Economics · Oct / Nov 2018 · Paper 22 · Question 1

Rubber production in Liberia Liberia is a west African country that has faced a number of serious problems in recent years. These have included a civil war and in 2014 the outbreak of the Ebola epidemic. There have also been improvements. The unemployment rate was 85% in 2004 but had fallen to 4% in 2016. This reduction has influenced both emigration and wages. Workers have received higher wages although some economists think that the higher wages have increased the country’s inflation rate which in 2016 was 8%. The country has a good supply of drinking water and a climate favourable to agriculture. More than 70% of the country’s labour force is currently employed in agriculture. The country’s main exports are rubber, iron ore, timber and gold. A US multinational company (MNC) runs the world’s largest single natural rubber farming operation in Liberia. The price of rubber fell by 75% between 2011 and 2016. The global supply of rubber had exceeded demand as a number of countries imposed import restrictions on rubber. In response to the lower price the US MNC cut its production, but still made a loss. The MNC does not want to go out of business and is trying to survive by cutting its costs. In the long run it hopes to maximise profits. When some of its 7000 workers retire, they will not be replaced. The MNC has introduced new production techniques and diversified into growing cocoa and coffee. The Liberian government is providing subsidies to local rubber farmers to help them buy new equipment and introduce new farming methods. Despite the challenging situation, a number of local Liberian rubber farmers are increasing the size of their operations by buying up more land. Some others are diversifying by using wood from the rubber trees to make furniture. While helping its rubber farmers, the Liberian government is also encouraging the expansion of the secondary and tertiary sectors. Between 2014 and 2016 it increased its expenditure on healthcare but this was at the expense of a number of public sector investment projects. Table 1 compares the infant mortality rate and healthcare expenditure per head in selected countries in 2015. Table 1 Infant mortality rate and healthcare expenditure per head in selected countries in 2015 Infant mortality rate Healthcare expenditure Country (deaths per 1000 per head live births) (US$) Cuba 4.5 459 Hungary 5.0 2 096 India 41.5 248 Liberia 67.5 90 Turkey 18.8 1 148 UK 4.4 3 749

Read automatically from the paper; the printed page above is exact.