Role of Foreign Direct Investment and Economic Liberalization in Sustainable Mineral Extraction: Evidence from the Global South

This study examines the potential impacts of foreign direct investment (FDI) and economic liberalization policies applied to the mineral extraction sector, in select Global South case studies, specifically China, India, and Brazil. The three case studies possess varied and heterogeneous economic and political conditions, making them suitable to draw of the potential consequences of FDI and economic liberalization on the sustainability of mineral extraction. The analysis leverages two decades of data and relies on the Spatial Auto-Regressive (SAR) model. The analysis illustrates that liberalized economies, in the sense of economic liberalization as the - reduction of trade barriers - and the shift towards market-oriented economies, do not have a significant impact on the sustainability of mineral extraction activities in the host economies. It implies that opening economies, coupled with less restrictive governmental frameworks, do not guarantee sustainable outcomes in mineral extraction activities. In contrast, FDI have shown, to some degree, positive outcomes for sustainable extraction. This is possibly due to the diffusion of foreign technologies, more efficient and sustainable environmental extraction practices, and the inflow of sustainable investment for extraction. However, this positive impact required the need of further exploration to fully realize benefits. The findings suggest that policy-makers in the global south need to carefully consider the design and implementation of economic reforms and strategies to attract foreign direct investment, ensuring that these initiatives align with and support the broader goals of environmental sustainability and social justice.