In 2003 Rio Tinto set out to study the challenges and opportunities arising from this discussion and to see what effects have these benefits from mining had on local economic development. The locality chosen for the study was Paracatu in Brazil, where RPM had been operating a gold mine for 17 years (the 51 per cent share that Rio Tinto owned at the time was sold to Kinross Gold at the end of 2004).

Paracatu lies at the side of the main road connecting Brasilia with Belo Horizonte, two and a half hours from the Brazilian capital. Since the town's inception at the beginning of the eighteenth century, gold extraction has played a dominant role in the shaping of local social, economic, and ethnic characteristics.

What catches the eye when visiting Paracatu is the geographical proximity between town and mine. Paracatu, a mid size urban centre of over 75,000 people, has in effect developed around the "Hill of Gold" (Morro do Ouro). This integration has come with advantages and disadvantages for the local economy, and has strongly impacted on the community.

RPM started construction in 1985 and began mining two years later. Figure four shows the total economic contribution since inception, and a detailed snapshot on 2001, the base year for the case study. The figures serve as a reminder of the limits of microeconomic policy in the context of macroeconomic adversity such as the effects of the devastating Brazilian hyperinflation in the years 1992/93, which has reflected so negatively in the level of real salaries and most statistics of economic welfare.

Total employment (direct and contractors) fell dramatically after inception until stabilizing in 1996, when total number of employees stayed constant at around 500 jobs. Further company restructuring in the context of the national stabilization plan resulted in high increases in productivity, as well as real average salaries.