Copper demand will be driven by various industries. 

​​​To meet the Biden administration’s net-zero carbon emissions targets, American annual copper supply will need to double by 2035. 

Infrastructure for artificial intelligence and data centers could require a projected additional 2.6 million tons of copper. 

​By 2030, the International Energy Agency predicts that the total copper production from existing mines and mines under construction will only meet 80 percent of the world’s copper needs.

When it comes to copper, Latin America could be a strategic partner to the United States, given its large share of reserves as well as its geographical proximity. Over the past two decades, copper exports from Latin America have been on the rise, but most of this supply has been routed to China.  

China has strategically secured an increasing volume of raw copper supply from Chile to feed its refineries and meet the significant domestic demand generated by its infrastructure and energy industries.  

To achieve this, China has leveraged various diplomatic efforts with Chile, from which it imports almost one-third (31 percent) of its total raw copper. In 2012, Chile was identified as a “strategic partner” to China; in 2016, it advanced to a “comprehensive strategic partner.” In 2018, it became one of the first Latin American countries to join China’s Belt and Road Initiative. 

In parallel, over the last two decades, the same story has played out in other Latin American countries. Even Mexico, the United States’ largest trading partner, relies on China to offtake its copper ore. In 2021, 94 percent of Mexico’s copper exports were sent to China, up from 82 percent in 2011. Meanwhile, less than 1 percent was exported to the United States​ in 2021​. 

China was able to secure a long-lasting supply of raw copper through strategic long-term offtake agreements with international mining companies located in Latin America. Chile, Peru, and Mexico collectively lead as China’s largest raw copper suppliers, with exports totaling $28.8 billion in 2022. 

This steady flow of Latin American copper fuels China’s dominant hold on copper refining—it refines more copper than any other country. Despite holding only 4 percent of global copper reserves, China produces 45 percent of the world’s refined copper. 

For the United States to meet its growing demand for copper while reducing its vulnerability to supply chain disruptions, increasing cooperation with Latin American nations is critical.  

This partnership becomes even more vital as expanded copper exploration and mine development are urgently needed to prevent a supply shortfall. Not only does Latin America stand out as the leading producer, but it also holds the highest potential for future production as it holds the world’s largest known copper deposits. 

This is well known to investors, who have poured hundreds of millions of dollars into identifying new copper deposits in Latin America to reduce the projected shortage.  

Almost half (45.9 percent) of the world’s copper exploration budget was invested in Latin America in 2023. Copper accounted for 82 percent of all investment in Chile’s mining sector in 2023—or 11 percent of total exploration investments globally across all commodities. 

This focus on copper exploration is largely driven by market demand; given its range of applications, copper prices reached an all-time high in 2024.  

Long before the United States sought to diversify its copper sourcing, China provided consistent demand to offtake Latin America’s copper in order to be smelted, refined, and manufactured into a range of goods destined for the global market. 

Rerouting copper supply away from China and establishing direct lines of supply from Latin America to the United States will require Western firms to enter long-term offtake agreements with processing and manufacturing companies outside of China.  

Argentina provides a perfect example of the importance of signing long-term offtake agreements early on. It currently does not have any major producing copper mines and does not export any copper. However, there are 34 projects that are currently in exploration, target outlining (advanced exploration), scoping, pre-feasibility, feasibility, and reserve development phases. This opens a unique opportunity for Western companies to sign long-term offtake agreements before Chinese firms do. 

Additional government support is needed to incentivize investments across the minerals ecosystem​,​ including infrastructure, production, processing, and manufacturing. 

In recent years, there has been an acceleration of U.S. government efforts to de-risk projects and reduce the cost of capital in Latin American mining projects. In 2020, the Development Finance Corporation (DFC) provided $25 million in equity for a Brazilian mine in Piauí, a state in northeast Brazil. In March 2024, the DFC set up its first Latin American office in Brazil, and in October, the U.S.-led Minerals Security Partnership backed the Serra Verde rare earths project in Brazil. 

Additional concessional financing, equity, and risk insurance, among other de-risking tools, can incentivize investments in the whole mining ecosystem. This includes investments in everything from water, energy, and roads to mines, processing, and manufacturing facilities. U.S.-backed projects can also help minimize negative impacts on local communities by elevating rigorous environmental, social, and governance (ESG) standards.

To achieve successful diversification, private investments in processing capabilities and value chains within the hemisphere are vital. 

Chile constructed its last copper smelter in the 1990s, and while the Chilean government has plans to expand copper processing domestically, projects have primarily captured the interest of Chinese investors.  

Peru has only one copper refinery in operation today. While the Peruvian government is interested in attracting more investment for refining facilities, this has been hindered by political unrest in the country. 

Broadly, it is commercially difficult to compete with China in refining because of the country’s state subsidies. Even the United States only operates ​three smelters due to the advantage offered by cheaper smelting in China. 

Concessional financing from the U.S. government can make investments in refining more commercially competitive. 

Despite long-time free trade agreements (FTAs) in place with copper-rich Latin American countries, the United States still struggles to secure its copper supply from its southern neighbors​. 

The Inflation Reduction Act (IRA) was designed to create tax incentives for U.S.-oriented green energy supply chains. It offers tax credits for electric vehicle purchases if specified amounts of minerals are sourced from the United States or countries with which it has FTAs or critical minerals agreements. 

In principle, South American FTA countries should benefit from this provision. However, copper is not included as part of the critical minerals list that the IRA uses to determine eligibility. This limits investment incentives in copper-rich countries like Chile, Peru, and Mexico. 

While copper is already on the U.S. Department of Energy’s critical materials list, including copper on the U.S. Geological Survey (USGS)’s list can open doors for Latin American countries to benefit from future U.S. incentives for defense technologies, transmission infrastructure, and semiconductors. 

Canada, the European Union, China, Japan, South Korea, and India have already put copper on their critical minerals list. Adding copper to the USGS critical minerals list would be a powerful signal to the private sector of its prioritization by the U.S. government. 

Given Latin America’s significant copper reserves, its relevance for high-priority industries is likely to increase for years to come. Government policy will determine whether the ​United States is a beneficiary of this growth.

Incentivizing Western private sector activity in the copper industry will require three critical actions:

1. Support long-term offtake agreements with projects under development
2. Leverage de-risking tools such as concessional financing, equity, and risk insurance
3. Add copper to the USGS critical minerals list to allow it to benefit from current and future incentives

To ensure the United States can meet its national, economic, and energy security needs, securing a sustainable copper supply chain is of paramount importance. 

This report was made possible through generous support from
Freeport-McMoRan, BHP, and South32.