Spend money on digging a hole in the ground while convincing the locals that it is good for them. As resource nationalism grows, that is the conundrum mining, oil and gas companies face the world over. Although they invest millions of dollars to develop projects and pay their dues to host governments, rising commodity prices prompt governments to ask for more, alarming investors. Ollanta Humala’s election as Peru’s president this month, amid talk of a mining windfall tax, raises concerns that he might imitate the resource nationalism of Hugo Chávez, his Venezuelan hero. Elsewhere, Tanzania is considering a super-profit tax on miners.
Governments must accept that extractive industries are capital-intensive and avoid fiddling with royalty and tax regimes over the long life of resource projects. Kevin Rudd, the former Australian prime minister, lost his job after trying to spring a resource super-profits tax on existing projects, potentially undermining their economics.
Resource companies, meanwhile, must show humility. BHP Billiton might have succeeded in its visionary bid for PotashCorp in Canada if chief executive Marius Kloppers had spent time on the ground building relationships with politicians in Saskatoon. Rio Tinto might have had an easier entry to its Simandou iron ore project in Guinea, avoiding a $700m upfront tax, if Tom Albanese, chief executive, had made a similar commitment earlier, albeit with four different governments. Miners easily come to be seen as colonialist thieves. Brazil’s Vale made a smoother entrance in Guinea: it is treated as a friendly investor in a fellow emerging market.