CFP Contributor David Harris offers a unique perspective on a Chilean example - here, he offers a precedence of what not to do in anticipation of an economic downturn regarding mining exploration.

Although Chile has immense geological potential, lower political risk, and is among the more promising emerging markets in Latin America, its mining industry suffers from a venture capital dilemma. Dominated by large-scale mining operations, Chile has neglected to develop the exploration sector of its mining industry, costing itself and its citizens foreign capital and employment opportunities.

The fall of international commodity prices has spelled trouble for Chile, as its unhealthy dependence on copper has been costly since last April. The Economist Intelligence Unit predicted that Chilean economic growth would fall below three percent in 2008. As the largest copper producer in the world, Chile would have benefited from developing domestic exploration before the fall of copper made the opportunity less attractive.

Exploration remains primarily in the hands of large corporations such as Anglo American, BHP Bilton, and state-owned Codelco. Because they already have established deposits, there is no reason for the oligarchy of multinationals to conduct additional exploration. Without this, the potential for growth and development for Chilean citizens and developing corporations will be held back into the foreseeable future.

Joint venture initiatives, sponsored by venture capital institutions or even the Chilean government, could have stimulated growth at a grassroots level and facilitated the development of a dynamic, competitive exploration industry. But for the time being, it may be too late.

One of the concepts emerging markets should embrace is the idea of securing long-term commitment to finance and development, that will be in place before a capital crisis, depressed commodity prices, or decreased demand can discourage foreign direct investment and financial commitment.

When copper recovers, so will Chile. The lesson for Chile to learn is to stimulate activity and investment before it is no longer attractive.