Unit 4 Macro: Guinea and Rio Tinto Agree Investment Deal that might Double GDP

Guinea has agreed a huge new capital investment framework with a number of transnational partners including Rio Tinto and Chinalco to develop one of the world's biggest iron ore assets. This is a project that may double the country's GDP not least because as well as mining the iron ore, there is a proposal to seek funding to construct a 650km railway and a deep-water port to transport the rocks and minerals. It is one of those examples that comes along every once in a while that prompts both students and teachers to re-visit the economics of large scale foreign direct investment projects. Is this nation building of the old style? Or is the proposed investment framework one that could be genuinely transformative for one of the world's poorest countries?Key points:Forecast of 45,000 new jobs created across the entire projectState of Guinea will retain 15% of any proceeds from the mineIn exchange, the joint venture with Rio Tinto / Chinalco will enjoy eight years' tax free operations in the countryProduction at the Simandou mine is expected to start within five yearsIt will be Africa's biggest mine