Crisis in the Commodities Market Are the LDCs to Blame?

Patrick Viterbo and Henri‐edme Wallard

Natural Resources Forum, 1984, vol. 8, issue 4, 307-313

Abstract: Many analysts blame the LDCs for the present oversupply crisis in certain commodity markets, and suggest that a reduction in the loans provided by multinational agencies would oblige them to reduce production levels. The underlying assumption is that the producers in LDCs can react like their counterparts in North America to a temporary decline in prices. A detailed comparison between two copper producers, one in the United States and the other in Zambia, leads to a very different conclusion. Unlike its North American counterpart, because of social and technical conditions, the Zambian company would not draw any benefit from a temporary closure. Its policy is, very logically, to maximize output, with the support of a government which wants to keep both employment and foreign exchange earnings high. Although this policy relies on external finance, it is very doubtful that a change in lending policies could impose significant production cuts. Any analysis of the commodity market should take into account the diversity of the producers, and particularly the low flexibility of mines in the LDCs.

Date: 1984
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Persistent link: https://EconPapers.repec.org/RePEc:wly:natres:v:8:y:1984:i:4:p:307-313

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