The Local Politics of Mining in Bolivia: The Distributive Outcomes of Firm Responses to Risk

The mining industry presents both an opportunity and a profound challenge for the regions in developing countries where extraction takes place.  Large extractives projects are a driver of economic activity, but they also are often removed in enclaves from the local economy, cause environmental destruction, and trigger intense conflict.  Yet, some communities affected by extractives industries experience better results than others.   How can the economic, social, and environmental outcomes in areas most directly affected by extractives be improved?  This question has crucial policy ramifications for regions dependent on commodity production and is central to a new frontier in theoretical development in the political economy of extractive industries.  This paper employs a mixed-method approach, drawing on a combination of comparative of 190 semi-structured interviews and an original household-level survey to explore this question in Bolivia, a country where the mining industry has a long legacy of failed contribution to development and where traditional regulatory approaches have not been effective.  Following the broader political economy literature on the resource curse, the analysis focuses on the distribution of costs and benefits of the mining industry—employment, contracts, social spending, and mitigation of environmental externalities—as a central dynamic in influencing development outcomes.  As opposed to the classic resource curse literature, however, I argue that in contexts where mining companies’ ability to operate is threatened by local actors, it is companies, not states, that are the central actor in distribution. Thus, to understand differences in outcomes, we must examine the private politics of mining. 

Comparative studies of four privately-owned mines reveals stark variation in the interactions between company strategies to mitigate risk and community structures that, in turn, influence patterns of distribution of costs and benefits.  For two of the mines, extractive firms attempted to form stable negotiating partners with community organizations.  As a result, company efforts to reduce risk aligned with investments in public goods and local diversification, although which goods the companies invested in was shaped somewhat by the structure or the community organizations.  For the other two mines, companies undertook negotiating strategies that exacerbated fractures in the communities, pitting local factions against one another.  As a result, these firms found it in their interest to target benefits narrowly, supporting allies that could counter-mobilize against threats, instead of investing in public goods.  Thus, interactions between firm strategies to reduce risk and social structures of nearby communities strongly shaped the distribution of costs and benefits of mining.  To complement the case studies, I draw on an original survey of 2,200 households in and around the four mines to examine individual-level implications of the argument.  Regression analyses of who supports the mining company and who receives benefits shows that mines that target allies do in fact have comparatively narrow bases of support, more uneven distributions of benefits, and fewer contributions to local development.  The paper concludes by highlighting broader contributions to the research to theoretical and policy challenges to increasing the likelihood of problematic commodity industries contributing to sustained and inclusive development.