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Resource TrapLogic follows that the wealthier a country becomes, the more financial resources it should have to combat poverty. The European Union countries and the United States have many programs to address domestic and global poverty, administered by both non-governmental (NGO) and governmental organizations. Taking the logical argument further yields that countries with vast natural resources should be equally capable of fighting poverty. By monetizing their vast natural resources, they should have plenty to provide for their citizens. The reality though is starkly different due to the resource trap.

Resource Trap

While rich countries are capable of enacting change, the manner by which their wealth was accumulated affects how their governments appropriate funds. The resource trap, or resource curse, as called by the Natural Resource Governance Institute (NRGI), posits that resource-rich countries tend to have higher rates of conflict and authoritarianism combined with lower rates of economic stability and economic growth. Along with the NRGI, Bloomberg finds that countries with vast natural resources have high degrees of conflict, corruption and poverty.

One of the many examples of this conundrum in the world today is Iran. According to the CIA’s World Factbook, Iran’s economy has a large industrial sector which makes up 35.3 percent of the country’s GDP. Iran’s large oil reserves gave rise to its top three industries: petroleum, petrochemicals and gas production. These three are resources commonly cited in reports regarding resource traps.

Even though Iran is rich with natural resources, it has an Aggregate Freedom Score of 18/100, which categories the country as “Not Free”. In their report on Iran, Freedom House cites antigovernment protests over the worsening economy and corruption as a factor in Iran’s low score. These dynamics have rendered the country prey to the resource trap. Resource traps like those found in oil-rich countries are especially troublesome because their governments are beneficiaries of vast amounts of income that would otherwise come from taxation. Since the government does not depend on tax revenues to remain in power, the will of the people tends to be ignored, which leads to unchecked corruption.

Economic Monitoring

NGOs combating corruption in oil-rich countries work to address how petroleum-based revenues are used to suppress its people. According to Radio Farda, Iran has a record of marginalizing NGOs that attempt to address the exploitation of its citizens. Solving the riddle of resource-trapped countries is a hard task and involves a multitude of tactics. Most of the work done by NGOs in Iran is done through the World Bank’s Economic Monitor program. Monitoring efforts like these where selected topics of interest to Iran and the international community are published provide data useful in liberating countries from their resource traps.

– Spencer Julian
Photo: Flickr

The Fall of Venezuela’s Oil-Based Economy
Currently, Venezuela is in an economic crisis. According to the International Monetary Fund (IMF), Venezuela’s inflation rate will exceed 10 million percent by the end of 2019. This high inflation has destroyed Venezuela’s economy, causing poverty and unemployment rates to rise. In turn, it has also created mass food and medical supply shortages across the nation. Venezuela was not always in a state of crisis; it was once a thriving country backed by a booming oil-based economy. If one understands the fall of Venezuela’s oil-based economy, they will know how Venezuela’s current crisis came to be.

Fruitful Origins

Back in the 1920s, people found some of the world’s largest deposits of oil in Venezuela. Upon this discovery, Venezuela embarked on the path of a petrostate. As a petrostate, Venezuela’s economy relies almost entirely on oil exports. The government overlooked domestic manufacturing and agriculture, choosing to import basic goods instead of producing them within Venezuela. With strong support for an oil-based economy, Venezuela rode on its economic boom until the end of the worldwide energy crisis of the 1970s.

The 1970s energy crisis involved international oil shortages due to interrupted supplies from the Middle East. In place of the Middle East, Venezuela became one of the top oil suppliers worldwide. Oil prices thus skyrocketed due to limited suppliers and oil production in Venezuela increased to meet rising demand. Venezuela added about $10 billion to its economy during the energy crisis, providing enough wealth to cover the importation of basic goods. It was even able to begin more social welfare programs.

The Fall

Once the energy crisis ended in the early 1980s and oil prices stabilized again, Venezuela’s economy saw its first notable decline. Oil production did not decrease in spite of lowered oil prices and demand, resulting in a capital loss for Venezuela’s economy. The production of oil is an expensive endeavor which requires high capital investment in the hopes of that even higher sales can offset the investment. Therefore, while oil production remained high, Venezuela failed to build off of the investment, losing capital immediately.

This loss of capital marked Venezuela’s oil-based economy’s initial fall, as Venezuela risked its well-being on the unstable oil market. Just prior to the drop in oil prices, Venezuela went into debt from purchasing foreign oil refineries. Without investing in domestic agriculture or manufacturing, the Venezuelan government became economically strapped; it could no longer pay for its imports and programs, and especially not its new refineries.

In order to pay for its expenses, Venezuela had to rely on foreign investors and remaining national bank reserves. Inflation soared as the country drilled itself further into debt. It was not until the early 2000s that oil prices began to rise again and Venezuela could once more become a profitable petrostate — in theory. Under the regime of Hugo Chávez, social welfare programs and suspected embezzlement negated the billions of dollars in revenue from peaked oil exports.

By 2014, when oil prices took another harsh drop worldwide, Venezuela did not reserve enough funds from its brief resurgence of prosperity. Ultimately, the country fell back into a spiral of debt and inflation.

Lasting Effects

The fall of Venezuela’s oil-based economy sent shockwaves throughout its population, affecting poverty and unemployment rates and causing mass food and medical shortages. Estimates determined that in April 2019, Venezuela’s poverty rate reached nearly 90 percent nationwide. A notable factor of its widespread poverty, some suggest that Venezuela’s unemployment rate was 44.3 percent at the start of 2019.

Unemployment is rapidly increasing in Venezuela as both domestic and foreign companies lay off workers — with some companies offering buyouts or pension packages, and others just firing workers without warning. As Venezuela falls further into debt and its inflation rises, there is not enough demand within the country for foreign companies to stay there.

As previously mentioned, the earlier Venezuelan government chose to rely on imports rather than domestic production for its basic goods. Now, in 2019, the country suffers from its past mistakes. Unable to afford its imports, food and medical supply shortages are rampant across Venezuela. According to recent United Nations reports, over a 10th of the nation’s population is suffering from malnourishment. In addition, malaria — which the country virtually eliminated several decades prior — is reappearing as there are more than 400,000 cases nationwide.

A Way Out

While the fall of Venezuela’s oil-based economy may be detrimental to the nation’s overall stability, there is a way out of ruin: the International Monetary Fund, an international agency that exists to financially aid countries in crisis. In the fight against global poverty, the IMF is a vital tool that can prevent countries from reaching an irreparable state.

If Venezuela defaults on its debt and seeks funding from the IMF, Venezuela would be able to invest in domestic agriculture and other infrastructure. Therefore, if the oil industry continues to decline, there will be a fallback for supplies and potential exports. While this is not a panacea to the fall of Venezuela’s oil-based economy, it is a way for the nation to prepare for any future declines in oil prices and begin to work toward prosperity.

– Suzette Shultz
Photo: Flickr

Venezuelans Fleeing
As the beneficiary of the world’s largest oil reserves, Venezuela was once the wealthiest nation in Latin America. However, in 2014, the economy began to collapse. The Bolivar, its currency, has gone into free fall, leaving millions unable to afford even the most basic necessities. According to Bloomberg’s Café con leche index, a cup of coffee today costs the same as 1,800 cups in January 2018. As food and health care become more difficult to come by, many Venezuelans are faced with the decision of struggling to get by or fleeing the country.

Why Flee?

Every day, thousands of Venezuelans leave their country in search of safety and stability, many of them arriving in Colombia. The International Rescue Committee has been supporting families in need in Cúcuta, a border city, since April 2018.

Venezuela is millions in debt while the only commodity that the country relies on is oil. Unfortunately, the value of oil has plummeted. In 2014, the price of oil was about $100 a barrel. Then several countries started to pump too much oil as new drilling technology could dredge up what was previously inaccessible, but businesses globally were not buying more gasoline. Too much oil caused the global price to drop to $26 in 2016. Today the price hovers around $50, which means that Venezuela’s income has been cut in half.

At the same time, Venezuelan President Nicolas Maduro’s hostility towards foreign business has created a corporate exodus. Companies such as United, General Motors and Pepsi have left entirely and unemployment in Venezuela could reach 25 percent this year. To try and keep up, Maduro has raised the minimum wage three times in 2019 in order to provide a little short-term relief to the poor. Currently, the minimum wage is at 18,000 bolivars per month, which is around $6.70 U.S.

How Many Venezuelans Have Left?

According to the U.N., more than three million people have already left Venezuela since the crisis began, and that number is increasing at a rapid rate. Approximately one million people, several lacking official documentation, have gone to neighboring Colombia. However, Peru is the second most popular destination country for Venezuelan refugees, with over 500,000. Ecuador follows, with over 220,000, Argentina with over 130,000, Chile with over 100,000 and Brazil with 85,000 immigrants.

By the end of 2019, the number of Venezuelans fleeing the country should reach 5.3 million. Nearly 300,000 children have fled the homes and lives they once knew, and approximately 10 percent of the country’s total population has already left.

The Way Out

The majority of those fleeing Venezuela do so on foot, and the road begins close to Cúcuta. Many people pay smugglers to use a trocha, which is an illegal border crossing through a river. On the Colombian side of the border has become a huge open-air market for all the things that people cannot get in Venezuela anymore. Vendors advertise medicines and cigarettes, candy and phone minutes for people to call home.

Sadly, some do not make the journey on foot. In Cúcuta, the temperature can hit 90 degrees Fahrenheit. However, on other parts of the route, the road climbs to 10,000 feet above sea level and temperature can drop below freezing. Walking this route takes approximately 32 days. The mountain pass, La Nevera, translates to the Refrigerator. Aid groups and residents have opened their homes and set up shelters along the path. However, the number of Venezuelans fleeing the country has surpassed the number of shelters available along the way, making space for only the lucky few.

The Impact

The emotional wellbeing of children who have fled Venezuela is of high concern. Sometimes traveling alone, boys and girls disrupt their education and are in great danger of falling behind in school and never catching up again. On the contrary, some parents leave their children behind when they leave the country. These children often gain material benefits from their parents’ migration, because sending hard currency to relatives provides greater access to food, medicine and other lacking necessities.

Furthermore, tensions between Venezuelans fleeing the country and citizens of other countries is often high. Colombia has had to reach out to the international community for help in dealing with the influx of migrants. Hospitals and elementary schools in Cúcuta have been overwhelmed, and administrators complain about the central government’s failure to reimburse them for the cost of caring for migrants. The national government has suspended the issuance of temporary visas, and the U.S. Agency for International Development, or USAID, has promised $30 million in assistance.

In Ecuador, anti-immigrant sentiments reached a highpoint when a Venezuelan allegedly stabbed to death his pregnant Ecuadorian girlfriend, Diana Ramirez Reyes, in front of police and scared residents of the city of Ibarra. Since then, President Lenin Moreno decreed a tougher immigration policy that requires incoming Venezuelans to present a document certifying they had a clean criminal record in Venezuela. However, such documents are costly to obtain in Venezuela.

Similarly, Peru and Chileans have developed hesitation toward Venezuelans fleeing the country. People cannot renew work permits in Peru and as of 2018, the country decided to stop issuing them. A recent survey in Chile found that many natives disapprove of the number of immigrants coming in. Seventy-five percent of those responding to the survey thought that the number of immigrants was excessive.

Who is Helping?

Since April 2018, the IRC has been working in Cúcuta supporting Venezuelans and vulnerable Colombians with specialized services for women and children, cash assistance and health care. Aid organizations and families are also working to help immigrants along the route. The Colombian Red Cross has a small aid station on the outskirts of Pamplona, a city in Colombia’s Norte de Santander region.

The U.S. government has also helped by providing about $200 million in humanitarian aid to address the crisis in the region. Most of this money has gone to Colombia as do the majority of Venezuelans fleeing the country.

UNICEF has appealed for $69.5 million to meet the needs of uprooted children from Venezuela and those living in host and transit communities across the LAC region. It is working with national and local governments, host communities and partners to ensure access to safe drinking water, sanitation, protection, education and health services for Venezuelans fleeing the country.

– Grace Arnold
Photo: Flickr

 

How Saudi Arabia Plans to Tackle Unemployment
Unemployment in Saudi Arabia reached a record high 12.9 percent in the first fiscal quarter of 2018. To alleviate this number and the ever-present wealth gap, Crown Prince Mohammed bin Salman has announced various social and economic reforms he hopes will mark a turning point in Saudi Arabian growth.

How Saudi Arabia Plans to Tackle Unemployment

Consistently one of the world’s top oil producers, Saudi Arabia hopes to lessen its dependence on the financially unstable resource to create a more diverse economy and to generate more jobs for its citizens.

The Saudi government will, however, continue to rely on oil for the foreseeable future in order to generate the capital that will allow them to invest in non-oil industry, ultimately alleviating the country’s reliance on oil.

Moving Away from Oil

Saudi Arabia has already shown a significant shift toward non-oil markets, specifically in the form of entertainment. The ban on movie theaters was recently lifted, and AMC Theaters proposed a plan to construct 40 theatres across 15 Saudi Arabian cities within the next five years, and a total of 100 theatres by 2030.

By introducing leisure-centric businesses, the Saudi government hopes to encourage spending by wealthy citizens while simultaneously providing jobs for the country’s impoverished citizens.

Incentivize Employment of Citizens

A major component affecting unemployment in Saudi Arabia is the number of foreign workers employed by private companies. Non-nationals account for 80 percent of the workforce, as they are typically migrants from neighboring countries willing to work for less than asked by Saudi Arabian citizens.

The Saudi Arabian government has announced in a series of reform plans, including the ambitious Vision 2030, that the country will invest in education for its people to prepare them to participate in the workforce. Additionally, the kingdom proposed strict nationalization quotas in the private sectors, meaning businesses will be required to hire a much higher rate of citizen workers.

By the end of the next decade, Saudi Arabia hopes that by investing in private enterprises and encouraging those enterprises to prioritize hiring Saudi nationals, they may increase the GDP generated by small businesses from 20 percent to 35 percent while simultaneously lowering the unemployment rate to 7 percent.

Social Reform

Beyond the humanitarian benefits that come from Saudi Arabia granting women many previously-withheld privileges, this key piece of social reform has the potential to bolster the economy by creating a new demographic of workers and consumers.

With nearly half the population of Saudi Arabia being female, introducing women to the workforce will allow for supplemental income in lower-class homes and help to fill the demand once nationalization quotas for small businesses are implemented.

The Saudi government expects social and economic reform to work cyclically, meaning that as previously marginalized people are introduced to the workforce, these members of society will help to grow the economy. This will then, in turn, create new businesses in need of more workers.

Looking Forward

Although Saudi Arabia is making very notable progress in terms of economic and social growth, it may take time for its efforts to translate to noticeable change. Many foreign and domestic investors remain wary of investing in Saudi Arabia, which are sentiments to be expected when a country announces major renovation.

However, once changes begin to take place and progress starts to show, investors may see the country as a place of economic potential. If the plans put forth in Vision 2030 come to fruition, unemployment in Saudi Arabia may dramatically decrease, and the country may find itself in a place of great economic development.

– Rob Lee
Photo: Flickr


Poverty in Angola runs high; roughly 40 percent of the population currently lives below the poverty line. The combination of a long, drawn-out civil war, systematic political corruption and economic crisis have prevented the country from establishing itself as a stable and prosperous state since Angola received its independence from Portugal in 1975.

While Angola does not have many lucrative exports, oil does make an important contribution to the country’s economy. Between 2006 and 2016, it accounted for as much as 97 percent of exports on average each year and, while there has been some reinvestment into national infrastructure, the president, José Eduardo dos Santos, has received criticism for not redistributing the profits fairly and using the financial boost from oil exports to reduce poverty in Angola as much as he could have.

Beyond its meddling in the oil industry, other forms of government corruption and nepotism are also rife in Angola. One particularly prominent example is the appointment of the president’s daughter, Isabel dos Santos, to the position of chief executive of the state-run oil firm in 2016. Forbes ranks her the richest woman in Africa, and she has an estimated net worth of more than $3 billion. Meanwhile, there is extreme poverty in much of Angola and subsistence farming is the main source of income for the majority of her countrymen and women.

This over-reliance on oil causes another problem: Angola is especially vulnerable to the fluctuations in the global oil market. Just last year, a global drop in oil prices resulted in an economic catastrophe for Angola. This triggered a rise in prices on everything from food and fuel to healthcare, putting an even greater strain on the country’s poorest inhabitants. The situation was exacerbated when the government imposed tough austerity measures, a move the U.N. Committee on Economic, Social and Cultural Rights deemed regressive and concerning.

Meanwhile, in a bid to diversify the economy with additional sources of revenue, huge land grabs have taken place at the hands of government officials and private businesses. In many cases, citizens have been forcibly evicted without adequate housing alternatives and proper compensation. Instead, they have been resettled in makeshift housing with little access to amenities such as healthcare, education, water and electricity.

Even before this move, access to healthcare and education has been severely limited, helping to reinforce a cycle of poverty. So while progress – although slow – has been made in both areas since peace was established in 2002, there is still much progress to be made. More investment is needed in the country’s public services to alleviate levels of poverty in Angola.

Rosie McCall

Photo: Flickr

Potential Rise in Poverty Among OPECThe drastic plunge that oil prices have taken from record figures of over $100 a barrel, down to averaging between $40-$45 a barrel, has left the economies of several OPEC countries beleaguered.

A potential rise in poverty among OPEC (Organization of the Petroleum Exporting Countries) is expected as oil is indeed the cornerstone of a majority of their exports and revenue has swung drastically since 2014.

The combined effects of excess supply and competition among markets over the years have impacted OPEC nations like Algeria, Nigeria, Venezuela, and Iraq. The economic uncertainty has deterred these large developing economies adversely.

An estimated 250,000 jobs have been lost as a result of the progressive decline in oil prices and many more are threatened owing to the 50 percent drop over the last two years. This crisis will result in a potential rise in poverty among OPEC, with declining national incomes overall.

Moreover, the presence of Boko Haram in Nigeria has also been a factor that is currently impacting its oil exporting capacity. The 50 percent price decline has only fueled this.

To combat a potential rise in poverty and economic instability, the African Development Bank plans to provide loans worth $10 billion by the year 2019 to bolster various sectors, including energy and electricity. Despite Nigeria’s depreciating currency and 70 percent poverty rate, this method can greatly increase investment capacity and attract more investment.

The Abidjan, a bank based in the Ivory Coast, also resolved to provide $1 billion for supporting the Nigerian budget.

A report by Nigeria’s Leadership newspaper has commended its diversification projects as a means to boost economic growth amid uncertainty.

Existing tensions between oil-producing nations have also escalated as a result of the plummet. Many nations argue about freezing and regulating their output. Consequently, mediating between countries is a viable way to ease the pressure. Iraq is currently heading a conciliation with Iran and Saudi Arabia in an attempt for both countries to reach a consensus regarding the crisis.

Ecuador, OPEC’s smallest member, was especially plagued by the plunge in oil prices as the government has to control and curtail public expenditure. The government has looked to OPEC remedy the situation in some way.

President of OPEC and minister of energy and industry in Qatar, Mohammed Saleh Abdulla Al Sada, is also working actively to agree upon a benchmark price and output level for all countries to adhere to. A renewed benchmark output of 32.5 million barrels has recently been discussed. This could alleviate the price volatility and circumvent a potential rise in poverty among OPEC countries.

Similarly, Algeria has also been a strong advocate of cutting production among OPEC nations as a means to raise oil prices again. Algeria is expected to see a 3 percent drop in its GDP this year.

Furthermore, political and economic turmoil in Venezuela, owing to the oil price decline and President Nicolas Maduro’s ration laws has resulted in food shortages and a 700 percent crippling inflation rate. Venezuela already has a concurrent poverty rate of 32.1 percent.

However, many neighboring countries like Chile, Peru, Argentina and Colombia are in the strategic position to aid the people and reach out to Maduro. Peru’s President Pedro Pablo Kuczynski recently called upon leaders to engage in the situation.

He believes that Peru’s pharmaceutical industry can be effectively used to help the country. Venezuela’s democratic Unity Alliance also echoes this view. Foreign aid is the only sustainable way for Venezuela to find its way through this major economic and financial bulwark.

Overall, a potential rise in poverty among OPEC countries may be the outcome of the drastic tumbling oil prices. It is vital that countries comply with OPEC proposals and guidelines to safeguard the interests of the economy and the people.

Shivani Ekkanath

Photo: Flickr

Poverty in Kuwait
Is there poverty in Kuwait, or isn’t there?

Statistical tables published by organizations such as UNICEF, the World Health Organization (WHO) and the CIA World Fact Book don’t show any measurable poverty in Kuwait. In addition, Nations Encyclopedia flatly states that “poverty is almost non-existent” in Kuwait. Anecdotal evidence, though, suggests that there is at least some poverty in Kuwait. For example, one set of anecdotes comes in response to a question on Quora: “what is life like for poor people in Kuwait?”

Respondents said, first of all, there is poverty in Kuwait, even if it goes unacknowledged. They counted among the poor: laborers, shepherds working in deserts, illegal immigrants and maids, some of whom were abused by their sponsors and employers. The common denominator for many of the poor is that they are non-citizens. They frequently come from tribal families who settled in the country only in the last 30 years. Many of these relatively recent arrivals were not granted citizenship, and as non-citizens they often face serious economic challenges.

Kuwaiti citizens, on the other hand, have greater access to the wealth of the country that comes from its oil. For example, around 90% of citizens work in the public sector which is largely funded by oil revenues. All citizens are eligible for help from the country’s extensive social services. These services include care for the needy, direct transfers to widows and students and help for families in a variety of circumstances — divorce, old age, disability, parental death, illness and financial difficulty.

For most of its young history — it won its independence in 1961 — Kuwait could afford generous state welfare because it is sitting on 6% of world oil reserves. Oil makes up 95% of its export revenues and 95% of government income. With the collapse of oil prices worldwide, down 60% since 2013, Kuwait had to do some belt-tightening. Like other Arab states, Kuwait has taken steps to reduce spending and increase revenues.

Kuwait has said it is prepared to lower subsidies for fuel and public utilities. The country said it would freeze, or at least slow, the growth of wages in the public sector. Kuwait also has other means to handle the shortfall in oil income in the short-term. Like the other Gulf states, Kuwait has extensive sovereign funds at its disposal. In total, the Gulf states manage $2.5 trillion in assets; that’s 37% of total assets of all sovereign funds in the world. Kuwait can use these if it needs to, though the long-term solution for Kuwait’s economy is to diversify its sources of income and grow the private sector, according to economists.

All in all, then, life in Kuwait looks like it should be pretty good, even with the oil price problem. Or, maybe not. Three years ago, before the belt-tightening, a blogger in the Kuwait Times, Thaar Al-Rasheedi, claimed that 90% of Kuwait’s citizens led poor and miserable lives. Even with apparent high salaries, Al-Rasheedi said, “there is hardly a citizen who still has a single dinar by the 15th of the month.” He went on to say that the problem is that rents are too high, installment loans are too high and there are in general “soaring prices right under the government’s nose and with its consensus.” “In fact,” Al-Rasheedi concluded, “we are experiencing intentional poverty on the last 15 days of each month!”

Is there poverty in Kuwait? It could depend on who you ask.

Robert Cornet

Photo: Flickr

The Resource Curse?
A strange correlation between natural resource-rich countries and human rights abuses has emerged over the past decade.

In 2001, Michael Ross discovered that the majority of states who are high oil-exporters also employ undemocratic policies.

An oil-rich state is classified by dividing total oil exports and by the total population of the country. To be considered a long-term oil-rich state, a country must produce over $100 per citizen for two-thirds of its sovereign years.

Ross found that oil-exporting states enjoy the “rentier effect”, which allows authoritarian regimes to use the revenue collected from oil sales to levy lower taxes. Consequently, the reduced taxes enable regimes to operate without accountability to its people.

The resource curse also has other negative consequences. According to Oil Change International, oil states employ a “repression effect”, which is the violation of human rights through the appropriation of land, forced migration and brutality on its citizens.

An example in which the resource caused human rights abuses in Nigeria. During the mid-1990s Ken Saro-Wiwa and eight other Ogoni leaders were executed for their roles in a successful campaign to remove Shell from the oil-rich Niger Delta.

Burma in the late 1990s also was a victim of the resource curse. The Burmese army and Unocal corporation were caught “clearing routes for the pipelines, including forced relocation, forced labor, rape, torture, and murder”. In 2005, Unocal offered conciliatory compensations to local villagers in lieu of a lawsuit engendered by Earthright International and the Center for Constitutional Rights.

Beyond authoritarian rule and the oppression of its people, the resource curse is linked to internal conflict. The Natural Resource Governance Institute (NRGI) found that over the past 26 years, oil-rich states have been twice as likely to experience civil war compared to their non-oil-rich counterparts, using the example of oil-rich states the Democratic Republic of the Congo, the Niger Delta, Iraq, Libya and Angola.

Similarly, the NRGI coined the term “petro-aggression” to define oil-rich states’ heightened likelihood to engage in an inter-state conflict such as Iraq’s invasion of Iran and Kuwait.

The resource curse also bears a direct relationship with the restriction of gender parity. Research has demonstrated that oil-rich states have fewer women in the workforce and government. Additionally, oil-rich states often have higher rates of HIV/AIDS, a consequence of the influx of male mine workers that travel from one oil-rich country to another.

An indirect consequence of the resource curse is the Dutch disease, which is the process of eliminating all non-oil industries. Consequently, states are dependent on a volatile market, undermining the stability of their economies.

The resource curse has incontrovertible and severe consequences. It is incumbent on democratic leaders to encourage good governance and strict adherence to the Universal Declaration of Human Rights. Additionally, democratic states must continue to encourage the diversification of oil economies through foreign assistance.

Adam George

Photo: Flickr

Poverty in Ecuador

With nearly 35% of the population or close to four million people living in poverty, poverty in Ecuador is extremely pervasive. According to The World Bank, “one and a half million Ecuadorians live in extreme poverty and cannot meet their nutritional requirements, even if they spend everything they have on food.”

Rural and urban poverty in Ecuador tend to have markedly different characteristics. The rural poor tend to have little access to land, lack education, have no integration into the market and have few employment opportunities. The indigenous population, included in the rural poor, is among the poorest of the poor.

The urban poor, on the other hand, face a lack of safe water and sewage, have to rent housing, have low job participation and, as with the rural poor, possess little education.

The World Factbook states that “Ecuador’s high poverty and income inequality most affect indigenous, mixed race, and rural populations.” The government has set up social services that are based on the poor sending their children to school and getting them medical check-ups. This has helped with advancing the education of rural poor children.

Oil and Agriculture: Profits and Challenges

Oil is the biggest export in Ecuador, accounting for half of Ecuador’s export income. But falling oil prices and other issues, including climate change, caused a financial crisis in 1999/2000. In 2000 the government approved new structural changes, including the adoption of the U.S. dollar as legal tender. This move, along with increasing oil prices, has helped improve the Ecuadorian economy and poverty levels.

Although oil is the largest export, the principal employer in rural Ecuador is agriculture. But, according to Rural Poverty Portal, the percentage of the total workforce that farming employs declined from 26.2% in 2001 to 20.8% in 2010. Small farmers also face disadvantages such as lack of access to land, lack of access to markets, lack of credit, soil degradation and climate change.

Labor, Land and Housing

The World Bank suggests that the main assets of the rural poor in Ecuador are “labor, land and housing.” Utilizing and growing these assets can lead to not only lower poverty levels but improved standards of living.

Education is the most powerful key to the labor force. Secondary education and allowing women access to jobs empowers the workforce. Keeping small, rural farmers on their land through access to credit and markets keeps them empowered and fed. Helping the poor use their homes to open businesses and other ventures could help generate income and help improve poverty in Ecuador.

The Price of Production? Deforestation

Unfortunately, the expansion of agriculture and oil production leads to deforestation. With expanded deforestation, other environmental and economic problems arise. The loss of forest not only changes the ecosystem, but it also brings the challenge for local owners to retain their land, especially indigenous landowners who are the hardest hit by poverty in Ecuador.

The country has been a member of the United Nations Reducing Emissions from Deforestation and Forest Degradation (UN-REDD) Program since 2009. In this program, incentives are given to landowners to keep the trees standing.

World Wildlife Federation (WWF) states that the United Nations Environmental Program calls Ecuador one of 17 megadiverse countries in the world. WWF believes that the worst threats to biodiversity within the country are the ways the economy has developed since the 1970s.

The economic measures taken have caused a loss of sustainability of natural resources and over-industrialization. By helping maintain biodiversity and improving sustainability, poverty in Ecuador can be greatly improved.

Rhonda Marrone

Photo: Flickr

Guyana Oil

Exxon Mobile’s recent Guyana oil discovery has given the historically poor nation reason to cheer. With oil the most important commodity in the global market, the South American country expects to make a large profit from the discovery.

Exxon Mobil found the oil on their sprawling 6.6 million acre oilfield off the coast of Stabroek, Guyana.

In the Stabroek block, the company’s Liza-1 well was drilled to more than 17,000 feet. There, the company found more than 295 feet of high-quality oil-bearing sandstone reservoirs.

The oil company is encouraged by the discovery and plans to determine the potential of the other sites.

With Liza-1 being the company’s first site of many, there is a good chance of further discoveries. Also, the findings from the well will be sent for analysis to determine its full commercial potential.

Even if no further discoveries are made, Guyana’s former Minister of Natural Resources and the Environment believes any discovery of oil will greatly boost the nation’s economy.

With Guyana having the 157th largest economy in the world, the recent discovery of the highly valued commodity promises to have transformational effects on the nation. Large revenues and foreign investments will pour into the country from its oil sales.

To ensure that the money will be used wisely, the President of Guyana, David Granger, promises to create a sovereign wealth fund from the Guyana oil revenue.

A sovereign wealth fund (SWF) is a pool of a nation’s money that is set aside for investments that will benefit the country’s economy and citizens. In this case, the revenue from Guyana oil sales will be put into a fund that will be reinvested in the country.

To assist in the creation of the SWF, Guyana is turning to their neighbor to the north, Canada. Researchers at the University of Calgary are putting together plans for the creation of the SWF.

Speaking on this, Guyana’s Minister of Governance, Raphael Trotman, said, “So later in the month of November, a team is coming from the University of Calgary with the specific responsibility of putting together the mechanism for what we refer to as the Sovereign Wealth Fund.”

The minister went on to reveal that the SWF will be split into three separate sub-funds.

One will look to secure funds the nation’s wealth for the future generations. The second will be a rainy-day fund for the nation’s budget in fiscally lean years. The third will be for developmental projects or initiatives.

Trotman expanded on this, saying, “So there are three funds that comprise the Sovereign Wealth Fund, but each has a different rate at which it is supplied and different reasons or mechanisms from which it can draw down.”

The three sub-funds ensure that the Guyana oil wealth will be used to benefit the nation as a whole. It includes investments into development and plans to save for the future.

The SWF is such a popular idea among the people that during the previous election both the current President and the opposition party had plans to create one.

Upon inauguration, President Granger promised that any funds from natural resources would benefit the people through an SWF.

He believes an SWF will make sure that “children will not have to live in poverty; that no matter what happens to the resources of the country, there will always be wealth to look after their education.”

The large oil revenues pouring into the SWF ensures that Guyana will have a strong investment in the nation and its citizens.

Andrew Wildes

Sources: Guyana Times 1, Guyana Times 2, Investopedia, Quandl
Photo: Guyanese Online