COLUMN-Trouble looms for developing countries as commodity revenues collapse – by John Kemp (Reuters U.S. – September 29, 2015)

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(Reuters) – Slumping commodity prices pose a serious challenge to economic and political stability in developing economies across Latin America, Africa, the Middle East and Asia.

According to the United Nations Conference on Trade and Development, 94 developing countries depended on commodities for more than 60 percent of their merchandise export revenues in 2012/13.

Sixty-three developing economies were considered “extremely commodity dependent” with commodities accounting for more than 80 percent of export earnings (“State of commodity dependence” April 2015).

Most commodity-dependent developing countries rely on raw material exports for more than 20 percent of their entire economic output, in some cases rising to more than 50 percent, according to UNCTAD (“Key statistics and trends” June 2015).

During the boom years, the value of commodity exports from developing countries jumped from $2.0 trillion in 2009/10 to $3.2 trillion in 2012/13, mostly as a result of higher prices, which gives some idea of the scale of revenues now at risk.

For example, oil export revenues for the members of the Organization of the Petroleum Exporting Countries (OPEC) rose from $123 billion in 1994 and $375 billion in 2004 to a peak of $1.2 trillion in 2012.

OPEC export revenues had already fallen to $965 billion in 2014 and are set to fall even more sharply in 2015 as the full impact of slumping prices filters through (“Annual Statistical Bulletin” 2014).

COMMODITY SUPER-CYCLES

Developing countries have always had to contend with unusually high volatility in export earnings and output as a result of the extreme variability in commodity prices.

Studying a broad range of fuel, farm and metals prices since the late 19th century, researcher David Jacks identified four commodity price super-cycles since 1900 (“From boom to bust: a typology of real commodity prices in the long run” 2013).

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