Relevance for UPSC: GS Paper III (Economy, Energy Security) | GS Paper II (International Relations)
Source: World Bank data; International Energy Agency; academic analysis on resource curse

Core Issue

Venezuela illustrates the resource curse, where abundant natural resources fail to translate into development. Despite having the world’s largest proven crude oil reserves (about 303 billion barrels), Venezuela faces prolonged economic collapse.

Why the Curse Operated

  • Overdependence on oil exports and failure of diversification
  • Weak institutions and politicisation of the state oil company
  • Heavy crude oil requiring advanced technology and high investment
  • Economic sanctions that deepened existing structural weaknesses

Oil revenues were used for short-term spending rather than productive investment, leading to debt, inflation, and output collapse.

UPSC Value Box

  • Concept: Resource curse — paradox where resource-rich countries show poor economic performance.
  • Related Concept: Dutch Disease — resource exports crowd out manufacturing and services.
  • Institution: Organization of the Petroleum Exporting Countries (Venezuela is a member).

Q. The term “resource curse” refers to:

(a) Depletion of natural resources
(b) High export dependence causing weak growth
(c) Environmental degradation due to mining
(d) Trade deficits in developing countries

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