Can commodity-based associations promote the economic development of their member states?

Author:Arcaya, Ignacio

The answer to the above question is, in principle, yes. But the association has to be large enough to wield an effective market control over supply and protect prices from falling which is, after all, its primary objective. And the revenues from the export of these commodities must be channeled into productive development investment and income-generating objectives. As an example, I may refer to the case of my country, Venezuela, one of the founders in the early 1960s of the Organization of Petroleum Exporting Countries (OPEC). Since oil resources are concentrated in only a few countries, most of which are also members of OPEC, the Organization has had some very effective control over supply through the use of mutually-agreed export quotas and, therefore, an important influence over prices. However, there have been times, such as recently, when market forces in favour of a reduction of prices have been too overwhelming for OPEC to contend with effectively.

In addition, the oil business in most of these countries, including Venezuela, is basically in the hands of the State and the revenues from oil exports have been destined to be used to pay for investments and public services that respond to the requirements of national development. I say "destined" because, to be honest, we must recognize that in practice this has not always been fully the case; there has been a lot mis-management, a lot of waste and even, in some cases, painful misappropriation. But there has always been in the national conscience of these countries a sense of purpose that revenues from a precious perishable commodity should be used to benefit the economic and social development needs of the whole population, particularly of the most needy among them.

Notwithstanding the successful case of OPEC, it must be underscored that what has worked with oil may not necessarily work with other commodities. It will be hard, for example, to create a powerful international association of corn or rice producers, since corn and rice are produced in many countries of the world. It can also be argued, besides, that such associations may only benefit the people who control the agricultural business in developing countries, which are usually the few biggest and richest farmers. The case of iron is another interesting example: an international association was formed - the Association of Iron Ore Exporting Countries, or APEF - of which I had the honour to be Secretary-General for several...

To continue reading