Bureau Recommends: Switzerland’s commodity traders

Switzerland – not just a land of clocks and chocolate, after all.

The Bureau recommends a new book analysing the growth of the commodity industry, and in particular how it has come to be centred in Switzerland.

‘Commodities: Switzerland’s Most Dangerous Business’, produced by the Swiss not-for-profit Berne Declaration, shows how a commodities hub has developed around Geneva and Zug thanks to a mix of tax privileges, a strong financial sector, weak regulation and lax embargo policy.

Trade in oil, gas, coal, metals and agricultural products has grown by an incredible 1,500% in the country since 1998, according to BD investigations.

The result? Seven of the twelve corporations with the highest turnover in Switzerland trade in, and/or mine, commodities.

The book, however, is more than a discussion of the Swiss economy and its financial make-up. This is an insightful and revelatory exploration of the commodity business, its growth and its power.

It explores the growth of the whole industry – not just the extraction of the product, but the trading, the hedging, the shipping and the capital markets that have grown at enormous speed around the industry.

According to estimates there are now between 10 and 15 times more ‘paper barrels’ of oil than physical, or ‘wet barrels’ for example.

The book also examines how the financial market has grown from a means for buyers and sellers of physical commodities which use hedging as a safeguard against price fluctuations, to ‘financial players such as banks and hedge funds who are only interested in profits they can make by speculating on the commodity futures markets.’

It argues that the commodity business is not only dangerous for those who must live and work amid the mines and facilities, but the risk also extends to Switzerland’s economy as corruption, tax avoidance and human rights abuses carry enormous reputational risk.

The book argues that the companies’ dealings are Switzerland’s next potential reputational catastrophe following the global criticism of Swiss bank secrecy.

The book is currently only available in French and German, but an English summary is available here.