Why resources are no guarantee of success

In 1856, the U.S. Congress approved the Guano Island Act, which allowed citizens of the United States to claim ownership of islands with guano deposits anywhere in the world. The condition was that these territories were not under the control of other nations or occupied. Through this law, the U.S. was able to justify the seizure of over one hundred islands in the Pacific and Caribbean, which greatly weakened Peru's monopoly on the guano trade. However, other powers, such as Britain and France, were also actively appropriating islands with rich deposits of this valuable resource.

Despite the initial economic boom in Peru caused by guano exports, this “guano boom” was short-lived. After three decades of intensive exploitation, the deposits were depleted and exports began to decline. The situation was exacerbated by the discovery in 1870 of sodium nitrate, a nitrate-rich mineral that proved equally effective for fertilizer and gunpowder production.

Peru's economic prosperity finally came to an end after the War of the Pacific, 1879-1884, also known as the Selitre War. Chile seized much of Bolivia's coastal territories, depriving the country of access to the sea, as well as half of Peru's southern coast. These lands were rich in deposits of saltpeter and guano, making Chile an incredibly wealthy country.

An invention that changed the world

However, Chile's monopoly on nitrates didn't last long. In 1909, German chemist Fritz Haber developed a method for synthesizing ammonia from atmospheric nitrogen using high electrical voltages. This technology enabled the production of artificial fertilizers, which greatly reduced the importance of natural nitrates. Despite the inventor's scandalous reputation for his involvement in the development of chemical weapons during World War I, his work won him the Nobel Prize.

Haber's technology was brought to industrial scale by Karl Bosch, an engineer at BASF, which acquired the rights to the invention. This method, called the Haber-Bosch process, made mass production of artificial fertilizers possible, depriving guano and nitrate of their status as major sources of nitrates. By 1925, natural nitrate production in Chile was 2.5 million tons, but by 1934 it had dropped to 800,000 tons, giving way to chemical fertilizers.

Nineteenth-century technological innovations wiped out many commodity exporters, dramatically altering economic landscapes around the world. The invention of synthetic dyes in Britain and Germany was a disaster for producers of natural pigments. For example, the creation of artificial red dyes such as alizarin led to the ruin of the economy of Guatemala, which was then heavily dependent on the export of cochineal, a unique dark red dye. 

This pigment, extracted from the insect Dactylopius coccus (better known as the “cochineal worm”), was used to color the robes of Catholic cardinals and was added to the famous Italian liqueur Campari, a key ingredient in the Negroni cocktail. Interestingly, despite the name, this insect is not a beetle at all, and outwardly resembles a mochi.

The breakthrough came in 1868 when BASF began producing alizarin from coal tar, turning black coal into one of the most valuable red dyes. This invention not only disrupted the markets for natural dyes, but also laid the groundwork for the company's subsequent developments. In 1897, BASF introduced the technology to synthesize artificial indigo, which dealt a devastating blow to the production of natural indigo in India. This collapse led to massive job losses and the ruin of numerous plantations, including British and European holdings.

The invention of synthetic rubber

The competition between natural and synthetic rubber had equally dramatic consequences. In the 20th century, scientists from Germany, Russia, and the United States developed technologies to produce synthetic rubber, which hit Malaysia's economy particularly hard in the 1970s. The country, which at the time produced half of the world's natural rubber, faced falling demand and severe economic dislocation. To adapt, Malaysia refocused on palm oil and electronics production, but the initial blow from synthetic rubber left a deep mark on its history.

It is not only the invention of synthetic substitutes that poses a threat to commodity producers, whether agricultural or extractive. Sometimes economic and political maneuvers that alter the balance of power in the global marketplace play a key role.

A prime example is the story of Brazil, once an absolute monopolist in the rubber market. Revenues from rubber exports have made rubber-producing regions incredibly wealthy. In Manaus, the center of the rubber economy, a lavish Amazon Theater was built, a symbol of wealth and prosperity. However, this golden era ended with a devastating blow. The British smuggled rubber plant seeds out of Brazil, then planted large plantations in their colonies of Malaysia (then called Malacca), Sri Lanka and other tropical territories. This reoriented the world market, and Brazil quickly lost its dominant position.

The example of Vietnam

Another impressive example is the rise of Vietnam in the world coffee market. In the mid-1980s, the country exported virtually no of the product. However, within a few decades, Vietnam became the second largest coffee exporter in the world, second only to Brazil. Already in the early 2000s, the rapid growth of Vietnamese coffee exports had a significant impact on the economies of other producing countries, creating a new competitive environment.

Conclusion

Natural resources can be an important asset for a country, but their presence is no guarantee of prosperity. History shows that success depends not only on mining, but also on good governance, economic diversification and investment in human capital. Avoiding the “resource curse” requires a comprehensive approach and a strategic vision aimed at sustainable development.