Black Gold, Copper Gold and Gold Gold

Universia@Wharton puts out a solid biweekly newsletter with in-depth pieces on Latin America (all translated into English, Spanish and Portuguese). This week’s edition features a re-examination of renewed interest in the Latin American extractive economy. I’ve written about how Chinese demand was driving up prices and sustaining growth in the region until, well, it wasn’t.

“In Chile, the sector made up 15.2% of the economy, a significant rise from 10 years earlier, when it was responsible for 5.2% of GDP. Extractives makes up 10% or more of the economies of Bolivia, Colombia, Mexico and Venezuela as well, according to ECLAC figures. If current investment trends continue, mining will make up some 12.5% of the region’s gross domestic product within the next decade, researchers at Queensland University suggest in a recent report.”

Chile built up a multi-billion dollar sovereign wealth fund from the proceeds of bumper copper exports. Mexico covered 35% of its federal spending with revenues from Pemex, and, well Hugo Chavez keeps winning elections while the same Americans buying Citgo gas label him a dictator. It takes a lot of energy to follow.

But Chinese demand for certain metals has fallen off sharply as construction stalls and exports fall. Latin America has slowed concurrently, although not at the drop off one might expect from a Chinese soft landing. The bad news is lower revenues, but the good news is increased policy room to evaluate the economic and social impact of mining projects and think about their value add in context of other economic input.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s