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Modern

Modern

Mining is a mixed economy in present-day Latin America although historically it was a state-chartered monopoly. Mining was at one time a mainstay of the colonial economy in Mexico, Peru, and Brazil, but its relative importance in their national economies was eclipsed soon after their independence. Alexander von Humboldt reported that agriculture was the chief source of wealth and revenue for Mexico on the eve of that country's independence. However, the wars for independence in Mexico and the Andean countries devastated their mining industries. Slackening overseas demand, especially in Europe, also contributed to the collapse of mining. Not until the second half of the nineteenth century did mining reemerge in Latin America as a viable, profitable economic activity.

Between 1850 and 1930, the apogee of private capitalism and liberal democracy in Latin America, mining was a private enterprise. In this system the state granted a private operator a concession to explore and an economic right (permit) to exploit. The mine operator financed exploration, production, beneficiation (turning minerals into metals), transportation, and marketing. In addition to concession and permit fees, the operator paid royalties ranging from 0 to 20 percent, based on the colonial levy of a royal fifth. In addition to colonial mines of gold and silver, the diversified industrial economies of the United States and Europe stimulated the development of new metallic and nonmetallic minerals. Guano, or bird droppings, became an important export item for Peru for nearly half a century, from 1840 to 1890, as fertilizer and as raw material for munitions. Chile first experienced a boom in nitrates (salitre) in the 1880s as an alternative to guano, then developed copper mining by the early part of the twentieth century. By 1970 copper was generating more than 80 percent of Chile's export revenues, and it continues to remain the single most important export, generating about 45 percent of the country's total export revenue in the early 1990s. Copper continues to be critical to the Chilean economy in the early twenty-first century. As of 2004, Chile produced 35 percent of world production.

Overall, Latin America emerged as a world-class producer of such base metals as iron, bauxite, copper, tin, and manganese, but it also produces energy minerals. Coal mining is an important economic activity in Colombia and Venezuela and is marginally significant in Argentina, Brazil, and Chile. The extraction of hydrocarbon resources such as petroleum and natural gas is important for several countries, primarily Venezuela, Ecuador, Trinidad and Tobago, Brazil, Peru, Colombia, Mexico, and Argentina. The first three were members of OPEC (Organization of Petroleum Exporting Countries), but only Venezuela remained in the cartel by 1994.

During the 1930s, the failing free-enterprise system led to a series of economic reforms throughout Latin America. One facet of this reform movement involved either buying out or expropriating both foreign- and domestic-owned mining and energy companies. These nationalized firms then became state corporations. The trend of nationalization and expropriation, with or without compensation, continued to the 1970s. In Brazil, iron-ore mining was the monopoly of the state or, more precisely, the Companhia Vale Do Rio Doce (after 1944), and under the 1988 Brazilian Constitution, foreigners were prohibited from mining. In Chile, copper mining was a state monopoly during the Salvador Allende years (1970–1973), but it since has been opened to private participation. In Mexico, major changes took place in the late 1980s, especially under the Carlos Salinas De Gortari government, when mining was privatized and Mexican and foreign investors bought up formerly state-held mineral properties. One Mexican investor alone holds more than three-fourths of the country's copper concessions.

Such major nonpetroleum state-owned mining companies as Comibol (Bolivia), MineroPeru and Hierro Peru, CVRD (Brazil), Cananeia (Mexico), Guayana and Minerven (Venezuela), Codelco and Enami (Chile), Yacimientos Carboníferos Fiscales (Argentina), and others are currently going through structural changes, either being sold off to private investors or reorganizing to meet shifting markets. Every country in Latin America has opened up mining concessions to both domestic and international investors, although the degree of participation allowed to private investors is still regulated by the state. The mining boom that hit first in Chile during the 1980s, then in other Latin American countries in the 1990s, was brought on by economic liberalization and deregulation measures that were based on the belief that private mining is more efficient and productive than public-sector operation. Hence, state corporations were seen as wasteful and too expensive to taxpayers. Many such companies are still exempted from tax obligations, but lack the capital resources to invest in new projects.

Mining possesses great growth potential. In Brazil, mining represented less than 2 percent of the country's gross domestic product (GDP) in 1990. Argentina has enormous mineral riches in its Andes but has not developed them. (Mining represents less than 0.4 percent of its GDP.) In Mexico, Colombia, Venezuela, Peru, and Chile, mining is an important activity, but none of these countries relies exclusively on minerals for its revenues. To develop the continent's immense mineral resources, however, Latin America is joining the global trend toward privatization, liberalization, and deregulation of the economy.

Latin America boasts the world's largest copper mine (Chuquicamata, in Chile) and the largest iron-ore mine (Carajás, in Brazil), but it also offers a variety of mining activities. Chile will have more than 60 percent of world-class operations (over 50,000 tons of copper ingot) by the end of this century, while the Carajás iron-ore reserve alone constitutes 18 billion metric tons (19.8 billion tons), or a supply for 530 years at current levels of Brazil's export and domestic consumption of 35 million tons. Gold mining has also become an important activity in several countries. Mexico, Brazil, Venezuela, Chile, Argentina, Ecuador, Costa Rica, and Honduras offer immense potential for gold exploitation. Mining activities stimulated the building of infrastructure such as roads, ports, and power-generation stations, as well as the creation of a coterie of component and supply companies for local industry, thus contributing to the growth of total national economies.

Styles of managing mineral resources and developing them vary from country to country. In Chile, mining is an economic activity shared between the private sector and such state corporations as Codelco in copper and Enami in noncopper minerals. A simplified rule now makes private participation and investment in mining easy and lucrative. In Brazil, for 1990–1991 alone, more than 5,900 mining concessions remained idle, because of a dearth of investment capital and the constitutional prohibition of international participation. In Venezuela and Mexico, private domestic and international capital is welcome. With diminishing ore quality and stringent environmental rules in the United States, major U.S. corporations are moving out to overseas sources, including Latin America.

In the early twenty-first century, Latin America's mining sector has benefited from the overall increase in commodity prices on world markets. China's rapid industrialization and the growth of the world economy have caused a dramatic increase in demand for minerals. Giving U.S. companies competition, Chinese enterprises are now looking to develop and invest in mineral resources in Latin America.

See alsoCopper Industry; Gems and Gemstones; Iron and Steel Industry; Tin Industry.

BIBLIOGRAPHY

Theodore H. Moran, Multinational Corporations and the Politics of Dependence (1974).

Malcolm Gillis et al., Taxation and Mining: Nonfuel Minerals in Bolivia and Other Countries (1975).

June C. Nash, We Eat the Mines and the Mines Eat Us (1979).

José Maria Gonçalves De Almeida, ed., Carajás: Desafio político, ecologia e desenvolvimento (1986).

Adrian W. De Wind, Jr., Peasants Become Miners: The Evolution of Industrial Mining Systems in Peru, 1902–1974 (1987).

Marshall C. Eakin, British Enterprise in Brazil (1989).

Ricardo A. Godoy, Mining and Agriculture in Highland Bolivia: Ecology, History, and Commerce Among the Jukumanis (1990).

Additional Bibliography

Delgado Wise, Raúl, and Rubén Del Pozo Mendoza. "Mexicanization, Privatization, and Large Mining Capital in Mexico." Latin American Perspectives 32, no. 4 (July 2005): 65-86.

García Flores, Pedro Pablo. La minería en Bolivia. Bolivia: Observador, 2005.

Sánchez Albavera, Fernando, Georgina Ortiz, and Nicole Moussa. Mining in Latin America in the Late 1990's. Santiago, Chile: Naciones Unidas, ECLAC, 2001.

                                         Eul-Soo Pang

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