A Conversation About The Natural Resource Curse - 1305 Words

A conversation about the natural resource curse in Bolivia is especially imperative today with the recent crash of oil prices which affects Bolivia’s export revenues as natural gas prices are indexed to oil prices. This chapter seeks to explore Bolivia’s economic structure; whether the natural resource curse phenomenon is already occuring in Bolivia? What are the contributors to their susceptibility to the risks of the resource curse? What role did Bolivia’s state-managed economy play in contributing to this and how have market mechanisms affected Bolivia’s economic welfare? In order to better understand where Bolivia stands today, it would be of interest to recall a resource curse that Bolivia had already endured in the past under their†¦show more content†¦With this policy direction in mind, we can look at Bolivia’s commodity export dependence, its effects on industrialization and diversification and the risks of commodity price volatilit y. This will require an inquiry into Bolivia’s natural gas sector that has been nationalized by the MAS government in 2006. The two secondary export products that Bolivia relies on are mining and industrial agriculture, they have similar effects of high revenue and low employment creation as the natural gas industry does on the economy. Finally a look at Bolivia’s macroeconomic policy will add the last dimension into our inquiry of Bolivia’s general economic state. Tin Bolivia is not new to commodity dependence; in fact, it was one of the cases that Richard Auty used in his essay where he first coined the term, â€Å"natural resource curse† (R. Auty 1993). Richard Auty’s case study of the Bolivian case between 1970-1990 outlines the boom and bust cycles of Bolivia’s ore exporting economy. It gives insight into what types of policies were pursued, or perhaps not pursued that further deteriorated the economy’s long term sustainability. In the early 70’s, Bolivia was highly dependent on mining; mining accounted for 77% of exports, 44% of taxes and 20% of GDP (R. M. Auty 1994). During this time, the Bolivian state was unable to extend domestic taxes to cover its large public sector expenses due to the polarization of the working class that demanded higher government