Geneva, 27 April 2007 - Rapidly climbing trade between developing countries in recent years is often termed a positive trend that will lead to poverty reduction and economic growth. . . but it is sometimes worth looking behind the numbers to see where the relative benefits fall.
Cashew nuts may either be termed a happy tale of increasing South-South trade -- as it is called --or as a cautionary lesson about the frequent inability of African countries to diversify their economies so that raw materials can be processed into more finished products, which is often where higher profits are made.(see figure 1)
Cashew production, while small in quantity -- an average of 2.2 million tons per year worldwide, as compared with 67.8 million for bananas -- features great differences in value added. The shell of the nut contains a highly caustic resin that is used, among other things, for aeronautical materials. The resin makes shell removal an exacting and sensitive process. African countries account for 36% of world production of raw cashew nuts, but because of the difficulty of the shell-removal operation, export 75% of the nuts in raw form, mostly to India. The value of such nuts as imported to India is about US$900 per ton. But the export value after processing averages $5,300 per ton. African countries that do not carry out processing hence miss the chance to reach highly profitable economic sectors such as the aeronautics market.
Mozambique used to be the leading producing and exporting country with more than a third of the world market between 1961 and the middle of the 1970s. In 1975, the government decided to wholly ban unshelled cashew nut exports to stimulate local processing. At the end of the 1980s and in the beginning of the 1990s, on the advice of the Work Bank and despite the hostility of newly privatized companies, Mozambican authorities decided to eliminate obstacles to exports of unprocessed cashew nuts. Contrary to what was expected, this policy mainly benefited traders and intermediaries rather than small farmers. Moreover, the domestic processing facilities were unable to compete with overseas producers of shelled nuts and eventually closed, causing widespread unemployment.
Figure 1. Share of African countries in India cashew nuts imports
Source: Infocomm computed from Comtrade Statistics