Determinants of country competitiveness in attracting mining investments: An empirical analysis

Abstract

This study contributes to the debate on the competitiveness of countries to attract mining investments. The specific objectives of this work are: to bring empirical support to the alternative view of mining competitiveness, which highlights the key role of country’s investment climate; and to propose a methodology, based on cross-country econometric models and the economic theory, to understand how the geological potential and the investment climate interact to define country’s mining competitiveness.

The research show that long-term mining competitiveness is not solely determined by the geological potential of countries. The models corroborate that both, geological potential and investment climate, are crucial to explain country’s attractiveness. Moreover, the results suggest that the relationship of these two variables is not developed individually and additive, but through an interaction of both terms.

Finally, the study identifies an “investment climate threshold area” in its final model. Mining competitiveness of countries with low investment climate depend on the interaction between their geological potential and investment climate. On the other hand, countries above this threshold compete for mining funds almost exclusively based on the mineral endowment of their territories. These findings could have relevant consequences in country’s strategic decisions for the mining industry.