After Indonesian coal, will Latin America's lithium mines and beef also become "black swans"?

The early lifting of Indonesia's coal ban has given Asian countries a sigh of relief. In Latin America, however, recent calls for export restrictions on primary commodities have been raised and some have already been put into effect, adding uncertainty to commodity markets in 2022.

At the beginning of the new year, the Argentine government announced the extension of the export ban on seven types of beef until the end of 2023, which means that Argentina's high-quality beef products will continue to be out of stock on the international market.

Argentina's neighbor, Chile, is the country with the largest lithium deposits in the world. Newly elected President Bolic said that the country's mineral resources will be strongly controlled, making it questionable whether Chile can stably supply lithium to the world in the future.

Yue Yunxia, a researcher at the Economic Research Office of the Institute of Latin American Studies of the Chinese Academy of Social Sciences, told the first financial reporter that it remains to be seen whether Boric's proposal can eventually be implemented, because there are multiple obstacles, first of all, it is necessary to pass a complex domestic legislative process, and he will also face economic pressure, even if the resources are nationalized, there is still a need for foreign cooperation and exports.

Resource nationalism

On December 19, The Chilean coalition of left-wing party coalition "in favour of dignity" candidate Boric won the second round of voting in the presidential election. During the election process, he advocated raising the royalties of the mining industry, opposed the privatization of the mining industry, and expressed his hope for the establishment of a state-run lithium company, and the implementation of the new government's governing program and policies has attracted much attention.

Chile's president will not be re-elected for a four-year term, and Boric will take office on March 11 this year, which is the challenge for him to promote economic development, stabilize fiscal policy, and effectively prevent and control the epidemic.

Since then, on January 4 this year, Chilean lawmakers have introduced a bill to the House of Representatives applying for a ban to block the outgoing government's tendering scheme for Chile's 400,000-ton lithium mine contract.

Chile is one of the world's most important mining powers, its copper and lithium resources occupy a dominant position in the world, due to the concentration of lithium minerals, poor substitution, so it has received more international attention. In recent years, the global production of new energy vehicles has grown rapidly, the demand for power batteries has been expanding, and the price of upstream lithium materials has also gone up.

Coincidentally, Mexican President López López, who is also a leftist, proposed a constitutional amendment in October to monopolize the government's interests in lithium mining. He shouted to the people: "All lithium resources in the motherland must serve the Mexicans." Peru's newly elected left-wing president, Castillo, also exuded the idea of nationalizing natural gas, saying that "Peru's property will be returned to the people."

The remarks of many of the above-mentioned Latin American leaders all reflect the idea of resource nationalism. The basic logic of resource nationalism is that the state should exercise complete control over resource reserves in order to obtain maximum benefits, including access conditions for resource exploration and production, development and production speed, tax system, domestic price measures, and export permits.

Latin America is one of the most abundant regions in the world for natural resources, with a wide variety of agricultural products, industrial raw materials and considerable reserves. Historically, the practice of resource nationalism in Latin America has also been richer than in other parts of the world.

For why at present, Latin America's resource nationalism has a rising trend, Yue Yunxia explained to the first financial reporter that from a political point of view, 2021 to 2024 is a super election cycle in Latin America, except for two countries, almost all countries have to conduct general elections, from the current results and expectations, the left has a trend of resurgence, and the left government is more in line with resource nationalism in concept. At the moment of the epidemic, the public also has demands for the government to improve social security and welfare, which further provides political support for resource nationalism.

From an economic point of view, Yue Yunxia analyzed to the first financial reporter that every time the price of commodities rises, it often triggers Latin American countries to strengthen their control of resources. Since the outbreak, global commodity prices have soared, once again providing a breeding ground for resource nationalism.

Other reasons for restricting exports

Since the end of May last year, Argentina has introduced a series of policies to restrict beef exports, in addition to setting export quotas, it also prohibits the export of high-quality beef in special parts such as beef ribs.

Recently, the Argentine government has repeatedly intervened in the food market. In late December, the Argentine government issued a resolution indicating that the government would limit maize and wheat exports for 2021/22 to avoid domestic supply shortages and curb food inflationary pressures. Argentina is the world's second largest exporter of corn and a major supplier of wheat worldwide.

Yue Yunxia told the first financial reporter that Argentina's policy of controlling domestic grain exports is not a product of resource nationalism, but hopes to control domestic inflation. "Argentina's current double-digit inflation rate is a huge disruption to the economy," she said.

However, as one of the countries with the most serious inflation problems in the world, Argentina's price control measures have been limited, and in November last year alone, the prices of many beef varieties saw double-digit month-on-month growth. The ban has also strained relations between the government and farmers, with Nicolás Pino, president of the Argentine Rural Society, complaining that the government's export ban would only create an artificial oversupply.