THE AMERICASGuyana’s Oil Boom and the Old Curse
As Guyana becomes one of the world’s fastest-growing economies, its sudden oil wealth is testing whether a small democracy in the Americas can escape the resource curse that has plagued so many petrostates.
Oil is often imagined as a shortcut to prosperity. In reality, it has frequently done the opposite, showering poor countries with sudden wealth while leaving them less diversified, more corrupt, and more politically brittle than before, a pattern described in detail by the Natural Resource Governance Institute.
Economists call this the resource curse, and in petroleum states it is commonly known as the oil curse: the paradox that countries blessed with vast reserves often struggle to convert that windfall into broad, durable development.
One of the classic mechanisms behind the curse is what economists call Dutch Disease. The term dates to the Netherlands in the 1960s, after the discovery of North Sea gas helped drive up the currency and squeeze other export sectors, especially manufacturing, a dynamic highlighted in the Natural Resource Governance Institute. The basic problem is straightforward: a booming oil or gas sector attracts capital and labor, strengthens the exchange rate, and makes the rest of the economy less competitive at precisely the moment when governments feel richest.
Across the Americas, the results have often been grim. Venezuela and Mexico closer to home, along with producers such as Nigeria and Angola elsewhere, earned immense oil revenues yet struggled with graft, misrule, and volatile, uneven development. Venezuela, once one of Latin America’s richest societies, turned exceptional oil wealth into institutional decay and economic collapse, while Angola’s petroleum riches coexisted for years with elite capture, stark inequality, and weak public services. In each case, oil did not simply fail to solve preexisting problems; it magnified them by concentrating wealth and power in the hands of the state and by enabling boom-bust spending patterns.
Still, the curse is not inevitable. Norway remains the clearest example of an oil-rich country that largely escaped it, thanks to strong institutions, cautious budgeting, and a sovereign wealth model that treated petroleum income as a long-term national asset rather than an invitation to plunder. Over the past few decades, Norway and a small number of other producers have used sovereign wealth funds and transparent budget rules to smooth volatile revenues and insulate politics from day-to-day battles over oil money, as the Natural Resource Governance Instituteand other analysts have emphasized.
