This is an abridged and edited version of an article by Nirit Ben-Ari of the
UN Department of Public Information published in Africa Recovery bulletin
Vol.16 No.2-3 September 2002. I find it relevant to the ongoing debate.

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One key factor contributing to the worsening poverty situation in African
LDCs, according to UNCTAD's LDC 2002, is commodity dependence.

According to UNCTAD's report released in June, the proportion of people in
29 African LDC living below $2 per day increased from 82 per cent in the
late 1960s to 87.5 per cent in the late 1990s.  For those in extreme poverty
- under $1 per day - the increase was from 55.8 per cent to 64.9 per cent.
The number of Africans living in extreme poverty in these countries rose
dramatically from 89.6 million to 233.5 million over the same period.

UNCTAD measures poverty using a different approach to that of the World
Bank.  Instead of using household survey data exclusively (WB and other
agencies), UNCTAD also uses national accounts data which the agency believes
to be more accurate in especially poor countries where household surveys
often under represent the poorest sectors of the population. This leads to
underestimation of overall poverty levels.

The report links weak economic performance and increasing poverty in African
LDCs to their economies' high dependence on exports of raw materials.  Most
African LDCs depend on a small number of low value-added commodities such as
minerals or agricultural products.  This makes them highly vulnerable to
fluctuations in the international market, especially with the erosion of
primary commodity prices in recent years.

Commodity dependency hinders economic growth and worsens poverty in LDCs.
These countries are connected to the global economy in a complex web of
dependent trade and financial ties with the developed countries.
Globalization, argues the report, tightens rather than loosens an
"international poverty trap."

How is the trap created?  Narrow, static, low-value commodity dependence
causes slow export growth.  That leads to unsustainable external debt, and
even greater reliance on aid.  Consequently, state capacities weaken,
contributing to political instability and conflict.  This worsens poverty,
weakens corporate capacities and scares off investors, leaving the country
even more reliant on commodity exports.

In an effort to lessen such dependence, a number of LDCs have turned to
tourism as a main foreign exchange earner.  However this strategy, the
report points out, is without pitfalls - the desired benefits of a thriving
tourism industry are usually undermined by financial "leakage."  This occurs
through the repatriation of profits to the investor's country of origin,
remittances sent abroad by foreign workers, and the import of goods and
services necessary for the industry.  Without strong links with the local
population, tourism typically contributes little to poverty reduction.

The report urges LDCs to consider more restrictive international trade
policies, rather than the sweeping kind advocated by the IMF and donors.
Studies have shown that so far trade liberalization has not been closely
associated with poverty reduction.

The evidence that trade liberalization has had negative consequences is
strong.  The Senegalese tomato industry is a telling example.  In 1990-91,
production of tomato concentrate in Senegal was 73,000 tonnes.  Over the
past seven years, total production has fallen to less than 20,000.  One key
reason, reports UNCTAD, was trade liberalization, as tomato imports – mainly
from subsidized exporters in the European Union – flooded the Senegalese
market.









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