Latin America and the Exportation of Agricultural Resources

The debate on development strategies in Latin America has been strongly influenced by two concepts in the literature of economics: first, by the hypothesis that a rich natural resource endowment can negatively affect development (“the natural resource curse”), and second, the empirical evidence pointing to a constant decline in the agricultural terms of trade. A look at the literature suggests that the “natural resource curse” hypothesis does not hold water and that, on the contrary, with sound policies for the use of the economic surplus, natural resources are indeed associated with development. Recent empirical evidence and an evaluation of the structural conditions of world agriculture suggest that prices of the main agricultural goods will remain high, thus ensuring favorable terms of trade for net food exporting countries. Latin America has an extraordinary agricultural natural resource endowment. If this is to be effectively exploited, it is necessary to elaborate new development strategies and innovative trade policies that will enable the region to insert itself effectively in international trade and attain to a productive structure with more added value. Last, it is also necessary to have fiscal and social policies in place that distribute any benefits and help to build a balanced economic structure.