Battling the Resource Curse: Sustainable Development in Latin America

The Social Challenge  

Sustainable Workforce and Economic Development

The mining sector generates 17 percent of Latin America’s exports — with this number rising to more than 50 percent in the most mineral-rich countries — and serves as a crucial engine of economic activity. However, many mining projects are carried out in socioeconomically vulnerable communities, and if these projects fail to meet local expectations around employment and economic benefits, there is a significant potential for conflict, with negative consequences for the communities, private sector and government. How do we ensure that mining investment helps to foster sustainable and diversified economic development in the communities in which it is carried out?

The Partnership

Beyond Extraction: Economic Opportunities in Mining Communities

The Partners

• Anglo American
• The Inter-American Development Bank and IDB Lab
• TechnoServe

The Idea and the Action

Beyond Extraction was launched in 2016 to pilot and scale approaches to drive local economic development in areas surrounding mining operations, working in mining company Anglo American’s communities of influence in Brazil, Chile and Peru. Bringing together three partners with distinct roles and contributions, the alliance worked to create both short-term impact and sustained long-term change. In conjunction with local stakeholders, including government, civil society and the private sector, the partnership focused on three levers:

• Enterprise development: Helping entrepreneurs access the business-skills training, market connections and finance necessary to grow their small businesses

• Workforce development: Building the soft skills and confidence of job seekers, facilitating linkages with employers, strengthening market systems, and boosting the services offered to job-seekers to promote the participation of young people and women in the labor force

• Value chain development: Identifying promising value chains, addressing key bottlenecks, and helping entrepreneurs build the technical and business skills and linkages needed to create competitive sectors that serve to diversify the local economy

Across its activities, the partnership also sought to leverage the mining value chain and strengthen the ecosystem in order to create a sustained, lasting impact, with a particular focus on creating opportunities for women and young people.

The Impact

Beyond Extraction directly benefited more than 2,600 participating people and organizations and helped to create or support more than 5,400 jobs. Training contributed to the growth of these small- and medium-sized enterprises, as businesses that graduated from the program experienced a 32 percent increase in average sales. In Brazil, graduates of the workforce development program increased their incomes by an average of 76 percent.

The partnership also helped foster a stronger ecosystem for local economic development. It helped 31 institutions — including local employment offices, technical schools and extension offices — provide better services to community members, ensuring sustained impact. In Brazil, where outdated regulations prevented artisanal cheese produced in the state of Minas Gerais from being sold across state lines, the program helped cheesemakers form an association and work with the government to update the rules. As a result, local artisanal producers have access to national markets for their certified cheese. In Chile, Beyond Extraction helped local companies apply a gender lens to their human resources practices, enabling more women to secure employment in the businesses, including in industries in which they have typically been excluded.

The program also contributed to the ecosystem by capturing and sharing lessons and best practices for supporting local economic development. These best practices are also being incorporated in the continuation of the partnership, which is focused on creating sustained and systemic change.

The Faculty Insight

Sustainable development — this is the dominating topic of conversation in the natural resource exploration and exploitation business. At a macro level, it ties in well with the U.N. Sustainable Development Goals, especially Goal 12, responsible production and consumption. There is also broad-based consensus on the need to put sustainable development at the center of current and future extraction activities. Mining, a form of natural resource extraction, is of particular importance here. For centuries, mining activities have supported the smooth functioning of our society by providing the necessary minerals and metals that allow our clocks to tick, enable our airplanes to fly, bring electricity to our homes, and build a connected future with the promise of 5G, AI, blockchain and Internet of Things. However, the benefits of mining have often occurred far from the area of resource extraction, earning the label “resource curse” for resource-rich countries. The underlying value chain, where little to no value is created at the extraction stage in developing countries, is often seen as the single most important contributing factor to the resource curse phenomenon. How then is our global society to continue its march toward sustainable development?

Academic research, civil society organizations and government policy instruments argue that companies need to make social investments in their supply chains, particularly in the communities around the resource extraction activity. We now hear about the need for a social license to operate: asking for community consent as part of the exploration process, conducting environment and social impact assessments as part of the audit process, formulating development and benefit agreements with the community, and building backward and side linkages through the extraction activity. Indeed, almost every major mining company now talks about its social investment activities as part of its corporate social responsibility reports. Yet, at the individual business and community levels, there is also much debate on how to execute these activities.

The Beyond Extraction program highlights the benefits accrued to the community through self-empowerment. This is done through a training program that allows the businesses on the ground to upgrade through the value chain. The success of this project across three different countries — Brazil, Chile and Peru, all of which have different national policies and needs — speaks to the sustaining nature of the training program and its role in future development programs beyond these three sites.

As nation states start to codify social investment mechanisms into their policy instruments, whether through public-private partnerships such as the partnership with Beyond Extraction or other programs, it is important to keep in mind that these mechanisms need to involve the community in the investment process, as well as demonstrate that the investments made by extraction companies make a tangible difference in the living conditions on the ground.

The Darden School of Business’ Institute for Business in Society partners with Concordia and the U.S. Department of State Secretary’s Office of Global Partnerships to present the annual P3 Impact Award, which recognizes leading public-private partnerships that improve communities around the world. This year’s award will be presented at the Concordia Annual Summit the week of 20 September 2021. The five finalists will be highlighted on Darden Ideas to Action on Fridays leading up to the event.

This article was developed with the support of Darden’s Institute for Business in Society, at which Maggie Morse is director of programs.