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Miguel Schloss President Surinvest Ltda.; member of Bretton Woods (World Bank- MF) Committee. Former Executive Director of Transparency International, and Director of Corporate and Budget Planning of World Bank.
Introduction
If it looks familiar, you’ve seen it in your dreams
If there are glaringly disruptive sectors, mining is certainly one of them. Extractive industries face growing nationalism and pressures to “control” such activities, which can undermine their potential competitiveness and productivity, and with it their contribution of surplus generation for economic development.
Among the disruptive forces needing special attention are: (i) the overwhelming impact on countries’ economic performance and creditworthiness; (ii) the associated implications on governance and corruption; and (iii) the growing environmental concerns to achieve carbon neutrality by mid-century, as per international agreements.
The Imperative of Social Acceptance and Economic Contribution
Dead fish go with the flow
More than most industries, mining relies on a high level of public consent since either the States or their citizenry tend to exercise a significant degree of control over access to, and exploitation of mineral resources.
Leading mining companies now accept that the industry’s continuing access to resources on viable terms – its “license to operate” – depend upon demonstrating that it has the capability to operate within transparent and sustainable development principles. To this end, the industry and the countries concerned need better governance structures to help manage resources generated by the sector.[1]
This will require a shift of traditional technocratic and State-driven approach to a more holistic and empirically anchored approach to problem-solving, and reducing discretionary powers in the public sector that generate conditions for corruption[2], through:
- Solid mining sector policies and strategies that provide incentives for investment and generation of a fair share of resources for the host countries, particularly through the adoption of legislation and regulations that are competitive internationally (including open, efficient and transparent access to mining properties)
- Establishment of a mining tax regime that is reliable, predictable and competitive
- Strengthening of government oversight institutions so that they can act on solid technical grounds, and independent vehicles of adjudication to assure fair treatment of all concerned.
- Buildup of a reliable system to technical data on the resource base of the countries concerned to facilitate generation of interest in further exploration and eventual production investments.
Countries that have adopted such policies have been rewarded with significant increases in foreign exchange earnings, fiscal revenues, investments and even levels of reserves resulting from increased exploration activities, as noted below, and consequent increased growth:
