UNCTAD15 Global Commodities Forum: High-level session on strengthening resilience in commodity-dependent countries
13 September 2021
Excellency, Primer Minister Mottley, Dear Mia,
Excellency, Ambassador of Barbados.
Distinguished Delegates,
Dear official partners of the Global Commodities Forum,
Dear colleagues at UNCTAD,
Dear friends,
It is my pleasure to welcome you all to this 9th edition of the Global Commodities Forum, the first of the 5 forums that lead up to UNCTAD XV, the fifteenth session of our conference which will be held this 3rd to 7th of October semi-remotely, here in Geneva and in Barbados.
I bid you all welcome, in this as you know, my first day at the job as Secretary General of UNCTAD, so please let me share with you how excited I am to be here amongst you, opening this important forum.
It is a very fortunate coincidence that my first official duty at UNCTAD is related to commodities. The subject of commodities, their potential, and their related issues are central to the work UNCTAD has done since its founding in 1964, and are a hallmark of our contribution to the multilateral system and the developing world.
As a Latin American economist, this is a subject I have followed all my life, a quest for which I have always relied on UNCTAD’s quality research. It is thus a double honor to host all of you today.
Dear friends,
I must share a word of thanks to our co-organizers of this event, the Government of Barbados, as well as to our official partners, with whom none of this could have been possible: The Common Fund for Commodities; The Global Gas Center; The Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF); The UN Food and Agriculture Organization; The Commonwealth; and The Organization of African, Caribbean and Pacific States (OACPS).
Launched in 2010, the Global Commodities Forum provides a high-level, neutral multi-stakeholder platform to discuss issues related to the production and trade of commodities, with a focus on developing countries.
The GCF was created to represent an all-embracing approach to resolving issues of common global concern. The aim is to forge a consensus around ways of dealing with a gamut of commodity-related problems and their effects on commodity-dependent developing countries. This forum is a place where developing countries can debate among equals about issues of particular interest to them.
The issue of commodity dependence has always attracted interest in view of the importance of commodities trade for developing countries, and the opportunities and challenges associated with it. The nominal value of world commodity exports increased 20% by 2019 compared with 2009, according to UNCTAD’s State of Commodity Dependence 2021 report released on 8 September. This can be seen as good news; however, dependence on commodities has also increased globally over the last decade affecting 101 countries and increase of 93 in 2009.
Commodity dependence is associated with challenges such as slow long-term growth, an undiversified economic structure, income volatility and macroeconomic instability, the Dutch disease, political instability and poor governance, illicit financial flows, as well as high exposure to shocks, including those resulting from climate change and pandemics such as the coronavirus disease of 2019 (COVID-19).
In fact, the correlation between commodity prices and economic growth in developing countries may be as high as 70 per cent, illustrating the strong link between commodity dependence and economic performance
More recently, UNCTAD’s work on commodities has shone light on global issues such as the challenges of climate change mitigation and adaptation for commodity dependent developing countries; and the devastating effect of the COVID-19 pandemic on international trade, including commodities trade
The UNCTAD free market commodity price index for all commodity groups was down by almost 36 per cent a result of economic contraction driven by the pandemic, from January to April 2020. This downward trend reversed and by July 2021 the index doubled its value.
So the other side of this story emerged showing that even though commodity exporters may have benefitted from this price increase, net food-importing countries, particularly the most vulnerable ones, have suffered a 41 per cent increase in food prices, making food security even more challenging
Most particularly hurt have been small island developing states relying on tourism for foreign exchange used to import food from international markets. Indeed, revenues from tourism dwindled, reducing these countries’ ability to meet their food needs.
In my lifetime, I have witnessed many commodity cycles firsthand, and have seen both its rapid upswings and distressing downturns. To be commodity rich is a double-edged sword, on the one hand gives countries the possibility to use it wisely when allows for economic diversification that manage of the volatility and risk it entails and using it in the benefit of the peoples’ well-being but, often it is too heavy to handle, often wielded by powers outside our control.
But the trap of commodity dependence, however, can be and has been escaped. From 1950 to 1954, coffee and bananas accounted for 88% of Costa Rica’s, my home country, total exports; we were then one of the poorest countries in Latin America.
Today, these two commodities represent about 11.5% of our total exports, less than half than our now main export: medical instruments. This change happened in my lifetime, and it is important that we consider it. Challenges are numerous and are different from country to country, but we must never lose the sight of that feasibility. It is not a destiny we need to accept.
For example, a recent report by UNCTAD highlight the potential for harnessing technology and innovation to enable commodity-dependent countries to escape from their dependence trap.
Dear friends,
The theme of the 2021 Forum is "Strengthening resilience in commodity dependent countries".
The topic of resilience is timely given the historic amount of global shocks we have experienced in recent years, which have particularly harmed commodity dependent developing countries. A shock often overlook is what happened to the transport costs.
We know commodities trade could not happen without maritime transport. More than 80% of global trade volumes are seaborne, and ports and shipping are currently confronted with unprecedented challenges due to the Covid-19 pandemic. Ports are congested, waiting times have surged, and freight rates have reached historically high levels.
This weekend, Container freight rates reached another historical record. To move a standard container from Shanghai to Santos today costs 10 148$, six times higher than the average over the previous decade, and more than double its previous peak. The Baltic Dry Index, a key measure of dry commodities transport, reached more than 4000 points end of August, twice the long-term average, higher than any time during the last decade.
But it is not only the high shipping costs that affect commodities trade and prices. Schedule reliability is historically low, and long delays in ports also affect commodities trades and prices.
The medium-term perspectives for shipping costs and options are not encouraging. UNCTAD’s research shows that the shipping cycle, trends in consolidation of the industry, and the expected costs of the decarbonization will all impede that freight rates return to previous levels for quite some time.
UNCTAD is supporting member countries to keep supply chains resilient through our support to trade facilitation, automation, and digitalization. We monitor trends in competition and build up capacities of national competition authorities. We collaborate with international partners in the assessment of the impact of decarbonization measures in shipping. And we strengthen the capacity of ports to remain resilient in times of the pandemic.
In this light, the need for increasing resilience of commodity dependent developing countries cannot be overemphasized. All countries are facing unprecedented challenges that transcend national boundaries. The vital signs of our planet are showing severe strain, with climate change at the forefront. At the same time, millions still lack access to electricity, water supply and good sanitation, mostly in rural areas of the developing world, while the demand for food is projected to increase by 60 per cent as the world population approaches 10 billion by 2050.
I am afraid that these global shocks will most likely continue, forcing us to push more forcefully for resilience and preparedness agenda. In a word, we must not be ‘shocked’ by shocks, any longer.
The forum is organized into four thematic sessions covering crucial dimensions of resilience in commodity dependent countries, and at the end a high-level policy roundtable.
The first session will be dedicated to agriculture, with a focus on food security and the necessary policy actions to attain and/or preserve it. The second session will examine challenges related to access to water in the twenty-first century. The third and fourth sessions will take place tomorrow and will examine issues related to energy commodities and minerals with a focus on energy transition.
The Forum will conclude on Day 3 with a high-level round table discussion on the theme of the Forum.
These panels will bring together experts, policy makers and high-level political and institutional representatives from all regions of the world, from the public and private sectors, as well as from academia and civil society.
We expect these discussions to help provide some answers to the burning questions associated with the issues I have just highlighted and chart the way for UNCTAD’s future work over the next four years. Among the questions of interest we have put forward are the following:
What should net food-importing developing countries do to increase their resilience to international commodity market price shocks?
Many fuel-dependent countries will see their assests stranded as a result of the decarbonation of the global economy. How should these countries prepare for this dramatic change?
Countries dependent on minerals needed to fuel the transition to greener sources of energy such as cobalt, lithium, manganese, copper, nickel, aluminium. And others are expected to experience booming demand for their commodities. How should they respond to ensure that expansion of mining activities does not harm the environment, respects human rights, and generates revenues that will benefit all citizens?
Dear friends,
The COVID-19 crisis has seriously compromised the achievement of Sustainable Development Goals and other long-term development objectives in many emerging countries, pointing to the need of accelerating the transition to a new and reinforced multilateral system, more horizontal, more committed, and more South-focused
There can be no resilience without international cooperation, and that undeniable fact should accompany us in our discussions in the days ahead.
I wish you a fruitful forum, full of interesting debates and valuable lessons and policies. Much hinges on these discussions, which are key stepping-stones towards UNCTAD XV next month, whose theme, “From inequality and vulnerability to prosperity for all”, is today more urgent than ever.
Thank you.
