Critical minerals and industrial development: old wine in new bottles?

The global race to secure critical minerals is accelerating. Demand for lithium, cobalt, copper and rare earths is projected to increase dramatically - in some cases by four times or more by 2040. These minerals are becoming strategic assets due to their centrality for clean energy, digitalisation, and security agendas, including militarisation.

As in previous commodity booms, resource-rich developing economies are throwing themselves into the game - some with decades of extraction behind them (Indonesia, DRC, Chile, Brazil), others arriving as new contenders (Zimbabwe, Namibia, Zambia, Uzbekistan). For more than 40 countries, minerals already account for over half of export revenues, and this moment will deepen that dependence.

Against this backdrop, expectations are growing that this time minerals will deliver development. From Jakarta to Harare to Windhoek and from Santiago to Brasilia, governments have been delivering variations on the same message: this time, we will not export rocks. Lula, from Brazil, put it plainly: "We are not going to be exporters of critical minerals. If you want to export them, you will have to industrialise them in our country so that our country can earn that money." International organisations, consumer nations and blocs are echoing the same ambition - backed by a dense ecosystem of initiatives, expert panels, strategies, and bilateral deals embedding value addition commitments.

But this is a familiar promise - one we have heard before. 

Old lessons, new boom

Few relationships in development economics have been more studied, or more frustrating, than the one between natural resources and prosperity. And for good reason: resource-rich countries have repeatedly found themselves caught between promise and disappointment, between booms and busts, between extraction and genuine development. This is because the opportunities are real, but so are the risks.

The evidence is clear: resource booms can bring much-needed investment, foreign exchange, fiscal revenues, and employment. Under the right conditions- though these are not easily met - they can also support structural change and industrial development through linkages, capability building, and technological learning. My own research has documented exactly this in South America, where firms that made sustained and deliberate efforts have successfully entered global mining and agricultural value chains and become competitive, innovative suppliers (Marín et al., 2023; Marín and Morales, 2025).

But the challenges are equally well established. The price volatility typical of natural resources generates macroeconomic instability and fiscal vulnerability; Dutch disease undermines competitiveness in other sectors. Extractive projects frequently arrive with their own international suppliers and function as enclaves, with limited linkages to the domestic economy. Political scientists have shown convincingly that resource rents can weaken institutions, fuel corruption, and reduce accountability.

The current boom in critical minerals is the latest, and in many ways most intense, iteration of this story. And worryingly, we are already seeing early signs of these familiar dynamics. Sharp price swings - dramatic in the lithium market, where prices fell by over 70% between 2022 and 2024 - early indications of currency appreciation in some mineral-rich economies, governance concerns in countries such as the DRC, and persistent difficulties in building local linkages despite decades of extraction: the familiar patterns are reasserting themselves.

But the key question now is: is the context in which this new wave of expansion is unfolding- geopolitically, technologically, environmentally - changing what is possible, what is at stake, and what development from minerals might actually require this time?

New challenges: the old problems, but harder

Three developments are fundamentally changing the conditions for development from minerals - and none of them make things easier.

First, this wave of extraction is unfolding in the midst of a deep environmental crisis. Resource-rich regions are already experiencing severe pressures on water, land, and ecosystems. Mining is highly resource-intensive, and its expansion is intensifying competition over scarce resources - often in already fragile environments. In the Atacama Desert, lithium extraction is consuming a growing share of local water supplies in regions facing acute drought. In Indonesia, the rapid expansion of nickel processing - involving large-scale smelting operations in Sulawesi and Maluku - has brought deforestation, coastal degradation, and serious air and water pollution to some of the world's most biodiverse landscapes.

Second, resistance to mining has become widespread and global. Conflicts around extraction are no longer isolated or localised phenomena - nor are they simply a symptom of weak institutions, as is sometimes implied. They occur across regions and income levels, wherever mineral deposits are found, as we recently showed (Marín and Palazzo, 2025). These conflicts reflect not only environmental concerns, but deeper questions of rights, distribution, and participation.

Third, geopolitical tensions around access to minerals have intensified sharply. In a context of high concentration of supply and processing of key critical minerals, access is increasingly framed as a matter of national security rather than market efficiency. Major economies are coordinating strategies to secure supply, often through alliances and "club" arrangements. While this may create new leverage for some producing countries, it also reshapes the rules of the game - and not necessarily in ways that favour development.

Taken together, these conditions do not replace the classic challenges of resource-based development, they amplify them. But an equally important question is whether producing countries are better positioned today than in previous booms to navigate them.

New opportunities: reasons for cautious optimism

Three developments may open new possibilities - though none of them are guarantees.

First, many low- and middle-income countries now possess capabilities that were largely absent in earlier commodity booms. Over recent decades, investments in industrial policy, education, and innovation systems have built scientific, technological, and productive capacities that simply did not exist before. At the same time, new technological opportunities - particularly in digital and modular domains - may lower entry barriers in certain sophisticated segments of mining value chains.

Second, there is stronger determination, and genuine creativity, in efforts to move beyond raw extraction. Governments are experimenting with new policy combinations. Indonesia has combined restrictive measures (such as the ore export ban) with negotiated investment arrangements. Chile has opted for a less restrictive but equally state-directed approach, linking private access to commitments to add value domestically. Others, like Argentina, are taking a more liberal route- fewer conditions, open doors, and close alignment with major powers to attract investment and secure deals. The approaches are contested and their outcomes uncertain, but they signal a wider policy imagination than in previous booms.

Third, social and environmental concerns have become harder to ignore. There is greater recognition of Indigenous rights, gender inequalities, and the broader impacts of extraction. Civil society is more organised and globally connected. These concerns have entered mainstream policy debates and governance frameworks, and consumers in key markets are increasingly aware of where and how minerals are produced. The gap between rhetoric and practice remains large - but the direction of pressure is real, and it is not going away.

These changes open new possibilities. But are they enough?

The missing enabler: coordination and collective learning

The short answer is no. Traditional responses to the classic problems of resource dependency remain necessary, stronger institutions, better linkages, industrial and technology policy, directionality. But the new challenges demand something different in kind, not just degree.

Fortunately, the same context that raises the stakes also brings new enablers. We have seen recently that conditions often treated as structurally fixed - market concentration, processing dominance, technological lock-in - can be reshaped through deliberate strategy. Rich countries did this in the past, though the lesson was largely forgotten under decades of orthodox economic thinking that presented these conditions as natural rather than constructed. China has reminded us, recently, and at scale, that they are not. What looks like the natural order of commodity markets is, on closer inspection, the accumulated outcome of political and industrial choices. The ceiling is higher than it is often assumed.

But most developing resource-rich countries will not be able to do this alone. What this moment calls for is coordination among them - on policy, on knowledge, on negotiating positions - and a serious investment in cross-learning. Not as an act of solidarity alone, but as a strategic necessity.

Advanced economies do not operate this way. They build coalitions, coordinate strategies, and defend shared interests. Resource-rich countries, for the most part, do not. Policies are designed in isolation, often without awareness of what others have tried, learned, or failed at. Knowledge and analytical capacity remain heavily concentrated in the Global North. The experiences of the Global South are not systematically documented or shared. The result is a striking replication of effort, and a persistent inability to build the collective positions that this moment demands.

And the costs of that fragmentation are rising. The current geopolitical turbulence, for all its dangers, is also creating a window: demand is high, the old rules are being rewritten, and the leverage of resource-rich nations, if exercised collectively, is greater than it has been in decades.

Not the same story - but not a solved one

So, are we facing the same story all over again?

The answer is both yes and no. The fundamental tensions of resource-based development remain. But they are now unfolding in a context of greater environmental pressure, stronger social contestation, and more intense geopolitical competition, and also, for the first time, with a generation of countries that have more capabilities, more policy experience, and more awareness of what is at stake.

The outcome is not predetermined. But it will not be automatic either. Turning this mineral boom into a driver of development will require more than favourable markets or better technologies. It will require coordination, learning, and new forms of governance that take these changing conditions seriously.

The conditions that have historically made development from minerals so difficult are not as fixed as they appear. But reshaping them requires something that has so far been in short supply: collective strategy, shared learning, and the recognition that no country can do this alone. The minerals are there. The knowledge is growing. What is missing is the political will to act together- and the window to do so will not stay open indefinitely. Whether this ends up as old wine in new bottles depends less on the minerals themselves than on whether resource-rich countries can, for once, write a different script - together.