Can commodity-based associations promote the economic development of their member states?

The answer to the above question is, in principle, yes. But the association has to be large enough to wield an effective market control over supply and protect prices from falling which is, after all, its primary objective. And the revenues from the export of these commodities must be channeled into productive development investment and income-generating objectives. As an example, I may refer to the case of my country, Venezuela, one of the founders in the early 1960s of the Organization of Petroleum Exporting Countries (OPEC). Since oil resources are concentrated in only a few countries, most of which are also members of OPEC, the Organization has had some very effective control over supply through the use of mutually-agreed export quotas and, therefore, an important influence over prices. However, there have been times, such as recently, when market forces in favour of a reduction of prices have been too overwhelming for OPEC to contend with effectively.

In addition, the oil business in most of these countries, including Venezuela, is basically in the hands of the State and the revenues from oil exports have been destined to be used to pay for investments and public services that respond to the requirements of national development. I say "destined" because, to be honest, we must recognize that in practice this has not always been fully the case; there has been a lot mis-management, a lot of waste and even, in some cases, painful misappropriation. But there has always been in the national conscience of these countries a sense of purpose that revenues from a precious perishable commodity should be used to benefit the economic and social development needs of the whole population, particularly of the most needy among them.

Notwithstanding the successful case of OPEC, it must be underscored that what has worked with oil may not necessarily work with other commodities. It will be hard, for example, to create a powerful international association of corn or rice producers, since corn and rice are produced in many countries of the world. It can also be argued, besides, that such associations may only benefit the people who control the agricultural business in developing countries, which are usually the few biggest and richest farmers. The case of iron is another interesting example: an international association was formed - the Association of Iron Ore Exporting Countries, or APEF - of which I had the honour to be Secretary-General for several years, which functioned and fulfilled its mission quite effectively for most of the 1970s and 1980s, but which was later, at the decision of its own members, dissolved itself.

So, not everything will be right all of the time, and it will require careful economic and political analysis on the part of interested countries.

For most commodities, it could be preferable for developing countries to explore the possibility of first promoting the creation of national associations of producers or agricultural cooperatives with the participation of small farmers. These organizations could later join forces with associations of other countries to form bigger groups of producers. Although this may not allow them to have a big influence on world prices, it will permit them to better approach foreign markets and better negotiate with new clients.

Another important point is that price support alone is not enough anymore. The product has still to be sold and the competition is rude in the open world market economy. What counts now is getting as close as possible to the final consumer, with ready-to-use products that have greater value added and leave bigger price/cost margins. Let me turn again to the example of Venezuela to illustrate this. Venezuela is selling less and less crude oil. It is gearing its production and marketing of mostly refined products, like gasoline and fuel oil, directly to the final consumer, such as the New York City commuter. To do that, our national company - PDVSA - has had to become a fully integrated "holding", controlling the production and marketing processes both at home and abroad. It has become one of the three largest oil companies in the world! Venezuela needed to do that, with or without OPEC, to fully use its most important commodity as an effective tool for economic development.

Finally, we should add that another way in which developing countries can find support in commodity-based associations to further their economic development objectives is to join with like-minded countries in linking the activities of their associations to the interests and goals that they may be trying to achieve in other multilateral fora such as the United Nations. A very good example of this are the "Declaration and Programme of Action on the Establishment of a New International Economic Order" and the "Charter of Economic Rights and Duties of States", which were adopted by the United Nations General Assembly in 1974 at the suggestion and strong lobbying of OPEC countries (as part of the Group of 77). Similarly, oil-producing countries were instrumental in the convening of the famous "North-South dialogue", held in Paris in 1976-1977, and in several exercises of a similar nature held over the course of the following years. Even though many of these initiatives fell far short of achieving the intended objective, and the fact that the times and issues have changed significantly in the last quarter century, it still remains a political fact that when countries join forces for a common purpose, and have something substantial to provide them with the needed negotiating power; important achievements can be attained.