Reinterpreting the Amazon Rubber Boom: Investment, the State, and Dutch Disease

Abstract

Few periods in South American history have so captured the imagination and begged the attention of scholars as the Amazon rubber boom. For fifty years, the extraction of wild rubber from the jungles of the Amazon fueled unprecedented economic expansion in the region: per capita incomes in the Brazilian Amazon climbed by 800 percent; the regional population increased by more than 400 percent; urban centers and secondary towns blossomed along the river banks; and the vast Amazonian forest lands were integrated into national political spheres and the international market economy. But when low-cost rubber from British plantations in Asia flooded world markets in the 1910s, rubber prices plummeted, sharply curtailing financial returns from wild rubber extraction. The price shock drove scores of traders and export houses into bankruptcy when they were unable to collect debts that were based on the future value of rubber. Urban real estate prices crashed, and service industries withered along with their customers' incomes. By the early 1920s, the boom was over, and per capita income levels had shrunk to pre-boom levels. Today, nearly a century later, such incomes (in real terms) have yet to return to boom levels in many areas despite massive state investment in Amazonia.