EXTRACTIVE INDUSTRY: CHARACTERISTICS, TYPES, EFFECTS AND EXAMPLES - ECONOMY - 2025

The extractive industry is any process that involves the extraction of raw materials from the earth to be used by consumers. This type of industry consists of any operation that removes metals, minerals and aggregates from the earth.

Nonrenewable mineral resources play a dominant social, economic and political role in 81 countries, which together account for a quarter of the world's GDP, half of the world's population, and nearly 70% of those living in extreme poverty. Africa alone is home to about 30% of the world's mineral reserves. It also houses 10% of the world's oil and 8% of the world's natural gas.

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The extractive industry is an important platform to obtain raw materials for industry and food. In most cases, the products of this industry go through processing.

Importance of government

The level of development of the extractive industry is based especially on the socio-economic conditions and the natural conditions of a country.

At the national level, with good and transparent governance, revenues from extractive industries can have a substantial impact on reducing poverty and fostering shared prosperity, while respecting the needs of the community and the community. environment.

But too often these natural resources have become a source of conflict rather than an opportunity. Many resource-rich countries also suffer from poverty, corruption, and conflict stemming from weak government.

characteristics

There are a number of specific characteristics that correspond to the extractive industry. These are the following:

- The unequal distribution of natural resources in countries and regions.

- The great intensity of capital flow that the industry needs, to be able to sustain long extraction life cycles and development periods.

- The possibility of depletion of natural resources, along with sustainability concerns surrounding issues such as human or cultural rights, the land, as well as health and environmental considerations.

- The principle of unbreakable sovereignty over natural resources, combined with the ability, whether or not one has, to be able to gather at the national level the significant long-term investments that are necessary to exploit such resources.

These characteristics are always at the bottom of the different tensions that arise between the host country, investors, local communities and the country of origin of the investing company or other importing countries.

Role of international trade

Due to the robust nature of the commercialization of minerals and fuels, both the investment framework and international trade play an important role.

The role they play serves to ensure that the trading of natural resources effectively results in inclusive growth and transformative development, while providing predictable and fair access to the global marketplace for countries that purchase such resources.

The World Bank helps countries take advantage of development opportunities and reduce poverty. This is achieved by focusing on effective governance of extractive industries, increasing transparency, enhancing the mobilization of domestic resources, and promoting inclusive growth.

Types

Extractive industry of renewable resources

The object of this extractive industry is the natural resources that can grow again naturally, without being depleted. For example, hunting, fishing or catching whales and marine animals.

It is important that they can be differentiated from livestock or agriculture. This is because these industries really guarantee that the resources have continuity, through breeding or sowing.

Currently, due to the excessive use of natural resources and existing overpopulation, there are few extractive industries that are truly renewable. This is because the rate at which the resource reproduces should naturally be higher than its consumption rate.

Extractive industry of non-renewable resources

It corresponds to those industries where resources are obtained that could be manufactured again, but at a much lower speed than they are consumed, or that cannot be permanently created again.

For example, among the sectors of this industry are the extraction of mineral products, such as oil, coal, natural gas, iron, rare metal ores, precious and non-ferrous.

Mineral and non-energy extractive industries

Minerals are essential raw materials for modern society. They are used to build roads and houses, and to produce cars, computers, and appliances.

The mining and quarrying industry that extracts these minerals is very important for the industrial, social and technological progress of a country.

This non-energy extractive industry is generally divided into three main subsectors, based on the different characteristics of minerals, their use, and the downstream industries they supply:

Industrial minerals

Industrial minerals, such as barites, kaolin or salt, are mined to supply a wide range of industries. For some minerals such as magnesite, fluorite, kaolin and potash, Europe is among the world's leading producers.

Metallic minerals

The metal minerals sector produces a wide range of minerals that produce metals or metallic substances. Examples of metallic minerals are chromium, copper, lead, iron, silver, and zinc.

Construction minerals

The most common construction minerals are aggregates (sand, gravel, and crushed natural stone), various brick clays, gypsum, and dimension or ornamental natural stone.

The demand for minerals for construction is high. The sector consists mainly of small and medium-sized companies operating in more than 20,000 extraction sites, supplying local and regional markets.

Effects on the environment

Extractive industries are considered to have unacceptable impacts on the environment. By their very nature, these industries use energy and disturb the land to extract the resource that is being developed.

The goal should be to extract and process the materials within environmental constraints. Also, the other site settings should be successfully maintained or restored after the resource has been extracted.

The early miners did not understand the effects of their activities or believed that there was so much land available that it simply did not matter if some areas were damaged. Today, these adverse effects are seen as a problem that must be addressed.

Modern mining companies for the most part recognize their responsibility to the environment and have adjusted their practices to avoid the problems of the past.

Leading companies begin environmental studies as soon as resources are discovered. Design principles for the environment, waste management and remediation are applied to extraction plans from the early stages of project development.

Geology, climate and topography

Geography, geology, climate and topography play a critical role in determining the type of waste produced and also how mining can be done. This directly influences the environmental consequences of mining activity.

Mining must be located where the mineral or other resource is naturally found. The geology of the ore body or resource deposit determines not only which target metals or resources are present, but also which unwanted materials must be removed or altered during extraction.

Climate has direct effects on the hydrology of surface and groundwater, as well as on mine drainage management. Furthermore, temperature, winds and other climatic factors influence the way in which mining can be carried out in a safe and environmentally responsible manner.

Finally, topography affects not only hydrology and site access, but also waste rock placement, processing and recovery facilities. Many of these restrictions are unique to the extractive industries.

Examples of extractive companies in Latin America

Goldcorp is a company with offices in Vancouver, Canada and British Columbia. It carries out gold mining activities in South America, as well as in Central America and Canada.

Hochschild Mining is a company based in England, but has a large stake in Latin America. Its main shareholder is the Peruvian businessman Eduardo Hochschild.

It carries out mining extraction operations, mainly silver and gold, in Peru in Minas de Ares, Arcata, Pallancata, Selene and Inmaculada; El Águila y Moris in Mexico; San José in Argentina.

Mexico

Fresnillo is a company formed in Mexico. Its extraction operation is concentrated in the Fresnillo mine in Zacatecas, Herradura and Cienaga.

Peru

Compañía De Minas Buenaventura is a Peruvian company that works with seven silver mines in Peru and has participation in other mining extraction projects, such as Yanacocha and Cerro Verde in Peru.

Chile

Corp Nacional del Cobre de Chile is a Chilean state company that carries out its operations in the Atacama, Antofagasta, Valparaíso, Metropolitana and O'Higgins regions.

Venezuela

Petróleos de Venezuela (PDVSA) is a Venezuelan state company. Its operational activities are the exploitation, refining and export of the oil it extracts in Venezuelan territory.

It was created by official decree during the first government of Carlos Andrés Pérez after the oil industry was nationalized. Its operations began on January 1, 1976.

Petróleos de Venezuela is among the largest companies in the world, based on its revenues. It is ranked 39th on Fortune magazine's Global 500 list. It is ranked second in Latin America.

References

1. Business Dictionary (2019). Extractive industry. Taken from: businessdictionary.com.
2. The World Bank (2018). Extractive Industries. Taken from: worldbank.org.
3. Preston S. Chiaro and G. Frank Joklik (1998). The Extractive Industries. National Academies Press. Taken from: nap.edu.
4. The E15 Initiative (2019). Extractive Industries. Taken from: e15initiative.org.
5. European Commission (2019). Minerals and non-energy extractive industries. Taken from: ec.europa.eu.
6. Wikipedia, the free encyclopedia (2018). Petróleos de Venezuela. Taken from: es.wikipedia.org.
7. The Trade (2017). These are the top 20 companies that produce silver. Taken from: elcomercio.pe.