This paper explores the impact of natural resource booms on economic growth in Latin America, using a theoretical model and empirical evidence. The authors argue that while natural resource booms can stimulate industrialization, they may also hinder growth through the Dutch disease effect, where resources are mis allocated away from sectors with positive externalities for growth. The paper presents evidence from seven Latin American countries, finding that natural resource booms are sometimes accompanied by declining per-capita GDP. The theoretical model demonstrates that the impact of a natural resource boom on growth depends on whether the increasing returns sector is traded or non-traded. When the non-traded sector has increasing returns, a resource boom can stimulate industrialization. However, when the traded sector has increasing returns, a resource boom can lead to a decline in growth. The empirical analysis supports these findings, showing that resource booms in Bolivia, Mexico, and Venezuela did not permanently raise per-capita GDP and were followed by a growth slowdown. The paper concludes by discussing the broader implications for economic development strategies in resource-rich countries.This paper explores the impact of natural resource booms on economic growth in Latin America, using a theoretical model and empirical evidence. The authors argue that while natural resource booms can stimulate industrialization, they may also hinder growth through the Dutch disease effect, where resources are mis allocated away from sectors with positive externalities for growth. The paper presents evidence from seven Latin American countries, finding that natural resource booms are sometimes accompanied by declining per-capita GDP. The theoretical model demonstrates that the impact of a natural resource boom on growth depends on whether the increasing returns sector is traded or non-traded. When the non-traded sector has increasing returns, a resource boom can stimulate industrialization. However, when the traded sector has increasing returns, a resource boom can lead to a decline in growth. The empirical analysis supports these findings, showing that resource booms in Bolivia, Mexico, and Venezuela did not permanently raise per-capita GDP and were followed by a growth slowdown. The paper concludes by discussing the broader implications for economic development strategies in resource-rich countries.