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Increasing demand for participation in natural resource revenues, stricter environmental protection regulations and legislative changes are increasing risks for mining and energy companies across Latin America, even in countries once considered safe investment destinations.

According to the Latin America Mining Risk Index 2022, published by consultancy Americas Market Intelligence (AMI), Chile, once a favourite with investors, is now the riskiest country in the region.

The nation is reworking its market-oriented constitution, which dates back to Augusto Pinochet’s military dictatorship. In September, a national referendum will be held on the new text, which could completely ban mining in glaciers, many of which are adjacent to lithium deposits.

The new constitution could also include mandatory prior community consent for new concessions near indigenous territorial claims and an end to water ownership within the boundaries of concessions, replaced by a water authorisation process.

The world’s leading copper producer, home to global copper giants such as Codelco, BHP, Anglo American, Albemarle and Antofagasta, scored 68 out of a maximum of 70 in AMI’s ranking.

The study divides the risks into seven overlapping categories: political interference, economic pressures, community opposition, legal and regulatory instability, reputational risk, security and operational risk.

By metrics, Peru ranks second, with 61 points and 80 projects suspended due to community opposition.

The mining industry blames President Pedro Castillo for the recent wave of social unrest. Since the former rural activist from a Marxist party took office, the number of social conflicts has increased by about 7%, as the administration is prioritising the right to protest over other concerns such as free transit.

Argentina, at 56, is the third riskiest country for miners and energy companies in Latin America.

In the past year the country has attracted major players, including the world’s second largest miner Rio Tinto and South Korean steel producer Posco.

According to the report, economic pressure could hamper the sector’s expected growth as Argentina’s ever-present fiscal crisis pushes the government to increase taxes on natural resource sectors, including mining.

Brazil ranks fourth, with 54 points. The geographical, historical and demographic diversity of the country, combined with its decentralised political system, makes risk analysis at national level difficult.

They point to an increasing number of projects in the Amazon basin, thanks to President Jair Bolsonaro’s concessions, which have attracted global criticism.

Costs are another issue in Brazil, as almost everything is more expensive in Brazil than in the rest of Latin America, the authors say. According to the report, logistics costs in the country are 50 per cent higher than in Canada.

Moreover, in some Brazilian states such as Bahia, security is a serious concern, especially due to drug trafficking.

Completing the ‘top five’ of countries at risk is Panama, with 53 points. First Quantum’s Cobre Panamá put the country on the map by developing the third largest mine in the world. With little mining history, Panama is only now waking up to the industry’s potential.

The country’s mining code, written in 1963, is outdated and does not incorporate today’s best practices. Key issues that need to be addressed include adherence to environmental best management practices, such as water, waste and biodiversity management.

Of equal or greater importance is the local investment climate, including the interests of local stakeholders, the concerns and aspirations of local communities, the rule of law and security environment, and the historical relationship between the local community and national authorities, among other issues.

The report also points out that most obstacles to mining projects in Latin America currently originate from local, not national, issues.