1. Primary Product Dependency

3. Price fluctuations
Long term planning is difficult
Natural disasters
Protectionism by developed countries
Prebisch-Singer hypothesis
Dutch Disease

4. Angola: 97% oil
Ghana: 39% gold, 26% oil, 17% cocoa
Kenya: 19% tea, 12% horticulture
Nigeria: 90% oil
Senegal: 11% fish, 11% phosphate
Tanzania: 37% gold
Uganda: 18% coffee
Zambia: 84% copper

5. Prebisch-Singer hypothesis
The theory:
YED for commodities is lower than YED for finished goods.

6. Different YEDs

7. Therefore, as incomes rise the demand for manufactured goods rises more quickly than the demand for commodities.

8. This worsens the terms of trade of developing countries.
D’y’all rememba terms o’ trade?

9. Terms of Trade
The ratio of export prices to import prices.

11. Evaluating Prebisch Singer
There is some truth in it and there is a danger in relying on one commodity, especially if your primary commodity is food.

12. However…..
Some developing economies sell commodities which are clearly luxury goods.

13. Many primary products (even ones that are not obviously luxury goods) have experienced a boom in demand and price – BRIC demand.

14. Even if you do rely on an income inelastic commodity (bananas, rice) rising global population will result in greater demand anyway, irrespective of the good’s YED.