The recent election in Ecuador, held on October 15, 2023, was a major moment not just in the country’s politics but also for its economic health, particularly the mining sector. Daniel Noboa, the newly elected president, is the son of a well-known banana magnate and his win is widely regarded as a favourable development for the mining industry. He defeated his opponent in a political climate that had investors, both domestic and international, keeping a watchful eye on the possible effects on extractive industries in the country.
Focus on Extractivism in the New Administration
The Noboa administration is anticipated to lay a strong emphasis on extractivism during the first 100 days in office. Extractivism is an economic model based on the principle that the exploitation of natural resources like oil, gas, and minerals is crucial for national development. Ecuador is a nation rich in these resources, boasting some of Latin America’s most significant deposits of gold, silver, and copper. Noboa’s approach aligns well with this wealth, fostering a setting that could fuel economic growth through natural resource extraction, and he has placed this at the forefront of his plan to close the fiscal deficit in the country.
From 2018 to 2020, Canada spearheaded foreign direct investment (FDI) in Ecuador, with a focus on large-scale mining projects. Mining is one of the key industries in Ecuador, and this trend of foreign investment is likely to continue, perhaps even more so under Noboa’s pro-business administration. His win comes at a critical juncture when four major mining projects are slated to begin production by the end of 2025, initially set into motion during the term of his predecessor, Guillermo Lasso.
Though there is plenty of optimism, it’s important to note that the mining sector in Ecuador is not without its hurdles. Opposition from local communities, coupled with environmental concerns and stringent regulations, present some challenges. Despite these obstacles, the government appears committed to fostering growth in the sector and is actively working to attract more foreign investment.
The Warintza Project and Solaris Resources
One project that stands to gain from the Noboa administration is the Warintza Project, owned by Solaris Resources (TSX:SLS) (OTCQB:SLSSF). The company has signed an Investment Protection Agreement with the Ecuadorian Government, establishing a stable regulatory environment for the project. This includes assurances regarding mining regulations, security of title, and substantial new tax incentives aimed at accelerating development. The project provides a case for how a supportive administrative backdrop can aid individual initiatives in the mining sector.
Solaris Resources also recently made headlines for appointing China International Capital Corporation (CICC) as its financial advisor for its operations in China. CICC is a leading global investment bank, with its headquarters in Beijing and a strong foothold in the Chinese market, especially in matters related to mining sector transactions. The appointment follows multiple acquisition proposals Solaris has received for the Warintza Project, underlining the increasing interest in both the project and Ecuador’s mining sector more broadly.
Recent public commentary and analysts suggest that Daniel Noboa’s election is likely to have a positive influence on the mining industry in Ecuador. His commitment to a pro-business stance provides a favourable climate for both domestic and foreign investment. While challenges still exist, particularly concerning environmental regulations and community opposition, the path ahead looks promising for projects like Warintza. Ultimately, a Noboa administration could make Ecuador an increasingly attractive option for foreign investors, potentially opening the door for more significant international partnerships and investments.