ABSTRACT
Oil is regarded by many citizens and leaders of developing countries as the panacea for their problems. This chapter examines the not only how each country's political system and democratic stability has been impacted by their lack of diversification, but also the relationship between export diversification and economic growth. Venezuela's dependence on oil is such that developments in the oil sector are largely autonomous with respect to the rest of the economy. On the other hand, in Mexico it is found that a more diversified export portfolio has had a positive impact on economic growth. Mexico is a special case because of its close proximity to the United States and the maquiladora program along the border. Mexico, with the help of the its largest neighboring trade partner, the United States, has diversified its economy and increased its capacity to withstand the ramifications of falling oil prices.
