Higher commodity prices seen dragging investments

Commodity price hikes in recent months, especially for agricultural, mineral and energy goods, is generating uncertainty and stands in the way of investment and the sustained accumulation of technological and productive capacity in Latin American and Caribbean countries.

That is the view of the executive secretary of the Economic Commission for Latin America, Alicia Bárcena. She was speaking during a two-day visit to Buenos Aires, Argentina, which ended Friday.

Ms. Bárcena was the main speaker at the second day of the G-20 workshop on commodities. She said that commodity price volatility is a challenge to economic policy creativity in the region. She highlighted the fact that the exact implications of this phenomenon for each country depend on whether they are net exporters or importers of such products.

Food price indices as estimated by several organizations, including the U.N. Food and Agricultural Organization, climbed by around 30 percent between June and December 2010, before reaching a record high in January. Increases in wheat and maize prices (94 percent and 64 percent between June and December 2010) had a strong impact on Latin American and Caribbean economies, she said. Meanwhile, mineral and energy prices have soared even more quickly.

According to Ms. Bárcena “Price rises tend to increase inflationary pressure, reduce food consumption among the poorest groups in society and generate unsustainable imbalances in countries’ current accounts”. She recommended policies to mitigate the impact of commodity price rises and volatility in at least three economic areas: trade, production and macroeconomics.

In the area of trade, she said international coordination should be promoted with a view to avoiding food shortages in importing countries and halting instability in exporters and importers alike. In terms of production, she advised increasing crop production and reducing vulnerability in consumer demand.

As for macroeconomics, she suggested measures to preserve industrial competitiveness and promote employment, while also controlling inflation and price volatility.

This entry was posted in World News. Bookmark the permalink.