Industrial Policy and Local Development With Resource Abundance

Abstract

This chapter examines the localized impacts of natural resource abundance, specifically focusing on Bolivia's natural gas sector and its effects on the Tarija department. It investigates how boom-and-bust cycles manifest regionally and assesses the effectiveness of national and subnational industrial policies in navigating these volatile economic periods. The study highlights Bolivia's historical resource dependence and the “resource curse” phenomena, including “Dutch disease.” It analyzes the government's efforts to capture and redistribute natural gas revenues for economic diversification, detailing significant investments in value-added production. Despite substantial financial influxes, particularly in Tarija, the research concludes that low institutional capacity, deficient planning, and limited private sector coordination largely hindered genuine economic diversification, perpetuating reliance on extractivism. While poverty reduction was notable, the overall objective of a diversified, resilient economy remained largely unfulfilled as the natural gas cycle declines.