| Abstract: | There are scale advantages in resource-based industrialization (RBI). Trinidad and Tobago's small size meant that its RBI projects resulted in: relatively low revenue retention, heavy dependence on export markets, skilled personnel shortages and severe ‘Dutch disease’ effects. However Venezuela squandered its size advantage because its RBI strategy was over-ambitious. Instead of taking advantage of its ample scope for risk-reducing diversification, Venezuela concentrated largely on metals processing in a single location. Although it captured more backward linkage than Trinidad and Tobago it did so at high cost as a result of inefficient project execution. Worse, Venezuela's metals projects greatly exceeded its sizeable domestic demand, overtaxed its human resources and exacerbated existing distortions in the economy. Since poorly implemented RBI projects can overwhelm even a large developing economy, RBI is risky and should therefore only be pursued as part of a flexible, broadly-based diversification drive. |
