ABSTRACT
In the previous chapters, we touched on the importance of the production and export of commodities in Latin America. The first purpose of this chapter is to explain in more detail why commodities have been an important factor in the economic development of the region. Second, commodities are going to be an important part of the future of the region, so an understanding of this part of the economy is important for an overall understanding of the history of the region and its future. In some regards, commodities are just another product to be analyzed using the familiar tools of supply and demand. However, commodities have their own peculiarities. Supply and demand still works, just somewhat differently in commodities markets. Third, if commodities are a significant percentage of total exports and gross domestic product (GDP), then changes in commodities markets can have ramifications for the entire economy. Since this is true for many of the economies of the region, we will introduce some of these issues. 1 Further, countries have policy choices concerning economic development. For a country that possesses commodities, there may be noticeable differences in economic development policy. Finally, commodities potentially can distort the entire structure of an economy. This can happen even in a high-income country. For the middle-income countries of Latin America, commodities can be like dynamite: useful if handled with care but potentially dangerous. The brief history of commodities in Latin America in the next section begins to illustrate both the costs and the benefits of commodities for a country or region.
