Beijing secures 11% of Nicaragua’s land for gold mining as US influence wanes

Key points

• Since 2023, 16 Chinese companies, mostly small and medium-sized, have won more new concessions in Nicaragua than all other miners combined.
• The concessions cover 1.4 million hectares, equivalent to the size of Northern Ireland, and are not limited to specific minerals but target gold and copper.
• Nicaragua holds an estimated 250 tonnes of gold resources, with gold accounting for over 20% of the country’s exports last year.
• China has provided over $1 billion in financing for infrastructure, energy, and telecoms projects in Nicaragua since re-establishing diplomatic ties in 2021.
• The US State Department has sanctioned entities for enabling corruption and repression, while China opposes the politicization of commercial cooperation.

Background

Nicaragua previously recognized Taiwan but switched to recognizing Beijing in 2021, aligning with China’s foreign policy. The country has faced US sanctions since 2017 due to internal repression, leading to a void in international lending that China has filled. Gold prices have recently climbed to three-month peaks, driven by weaker dollars and lower yields, increasing the strategic value of gold reserves for central banks like China’s.

How outlets are covering it

The Financial Times emphasizes the strategic competition between the US and China, noting that the US is expanding its reach in overseas mining under the 'Donroe Doctrine' while China deepens its ties with Nicaragua. La Prensa highlights the opacity of the mining sector, pointing to companies like Global Group and INECOSA that export gold to the US despite regime controls, suggesting a complex web of political favor and corporate structures. Traders Union focuses on the environmental and strategic risks, citing concerns from Nicaraguan non-profits about low environmental standards and the erosion of legal protections. The Maeil Economic Daily underscores the financial aspect, noting that China’s funding has helped fill the gap left by US sanctions and international lender pressure.

Why it matters

The expansion of Chinese mining rights in Nicaragua signals a shift in geopolitical influence in Central America, challenging US dominance in the region. It also raises concerns about environmental sustainability and the potential for resource exploitation without adequate safeguards. For investors, the move indicates growing Chinese interest in securing gold assets, which are critical for central bank reserves, amid global economic uncertainties.

What to watch

The US may continue to monitor and potentially sanction entities involved in the mining sector, while China is likely to expand its infrastructure and mining presence in Nicaragua. Environmental groups may push for stricter regulations, and the Nicaraguan government may face pressure to balance economic gains with environmental protection. The geopolitical rivalry between the US and China in the region could intensify, with potential implications for other Central American nations.