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Mining and the Green New Deal

By Adrian Juarez - CTA Consultoría y Tecnología Ambiental
CEO

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By Adrián Juárez | CEO & founder - Wed, 08/31/2022 - 10:00

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The direction that politicians are taking in some countries in Latin America surprises me. The following three examples catch my attention: in Chile, Colombia and Mexico, the political leaders, are or will be implementing their mining and energy policies according to the historic and traditional roots of their countries, but strongly influenced by the “Green new deal”. This new development concept that gives priority to the renewable energies at the expense of fossil fuels, requires more of some specific metals (copper, nickel, cobalt, iron, and others) to build the solar panels, aero-generators, and batteries.  Therefore, mining is its foundation.  

The Green New Deal, as described by the Green Party in the US[1], will convert the old, gray economy into a new, sustainable economy that is environmentally sound, economically viable and socially responsible. It seeks to solve the climate crisis by combining quick action to get to net-zero greenhouse gas emissions and 100 percent renewable energy by 2030 along with an “Economic Bill of Rights” – the right to single-payer healthcare, a guaranteed job at a living wage, affordable housing and free college education.

European Greens were among those calling for a Green New Deal in response to the global financial crisis of 2008. In addition to a call for both climate action and a bill of economic rights, the approach by the European Greens sought to democratize the world's financial system.

Mexico

The direction that the administration of President Manuel Andrés López Obrador wants to take in terms of mining seems to be focused on two strategies: one strategy is promoting the creation of the national lithium company, which will be the only company authorized in Mexico to take advantage of this element; with the exception of a Chinese operation, likely because it has a preexisting rights.; and the second strategy is to hinder and even interrupt the continuity of mining operations by delaying and denying expansion or operational continuity permits and wanting to allow only underground mining operations. Interestingly, at the same time, it seems that the administration does not want to interrupt the projects that are happening in Sonora, which is heavily a mining state. Both strategies of AMLO’s administration generates uncertainty in the industry, increases costs and drives away future investments in Mexico. Several Canadian companies with mining operations exclusively in Mexico, which was an outstanding confidence indicator for the country, have felt threatened by this administration and have already taken action to expand their operations to other, friendlier jurisdictions, such as the state of Nevada, just in case something happens in Mexico.

Chile

The new administration of President Gabriel Boric, barely 6 months old, is already showing the direction in which, he wants to push the country. The National Mining Society (SONAMI) of Chile has declared[2] itself surprised that at least six extensions of mining projects have been rejected in the last two to three months, something that did not happen in the past administrations.  Let’s assume that every mine employs 2,000 people, and the extension could last another 10 years, if the government is acting in the best interest of its people, what is going to create 12,000 new well paid jobs; let alone attract the investment needed for job creation?  Boric is also clear about his desire to create a National Lithium Company[3] so that clean and sustainable energy is guaranteed to future generations, and has also confirmed that he wishes to strengthen the national copper company (CODELCO). After Boric's visit to Canada in April, the mining deputy minister visited the PDAC (Prospectors & Developers Association of Canada) in June and invited international companies to invest in developing 34 mining projects, in conjunction with the state-owned CODELCO. There is a contradiction of promoting mining projects related to the state-owned company, and at the same time blocking mining projects developed by private companies.

Colombia

The recently inaugurated (Aug. 7, 2022) president of Colombia, Gustavo Petro, appointed Irene Vélez for the  position of minister of mines and energy. Irene Vélez has served as an environmental social leader[4]. In addition, Petro has indicated that he will propose a mining moratorium[5], during which "compliance with mining, environmental and economic obligations by current concessionaires" and agreements will be reviewed and a "new mining model" will be designed, with prohibitions and environmental restrictions. He has also proposed reforming the mining code and the energy legislation. Prior to taking office, it was heard that the new administration would promote mining to advance the energy transition, favoring mining of some metals, such as copper, nickel, and cobalt, but limited to underground operations. The Colombian Mining Association (ACM) said[6] that "it will continue working to contribute to the employment and development of the country, highlighting that the mining agenda will be decisive in advancing in the energy transition."

I can see in the policies of Colombia, Chile and partially in Mexico, due to the strong support for the stated-owned oil company (PEMEX) and the support for state-owned CFE (Federal Electricity Commission) which favors the use of coal than renewable energies, the influence of the "Green New Deal" that is strongly promoted by the Democratic Party of the US, and by the green parties of Europe.

Mexico and Chile are building on their tradition of state-owned companies; while Gustavo Petro wants to get the country out of the fossil-fuel economy, European style, hopefully he can find a way to do it, without inflicting pain to his people and to the finances of the country.  The political leaders in Mexico and Chile do not need to change a lot to become true leaders, they need to focus on the development of their state-owned lithium company following the model of Chile, where the concept is not to create a monopoly, and let the private companies continue their mining operations and developing new mines for the benefit of the people and their economies. Colombia is in a more difficult position, because abandoning the use of its natural resources like coal and oil (around 1% of the world production) will inflict a pain to Colombian  people and the country´s economy.  It will be difficult for these three administrations to deliver on their promises during their respective periods.

 

[1] The Green Party US: Green new Deal: https://www.gp.org/green_new_deal

[2] Mineria Chilena, Julio 21, 2022: Sonami lamento rechazo a proyecto de continuación operacional de El Soldado

https://www.mch.cl/2022/07/21/sonami-lamento-rechazo-a-proyecto-de-continuidad-operacional-de-el-soldado/

[3] Pauta: Junio 1, 2022: Presidente Gabriel Boric: “Uno de los pilares es la creación de una empresa nacional de Litio.”

[4] El tiempo, Agosto 8, 2022: Paridad y experiencia: este es el gabinete de ministros de Gustavo Petro.

https://www.eltiempo.com/politica/gobierno/gustavo-petro-este-es-el-gabinete-de-ministros-del-presidente-692941

[5] EFE, Agosto 1, 2022: Los diálogos con ELN y la moratoria minera, entre las primeras medidas de Petro

https://www.efe.com/efe/america/politica/los-dialogos-con-eln-y-la-moratoria-minera-entre-las-primeras-medidas-de-petro/20000035-4860458

[6] La Republica, 20 Junio, 2022: Las reacciones de los gremios de minería y petróleo a la victoria de Gustavo Petro.

https://www.larepublica.co/especiales/especial-elecciones-presidenciales-2022/las-reacciones-de-los-gremios-de-mineria-y-petroleo-a-la-victoria-de-gustavo-petro-3387742

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