Development and Globalization: - Unctad

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OVERVIEW DEFINITIONS The removal of international and domestic commodity price stabilization schemes, combined with the recent dismantling of compensatory mechanisms, has completely reshaped the systems governing commodity sectors. Today, commodity producers in developing countries are no longer protected against price volatility. There is no clear evidence about the long-term impact of globalization on commodity price fluctuation. However, price instability indices in monthly market prices for all commodities increased slightly in the past decade, from 1.8 in 1990–1992 to 2.5 in 2000–2002. Significantly, this instability is passed on to producing countries and is a major impediment for trade in some commodities such as cocoa, banana, pepper, coconut oil, nickel and crude petroleum. Instability indices for these products in 2000–2002 were 10.4, 15.0, 20.3, 18.1, 12.5 and 9.5. Past attempts to smooth the negative effects of instability – including Keynes’s plan in 1943, the Compensatory Financing Facility in 1963, STABEX in 1975, and measures stipulated in UNCTAD’s Integrated Programme for Commodities in 1976 – have either been discontinued or never been implemented. Price instability strongly affects both the macro-economic vulnerability of developing-country economies, including debt, and the micro-economic and social stability of those who depend on commodities. To learn more 84 5.3 Commodity prices ● The price instability index is the measure of price n instability 1/n � [(|Y(t)–y(t)|)/y(t)] * 100, where Y(t) is t=1 the observed magnitude of the variable, y(t) is the magnitude estimated by fitting an exponential trend to the observed value, and n is the number of observations. Instability is measured as the percentage deviation of the variables concerned from their exponential trend levels for a given period. ● In 1943, John Maynard Keynes proposed a world currency based on a price index of the 30 most-traded commodities. The idea was to link currencies to the index in order to automatically stabilize commodity prices. ● In 1963, the International Monetary Fund began offering a Compensatory Financing Facility that later became the Compensatory and Contingency Financing Facility. In 1988 it introduced a Buffer Stock Financing Facility; this was discontinued in the early 2000s. ● The first Lomé Convention in 1975 gave birth to the STABEX system, which was designed to alleviate the effect of non-structural problems such as fluctuation in world commodity prices and unforeseen events such as natural disasters. STABEX was discontinued in 2000 with the signature of the Cotonou Agreement, and was replaced by the more narrowly focused Flex programme. ● The Integrated Programme for Commodities set up an approach for an international policy framework that included the negotiation of a series of price-stabilizing agreements for commodities with very unstable prices. DATA SOURCES [1] UNCTAD, Commodity Price Bulletin. [1] UNCTAD, Commodity Yearbook 2003, volumes I and II. Paper No. 159. UNCTAD assists developing-country governments and other institutions in reducing the effects of price instability, including by creating relevant publications and providing training in risk management techniques. It also carries out research on international instruments for smoothing commodity export revenue fluctuations. The INFOCOMM site at www.unctad.org/infocomm presents several studies on commodity price instability and potential strategies for dealing with this issue. See, for instance, Report of the Meeting of Eminent Persons on Commodity Issues and Integrated Approach to the Management of Production and Marketing in the Primary Sector of the Developing Countries.
50 40 30 20 10 Commodity price volatility [1] (minimum, maximum and average based on monthly data) 0 250 200 150 100 50 0 20 000 16 000 12 000 8 000 4 000 0 Bananas (US¢/lb.) 1960 1970 1980 1990 2000 Cocoa (US¢/lb.) 1960 1970 1980 1990 2000 Nickel (US$/metric ton) 1960 1970 1980 1990 2000 Instability indices in monthly market prices [1] 10 000 8 000 6 000 4 000 2 000 0 1 600 1 200 800 400 0 50 40 30 20 10 0 Commodity price instability 5.3 B Pepper (US$/metric ton) 1960 1970 1980 1990 2000 Coconut oil (US$/metric ton) 1960 1970 1980 1990 2000 Crude petroleum (US$/barrel)* 1960 1970 1980 1990 2000 * Memo item: not included in the calculation of price indices. 1960 - 1962 1970 - 1972 1980 - 1982 1990 - 1992 2000 - 2002 All commodities in current dollars .. 4.33 4.88 1.79 2.48 All food 2.15 5.14 7.21 2.43 2.58 Food and tropical beverages 2.70 6.03 7.65 2.52 3.05 Tropical beverages 2.39 6.47 5.10 5.41 8.95 Food 3.16 6.37 10.10 3.65 3.86 Vegetable oilseeds and oils 4.35 4.81 6.01 3.30 10.18 Agricultural raw materials 2.24 3.91 3.11 3.06 4.53 Minerals, ores and metals .. 4.34 1.92 3.65 2.87 85
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2004 Development and Globalization:
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ii Note Development and Globalizati
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This publication was prepared by a
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vi Contents Notes ii Foreword iii A
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1 Countries, population and economi
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3 000 2 000 1 000 0 180 120 60 0 50
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33 Exports by commodity group, 2001
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160 140 120 100 80 60 40 20 0 140 1
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2001 1990 1980 1970 12 8 4 0 600 50
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Population structure by age, 2000 [
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1970 2000 Illiteracy rate [1] Devel
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100 90 80 70 60 50 40 30 20 10 0 Ma
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60 50 40 30 20 10 0 Participation o
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Share of nominal GDP by region, 200
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80 70 60 50 40 30 20 10 0 Gross dom
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OVERVIEW DEFINITIONS Total aggregat
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26 2.1 External finance and debt OV
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OVERVIEW DEFINITIONS The total exte
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OVERVIEW DEFINITIONS Ratios of debt
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OVERVIEW DEFINITIONS Global foreign
Page 44 and 45: OVERVIEW DEFINITIONS In the past tw
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Page 51 and 52: World's top 50 non-financial TNCs i
Page 53 and 54: Largest transnational corporations
Page 55: Selected indicators of internationa
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Page 107 and 108: Developed countries Developed count
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Page 112 and 113: AFRICA 58 North Africa 7 Algeria Eg
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Page 116 and 117: ANCOM Andean Community APEC Asia-Pa
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Development and Globalization: - Unctad

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