Timing Is Key to Mineral-Rich Andes' Development

March 10, 2011

Maritza Paredes Gonzales sought to steer away from bedeviling rents as the main culprits of shaky state formation in mineral-rich Latin American countries, during a recent talk at the Institute. The focus was instead put on the timing of the Andean commodities bonanzas and the impact that the sequence of these bonanzas had in the setting for elite politics.

“Rents are an insufficient cause for explaining state underdevelopment,” said Paredes, a visiting research fellow at the Center for Latin American and Caribbean Studies and a PhD candidate at Oxford University's St. Anthony's College. “Timing and sequences and their effect on elite politics are also important.” 

Bolivia, Chile, and Peru were analyzed during her talk, titled “Shaping States in the Andes: A Comparative Historical Analysis of Mineral States, 1850s-1930s.” Though the three Andean countries have experienced resource dependence, the sequencing and types of dependence were decisive in creating divergent state formations. “The three countries achieved significant levels of state development,” according to Paredes, “but elite actors displayed contrasting degrees of counterweights to resist the perverse incentives fueled by windfall rents” 

Silver and tin were mined in Bolivia during its first (1880s-1890s) and second (1900s-1930s) export cycles, respectively. But the landlocked nation lagged behind its regional peers in terms of development, partially because it was a late adherent to export-oriented growth. In addition, the late timing ushered in a period of political instability, which worsened Bolivia’s already strongly contentious politics. The country’s mining elites chiefly stashed their wealth abroad and invested little in the country, thus further complicating development and state formation. 

But Chile’s mining history is a far more successful tale. Copper and grains boomed between the 1840s and 1880s, while nitrates swelled from the 1880s to the 1930s. Though the second cycle created far more dependence, the Chilean state was able to successfully profit from nitrates, partially thanks to the strong state legacy inherited from the first cycle. “Diversification should not only been studied as an economic process, but also as a political one,” said Paredes. “Early diversification in Chile created favorable incentives for the elites to associate with state development.”

Conversely, Peru underwent dependence in the early cycle, when it borrowed heavily and was vulnerable to price changes for guano. Lack of bureaucratic centralization and involvement of elites hindered state formation. Political instability was not dealt with adequately, according to Paredes, as rulers tried to “buy the peace” with money from rents or foreign loans. 

“This is a very typical expression of a Peruvian historian,” she said of the term. “And when resource-rents were gone, political instability was the consequence.” “In the case of Peru, you have early dependence and bad institutions,” Paredes said.
These diverging time frames, Paredes concluded, were also important in shaping public and private relations and the differing state outcomes. “It’s not just resource revenue,” she said. 

The talk was sponsored by the Center for Latin American and Caribbean Studies. 

By Watson Institute Student Rapporteur Alexandra Ulmer ’11