Commodity dependence, structural reforms, and commodity trap: South America 1970-2017^*

Dependência de commodities, reformas estruturais e armadilha de commodities: América do Sul 1970-2017

ABSTRACT

Commodity dependence is a long-lasting feature of South American economies, with far reaching effects in economic and social performance. This paper focuses in the interaction between commodity prices and real exchange rate and in its effects on productive capabilities. New-Developmentalist approach has labeled that situation as a “Dutch-Disease”. I propose a Balance of Payment Constraint Growth model especially designed to address some specificities of commodity dependence that allow to theoretically analyze this issue. Empirical tests are conducted for the period 1970-2017. It is found that price surges are damaging for productive capabilities only in the context of the dismantling of state intervention.

KEYWORDS:
Real exchange rate; balance of payments constraint growth model; commodity-dependence; structural reforms