There is now a growing chorus of opinion calling for Global South countries with substantial production in extractive industries (mining, petroleum, gas) to utilize the tax revenue from this production to bring about widespread improvements in living standard. An array of institutions, from the International Monetary Fund, to the World Bank, to a variety of United Nations entities, including the United Nations Development Program have all weighed in on this issue. The substantial rise in commodity prices, between the early 2000s and 2013, generated wealth that (theoretically) could have been used for development programs, especially for social programs (conditional cash transfer programs being one of favorites) and for infrastructural development. There is a consensus that while the commodity boom brought about some improvements in many African countries, for example, the results in terms of improved inclusion could have been considerably better than they were.
The recent scandals in a number of Latin American countries raise the issue of institutional capacity and the vexing issue of what is at the root of state incapacity in Latin American countries, particularly in those cases that have made recent significant progress in reducing poverty. This blog entry argues that there are long-standing historical and structural conditions that make corrupt practices extremely resilient. The reform of formal institutions will not be effective unless it is accompanied by efforts to grapple with those underlying conditions.