Surging Protectionism May Threaten Natural Resources Sector

A study conducted recently found that nations that are rich in natural resources have become more protectionist in the last year as the COVID-19 pandemic threatened their economies. The study, which was published last week by Verisk Maplecroft, a risk consultancy firm, found that over the course of last year, 34 nations had observed a considerable growth in resource nationalism, with the coronavirus pandemic only aggravating an existing trend toward government intervention.

Maplecroft discovered that of the 34 nations, 18 of them were dependent on the hydrocarbons or minerals they export; the firm forecasted that the isolationism threat would only grow in the near future as governments attempted to fill up the fiscal deficits left by the pandemic.

According to the report, the mining sectors of these nations would be the most affected by these new measures, with some of the world’s largest producers of iron ore and copper, particularly in South America and Africa, featuring among the top 10 nations at risk.

Hugh Brennan, head of mining risk at Verisk Maplecroft, stated in an interview last week that the governments of these countries searching for additional revenue sources was completely understandable, especially in these fiscally strained times.

The top 10 countries listed in the Resource Nationalism Index report released by Verisk Maplecroft were Papua New Guinea, Bolivia, Tanzania, North Korea, Kazakhstan, Zimbabwe, Zambia, Russia, the Democratic Republic of Congo and Venezuela.

Jimena Blanco and Mariano Machado, both Verisk Maplecroft analysts, noted that these nations were found to be the ones most likely to resort to various instruments in resource nationalism, such as direct expropriations with insufficient or no compensation.

In the recent past, North Korea made public its new five-year plan, which analysts say will help centralize control of the country’s economy and boost its self-sufficiency. According to data released by the IMF that was aggregated by Verisk, developing economies and emerging markets closed last year with a 10.9% year-on-year average decline in government revenue as a GDP share. The regions that were the most affected were Latin America with an 8.7 percentage point hit and sub-Saharan Africa with 12.55 percentage points lost.

Of course, the COVID-19 pandemic was not the only factor that prompted the move toward nationalism, but it has triggered a trend that has been observed in the index since 2017. Verisk expects that this trend will surge in the near future, with analysts suggesting that mining companies may need to watch ESG factors in emerging economies where various state interventionism methods will become the chosen instruments of governance.

While Latin America took a hit of 8.7% to its mining sector during the pandemic, Chile is poised to see an uptick in mining activity as GoldHaven Resources Corp. (CSE: GOH) (OTCQB: GHVNF) starts exploring and drilling on its five newly acquired gold properties in the country.

NOTE TO INVESTORS: The latest news and updates relating to GoldHaven Resources Corp. (CSE: GOH) (OTCQB: GHVNF) are available in the company’s newsroom at http://ibn.fm/GHVNF

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