South losing up to 67% of commodity export earnings: UNCTAD report

UNCTAD XIV did not receive the media attention it deserved.  One of the most interesting reports launched there carried the startling news that  developing countries are losing up to 67% of their commodity export earnings due to misinvoicing of the true value of their exports.  The losses come up to hundreds of billions of dollars.

Trade misinvoicing takes place when a company deliberately increases the prices of goods it imports or reduces the prices of its exports in order to report lower earnings and profits and thus reduce or escape taxes.

It is thought to be one of the largest drivers of illicit financial flows from developing countries, so that the countries lose precious foreign exchange earnings, tax, and income that might otherwise be spent on development, according to UNCTAD.

Released during UNCTAD’s Global Commodities Forum, the study uses data from up to two decades covering exports of commodities such as cocoa, copper, gold, and oil from Chile, Côte d’Ivoire, Nigeria, South Africa, and Zambia.

Findings of the report include:

• Between 2000 and 2014, underinvoicing of gold exports from South Africa amounted to $78.2 billion, or 67% of total gold exports.
• Between 1996 and 2014, underinvoicing of oil exports from Nigeria to the United States was worth $69.8 billion, or 24.9% of all oil exports to the US.
• Between 1995 and 2014, Zambia recorded $28.9 billion of copper exports to Switzerland, more than half of all its copper exports, but these exports did not show up in Switzerland’s books.
• Between 1990 and 2014, Chile recorded $16.0 billion of copper exports to the Netherlands, but these exports did not show up in the Netherlands’ books.
• Between 1995 and 2014, Côte d’Ivoire recorded $17.2 billion of cocoa exports to the Netherlands, of which $5.0 billion (31.3%) did not show up in the Netherlands’ books.
• Between 2000 and 2014, underinvoicing of iron ore exports from South Africa to China was worth $3 billion.

Reports such as these show the valuable research that UNCTAD has been doing.  The renewed mandate obtained in Nairobi will enable the UNCTAD secretariat to produce more useful reports in the future.