Opublikowano: 17/07/2024

The European Union is looking for ways to diversify the supply of critical raw materials. Latin America, where 25 out of 34 raw materials identified as critical by the European Commission are mined, can play an important role. It is home to 56.7 % of the world's lithium reserves and 94.1 % of the world's niobium reserves. Between 2022 and 2023 alone, the combined total of planned and active mining investment projects in Argentina, Brazil, Chile and Peru amounted to USD 178 billion. The region's political and economic instability remains a challenge to plans to increase mining, with 28 % of the world's documented environmental conflicts with local communities, among other factors. These are the conclusions of the Polish Economic Institute's report Latin America's critical raw materials and the economic security of the European Union

“The European Union’s dependence on energy raw materials from Russia has proven to be a mistake. Today’s challenges for the EU and its Member States, including action on critical raw materials, arise in turn from the scale of new conflicts, political and economic tensions, crises and intense competition for resources.

Therefore, the strategic objective for the European Union in the case of critical raw materials is security understood in terms of stability and security of supply, diversification of sources and risk management,” points out Bartosz Michalski, Ph.D., Senior Advisor, Global Economy Team, PEI

Latin America’s large raw material potential

Latin American countries host deposits of 25 of the 34 raw materials considered critical by the EC. There are 94.1 % of world reserves of niobium, 56.7 % of lithium, 36.3 % of copper, 27.5 % of natural graphite and 24.3 % of fluorspar. The most important producers responsible for the majority of the extracted deposits in Latin America are: Brazil, Chile, Peru and Mexico. Brazil is the largest global producer of niobium, accounting for 91.8 % of global niobium production. Lithium deposits, on the other hand, are mainly distributed in the ‘lithium triangle’ – Bolivia, Chile and Argentina. The leader in lithium production in Latin America is Chile, which holds 10 % of proven global reserves and is responsible for 24 % of world production. The region also has significant quantities of bauxite (10 % of global reserves), antimony, manganese, nickel and rare earth metals. The latter are found in Brazil (19.1 % of world reserves), but are not mined on an industrial scale.

“Latin America can play an important role in securing the supply of critical raw materials. Of the 34 critical raw materials on the EC list, 25 are extracted in Latin America. The EU imports 16 of these, including copper, niobium, natural graphite and fluorspar.  The share of critical raw material imports to the EU from Latin America in 2023 was 24 %,” points out Katarzyna Sierocinska, PhD, Senior Analyst, Global Economy Team, PEI.

Poor infrastructure and instability limit Latin America’s mining potential

Latin America’s weakness is the low level of mineral processing, with the majority of regional exports being unprocessed raw materials.  The socio-economic difficulties of Latin American countries remain a challenge for the development of partnerships and trade cooperation. Latin America’s average economic growth between 2018 and 2022 was 1.3 %. The COVID-19 pandemic hit the region particularly hard, with the region experiencing the largest decline in GDP in the world (by 7 % of GDP) in 2020. Latin America also faces high income inequality, with a third of the population living in poverty. The quality of transport infrastructure is also an issue in most countries in the region, which affects the potential for mining cooperation and the risk of supply disruptions.

An additional barrier to mining projects in Latin America is socio-environmental conflicts with local communities. Latin America is home to 28 % of the total number of such disputes worldwide, of which nearly a third are related to mining projects. The cause of the conflicts is, on the one hand, the regulatory gap at the level of implementation of the environmental impact study and public consultation legislation, and on the other hand, the lack of trust of local communities in foreign governments and companies. As a result, these communities often boycott public consultations and mines stop operations or are closed down.

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 The Polish Economic Institute is a public economic think tank dating back to 1928. Its research primarily spans macroeconomics, energy and climate, foreign trade, economic foresight, the digital economy and behavioural economics. The Institute provides reports, analyses, and recommendations for key areas of the economy and social life in Poland, taking into account the international situation.

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