SANTO DOMINGO (miningweekly.com) – The share of Latin America’s mining activities as a percentage of its gross domestic product (GDP) has grown significantly in the past decade.

“Mining has gained relevance in virtually all of the Latin America economies since the commodities super cycle started to emerge in the early 2000's,” a leading expert on Latin American economies and head of research at Bulltick Capital Markets Alberto Bernal said.

“This sector of the economy accounts for the bettering of the regional fiscal accounts, and for the increased capacity of the region to consume, since foreign exchange rates have appreciated thanks to the higher commodity prices.”

Mining accounted for 4.3% of Latin America’s GDP in 2001. Last year that number rose to 6.1%, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). In value terms, mining activity more than tripled from $90.1-billion to $305.8-billion last year, according to ECLAC.

If this trend continues, based on the realization of various projects in the pipeline, the figure will top $400-billion a year by 2020, representing an unprecedented 12.5 per cent contribution to Latin America’s GDP by the mining sector, according to a recent report by the Centre for Social Responsibility in Mining at Queensland University’s Sustainable Minerals Institute.

The countries that have seen the strongest growth include Chile, Colombia and Bolivia. In Chile mining has gone from 5.2% of GDP in 2001 to 15.2% last year. Colombia saw mining grow from 4.9% to 11% in the same period, while Bolivia saw mining jump from 6.3% to 15.5%.

Mexico saw mining grow from 6.1% to 9.9% in the past decade. Brazil, Latin America’s largest economy, has also seen strong growth, although mining remains a small part of its economy. Mining accounted for 3.5% of its GDP last year, nearly three times more than the 2001 level of 1.3%.

Meanwhile, Argentina only saw a small increase – from 2.5% to 3.1% in the 2001 to 2011 period.

OUTLOOK

The expected growth in mining in Latin America will be spurred by continued demand from China and expanded exploration in the region. “It will remain very relevant for as long as China's urbanization process remains present,” Bernal says of mining’s impact on Latin American economies in the future.

New developments like the Puebla Viejo mine in the Dominican Republic will also help boost mining’s share of Latin America’s GDP. The mine, a joint venture between Barrick Gold and Goldcorp, started its first gold production last month and could account for as much as 2.9% of GDP within the next decade, according to the Queensland University institute’s report. That compares with a mining impact of only 0.4% of GDP last year.

Bernal warns against wasting the opportunity mining represents. “Some governments are doing the right thing, via assuming that the wealth effect will not be permanent,” he says. “Some other governments - like the Venezuelan one - are squandering the opportunity.”

Venezuela’s government nationalized mining in August 2011 and had for years blocked the development of Las Cristinas, one of the world’s leading undeveloped gold mines.

Crystallex planned to develop it after winning a contract in 2002, but had its contract cancelled last year. Last month, Venezuela announced that China International Trust and Investment Corporation will be developing Las Cristinas.

ECLAC does not have data on mining in Venezuela for 2011, but in 2010 it reached 27% of GDP – the highest in Latin America. While nearly twice as much as in 2009, it represented a decline compared to the 200http://www.miningweekly.com/article/mining-gdp-contribution-triples-in-latin-america-2012-10-115 level of 30.3%.