Commodities boom has its dangers, too

As mining commodities enjoy boom times, pressure is growing to build the world"s supply of coal, bauxite and rare earth metals in increasingly difficult locales. As safety and environmental risks rise, so does the allure for developing economies like Mongolia to harness the world"s growing minerals appetite. "We expect to be one of the top-performing economies in the next few years, and this is mainly due to mining," D. Zorigt, Mongolia"s minister of mineral resources and energy, told CNN.



Mongolia"s economic output is projected to nearly quadruple to USD23 billion by 2013, and Zorigt projects the nation"s per capita income -- which now stands about USD3,200 a year -- will grow to USD5,000 by 2015 and USD12,000 by 2021. "We are following the economic model of Chile," Zorigt said. "There are a lot of lessons we can learn from the mine accident."



But a commodities boom in developing nations is often beset by the "Dutch disease" -- a lopsided influx of capital that causes currency and prices in the country to inflate without trickling through to the rest of the economy. “The socio-economic challenges when mining transforms an economy are enormous and there"s a tremendous amount of risk associated with that," says Nigel Finch, senior lecturer at the University of Sydney"s school of business and economics. "But when they plow that back into their own nation to do the right sort of things that one would imagine -- building roads, hospitals and all the rest of it -- they bring home so much cash in one go it has this enormous splash effect on the economy," he said.



Often it"s not the obvious socio-economic impacts that are hardest for mining companies, said Chris Hinde, editorial director for Aspermont UK, publisher of Mining Journal and other mining industry publications. "How to mine without polluting, ruining lifestyles, fitting in with the existing community are the real challenges."



"For example, if you build a mine in some parts of Africa, you obviously want to employ local people. The problem is that in the structure of a lot of African tribes seniority comes with age," he said. "Mining at a stroke destroys centuries of culture, because the young men are the men who have salaries and making good money -- how on earth do you stop that, because they"re the ones driving the trucks and equipment? But then they effectively almost take control of the tribe, because they"ve got the money."



The Chilean economy was built on copper mining, but avoided becoming a victim of Dutch disease. "Copper transformed the Chilean economy and Chile has had enormous social benefit from mining ... there"s enormous wealth that"s being created there and that"s fed back into the economy," Finch said.

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