world with a myriad of raw materials. However, as the world undergoes a paradigm shift towards sustainable practices and the green transition gains momentum, Latin America’s abundance of critical minerals faces unprecedented scrutiny. This presents a significant opportunity for collaboration between Latin America and the United States, particularly in the realms of critical minerals, infrastructure development, and sustainability.

Latin America’s potential

Latin America takes a leading position globally in the domain of Critical Minerals, relying on significant resources like Lithium and Copper. The demand for minerals essential to low-carbon technologies remains insatiable.This is why the region stands out as an indispensable global supplier in this domain.

When it comes to battery metals, Bolivia contributes with tin, crucial for soldering in electrical components, and Brazil rules graphite production, another essential metal. The potential for further discoveries is high, considering that Brazil is a vastly untapped region, with only 30% of Brazil’s subsoil having undergone exploration. However, the region’s abundant mineral reserves can only be properly exploited once robust infrastructure is in place, joined by available and skilled professionals, and comprehensive regulations aligned with sustainability goals and local content . Overcoming these challenges is crucial for Latin America to unlock its full potential in the global market.

USA and China geopolitical tensions

The country’s geopolitical tensions have got other countries eyeing a more neutral zone for their investments. The United States, recognising the strategic importance of securing critical minerals, has taken legislative action through its Inflation Reduction Act. From 2027 onwards, 80% of the market value of critical minerals used in EV (electric vehicle) batteries must be extracted or processed within US soil or within its free-trade agreement partner countries. The U.S., facing significant dependency on China for critical minerals’ supply, is looking to intensively diversify its sources, making Latin America an attractive destination to US investors.

Overcoming Hurdles: Regulation, communities and Education

Despite the promising scenario, several challenges stand in the way of unlocking Latin America’s full potential in collaboration with the United States. A lack of sufficient investment in the mining sector, underdeveloped permitting and regulatory regimes, and conflicts with local communities present formidable challenges including:

Regulations: regulatory norms have become increasingly stringent, such as Chile raising tax rates on copper miners and Mexico nationalising its lithium deposits. Other barriers such as permits, and concessions also stand as a barrier for the private mining sector. Marc Stanley, the U.S. Ambassador to Argentina, participated in our recent Argentina Lithium event and emphasised the need for transparency, predictability, and access to capital in creating a fair and honest market in which growth is possible. He sees the current moment as an opportunity for provinces like Salta, Jujuy, and Catamarca in Argentina to attract companies by demonstrating commitment and clarity.

Addressing conflicts with local communities: a path to sustainable growth expanding mining activities often lead to conflicts with local communities stemming from issues of land use, environmental impact, and socio-economic concerns. It’s important now more than ever, to foster open dialogue, implement community engagement initiatives, and adopt sustainable practices to once and for all resolve these conflicts.

Education also emerges as a crucial factor, with Latin America falling short in producing an adequate number of engineers and investing a mere 0.6% of its GDP in research and development annually. Legal certainty is paramount to attract investment, especially since returns in the mining sector often materialize years into a project. The harsh reality remains that Latin America needs more mining professionals to satisfy demand. This presents a unique opportunity to not only have Latin America as a supply chain and collaborator for the US, but also to invest in and promote education, contributing to the growth of the sector. For example, fostering partnerships between universities in the region and obtaining certifications from the USA professionals can be a positive step forward.

Advantages

It is essential for the United States to navigate negotiations and promptly engage with the market, as delaying such actions might result in missed opportunities for prosperity. By strategically engaging with Chile’s ambitious Green Initiatives, the U.S. can not only contribute to global environmental goals, but also tap into lucrative opportunities for economic growth. Chile’s Green Initiatives showcases the Nation’s commitment: navigating the path to carbon neutrality Chile, a key player in Latin America, has set ambitious goals in its pursuit of sustainability. The country aims to be the first developing nation to achieve carbon neutrality by 2050 as pledged in the Paris Agreement. This goal involves absorbing as much CO2 as it produces, resulting in a net environmental impact of zero by 2050. In the Bloomberg report Climatescope 2020, Chile is ranked as the country with the best opportunities for developing renewable projects. With its rich natural resources, Chile has vast potential to become the leading renewable power country in South America.

The Role of the United States

By extending support in developing infrastructure, navigating regulatory challenges, and fostering education and community engagement, the U.S. could be able to enhance its own access to critical minerals while also contributing to Latin America’s sustainable growth. For this collaboration to thrive, a point of convergence must be reached where the interests of the United States align harmoniously with those of each Latin American nation. Negotiations should be conducted fairly, ensuring that all stakeholders, including local communities, derive equitable benefits. It is imperative that the collaboration between the United States and Latin America is grounded in principles of fairness, sustainability, and shared prosperity.

Conclusion

The collaboration between Latin America and the United States in critical minerals, infrastructure, and sustainability marks a pivotal moment in the global economic landscape. Latin America’s wealth of resources and the United States’ strategic imperative to secure a diversified supply chain create a symbiotic relationship. Overcoming challenges in investment, regulation, education, and community relations is not just an opportunity but a necessity for sustainable growth. Once both roll in collaboration, Latin America and the United States must navigate the path considering the future implications, ensuring that the benefits extend beyond economic gains and provide environmental preservation, social equity, and long-term prosperity. The journey towards sustainable growth is a shared one, where collaboration, negotiation, and a commitment to common goals will pave the way for a brighter future for both regions.

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December 19, 2024

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