ABSTRACT
The Dutch disease, or the “natural resource curse”, results in a permanent over-valuation of the exchange rate, which is key in explaining why some developing countries industrialize and grow rapidly whereas others lag behind. To be sure, there are other explanations for the fact that most oil-exporting countries fail to industrialize and grow, despite the wealth that oil represents; but the Dutch disease is certainly the crucial factor. We may find other explanations for Asian countries developing faster than Latin American countries since they became independent, but a main cause is that Latin America, unlike the fast-growing Asian countries, has an abundance of natural resources. As a result, the Asian countries do not suffer – or suffer only mildly – from the Dutch disease, and can neutralize it relatively easily, while in Latin America the Dutch disease is usually severe, even in non-exporting oil countries such as Brazil.
