What is the Dutch disease that Colombia is supposedly overcoming, according to Petro?
Although this normally occurs with the extraction of raw materials, it can occur with any economic sector. Photo: Ecopetrol
TL;DR
- President Gustavo Petro referenced the 'Dutch disease' in discussions about falling unemployment.
- The 'Dutch disease' occurs when a country becomes overly dependent on extractive sectors with low job intensity, which represent a large portion of exports.
- This phenomenon is characterized by a boom in one sector (like natural resources) leading to the appreciation of the national currency, which in turn harms the competitiveness of other export sectors.
- While commonly associated with natural resource discoveries, the IMF states it can result from any development causing significant foreign currency inflow, such as increased prices of natural resources, foreign aid, or foreign direct investment.
- The concept has been used to explain historical economic events, including Spain's influx of wealth from the Americas and Australia's gold discoveries.