Windfalls from Extractive Activities in Colombia

Abstract

Authors such as Clough (1955) and Rostow (1960) believed that countries endowed with natural resources could achieve sustainable economic growth. This belief was based on the role coal and oil had during the 19th and 20th century in the industrial development of countries such as Australia, Canada and the United States of America. However, this perspective started to change in the early 1980´s and has prevailed throughout the years, economists have observed that developing countries rich in non-renewable natural resources such as minerals and fossil fuels, have had a slower economic growth compared to developing resource-poor countries. The economist Auty (1993) denominated this phenomenon as a Natural Resource Curse, in which there is a negative correlation between natural resource dependence and economic growth.

The South American country, Colombia, is the case study of the thesis in which an analysis is provided on how the growth and development of the extractive sector during the commodity price boom of the period 2004-2013 has affected the overall economy of the country. Additionally, the Colombian constitution states, the exploitation of a non-renewable natural resource will cause, in favour of the National Government, an economic consideration as a royalty (Const., 1991 Art. 360). Thus, for the present thesis, an emphasis is placed on the royalties the government received during the years 2012-2016 through the General Royalty System, (i) how these were used in the aspects of Science, Technology and Innovation, and Regional Development, (ii) to provide an understanding of to what extent these investments have contributed to regional growth, (iii) the correlation these investments have in a strategic economic sector such as the agroindustry.