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Commodity prices: Investing in decline?

Briefing/policy paper

Briefing/policy paper

Until recently primary product prices were, in real terms, lower than at any time in the twentieth century, with the possible exception of 1932. The weakness of commodity prices in the 1980s has added new fuel to arguments about the long-term prospects for primary products exported by developing countries (LDCs). Instability has increased and in the 1980s the trend has been far worse than forecast, relative to other prices. This paper is about the longer-term and asks whether new investments in primary products are likely to offer reasonable rates of return. The paper argues, in conclusion, that it is in the interests of both the industrial countries and LDCs to reform the present system.