Falling Commodity Prices: Perspectives from Mexico, Guinea, and Beyond

The dramatic fall in the value of oil and other commodities over the past six months has impacted both governments and communities in resource-rich countries, and has sent many searching for lessons learned during previous periods of price crashes.

With the aim of surfacing and discussing some of these lessons, the Natural Resource Governance Institute (NRGI) and the Global Policy Academy at the Central European University School of Public Policy (SPP) organized a panel discussion on April 13: “Falling Commodity Prices, Rising Tensions: Have Countries Learned From the Past to Navigate the Future?” CEU President and Rector John Shattuck introduced the four-person panel: SPP Distinguished Visiting Professor and Professor of Economics and Director of the Centre for the Study of African Economies at Oxford University, Sir Paul Collier; Daniel Kaufmann, NRGI president; Juan Roberto Lozano Maya, a researcher at Tokyo-based Asia Pacific Energy Research Centre (APERC); and Zeinab Camara, founder and president of Women in Mining Guinea.

Kaufmann opened the panel, noting that although there have been some exceptions, “governance, on balance, has not improved in resource-rich countries.” Collier echoed this sentiment, going on to say that he had spent a lot of energy during the last ten years trying to figure out why the commodity boom of the 1980s had been “a missed opportunity.” Although there have been changes since the last commodity boom, “I have to conclude that to a considerable extent, it [the most recent commodity boom] has been another missed opportunity,” Collier observed.

Collier said that there was now much greater international awareness of resource governance challenges than in the past, and a lot more transparency as well. Governments were also savvier in their negotiations with companies. “Where things went badly wrong,” said Collier, “was in how governments used the money.” He noted that in most cases, governments had borrowed for consumption, and not for productive investment. He faulted governments also for a failure to communicate to citizens. “The core message should have been around stewardship. Instead of building children’s futures, governments saddled future generations with debt,” he said.

Panelists Juan Roberto Lozano Maya and Zeinab Camara added country-specific perspectives to these comments. In his remarks, Lozano Maya observed, “the times are changing” in Mexico. For many years, he said, Mexico had “sipped” at the Cantarell oil and gas field and “neglected many social priorities.” Although Mexico has recently enacted significant energy reforms, “the benefits to citizens are still very unclear.” He said that rules and institutions were not enough; “we need transparency and accountability.” Lozano Maya noted, “The lack of a free press is also an issue.”

Camara focused her remarks on Guinea, a country that has been dealing with natural resource governance issues since it gained independence in 1958. She said that there was enormous potential in Guinea now because of the election of a new government in 2010, but that the people had not yet benefited. Camara described the impact that the price volatility in the commodity sector has had on local governments and communities. She credited the government of Guinea with having made “a lot of progress in increasing governance of the mining sector.” Camara noted also that the government was slow to implement some measures and was not doing enough to educate the citizenry. She furthermore decried the lack of a vision for the mining sector: “What I want to see is a strategy,” she said.

There was general agreement among the panelists that although there have been important changes in some areas, such as greater transparency, there is still a lot that governments in resource-rich countries could and should have done to improve governance. The recent fall in commodity prices offers these governments a second chance to learn lessons that may have been forgotten since the last crash.

Susanne Lane and Dorothy Lineer are communications staff members at the CEU School of Public Policy.

This post is a modified version of one which originally appeared on the CEU SPP website.