Unit 2 Geography: Resource Curse in Latin America (Pellegrini,2019))) Flashcards
What is the central idea of the resource curse hypothesis?
Countries rich in natural resources are more likely to experience poor economic growth and other developmental problems compared to resource-scarce nations.
This suggests that resource wealth can be a hindrance rather than a benefit.
Is the resource curse deterministic in Latin America?
No, it is not deterministic.
The region shows a mixed picture, with some resource-rich countries underperforming while others have achieved significant growth.
What distinction do the authors make between ‘mineral dependence’ and ‘mineral abundance’?
‘Mineral dependence’ measures the value of natural resources relative to the economy, while ‘mineral abundance’ refers to the per capita value of resources.
Dependence is considered a better indicator of the distortive effects of a large extractive sector.
Explain the ‘Dutch Disease’ theory.
Dutch Disease explains how a boom in one sector, like natural resources, negatively impacts other sectors through:
* Resource movement effect: Labour and capital shift to the booming sector
* Spending effect: Inflation and appreciation of the real exchange rate reduce competitiveness of other exports.
This can contribute to the resource curse.
How does mineral wealth affect fiscal management and debt?
Mineral-rich countries might allocate more income to consumption than savings and are prone to long-term debt overhang due to easy access to international borrowing.
This is often exacerbated by volatile commodity prices.
What are the implications of significant mineral resources on institutional quality?
Mineral wealth can foster rent-seeking behaviours, undermining the development of pro-growth institutions.
This includes activities like lobbying or bribery instead of productive economic activities.
How can unequal mineral rent distribution contribute to conflict?
Unequal distribution can exacerbate grievances and create opportunities for conflict in resource-rich regions, especially where there are existing income inequalities and ethnic divisions.
This can lead to political instability and civil war.
What was the significance of oil extraction for Ecuador in the 1970s?
The intensified oil extraction marked the beginning of boom-and-bust cycles in Ecuador, leading to economic growth built on increasing public debt and institutional failures.
Initial expectations that oil would propel development were not met.
What is the ‘neo-extractivist’ development model?
A model relying on high resource revenues for social programs and infrastructure, aimed at redistributing resource wealth.
Adopted by Ecuador in the mid-2000s, it continued the country’s dependence on oil.
What is the ‘paradox of plenty’ in the context of natural resources?
The paradox of plenty refers to the phenomenon where countries rich in natural resources often experience less economic growth and worse development outcomes.
This challenges the assumption that resource wealth guarantees prosperity.
What mechanisms drive the resource curse?
Key mechanisms include:
* Dutch Disease
* Poor fiscal management
* Increased debt
* Weak institutions due to rent-seeking
* Conflict and political instability.
These factors contribute to developmental failures in resource-rich countries.
What socio-environmental costs are often unaccounted for in resource extraction?
Impacts on water and air quality, as well as social and environmental liabilities associated with extraction.
These costs are often neglected in economic development assessments.
What does the term ‘commodity consensus’ refer to?
A prevailing mindset in Latin America that equates resource extraction with development despite evidence of the resource curse.
This consensus persists even in light of negative developmental outcomes.
Fill in the blank: The resource curse hypothesis suggests that natural resource-rich countries tend to experience _______.
poor economic growth and developmental issues.
True or False: The resource curse is solely about the abundance of natural resources.
False.
What is rent-seeking?
Activities aimed at obtaining economic gain without contributing to productivity, often through lobbying or bribery
Rent-seeking can undermine pro-growth institutions like the rule of law and property rights protection.
How can the unequal distribution of mineral rents impact regions with income inequality?
It can exacerbate grievances and create opportunities for greed-driven conflict, leading to political instability and civil war
Different groups may feel excluded from the benefits of resource extraction.
What characterized the ‘petroleum age’ in the Ecuadorian Amazon during the 1970s?
Marked by increasing public debt, institutional failures like corruption, and significant social and environmental liabilities
Initially seen as a catalyst for national development.
What is the neo-extractivist model in Ecuador?
A model that uses high resource revenues to fund social programs, infrastructure development, and selective industrial policies
It often treats extractive activities as an unquestionable objective.
Define the paradox of plenty.
The counterintuitive finding that countries with abundant natural resources often experience worse development outcomes than those with fewer resources
This challenges the assumption that resource wealth translates into prosperity.
What is the resource curse hypothesis?
The idea that countries abundant in natural resources are paradoxically more prone to poor economic growth and developmental problems
This challenges the expectation that resource wealth leads to prosperity.
Does the resource curse affect all Latin American countries uniformly?
No, it does not apply uniformly; evidence is mixed and context-specific
Dependence on natural resources as a large proportion of GDP and exports is more strongly associated with developmental failures.
How does Dutch Disease contribute to the resource curse?
It involves a ‘resource movement effect’ and a ‘spending effect’ that hinder diversification and long-term growth
This leads to decreased competitiveness of non-resource exports.
What developmental issues are linked to the resource curse beyond economic growth?
Negative correlations with Human Development Index (HDI), constrained access to safe water, and lower standards of living
Resource-rich countries may also face environmental damage and reduced subjective well-being.
What role do institutions play in the resource curse?
Weak institutions promote rent-seeking behavior and undermine rule of law, corruption control, and property rights protection
Resource wealth can reduce the urgency for general taxation.
Is there a link between natural resources and conflict in Latin America?
Yes, unequal distribution of resource rents can increase the likelihood of conflict, particularly in areas with existing inequalities
Extractive industries are linked to conflicts over indigenous rights and environmental justice.
How does Ecuador illustrate the resource curse?
Ecuador experienced boom-and-bust cycles, increasing public debt, and institutional failures despite high hopes from oil exploitation
Oil extraction has led to significant social and environmental liabilities.
What are the implications of the resource curse for development strategies in Latin America?
Relying heavily on natural resource extraction is risky and can lead to negative economic, social, and political consequences
A more cautious perspective is needed, considering socio-environmental costs and historical experiences.
What is the ‘extractive imperative’?
The dominant idea that resource-rich countries must prioritize extractive activities as the primary means of achieving development
This idea often overlooks the potential negative consequences of such reliance.
What is ‘Mineral Dependence’?
The extent to which a country’s economy relies on the extractive sector, often measured as the proportion of GDP or exports from minerals
High mineral dependence can lead to economic vulnerabilities.
What is ‘Mineral Abundance’?
The quantity of natural resources available in a country, often measured in per capita terms
High mineral abundance does not guarantee better development outcomes.
Define ‘Neo-Extractivism’.
A development model that relies heavily on the extraction and export of natural resources, with the state managing resource revenues
It aims to fund social programs and infrastructure but maintains reliance on extraction.
What is the ‘Commodity Consensus’?
The belief that extraction and export of commodities is a necessary and sufficient pathway for economic development
This perspective can lead to neglect of other potential development strategies.
What is the ‘Primary-Export Development Model’?
An economic strategy focused on the export of raw materials and commodities as the primary engine of economic growth
This model can lead to over-reliance on volatile commodity markets.
