How to build a responsible, transparent mining industry in Latin America.

BY SEBASTIAN PEREZ-FERREIRO

Mining has long been a double-edged sword for resource-rich nations. Done responsibly, it can be a driver of industrial development, fiscal stability, and community welfare. Done poorly, it can leave behind poisoned rivers, fractured communities, and squandered economic opportunity. Latin America, home to some of the world’s largest deposits of copper, lithium, silver and other metals, has witnessed both extremes.

For countries seeking to build a mining industry from scratch — or reform one plagued by mistrust — the region’s experiences offer valuable lessons. From Chile’s copper dominance to Peru’s struggles with social conflict, and from Colombia’s cautious efforts to diversify into metals to Mexico’s lithium nationalization, the question remains: What does a responsible and transparent mining industry look like?

This article outlines best practices observed in successful jurisdictions worldwide, with a particular focus on how they can be adapted to Latin America’s realities of resource abundance, political volatility and pressing social needs.

1. Building a Royalty System That Balances Risk and Reward

One of the most critical aspects of designing a mining industry is taxation. The temptation is to demand maximum revenue from investors up front. However, experience shows that overly rigid or punitive regimes can deter investment or prompt companies to slow down when commodity prices fall.

Best practice: Create a sliding-scale royalty system, where government revenues rise when companies thrive but fall when markets slump.

• Chile’s copper royalties are a case study. After years of debate, the country implemented a progressive system that links tax rates to copper prices and production volumes. This ensures that the state captures windfall profits during high-price cycles — like the 2021 copper boom — while keeping operations viable when markets cool.
• Botswana’s diamond model provides another lesson. While the state captures a substantial portion of mining profits, it has repeatedly revised its agreements to maintain De Beers’ long-term commitment and investment in Botswana.

For a new mining jurisdiction, adopting this royalty approach would ensure fiscal stability and avoid mine closures that devastate local economies. Importantly, governments must resist the urge to rewrite tax codes mid-cycle, as policy unpredictability is often a bigger deterrent than the tax burden itself.

2. Designing Mines That Are Environmentally Sensitive

No industry in Latin America faces as much scrutiny as the mining industry when it comes to environmental concerns. Water is a flashpoint, tailings dams can be catastrophic if neglected, and pristine ecosystems often overlap with mineral-rich areas. To earn the local community’s buy-in, environmental safeguards must be rigorous and non-negotiable.

• Protecting water sources. Do not contaminate rivers, lakes or aquifers. In Peru’s Andean highlands, water disputes have sparked repeated protests and mine shutdowns. Modern mines must adopt closed-loop water systems, advanced filtration, and have transparent water-use monitoring that is accessible to the public.
• Safe tailings management. Disasters like Brazil’s 2019 Brumadinho dam collapse are stark reminders of the cost of negligence. Safe design means dry-stack tailings where feasible, independent inspections, and real-time monitoring systems. Public disclosure of tailings safety reports, already encouraged by the Global Industry Standard on Tailings Management, should be mandatory.
• Respecting pristine lands. Mining should avoid high-biodiversity zones, national parks and indigenous territories unless there is free prior and informed consent (FPIC). Ecuador’s experience with mining concessions overlapping protected forests illustrates the risks of ignoring this principle.
• End-of-life restitution. Every mine must have a closure plan in place from the outset, including financial guarantees (such as reclamation bonds) to restore the land to its natural state. Canada and Australia have pioneered this practice, requiring mining firms to post funds that cannot be withdrawn until restoration is complete. Latin America can adapt these safeguards to ensure sites don’t become toxic legacies.

3. Operating Mines That Create Lasting Local Jobs

Mining can either become an enclave economy — rich in exports but poor in local benefits — or a catalyst for industrialization. The difference lies in how much of the value chain stays in-country, and close to the mine.

• Maximizing local vendors: Mines should prioritize local suppliers for construction, catering, maintenance, and transport. In Chile, supplier development programs have helped create a robust mining services cluster, now exporting technology worldwide. Ecuador’s Fruta del Norte mine won awards and community support by sourcing over 30% of its vendor budget to local providers.
• Training the workforce: Mines should invest in technical schools, scholarships and apprenticeships, ensuring that local populations — rather than expatriates — fill positions from operators to engineers. Peru’s large-scale copper mines have made progress in training rural youth for technical careers, although gaps remain in gender inclusion. Training is especially crucial in relatively new mining jurisdictions that lack mining engineering programs, such as Panama, the Dominican Republic, and Ecuador.
• Integrated value addition: Smelting, refining, and battery production are logical next steps for Latin America, particularly with copper in Chile and Peru and lithium in Argentina and Bolivia. Adding domestic processing not only generates jobs but also reduces exposure to raw commodity price swings. However, policies must attract private capital rather than relying solely on state-led ventures, which often underperform. The heightened geo-political interest in Latin America’s strategic mineral riches provides an opportune moment to attract downstream processing investments.

4. Operating Mines That Give Back to Communities

The social license to operate has become as important as the mine’s legal concession. Communities must see tangible benefits, or they will mobilize against projects. Successful models show that mining companies should embed community investment into their operating philosophy.

• Funding social services. Mining revenues should support schools, clinics, and infrastructure. In some cases, companies directly finance projects, raising concerns about community dependence and corporate influence. A better approach is co-designing projects with local governments and civil society to ensure sustainability. Co-investing with government on Corporate social responsibility (CSR) spending adds additional oversight to such projects, the lack of which is often a source of community discontent.
• Stakeholder buy-in. Consultation is not a box-ticking exercise. Companies must hold meaningful dialogues from exploration onward. In Colombia’s Santurbán Páramo — a protected high-Andean wetland ecosystem — failure to secure community consent has led to years of legal and political battles. Best practices include establishing roundtable groups that include local communities, NGOs, government, business leaders and the mining company to both survey local input and pilot-review the miner’s CSR plans.
• Designing CSR programs with communities. CSR programs should not be imposed by the miner based upon successful projects elsewhere. Instead, they should be tailored to community priorities, as defined by a representative and diverse committee of local leaders. In Mexico, some mines have successfully partnered with local cooperatives to co-manage funds for community development.

5. Ensuring Transparent Governance

Even the most responsibly run mines will face skepticism if revenue flows vanish into opaque government accounts. In Latin America, decentralization laws often transfer royalties to local municipalities. At the national level, voters rarely grasp where mining taxes and royalties are spent. Without oversight, an anti-mining narrative flourishes, with or without fiscal malfeasance. Establishing independent watchdog agencies and digital dashboards can help track spending in real time. Transparency is a cornerstone of building trust.

• Publicizing company payments: Companies should disclose taxes, royalties and community contributions on a project-by-project basis. Many jurisdictions, such as Peru and Colombia, participate in the Extractive Industries Transparency Initiative (EITI), which provides a global standard for these disclosures.
• Transparent use of funds: Governments must disclose how mining revenues are spent. Ghana transfers royalties from gold, bauxite, manganese and other minerals into the Minerals Development Fund, with published reports on allocations.
• Stable and transparent contracts: Contract negotiations between governments and companies can lead to win-win situations as long as they’re public or at least subject to congressional approval. Mongolia’s Oyu Tolgoi copper mine provides lessons in how a controversial project can move forward through a framework of transparency. After stalling over cost overruns, alleged unpaid taxes and investigations into corruption, the state and Rio Tinto restored public trust through a renegotiation based on open publication of contracts and financial data, enhanced sovereign oversight and creator revenue-sharing clarity and ESG commitments.

Latin America’s Path Forward

The global energy transition is driving demand for copper, lithium, nickel, and rare earths — resources that Latin America holds in abundance. Yet history warns of the resource curse, where wealth fuels inequality and corruption instead of development.

By adopting best practices, the region’s mining jurisdictions can chart a different course:

• Design flexible royalty systems to strike a balance between investor confidence and fair state revenues.
• Enforce strict environmental safeguards to protect water, land, and people.
• Ensure local benefits by building supply chains, training workers, and adding value domestically.
• Embed community participation in every stage of the mining cycle.
• Institutionalize transparency, so citizens can see where every mining dollar goes.

Latin America does not need to reinvent the wheel here — successful models exist in Chile’s royalty system, Canada’s mine closure policies, Botswana’s resource partnerships and Australia’s supplier networks. What is needed is a strong political will, effective regulatory capacity, and genuine engagement with citizens.

If done responsibly, mining can be more than an export machine. It can be the backbone of a diversified economy, a source of dignity for workers and a partner to sustainable development. The stakes are high, as the world looks to Latin America to supply the metals needed for the renewable energy transition. How the region responds will determine not only its economic future, but also its social and environmental legacy.

Sebastian Perez-Ferreiro is Mining Practice Co-Director at Americas Market Intelligence.

This article was originally published by AMI. Republished with permission from AMI.

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