How Will Nations Address Their Water Stress Conflicts?

Water allocation is becoming an increasingly contentious issue in many countries, not just to meet the needs of agriculture and cities, but also in resource extraction, energy production, and other industries. Global investors and risk analysts will want to keep an eye on these local disputes, suggested Veronica Retamales Burford, Senior Research Analyst in Country Risk, during our recent thought leadership webinar. She singled out several regions and sectors where such conflicts, and possible regulatory action, will likely become flashpoints in the coming years.

Retamales Burford noted that drought has driven protests against extraction that have resulted in regulation by nations and communities. Such protests “have been behind when we're seeing, for example, in the case of Colombia, where we have seen there has been a main driver behind the government's effort to implement a ban on fracking, for example. We're also seeing how we have a heightened amount of protests related to mining, of course, particularly, in areas where we're seeing more arid climate and water is becoming an issue. We are seeing more water permits being disputed in the courts by communities as well.”

Mining is particularly vulnerable to activists seeking regulation, Retamales Burford said. “It's not only protest that we're seeing by the communities, but also legal recourse as well as a potential to dispute the operations of mines. And when we look, of course, at the energy transition, looking at copper, lithium is also something that is really important to look at. And we have seen, for example, in Argentina, protest related to this. And also we have seen in the Atacama region as well. And with these regions likely to further expand their operations, we are likely to see further protest coming.”

Even when extraction is done in the name of sustainability, it can raise water allocation concerns. “This is something that we monitor very closely, particularly, in the country risk area team and how this will impact the energy transition,” Retamales Burford said, “particularly, when we look at the Southern Cone, where we have 60% of global lithium reserves. And also, when we look at a green hydrogen and the high use of water as well, we haven't seen as many protests regarding this because a lot of it is used regarding the salinization plans and particularly to the coast.”

Observers should expect more clashes over water between communities and for-profit sustainability initiatives – and the governments that support them. “This becomes more common and, particularly, in countries where it has become a major government priority,” Retamales Burford said. “For example, in the case of Chile, where we are expecting to see billions of revenues coming from this by 2050, we are likely to see more community opposition to this as well.”

To hear further insights from Retamales Burford on the U.S. economic outlook, access our complimentary, on-demand webinar.

For more on global water stress trends, read our Big Picture outlook report.