The Economic Impact of Mining Investment Projects: An Analysis of the Input-Output Matrix Applied to the Coquimbo Region

Abstract

This study analyzes the potential economic impact of a mining investment and operation project in the northern region of Coquimbo in Chile. The estimates are based on the Input-Output Matrix regionalized to the year 2013. According to the analysis of the project’s investments planned during the construction phase, it is estimated that each dollar invested in the project will generate 80 additional cents in production. Depending on the investment levels, the effects on direct and indirect employment are also calculated. Only the direct effect of the project is estimated at approximately 10 thousand new jobs during the construction phase. The construction phase is estimated to last for three years. In this exercise, data of a mining project with investments in the order of US$ 2,500 million are used. In the operation phase, each dollar invested in the mining project generates an estimated 49 additional cents and a total direct annual employment that depends on the annual expenditure. The life of mining projects exceeds, in general, 20 years of operation. The current operating expense estimate amounts to US$ 300 million per year for the project. The effects on the total product and employment are calculated from the interactions of the economic value chain of the mining sector with the other sectors of the regional economy using the Input-Output Matrix regionalized to the year 2013. Benefits and limitations of the use of ipm are discussed and reflected upon from the perspective of studies of this nature.