ABSTRACT
This chapter explains the behavior of commodity prices, including the "super-cycle" and the implications for public sector revenues. It considers the evidence regarding institutional strength in the region and attempts to gauge the gaps in the quality of institutions relative to best practices. The chapter also considers the challenges for natural resource tax systems in Latin America in an era of lower prices and a possible reconfiguration of investment flows. Commodities are traded on forward-looking markets, focusing liquidity on specific, standardized contracts which then aggregate information regarding current and future supply, demand and other relevant conditions. Some suggest the advent and growth of dedicated commodity investment funds and the idea that commodities formed a new "asset class" played a critical role. Non-renewable natural resource economics is a large area with many different streams of literature reflecting the underlying economic issues involved.
