Is Argentina becoming a mining competitor to Peru? The Argentine Copper Projects Putting the Country on Investors’ Radar

by | Jan 31, 2025 | FDI Latin America

Argentina’s growing mining sector is rapidly gaining attention, with an emerging role in South America’s copper production. The country’s burgeoning copper projects are creating a potential challenge to its mining neighbor, Peru. With a series of copper-focused initiatives, Argentina is positioning itself as a key competitor in the region. The Argentine copper projects are at the heart of this potential transformation, attracting significant investments and could radically change the country’s standing in the global mining landscape.

A Promising Future for Argentine Copper

According to the Argentine Chamber of Mining Companies (CAEM), the country is home to six major mining projects, representing a cumulative investment of approximately US$25 billion. These projects, many of which are located in Argentina’s San Juan province, are expected to produce a combined 1.2 million tons of copper annually at full capacity. The development of these Argentine copper projects could make the country a serious competitor to established mining giants like Peru and Chile.

Some of the most prominent projects include El Pachón, managed by Glencore; Josemaría, owned by BHP and Lundin Mining; and Los Azules, operated by McEwen, Stellantis, and Rio Tinto. These three projects are among the most significant in Argentina’s copper mining landscape. In addition, other important projects, such as Taca Taca (led by First Quantum) in Salta, San Jorge in Mendoza, and Agua Rica in Catamarca, are also on the horizon, further reinforcing the country’s rise as a potential mining powerhouse.

As Roberto Cacciola, president of CAEM, pointed out, these Argentine copper projects are part of a broader strategy to use mining as a key economic driver. The Argentine government has identified mining as a crucial sector in generating foreign currency and stabilizing the country’s economy. According to Cacciola, if all six projects reach full production, Argentina could see its mining exports grow from US$11 billion to US$12 billion, with projections reaching as high as US$20 billion when factoring in other resources, like lithium.

Why Argentina Is Attractive to Investors

Argentina’s mining sector has long had potential, but past economic instability prevented many of these copper projects. However, in recent years, the country’s macroeconomic situation has improved, and a series of investor-friendly reforms have made Argentina an increasingly attractive destination for mining investment.

Miguel Leiva, head of Credicorp Capital’s Equity Research Peru team, noted that the Argentine government has implemented policies encouraging mining investments, including economic liberalization and reducing bureaucratic hurdles. One of the key measures is the Investment Incentive Regime for Large Investments (RIGI), which came into effect in October. Under this framework, mining companies can access more foreign currency while benefiting from a reduced corporate income tax rate (35% to 25%) and shifting to taxing mining revenue rather than production.

Carlos Gálvez, former president of Peru’s National Society of Mining, Petroleum, and Energy, highlighted that Argentine President Javier Milei has actively worked to create an environment conducive to mining development. As Gálvez explained, the Argentine government is working to make it as easy as possible for investors to set up operations in the country, thus laying out a figurative “red carpet” for foreign mining companies.

In addition to these incentives, the location and geological characteristics of Argentina’s Argentine copper projects make the country even more attractive. The copper deposits in Argentina are relatively accessible, with many high-grade ores located near the surface, reducing the need for costly and complex deep excavation. This could make mining operations in Argentina cheaper than in other countries where deep excavation is required, further improving the overall economics of the Argentine copper projects.

The Situation in Peru: Challenges to Competitiveness

While Argentina is making strides in mining, its neighbor, Peru, has faced several challenges impacting its competitiveness in recent years. Peru, historically one of the world’s largest producers of copper, has seen a decline in its global mining investment ranking. The Fraser Institute’s global mining investment attractiveness ranking shows that Peru fell from the 32nd percentile in 2019 to the 69th percentile in 2023.

Leiva attributed this decline to increased tax burdens in Peru, particularly the introduction of corporate income taxes and an extraordinary mining tax. In addition, Peru’s mining projects are often delayed due to the country’s lengthy and bureaucratic permitting process. According to Gálvez, mining projects in Peru require an average of 265 permits before they can begin operations. This bureaucratic bottleneck has led to project delays, sometimes stretching for a decade or more before reaching production.

For mining companies, time is money. As Leiva pointed out, the rate of return on investment depends heavily on how quickly a project can reach production and start generating revenue. In Peru, the drawn-out permitting process and complex regulatory framework can make it more challenging for mining companies to recover their investments in a reasonable time frame, making Argentina’s Argentine copper projects even more appealing.

The Future of South American Mining

While Peru has traditionally dominated the South American copper market, Argentina’s efforts to streamline its mining sector and create a more investor-friendly environment have the potential to disrupt the balance of power. The development of the Argentine copper projects could lead Argentina to become a key player in the global copper market. With an expected output of 1.2 million tons of copper per year from these six significant projects, Argentina is positioning itself as a serious competitor to Peru, especially if its mining reforms continue to attract foreign investment.

However, as Leiva stressed, Peru’s future mining competitiveness will depend on its ability to reform its mining sector, reduce bureaucratic red tape, and maintain legal and tax stability. For mining companies, long-term stability is critical to making the large investments necessary to develop mining projects. If Peru can address these challenges, it can continue to leverage its rich mineral resources and skilled workforce to maintain its competitive edge in the global mining industry.

In conclusion, Argentina’s copper sector is rapidly expanding, with the Argentine copper projects positioning the country as a viable competitor to Peru. The country’s policy reforms, favorable economic environment, and low-cost mining operations make it an increasingly attractive option for investors. While Peru remains a key player in South American mining, Argentina’s rise could challenge the status quo, and the future of the region’s mining industry may be shaped by the growth of Argentina’s copper projects.