The “Resource Curse” in Developing Mining Countries

The “resource curse” is invoked when the exploitation of exhaustible natural resources hinders economic and human development, while irreversibly degrading the environment. This chapter shows how economic analysis takes into account the contribution of exhaustible natural resources to sustainability by emphasizing the importance of rent. The exploitation of mining resources generates high profits that lead to the development of mining activity to the detriment of other sectors. The chapter analyzes the problematic link between rents and states, emphasizing governance and conflict issues, and presents some of the mechanisms put forward by international institutions and non-governmental organizations to counteract the “resource curse”. The major economic contribution of the extractive sector lies in corporate taxes and the share of the mining income captured by the state through the collection of royalties or other special taxes. Governance of extractive activities is a necessity that can be achieved through the control of transnational mining companies and international financing agencies.