Antoine Godin, Alberto Botta and Marco Missaglia

In the recent years the Colombian economy grew relatively rapidly, but it was a biased growth. The energy sector (the locomotora minero-energetica, to use the rhetorical expression of President Juan Manuel Santos) grew much faster than the rest of the economy. The agricultural sector did not grow that rapidly and, above all, the manufacturing sector registered a negative rate of growth. These are the symptoms of the well-known “Dutch disease”. On top of this, over the last years real wages in Colombia declined and, simultaneously, household debt was on the rise. Is there a way to put together these tendencies?

In the neoclassical literature Dutch disease is qualified as a “disease” because the tradable sector resources move toward the non-tradable sector. In the structuralist tradition (see, for example, Taylor, 1983), it is again a story of competition on the use of scarce resources: instead of focusing on labor and capital, structuralist authors put the emphasis on non-tradable essential inputs such as transport and other infrastructure services: if the supply elasticity of those inputs is not sufficiently high, an expansion of the mining sector makes them more costly to the rest of the economy. On top of this channel, the structuralist tradition also gives quite a lot of importance to dynamic effects (see, for example, Botta, 2010): technical change and productivity growth are typically more vigorous outside the primary sector (for a different view, see Torvick, 2001).  

In this paper, we want to investigate a different reason why an economy may suffer from an expansion of the mining sector. In particular, we want to shed some light on the financial side of the economy and its links with a resource-boom. For this reason, we use a balance sheet approach, following the seminal work of Wynne Godley (1999), in order to highlight the imbalances emerging for the process at hand. We can observe several unsustainable dynamics: (i) a traditional Dutch Disease due to large increase in mining exportation and exchange rate appreciation, (ii) massive increase in foreign direct investment (FDI), particularly in the mining sector (iii) a rather passive monetary policy by the central bank, aiming at increasing purchasing power via exchange rate appreciation, (iv) recently, large dividends distribution from Colombia towards the rest of the world. We believe these processes should be seen as potentially dangerous for the Colombian economy and offer alternative policy recommendations.


Botta, A. (2010) Economic Development, Structural Change and Natural Resource Boom: a Structuralist Perspective. Metroeconomica, 61 (3) 510-539.

Godley, W. (1999) Seven Unsustainable Processes. Medium-Term Prospects and Policies for the United States and the World. Strategic Analysis, The Levy Economic Institute of Bard College.

Taylor, L. (1983) Structuralist Macroeconomics: Applicable Models for the Third World. Basic Books, New York, USA.

Torvick, R. (2001) Learning by doing and the Dutch disease. European Economic Review 45, 285-306.