The reality of the so-called 'resource curse' is now widely accepted. The populations of countries that possess significant natural resources often suffer when these resources are extracted and exported. Attention is turning to ways of mitigating the adverse effects of the 'curse'. Responsible fiscal policies are required but are in themselves insufficient for overcoming it. International institutions have recently advanced what I term the 'new natural resource policy agenda' to deal with the problem. Its core features are (a) decentralisation of government (b) a greater role for direct citizen participation in the allocation of mining revenue; and (c) more cooperation between state agencies and commercial organisations (public-private partnerships). However, the recent history of Peru poses major questions about the effectiveness of this new policy agenda. The government has adopted both conservative fiscal policies and the new policy agenda. Over the last five years the mineral price boom has increased mining revenues markedly, but it has had little impact on poverty. More important, local level conflicts around mining operations have increased, and appear to threaten political instability even more. The problem is that, in a context of weak central state and even weaker local governments, the 'new natural resource policy agenda' has partially re-located the resource curse to sub-national levels. Local governments, mining companies and a variety of activist movements are locked into complex relationships that are not easy to negotiate and into conflicts that are not easily resolved. Like its predecessors, this very contemporary manifestation of the resource curse results in poor quality public expenditure and the waste of much of the new resource revenue.
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IDS Working Paper, No.300, Brighton, UK, 51 pp.