Natural Wealth: Blessing or Curse?

Natural resource-richness is basically a blessing, as stocks of natural wealth are among the factors of production which help determine the output per worker of a country. But it may become a curse, depending on the quality of governance and on the policies adopted to cope with macroeconomic challenges that accompany it. Natural wealth as a blessing supposes that the use of non-renewable resources must correspond to some extent to its transformation into the other types of assets. Such transformation passes by production diversification over time. Natural wealth must crowd-in other activities rather than crowd them out. Blessing supposes governance features that avoid rent captures for patronage purposes and misallocation of resources, as well as appropriate policies to deal with macroeconomic challenges that come with resource richness, such as Dutch disease effects of booms, temptations to over-borrow, and periodic situations of commodity price busts.

Continue ReadingNatural Wealth: Blessing or Curse?

Are We on the Verge of a New Commodity Super-Cycle?

Some analysts have started to speak of the possibility of a new commodity price ‘super-cycle’ after the downturn since 2011. Although it is always possible to find moments of joint fluctuation, in which commodities remain for a long time above or below their long-term trends, differences among them matter. Copper is King! It is in metals, especially copper, lithium, and rare earth ones, that a strong bullish cycle is most evident.

Continue ReadingAre We on the Verge of a New Commodity Super-Cycle?

O cobre será o novo petróleo, escreve Otaviano Canuto

Os preços de commodities recuperaram suas perdas do ano passado, subindo mais de 25% até aqui em 2021 e, na maioria dos casos, já estão acima dos níveis prévios à pandemia. O pacote fiscal de infraestrutura proposto pelo presidente Biden nos Estados Unidos e a transição energética global para a descarbonização trarão impactos de demanda e preços diferenciados entre commodities. As matérias-primas necessárias para baterias e motores de veículos elétricos –lítio, terras raras– já estão vivendo uma euforia de mercado. O cobre, por suas propriedades de conduzir eletricidade, tende a ser usado 4 ou 5 vezes mais em carros elétricos que em carros movidos a derivados de petróleo. O petróleo, por seu turno, não estará em sintonia com a “recuperação verde”.

Continue ReadingO cobre será o novo petróleo, escreve Otaviano Canuto

Commodity Price Cycles

Commodity prices go through extended periods during which prices are well above or below their long-term price trend. The upswing phase in super cycles results from a lag between unexpected, persistent, and upward trends in commodity demand, matched with a typically slow-moving supply. Eventually, as adequate supply becomes available and demand growth slows, the cycle enters a downswing phase. The latest super-cycle of commodity prices, starting in the mid-90s, reaching a peak by the time of the global financial crisis, and getting to the bottom by 2015, can be seen as associated to the developments of globalization that we have already dealt with in this series. More recently, some analysts have spoken that we might be on the verge of a new cycle, super-cycle or not.

Continue ReadingCommodity Price Cycles
Read more about the article Channels of transmission of coronavirus to developing economies from abroad
Photo by Edwin Hooper on Unsplash

Channels of transmission of coronavirus to developing economies from abroad

In a previous article, we highlighted how developing economies have faced simultaneous shocks from their external environment, as pandemic and recession curves have unfolded abroad. In addition to financial shocks, there have been declines in remittances, tourism receipts, and commodity prices . The combination of these shocks with the hardships related to flattening domestic infection curves has configured what we have called a ‘perfect storm’ for developing countries, brought by COVID-19. Recent World Bank and United Nations World Tourism Organization reports have given us a view of how serious these shocks have been. We assess here the falls in remittances, tourism receipts, and commodity prices, particularly in oil markets (with accompanying video at bottom).

Continue ReadingChannels of transmission of coronavirus to developing economies from abroad

O preço do petróleo vai subir ou vai cair?

Para que rumo seguirá o preço do #Petróleo no mercado internacional? O ataque feito por um #Drone à uma das principais refinarias de petróleo da #ArábiaSaudita deixou clara a vulnerabilidade do setor. Direto de Washington, nos Estados Unidos, Otaviano Canuto analisou a repercussão do atentado.

Continue ReadingO preço do petróleo vai subir ou vai cair?

Natural wealth and economic growth – the case of sub-Saharan Africa

This note approaches the relationship between natural wealth and economic growth, using the case of Sub-Sahara African economies as an illustration. Delving into recent World Bank reports, it highlights how a sustained positive correlation between natural capital and GDP growth happens through the transformation of the former into other forms of assets: produced capital, human capital and other intangible assets. Governance features and the quality of macroeconomic policies are of the essence for such a benign trajectory to take place.

Continue ReadingNatural wealth and economic growth – the case of sub-Saharan Africa
Read more about the article ‘Para onde vão os preços do petróleo?’, questiona Otaviano Canuto
Distribuidoras de combustivel da Petrobras. Gasolina, caminhão tanque, caminhoneiros, paralizacao. Foto: Sérgio Lima/Poder 360

‘Para onde vão os preços do petróleo?’, questiona Otaviano Canuto

  A subida dos preços domésticos de derivados de petróleo, que serviu como estopim para a greve dos caminhoneiros, refletiu o repasse pela Petrobras da evolução internacional de seus preços,…

Continue Reading‘Para onde vão os preços do petróleo?’, questiona Otaviano Canuto
Read more about the article Quão dependentes de commodities são as economias latino-americanas?
People listen to an explanation of the stock chart during the Expo Money in Sao Paulo, Brazil, on September 20, 2012. The Expo Money became the largest event of financial education and investment in Latin America since 2002 and today the annual expo covers 13 Brazilian cities. AFP PHOTO/Yasuyoshi CHIBA (Photo credit should read YASUYOSHI CHIBA/AFP/GettyImages)

Quão dependentes de commodities são as economias latino-americanas?

  O fim da fase de ascensão no super-ciclo de preços de commodities após seu pico em 2011 levou a uma redução nas perspectivas de crescimento econômico na maior parte…

Continue ReadingQuão dependentes de commodities são as economias latino-americanas?