The Oil Curse Essay

814 Words Aug 26th, 2012 4 Pages
International Business
Assignment 3
A Pipeline of good Intentions 1- What is the “oil curse”? Why do you think it develops?

The oil curse (Paradox of Plenty) refers to the paradox that countries and regions with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources. This is hypothesized to happen for many different reasons, including a decline in the competitiveness of other economic sectors (caused by appreciation of the real exchange rate as resource revenues enter an economy), volatility of revenues from the natural resource sector due to exposure to global
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So to gain the World Bank’s approval for the loan, Chad agreed to enact the Petroleum Revenue Management Law.

4- If the World Bank and Chad’s government fail to settle their dispute over amendments to the Petroleum Revenue Management Law, What should the consortium do? Should they make funds available to Chad’s government in defiance of the World Bank’s wishes?

Chad’s government began to suffer budget difficulties. In December 2005 Chad’s National Assembly voted to amend the petroleum Revenue Management Law. The new amendments abolished special fund that would preserve oil revenues for the benefit of future generations. In addition, the legislation doubled the percentage of oil revenues that the country could spend without outside oversight to 30 percent. the World Bank acted swiftly in response to this legislation, which it viewed as abandoning Chad’s obligations under the agreement. In January 2006, it suspended all new grants and loans to Chad and cut off additional disbursements under existing projects with Chad. The World Bank’s action affected some 124$ million in undisbursed fund in eight bank-funded projects with Chad.
The Exxon-led consortium was now caught in the middle. It decided to withhold all revenues until the dispute between the World Bank and Chad’s government was resolved. However, President Deby

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