Natural Resources and Violent Conflict - WaterWiki.net

360 guillaumont and guillaumont jeanneneythe eligibility criteria are both a decline in the total export earnings ofgoods (or in some cases revenue from primary commodities as a whole)and a deterioration (of 10 percent) in the programmed fiscal deficit.More clearly than Stabex, the new mechanism appears to be budgetarysupport intended to ward off the macroeconomic consequences of thedrop, but the mechanism could be used for sectoral purposes in order todampen shocks incurred directly by stakeholders in the sector concerned.Moreover, agreement on the need to allocate funds is required.This requirement, of course, threatens to slow the procedure eventhough a system of advances is provided to overcome delays in thereceipt of information on foreign trade statistics. Price drops are stillcalculated in relation to an average for previous years, which makesit impossible to distinguish between the temporary component andthe trend component of the revenue decline and results in limiting thesupport to four successive years.This brief review of the measures taken to dampen the internationalprice shocks facing developing countries clearly shows their limits. Ifone excludes those measures, heretofore ineffective, aimed at reducingprice instability upstream, the methods intended to dampen the effectsof shocks are characterized by two major problems: they are associatedwith the consequences of price drops—that is, negative shocks—ratherthan with the consequences of instability, and insufficient efforts havebeen made to distinguish between permanent and temporary priceshifts. Further, sometimes they seek to preserve the incomes of a particularcategory of stakeholders, and sometimes they seek to achieve macroeconomicstabilization, without reconciling these two objectives.What Options Are Available to theInternational Community?Although it may recognize the need to assist poor and vulnerable countriesto address the price shocks that affect them, the internationalcommunity may be tempted to skirt the issue in one of two ways. Thefirst is to say that the main objective is to prevent instability. As there islittle chance of doing so by means of agreements by commodity, the solutionproposed is to diversify production and exports. But althoughdiversification may be regarded as desirable, it is a long-term process,and speeding it up has its costs, particularly in small countries, namely,that of forgoing the advantages of specialization.Another frequently heard proposal is to invite countries to managethe price shocks affecting their exports by means of exchange rate