Nicaragua’s “super unstable” political environment is threatening to derail gold miners’ growth ambitions, with the nation braced for violent protests after November’s election.
Mining companies are aiming to deliver a gold boom in the Central American nation, despite fears over a slide into dictatorship under President Daniel Ortega (in photo).
The leftist head of state is expected to secure a fifth term in the November 7 polls, following the arrest of a string of opposition politicians, and despite years of protests against his rule.
“He [Ortega] arrested every opposition candidate, and in the end he will be the only one running, apart from a few candidates aligned to him,” Valeria Vásquez, Central America analyst for UK-based consultancy Control Risks told BNamericas.
“I am almost 100% sure he will win the election.”
Victory will mean a further five years of political instability and encroaching control of institutions by President Ortega, who has been in office since 2007, which will hamper investment in mining.
“The political environment is super unstable,” Vásquez added. “Not only in the government, but the media and government institutions, there is no transparency. President Ortega is trying to control every aspect of the country.”
It remains unclear whether a fifth Ortega election win will spark a further upsurge in anti-government protests, which have affected the country for many years.
Demonstrations over social welfare reforms saw mining operations disrupted in 2018, but have had little impact on the sector since then.
“For now there hasn’t been violence, protests or civil unrest, but we don’t know what will happen in November,” Vásquez said.
“Mining companies will need to think about whether it’s worth it staying in the country and keep investing in a country where there is no security, there is no legal security, there is no transparency and a lot of corruption.
“I don’t think this will be an advantage for mining companies or investment.”
MINING – A SPECIAL CASE?
While investment in Nicaragua’s mining sector will suffer as a result of the political uncertainty and prospects of civil unrest, direct government intervention in mining is not likely in the short term.
Ortega has supported foreign investment in the sector for around a decade, according to Vásquez, and industry leaders see the country as something of a safe haven for mining.
“We have got a strong, transparent mining friendly jurisdiction,” Darren Hall, CEO of Nicaragua-focused Calibre Mining, told BNamericas in July.
The CEO said he had received verbal assurances directly from Ortega – one of the main leaders of the 1979 Sandinista revolution, after which he became president for the first time – confirming that he has no plans to seek to nationalize mines, recognizing that the government does not have the capacity and expertise to do so.
Under this relatively benign environment, mining companies including Calibre, are advancing projects which could increase gold output by around 300,000oz/y, roughly doubling current levels.
Ortega is unlikely to change the status quo as mining is playing a vital economic role in the country, as one of the few industries which has continued to perform well during the COVID-19 pandemic, according to Vásquez.
Gold has secured its position as the country’s highest value export.
“I don’t think President Ortega will close investment in mining activity but attractiveness for potential investors in Nicaragua will remain low,” she said.
“The country’s political environment will remain an obstacle for foreign investment as a whole, not only for the mining sector.”