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Role of Copper in the Chilean and Zambian Economies: Main Economic and Policy Issues

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Name of the Asset | Role of Copper in the Chilean and Zambian Economies: Main Economic and Policy Issues
Type of Asset | Working Paper
Date | June 2011

Summary

Natural resources are a great source of wealth for developing countries. However, countries should be able to lift themselves out of poverty without dependence on natural resources. The “Curse of Natural Resources” and the “Dutch Disease” hypotheses see natural resource dependence as a negative factor in their development, with the latter predicting that an overreliance on natural resources will lead to an appreciation of the exchange rate, and an underdevelopment of learning-by-doing sectors.  The paper examines the existing differences between the problems of abundance and dependence on natural resources by considering the cases of copper in Chile and Zambia.

The study finds that a country’s economic growth and exchange rate does not depend exclusively on what happens with its main export commodity. In both Chile as well as Zambia, there are other foreign currency inflows that have an influence on the exchange rate, and the relative importance of these inflows (with regard to copper) increases as the country develops also, indicating that the exchange rate is mainly a macro variable. These findings may also apply to other countries as well.

Authors:

  • Patricio Meller
  • Anthony M. Simpasa (with the collaboration of Bernardo Lara and Gonzalo Valdés)

Country and/or Region | Chile and Zambia
Name of the Program | Inter-regional Research Project on Latin America and Africa: Cross-Regional Dialogue on the Effects of Commodity Dependence
Funder(s) |  The World Bank and the UK Department for International Development (DFID)

Download the Full Study here

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