Despite setbacks in recent years, the market for precious metals is turning around and attracting the attention of investors worldwide. Countries like China and Canada are especially eager to place their claims on foreign natural resources, and South America has become one of the most popular regions for mining companies to expand into.
Vast South American Gold Resources Offer Untapped Potential
The countries of Latin America are filled with untapped potential. Approximately 27% of all foreign investment into gold exploration involves locations in this region. In Chile and Peru alone, more than $29 billion has been devoted to this task so far. This provides numerous advantages to both the investors and the countries alike, though brings with it a fair share of problems.
Investors are attracted by several things. There is a large supply of cheap labor available in many of these economically struggling countries. Several of these countries do not have the money to develop the mines themselves, so large deposits remained untouched and ready for companies to come in and fill that role. In addition, environmental regulations are less strict and allow companies to operate with lower costs.
The main benefit to South American countries lies in the significant amount of revenue that these foreign investors provide. With no developed mining industry, they must rely on outside sources to bring in the technology, specialty skills and capital to get operations going. An increased investment in mining will also allow countries to diversify their resources instead of relying on a few industries to hold their economy together. Due to the demand for gold, some governments have the opportunity to negotiate better deals with foreign investors, including control over the mines once foreign contracts have expired.
While this may seem a golden opportunity for many, there are still several issues which are of concern. Due to the instability in many of these regions, companies are taking a risk when they set up operations there. They must rely on guarantees from the government or try to get in-and-out as fast as possible to avoid potential problems.
These large mining projects are also proving to be a strain on the local environments. Clearing of land for mining operations and the massive amount of water used during extraction are depleting natural resources. Chemicals used for metal extraction are also at risk of polluting nearby water supplies.
The movement from smaller mining operations to larger ones also creates economic issues. A larger operation typically provides less long-term employment and fewer jobs in general as the need for labor is replaced by the use of machinery. A significant amount of the money from these operations leave the country in the hands of the corporations as well, meaning less profits for struggling communities.
The attention given to South American gold mining projects will no-doubt continue, though only time will tell if they prove to be a boon only for gold trading investors or whether the countries of Latin American will reap the benefits in the long-run.