The "Dutch Disease" and Violence in Colombia

Colombia's rentier-based economy constitutes the main threat to development and peace.
Nazih Richani 3/12/2013


The strike of the mining workers of Cerrejon and the rebellion of the small coffee growers ended after several weeks of unrest which caused the loss of millions of dollars of income. Unfortunately, the end of these strikes and mobilizations would not solve the deep-rooted problem of Colombia’ economy.  President Juan Manuel Santos and his Minister of Economy, Mauricio Cardenas, expressed that “black clouds” are looming on the horizon for the industrial and agricultural sectors as growth has slowed from 5% in 2011 to 3.8% in 2012, and the decline looks like it will continue.

Colombia’s economic slowdown is attributed to a number of factors, including the global economic crises, decreasing commodity demand, increasing competition from cheaper products, and the appreciation of the Colombian peso, which makes products less competitive. The last two are concomitant with the so-called “Dutch Disease.”

1613 Photo Credit: Bloomberg

I have been arguing for some time that one of Colombia’s greatest threats is not narcotrafficking, organized crime, and the insurgency—but instead the rentier-economic model that brought the “Dutch Disease” propelling the causes and agents of violence. The deepening crises of the agricultural and manufacturing sectors that Santos and Cardenas alluded to in their Council of Ministers meeting held this last weekend is mainly caused by the appreciation of local currency. The Colombian peso is inflated by the increasing influx of foreign direct investments in mining, oil, and bio-fuel products that are pushing the peasants to increasingly join the coca economy, organized criminal groups, neo-paramilitaries, and the insurgency. Alternatives to coca plantations are incompatible with a rentier-model because of the opportunity costs. Simply put, alternatives crops are not profitable enough to sustain even traditional crops such as coffee, rice, sugar, cacao, potatoes, and yucca. Consequently, a rentier-based economy is the enemy of sustainable development and to a long lasting peace.

If Colombia is to avoid the development of its war system into a perpetual system of violence such the one that has prospered in post-conflict Guatemala, El Salvador, and South Africa, a new model of economic development is an imperative.

Stay tuned!



Nazih Richani is the Director of Latin American studies at Kean University. He blogs at



Read more on the economic implications of the conflict in Colombia from NACLA.

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