He is in Washington to discuss a counter to Russian and Chinese ambitions.
He is in Washington to discuss a counter to Russian and Chinese ambitions.
C hina has been busily ensuring that it dominates the market in key strategic minerals including copper, cobalt, lithium, and nickel. It’s high time that the West find a way to challenge their strategy.
The World Bank estimates that the production of those minerals will need to increase 500 percent by 2050 if industrial countries are to meet their targets for a clean-energy transition. The West needs those minerals to realize the benefits of the clean energy provided by nuclear, hydro, and wind and to sidestep dependence on fossil fuels coming in from Russia. For example, an electric car uses three time more copper than does a conventional one.
Existing mines are concentrated in a few countries in Africa and Latin America, making China’s role as a major minerals player a real concern. According to the International Energy Agency, China already processes 50 to 70 percent of the world’s lithium and cobalt and as much as 90 percent of its rare-earth metals. China is also the largest processor of copper and nickel.
The West needs to develop a better game plan for challenging China’s dominance in strategic minerals. Many countries with mineral deposits face opposition to mining projects, given environmental concerns, suspicion from indigenous communities, and polarizing debates on who will benefit from the profits.
The Peruvian economist Hernando de Soto believes he may have a solution. The head of an influential think tank that pioneered the role of the “informal sector” in spurring economic development in poorer countries, de Soto has been named by Time magazine as one of the five leading Latin American innovators. Foreign Policy magazine has named him one of the 100 most influential intellectuals in the world. In Peru’s 2021 presidential election he placed fourth in the first round of voting, coming out on top in Lima, the capital, where 30 percent of the country lives.
Peru has been wracked by civil unrest since December, when former president Pedro Castillo mounted a failed coup d’etat, was removed from office, and was arrested. Current president Dina Boluarte has a disapproval rating of 86 percent, and her tenure has resulted in blockades, protests, and a behind-the-scenes revival of the terrorist Shining Path movement.
De Soto wants to tone down the polarization between classes and end the stalemate over minerals in his country. He would build equitable financial bridges between the global capital markets that can provide resources to extract the minerals and the informal-sector miners and farmers who control access to the minerals under Peru’s ground. Both sides would benefit.
His team has developed and successfully tested a property- and mineral-rights project that could free up the strategic metals needed to meet the global climate-change challenge and to substitute for fossil fuels presently supplied by Russia. Indigenous groups will have their property rights listed on exchanges that can either make them partners in mining projects or give them market-value compensation.
“We have developed protocols that can govern a mining revolution,” de Soto told me. “We have gone through a messy haystack of 800,000 regulations and separated out those that can be used internationally and those that are rhetorical. In six months, we will be able to tell any community, property holder, or miner in Peru the critical path that they must follow to create capital.”
De Soto is accompanying a delegation of influential Peruvians to Washington, D.C., to discuss opening up Peru, which holds some of the world’s largest mineral reserves, to a new mining renaissance. Included in his delegation, which arrives Monday, will be Mario Ayamamani Quispe, the head of the gold-producing cooperatives of Peru; Ulises Solís Llapa, Peru’s foremost authority on lithium and uranium; and Julio Renán Riveros Cárdenas, who led the self-defense committees that defeated the Shining Path terrorists in the 1990s.
There is also a political angle to the story. Peruvians are fed up with their dysfunctional government, with 69 percent of them favoring early elections later this year or early next year. A new poll from the Institute of Peruvian Studies, prepared for the newspaper La República, indicates widespread cynicism about all the candidates, but of those named as potential presidents, de Soto finishes in second place.
Hernando de Soto has spent a lifetime advising governments on how they can use property rights to help largely powerless communities that have no recourse to normal contract law. The bulk of the population in many countries is excluded from the world’s trading system. If de Soto and his delegation members are right, they will provide an avenue to improve the lot of the average Peruvian, uncork capital flows that can develop the mineral resources in countries all over Latin America, and deal a far bigger body blow to the energy ambitions of China and Russia than either diplomacy or punitive trade wars are likely to accomplish.
Washington officials should listen to him.