High prices not all bad
The hardship of high food and fuel prices for the world’s most impoverished people has garnered much attention, but economists say the commodities boom is probably helping more poor people than it hurts because developing countries are the primary source of raw materials. Most Middle Eastern nations as well as countries such as Brazil, Argentina, Chile, Venezuela, Botswana, Zambia and Congo are major beneficiaries of the sixfold increase in oil prices since 2002 as well as record high prices for corn, rice, wheat, soybeans, copper, gold, diamonds and other basic goods the world needs for sustenance and growth.
While high costs are a burden on millions of people in the developing world - primarily the urban poor not engaged in farming or mining - the world’s richer countries are paying the biggest price because they are dependent on developing nations for the raw materials they need to fuel their economies.
¿High commodity prices are a problem for the industrial countries - almost all of which are commodity importers, but a boon to the emerging economies, many of which are net exporters of commodities,¿ said David Wyss, chief economist at Standard & Poor’s Corp.
The hundreds of billions more dollars each year that consumers in the United States, Europe and Japan pay for fuel and other raw materials amounts to a massive transfer of income to the developing world, where the money is fueling rapid growth, raising living standards and feeding the emergence of a middle class.
¿Latin America and the OPEC countries are the greatest beneficiaries, but sub-Saharan Africa is also a winner, averaging 5.4 percent real growth over the past five years, perhaps the best performance in history,¿ Mr. Wyss said.
Africa holds many of the crucial minerals - copper, nickel, aluminum, uranium - that fast-rising Asian economies like China and India needed to fuel their rapid development. China has cultivated close ties with African nations like Sudan and Angola to ensure it has the raw materials it needs - giving a shot in the arm to some of the weakest economies on the continent.
¿The strong revenues are even helping the countries where government policies are poor, since a rising tide can lift even a poorly sailed boat,¿ Mr. Wyss said.
Brazil’s star rising
Perhaps the most notable rising star among developing countries getting a lift from the commodities boom is Brazil, the Latin American giant whose exports of everything from beef to oranges have turned it into an economic force to contend with this decade. The surge in food prices after years of stagnation has been especially kind to Brazil, which at the turn of the decade was a debt-ridden ward of the International Monetary Fund.
Brazil’s economy expanded by 5.4 percent in 2007 - the fastest rate in three years - and its exports have tripled since 2003 amid booming global demand for steel, iron-ore, soybeans, orange juice and sugar. With a recent major discovery of oil off the coast of Rio de Janiero, some analysts think Brazil may soon become a major exporter of oil as well.
Brazil’s record commodity exports have bolstered its revenues and reserves to the point that it shed its external debts and became a net creditor to the world in January, prompting Wall Street ratings agencies to raise the nation’s credit rating above junk status - a fitting symbol for the country’s meteoric rise.
The growing incomes and rising opportunities for people in Brazil and other commodity-rich countries have raised living standards and enabled consumers to purchase more from abroad, causing imports of all kinds to leap by 172 percent to $6 trillion in those nations between 2000 and 2007, said Joseph P. Quinlan, chief market strategist at Bank of America Corp.
“The penchant to consume is gaining traction globally, most notably in developing nations,” he said. “Going to the mall on Saturday afternoon is just as popular in Bangkok and Sao Paulo as it is in Boston and San Antonio.”
Nowhere is the conspicuous consumption of newfound commodity wealth more visible than in the Middle East, where billions of petrodollars pouring in from the developed world are fueling the biggest building boom and economic expansion ever seen in that region.