South Centre Analytical Note - August 2005

EXECUTIVE SUMMARY

Many developing countries are rich in natural resources and in particular mineral commodities. While the extraction and processing of mineral commodities through large scale mining can make a major contribution to the economies of developing countries by providing export and fiscal revenues, it can also raise economic, environmental and social issues that pose policy dilemmas from the Government’s perspective.

This paper identifies the limitations derived from the external setting that are faced by developing countries to design, implement and enforce laws and policies intended to foster a developmental strategy based on mineral commodities. The purpose of this paper is to highlight challenges that do not seem to be fully recognized by the “good governance” discourse on decisions related to the extraction and production process of mineral commodities.

This paper is structured in four sections. The first one describes the mining production process and the location of mineral resources and specialization patterns. The second section explains the general characteristics of the large-scale intensive mining industry and the operations of Transnational Corporations (TNCs). The final section identifies challenges faced by developing countries to engage in this sector in view of this context and presents policy recommendations.

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