Industry Trend Analysis - Improving Prices, Supportive Policies, Competitive Costs Align To Drive Recovery - APR 2017


BMI View: Latin America ' s mining industry value will return to growth over the coming quarters, driven by improving mineral prices and stable regulatory environments in key markets .

Key mining markets in Latin America will experience solid industry value growth over the coming years, supported by improving prices, business-friendly government policies and low operating costs. Following the multi-year downtrend in commodity prices, we expect top Latin American mining market Brazil to return to industry value growth in 2017, recoding a 4.5% y-o-y uptick, driven by a strong near-term iron ore price outlook ( see 'Iron Ore: Price Rally To Fade By H217 ' , February 16). Peru will remain the standout mining market in the region, with an expected 11.7% y-o-y increase in mining industry value in 2017, as solid copper production growth benefits from rising prices ( see ' Fundamentals Catching Up To Speculation Could Drive Copper Higher ' , February 2). Improving prices of key commodities will drive the recovery, while low operating costs and favourable regulatory environments will be key factors in sustaining mining industry value growth over the coming years.

Stable and established mining regulatory environments will be key focus for foreign investment decisions over the coming quarters, as miners look to reduce risk to better withstand price volatility. As such, Peru and Mexico will stand out as attractive mining investment destinations. In Peru, a stable policy outlook, with limited scope for tightening environmental regulations under President Kuczynski will continue to encourage project development. In Mexico, federal authority over mining regulation provides clarity and consistency for investors. Brazil continues to show signs of moving toward pro-investment policy. For instance, in February, legislators from the Amazonas state proposed a bill to reduce the size of four conservation reserves and eliminate another, which were created in August 2016. According to the National Department of Mineral Production data, there is considerable interest in exploiting the area, based on mining prospecting requests.

Recovery Underway
Select Countries - Mining Industry Value Growth (% y-o-y)
e/f = BMI estimate/forecast. Source: National Sources, BMI

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