Abstract

The literature about natural resources and development has largely described states' failure to translate large resource endowments into sustainable development. Consequently, terms like resource curse or Dutch disease have become widely accepted. However, the literature examining this process at the subnational level has been less conclusive regarding the local effects, such as economic diversification. It is therefore pertinent to examine the contextual conditions underpinning both the expenditure of resource rents at the subnational level and the effects of such expenditures on economic diversification, particularly on the agrarian sector. To do so, this contribution deploys a comparative analysis between the Tarija department in Bolivia and La Convencion province in Peru. Both are hydrocarbon-rich areas in which subnational governments received massive amounts of resource rents. A deep examination based on qualitative and quantitative data permits the affirmation that whereas similar place-specific conditions boosted a massive investment of resource rents into public infrastructure, the composition of the agrarian sector defined a different trajectory in each case. While the strong peasant organization of Tarija obtained a direct transfer of resource rents, the transfer of those rents to the peasants in La Convencion was only through wages conditioned to work in the construction sector. As such, resource rents undermined the agrarian sector in La Convencion, while in Tarija the sector remained stable and potentially stronger in the long run.