Latin America has them; the world wants them. But regional governments, and their citizens, are of two minds about the costs and benefits of further development.
The increasing competition between world powers to secure the future of their manufacturing and technology supply chains is turning Latin America’s unique pool of critical minerals and rare-earth elements into a critical new battleground.
“The region has immense mineral wealth,” says Henry Ziemer, associate fellow at the Center for Strategic and International Studies (CSIS), “particularly in the form of copper and lithium, which are projected to skyrocket in demand, as well as more bespoke minerals such as niobium, used in aerospace and steel manufacturing; nickel; and rare-earth elements.”
Global demand for lithium could increase by a factor of 40 over the next 15 years, the International Energy Agency (IEA) projects, and according to S&P Global Market Intelligence, it could outpace current global production output by 2028. The IEA also projects copper demand to soar by 40% over the next five years, outpacing current output by 2030.
Lithium demand appears more vulnerable to changing dynamics in the green energy market, particularly as the Trump administration pulls the US out of the Paris Agreement and slashes carbon emission goals. But the same can’t be said of copper, which is “almost certain to remain high in demand as it will be critical for applications ranging from green energy and electric vehicles to the wiring needed to power AI data centers,” Ziemer argues.
Latin America holds some 60% of the world’s lithium reserves and another 40% of copper reserves, as per IEA data, and is home to seven of the world’s 10 most productive copper mines. Moreover, most of the world’s top-producing countries for the two metals are in the region, with Bolivia, Argentina, and Chile spearheading the list for lithium and Chile and Peru for copper.
Diversifying Supply Chains
As competition intensifies between China and the US, particularly in technology, and as global supplies of metals become further strained by increasing demand, diversifying mineral supply chains is becoming both a geopolitical and a corporate top priority.
According to UN research, China holds over 40% of the global smelting and refining capacity for copper, lithium, rare earths, and cobalt. In Latin America, China accounted for a massive 65% of Chilean mineral exports in 2021, amounting to about 6% of Chile’s GDP, according to the World Bank.
“China’s market dominance allows it to exert significant influence over global pricing,” says Melissa Sanderson, board member of American Rare Earths, “whether through increasing or restricting exports of key commodities or by implementing other restrictions on key materials.”
One of the main reasons US President Donald Trump has expressed a desire to annex Canada is the country’s supply of metals and minerals, Canadian Prime Minister Justin Trudeau said recently. “This is a strategic vulnerability for the US vis-à-vis China, as it is for much of the Western world, just given China’s control of the critical minerals around the world,” he observed.
In one of the first deeds of his second term, Trump declared a national energy emergency and promised to further decouple from China’s midstream supply chain. He followed this by announcing a 10% global tariff on Chinese goods, to which Beijing responded with—among other things—a curb on exports of minerals that it uses in its supply chain.
The intensifying risk of trade war is likewise prompting companies to decouple from their current mineral supply chains.
“Trump’s early signals have supply chains on edge, especially in industries that rely on manufacturing and critical materials,” says Tim Heneveld, country director for Pergolux in North America. “Companies are rethinking where they source materials, with many looking to secure alternative suppliers or shift production to regions with fewer geopolitical risks.”
Forging more resilient mineral supply chains will come at a cost, however, says Laura Dow, business director at CPG Sourcing, which specializes in sourcing materials and products with a focus on China. “Companies that prioritize a well-balanced, future-proof supply chain will be the ones best positioned for long-term success.”
As Iggy Domagalski, CEO of Canadian industrial products and services provider Wajax, explains, “This dynamic has prompted the US and Canada to seek stronger partnerships in Latin America to diversify and secure their critical mineral supplies.”
Achieving Full Potential
While Latin America holds some of the world’s largest reserves of critical minerals and rare-earth elements, much of this is still untapped. Further development could prove a key solution for increasingly strained global supply chains.
“The region, with a few exceptions, has so far not been able to realize its full potential in the value chains for critical minerals,” notes a co-authored research piece by Economist Impact and J.P. Morgan Private Bank, “and therefore, in those for clean energy and digital components.”
But developing the sector may prove a tricky game, given competing local and global geopolitical aspirations and growing environmental concerns. Moreover, a historical gap between raw material production and midstream output in the region continues to limit local interest in developing sourcing networks.
Over the last two decades, China has established itself as a leading player in Latin America’s midstream business for copper and lithium, flourishing in the gap left by a lack of investment from the region’s governments, says Isabel Al-Dhahir, senior analyst at GlobalData, parent of Mining Technology.
“This weakens Latin America’s geopolitical influence, limiting the region to exporting raw minerals to Chinese and other foreign investors,” she warns.
Economist Impact and J.P. Morgan Private Bank attribute this gap to “a myriad of factors, including an increasingly complex regulatory environment, lack of critical infrastructure, and low extraction and processing capacity, to name a few.”
An ongoing challenge will be opening new mines, says Ziemer, “as global demand is projected to outpace production for key inputs like lithium and copper by 2030. Given that it can take years or even decades from staking a mining claim to first production, new projects need to be under development sooner rather than later or risk a worldwide supply crunch for several critical minerals.”
Local Governments: Correcting Historical Imbalances
Given these tensions, local populations distrust the sector’s push for development in the region, and particularly for the opening of new mines: a key requirement for output expansion.
“The increase in demand [for critical minerals] has come with a price, as many communities in Latin America find themselves bearing the environmental and physical costs of increased mining,” Ziemer notes.
This has pushed local governments to step in with increased state funding and more public-private partnerships, diversifying production and output supply chains.
The region’s largest economy, Brazil, which holds the world’s third-largest global reserves of nickel and rare-earth elements, has devoted $815 million to bolstering projects in the field “in the context of sustainable and technological development,” Aloizio Mercadante, president of Brazil’s National Development Bank, said last month.
Chile’s government-operated copper mining company, Codelco, closed a 35-year agreement with lithium manufacturer Sociedad Química y Minera de Chile to codevelop the extensive lithium resources in the Salar de Atacama salt flat between 2025 and 2060, aiming to further domesticate the midstream lithium business.
In lithium-rich Argentina, the latest development has come from government, with the signing of a cooperation deal with the US to further diversify the latter’s long-term sourcing away from China.
The moves follow significant backlash against foreign mining projects in countries including Panama, Chile, and Bolivia, leading notably to the recent shutdown of the Cobre Panama mine due to environmental concerns and popular unrest.
“The incident further underscores that demand alone for critical minerals does not mean countries, or their citizens, are prepared to accept an unrestricted expansion of mining,” Ziemer cautions.