Natural resources trap and regressive specialisation: Global integration and the destruction of productive capabilities in Latin America

This article develops the concept of a natural resources trap to explain why resource-rich, middle-income economies diverge under global integration. Focusing on Latin America, it argues that commodity booms can reinforce, rather than ease, the constraints on industrial development when dominant coalitions derive income from natural resource extraction, finance and protected non-tradeable sectors. Real exchange-rate appreciation compresses manufacturing margins and weakens long-horizon investment, while the sectors that benefit from this regime gain the leverage to preserve it. The result is not a temporary Dutch Disease episode but a durable macroeconomic settlement in which correction is repeatedly deferred. Because productive capabilities are lost faster under sustained appreciation than they are rebuilt after depreciation, each cycle leaves a thinner industrial base. Across Latin American economies, higher pre-boom resource rents are associated with larger declines in economic complexity during commodity expansions, a descriptive pattern consistent with the mechanism proposed here. East Asia is used not as an idealized model but as a contrasting reference, showing that commodity exposure need not produce the same structural consequences. Brazil, Chile and Mexico show that integration's developmental effects depend less on institutional quality or trade openness than on the sectoral interests shaping macroeconomic policy.