Preliminary Overview of the Economies of Latin America and the Caribbean 2013

Includes bibliography.

The Evolution of Modal Split for Goods Transport in South America

This FAL bulletin analyzes data for commodities traded and transportation used between nine South American countries, during the years 2000, 2006, and 2010.

Maritime reefer trade in South America: a comparison of the west and east coasts

This issue of the FAL Bulletin examines the scale of maritime reefer trade in South America and the developments made in this area since the 1990s. It also looks at the increase in the capacity of liner services and the relationship between conventional and containerized reefer vessels in terms of trade volume, commodities exported and the destinations for exports from South America.

Capital flows to Latin America: recent developments

The external environment has deteriorated sharply as a result of the spiraling financial turmoil, and has led to a weakening in commodity prices and fears of a worldwide recession. Latin America and the Caribbean's fastest expansion in 40 years may be threatened as the global credit crunch makes financing scarce and squeezes demand for the region's commodities. This time around the region is better positioned to weather the crisis than in the past, given improvements in macroeconomic and financial policies as well as a reduced net dependency on external capital inflows. However, Latin American markets are feeling the effects of the crisis through a slowdown in capital inflows, large declines in stock price indexes, significant currency adjustments and an increase in debt spreads. Volatility has soared, with the closely watched Chicago Board Options Exchange Volatility Index moving to an all-time high of 70.33 on October 17, indicating that fear (rather than greed) has been ruling the markets.After reaching record lows in May 2007, emerging markets bond spreads are now above pre-Asian crisis levels. The JPMorgan EMBI+ Latin American composite widened by 146 basis points in the third quarter, with spreads reaching 448 basis points at the end of September. Spreads have widened sharply in recent weeks as foreign investors cut back regional exposure for the safety of U.S. Treasuries. The ongoing lack of liquidity and subsequent liquidation of assets is leading to a collapse in asset prices and a sharp widening in spreads. Daily spreads in October have risen to levels not seen since December 2002, making it much more difficult for governments that need financing to get it. Risk premiums for Latin corporates and sovereigns have risen substantially, but have remained well below U.S. junk (high-yield) bonds. Latin corporates are facing a steep rise in foreign exchange borrowing costs (although less than firms in other emerging markets), which raises concerns that refinancing risks will climb.So far, emerging markets vulnerabilities have been more focused on corporates, as sovereigns have improved public debt dynamics and countries' financing needs are under control. Market performance has been driven by the rapid deterioration of emerging markets bank and corporate market, as well as ongoing losses in emerging markets equities. From January to September 2008, the Morgan Stanley Capital International (MSCI) Latin American Index lost almost 28%, while the Emerging Markets Index lost 37% and the G-7 Index lost 24%. While in 2007 the Latin America component gained 47%, almost nine times as much as the MSCI-G7 index for developed markets, since mid-September 2008 stocks in Latin America have been doing worse than stocks in developed countries, as concerns about access to credit and the adverse impact of sharp falls in commodity prices and in local currencies contribute to increased risk aversion and to outflows of capital. Many governments in the region have used revenue from the commodity boom to pay down debt and build reserves. Now, facing a global financial crisis and the threat of recession in developed countries, the biggest question for Latin America is how long and deep this cyclical downturn will be, and how much it is going to reduce commodity prices. Prices for commodities such as soy, gold, copper and oil, which helped fund the region's boom, have fallen 28% since their July 2 high, according to the RJ/CRB Commodity Price Index. According to Morgan Stanley (in a September 29 report), should prices return to their 10-year average, Latin America's balanced budgets would quickly revert to a deficit of 4.1% of GDP. As risk aversion increases, investors are rapidly pulling out massive amounts of money, creating problems for local markets and banks. There is an ongoing shortage of dollars (as investors liquidate assets in Latin American markets), and as currencies depreciate, inflation concerns increase despite the global slowdown. In Brazil and Mexico, central banks deployed billions of dollars of reserves to stem steep currency declines, as companies in these countries, believing their local currencies would continue to strengthen against the U.S. dollar, took debts in dollars. Some companies also made bets using currency derivatives that have led to losses in the billions of dollars. Dramatic currency swings have caused heavy losses for many companies, from Mexico's cement giant Cemex SAB to the Brazilian conglomerate Grupo Votorantim. Mexico's third-largest retailer, Controladora Comercial Mexicana, declared bankruptcy recently after reporting huge losses related to exchange rate bets. As concerns about corporate exposure to dollar-denominated derivatives increases, yields on bonds issued by many of Brazil's and Mexico's leading companies have started to rise, sharply raising the cost of issuing new debt. Latin American external debt issuance came to a halt in the third quarter of 2008, totaling only US$ 690 million. The cost of obtaining loans for capital expenditures, M&A and debt refinancing is also rising substantially for Latin American corporates amid contagion from the U.S. financial crisis. According to bankers, a protracted trend of shortening tenors and widening spreads has intensified in the past few weeks, indicating that bank lending is quickly following the way of bonds and equity. Finally, money transfers from Latin American migrants are expected to decline for the first time this decade, as a result of economic downturns in the U.S. and Spain, inflation and a weaker dollar. The Mexican Central Bank announced that money transfers from Mexicans living in the U.S. dropped a record 12.2% in August. In 2008, migrants from the region will send some 1.7% less in remittances year-on-year when adjusted for inflation, according to the IADB, compounding the adverse effects of the deepening financial turmoil.

Terms of trade and output fluctuations in Colombia

Includes bibliography.

Capital Flows to Latin America and the Caribbean: Recent Developments

For six years, the global economy has been driven by the U.S. Federal Reserve’s policies of easy money. Liquidity has flowed from developed to developing economies, financing infrastructure and corporate investment and allowing consumers to indulge in credit-fuelled retail spending. Thus the effective ending of the Fed’s third round of asset purchases (QE3) at the end of October represents both a watershed and the beginning of a new stage in the world economy. The end of asset-purchases comes at a challenging time for emerging markets, with China’s economy slowing, the Euro zone struggling to avoid a recession and the Japanese economy already in recession. The unwinding of the U.S. monetary stimulus, while the European Central Bank and the Bank of Japan step up their monetary stimulus, has underpinned an appreciation by the U.S. dollar, in which most commodities are priced. An appreciated dollar makes dollar-denominated commodities more expensive to buyers, thereby creating pressure for sellers to lower their prices. Latin American markets ended the third quarter of 2014 under pressure from a stronger U.S. dollar. In this changing external context, there are many signs that a slowdown in Latin American and Caribbean (LAC) financial markets, particularly debt markets, which have been breaking issuance records for the past six years, may slowdown from now on. Commodity prices – including those of oil, base metals and some goods – are in a prolonged slump. The Bloomberg commodity price index, a benchmark of commodity investments, has fallen to a five-year low as China’s economy slows down, and with it the demand for commodities. Investment into the LAC region has decelerated, in large part because of a deceleration of mining investments. Latin American currencies have suffered depreciations, as current account deficits have widening for a number of countries. And LAC companies, having issued record amounts of foreign currency bonds may now struggle to service their debt. In October, credit-rating agency Moody’s downgraded the bonds of Brazil’s Petrobras to tow notches above speculative grade because of the impact of falling oil prices and the weaker real on its debt. Growth prospects look brighter in 2015 relative to 2014, but a strengthening U.S. dollar, uneven global growth and weakness in commodity prices are skewing the risk toward the downside for the 2015 forecasts across the region. The Institute of International Finance expects the strengthening of the dollar to have a divergent impact across the region, however, depending on trade and financial linkages. The Institute of International Finance, Capital Flows to Emerging Markets, October 2, 2014. A stronger dollar lifts U.S. purchasing power, supporting exports, growth and capital inflows in countries with close trade links to the U.S. economy. However, rising dollar financing costs will increase pressure on countries with weak external positions. Given the effects of falling oil prices and a stronger dollar, some companies in the region, having issued record amounts of foreign currency bonds, may now struggle to service their debts. Prospects of Fed rate hikes resulting in tighter global liquidity amid the rapid rise in the corporate external bond stock has indeed raised concerns over some companies. However, there is still a shortage of bonds at a global level and the region still enjoys good economic policy management for the most part, so LAC debt markets may continue to enjoy momentum despite occasional bursts of high volatility – even if not at the record levels of recent years.

Capital Flows to Latin America and the Caribbean: 2014 Overview

Divergence in macro trends and in monetary policy in advanced economies was a dominant driver of rates and currencies in emerging markets in 2014. Diverging macroeconomic developments were reflected in different monetary policy actions in 2014, with the European Central Bank (ECB) and the Bank of Japan (BOJ) moving in the opposite direction of the U.S. Federal Reserve. The unwinding of the U.S. monetary stimulus, while the ECB and the BOJ step up their monetary stimulus, has underpinned an appreciation by the U.S. dollar, in which most commodities are priced. Latin American markets, which started the year under pressure from fears of the U.S. Federal Reserve tapering off its quantitative easing program and concerns over stability, ended 2014 under pressure from a stronger U.S. dollar. However, there are many signs that a slowdown in LAC financial markets – particularly debt markets, which have been breaking records in debt issuance for the past six years – is under way. The region’s growth prospects look somewhat brighter in 2015 relative to 2014, but a strengthening U.S. dollar, uneven global growth and weakness in commodity prices are skewing the risk toward the downside for the 2015 forecasts across the region.

Estado e desenvolvimento para América Latina: notas para um novo “programa de pesquisa”

O "debate desenvolvimentista" latino-americano não teria nenhuma especificidade, se tivesse se reduzido a uma discussão macro-econômica entre "ortodoxos" neoclássicos ou liberais, e "heterodoxos" keynesianos ou estruturalistas. Na verdade, ele não teria existido se não fosse por causa do Estado, e da discussão sobre a eficácia ou não da intervenção estatal, para acelerar o crescimento econômico, por cima das "leis do mercado". É muito pouco provável que o velho paradigma "líbero-desenvolvimentista" consiga se renovar. Seu "núcleo duro" perdeu vitalidade e não consegue gerar novas perguntas, nem consegue dar conta dos novos problemas latino-americanos, e muito menos ainda, do desenvolvimento asiático e do desafio chinês. Nestes momentos é preciso ter a coragem intelectual de romper com as velhas ideias, para propor novos caminhos teóricos e metodológicos. Com relação à América Latina, o Brasil conquistou um razoável grau de autonomia neste início do século XXI, e já entrou no grupo dos estados e das economias nacionais que fazem parte do "caleidoscópio central" do sistema, onde todos competem com todos, e todas as alianças são possíveis, em função dos objetivos estratégicos do país e da sua proposta de mudança do próprio sistema internacional. Esta nova importância política e econômica deverá crescer nos próximos anos de forma regular, na América do Sul, no Atlântico Sul, e no sul da África, mas o Brasil seguirá sendo um país sem capacidade de projeção global do seu poder militar. "Daqui para frente, a América Latina será cada vez mais hierarquizada e o futuro da América do Sul, em particular, será cada vez mais dependente das escolhas e decisões tomadas pelo Brasil. Em primeiro lugar, este país terá que decidir sobre a sua própria estratégia econômica nacional porque se for pelos "caminhos do mercado" o Brasil se transformará, inevitavelmente, numa economia exportadora de alta intensidade, de petróleo, alimentos e commodities, uma espécie de "periferia de luxo" dos grandes potências compradoras do mundo, como foram no seu devido tempo, a Austrália e Argentina, ou o Canadá, mesmo depois de industrializado. E se isto acontecer, o Brasil estará condenando o resto da América do Sul à sua condição histórica secular, de periferia "primário-exportadora" da economia mundial. Mas o Brasil também pode seguir um caminho novo dentro da América do Sul, combinando indústrias de alto valor agregado, com a produção de alimentos e commodities de alta produtividade, sendo ao mesmo tempo, auto-suficiente do ponto de vista energético.

Uma Análise da Heterogeneidade Intrassetorial no Brasil Na Última Década

O conceito de Heterogeneidade Estrutural (HE) pressupõe duas ideias: (i) nos países nos quais se pode afirmar que sua estrutura econômica é marcada pela HE, há uma significativa disparidade entre os níveis de produtividade do trabalho dos diversos agentes econômicos; (ii) tal disparidade se perpetua no tempo, quando não se acentua. Um olhar sobre o comportamento global da economia aponta para resultados positivos, representados por um crescimento da produtividade média do trabalho associado a uma redução no coeficiente de variação dessa produtividade, particularmente a partir do ano de 2006. Do ponto de vista da estrutura produtiva, isso indica um processo de “convergência para cima” (redução da heterogeneidade estrutural com aumento da produtividade). Uma análise do comportamento setorial indica que esse fato, a despeito dos resultados positivos no presente – que vêm se traduzindo nos ganhos sociais citados – há uma ameaça de vulnerabilidade na sustentação de processo. O crescimento da produtividade média da economia foi alavancado, basicamente, por um expressivo aumento da produtividade da agropecuária. A despeito disso, a produtividade desse setor ainda se situa em apenas cerca de 1/3 da produtividade média da economia, boa parte dessas atividades – entre as quais também se deve incluir a de Extração de petróleo e gás natural, que apresenta fortes perspectivas de crescimento nos próximos anos – são intensivas em recursos naturais, e fica patente a perda de competitividade dos setores industriais mais expostos à concorrência internacional. Assim, há uma sinalização de que a economia pode estar caminhando para uma fragilidade em relação à conjuntura internacional, criando dependência dos preços internacionais de commodities e do mercado financeiro global.

Rising concentration in Asia-Latin American value chains: Can small firms turn the tide?

Dynamic Asia has overtaken the European Union as Latin America and the Caribbean’s second largest export market, after the United States. However, the region’s exports to Asia remain concentrated in few commodities involving a small number of large firms. This book explores the present and future scope for the participation of small and medium-sized enterprises (SMEs) in biregional trade and value chains and the measures that can be taken to make those chains more inclusive and sustainable. SMEs have a low direct presence in the region’s export flows and their participation in the supplier networks of multinational companies is weak. This volume reviews several supplier development programmes (SDPs) adopted in various countries in Asia and Latin America to increase SME linkages with multinational firms. These programmes, many of which are public-private initiatives, aim to boost SME productivity and enhance their participation in value chains.

An assessment of the economic impact of climate change on the Agriculture, Coastal and Human Settlements and Health Sectors in Guyana

This report analyses the agriculture, coastal and human settlements and health sectors in Guyana to assess the potential economic impacts of climate change. The fundamental aim of this report is to assist with the development of strategies to deal with the potential impact of climate change on Guyana. It also has the potential to provide essential input for identifying and preparing policies and strategies to help bring the Caribbean sub-region closer to solving problems associated with climate change and attaining national and regional sustainable development goals. Some of the key anticipated manifestations of climate change for the Caribbean include elevated air and sea-surface temperatures, sea-level rise, possible changes in extreme events and a reduction in freshwater resources. The economic impact of climate change on the three sectors was estimated for the A2 and B2 IPCC scenarios until 2050 (agriculture and health sectors) and 2100 (coastal and human settlements sector). An exploration of various adaptation strategies was also undertaken for each sector using standard evaluation techniques. The study of the impact of climate change on the agriculture sector focused on three leading sub-sectors namely: sugar-cane, rice-paddy and fisheries. In estimating costs, the sugar sub-sector is projected to experience losses under A2 between US$ 144 million (at 4% discount rate) and US$300 million (1% rate); comparative statistics for rice are US$795 million and US$1577 million, respectively; while for fisheries, the results show that losses range from US$15 million (4% rate) and US$34 million (1% rate). In general, under the B2 scenarios, there are gains for sugar up to 2030 under all three discount rates while for rice the performance is somewhat better with gains realized under all three discount rates up to 2040. For fisheries, gains are forecasted under all three rates up to 2050, following marginal losses to 2020. In terms of the benefit-cost analysis conducted on selected adaptation measures under the A2 scenario, there were net benefits for all three commodities under all three discount rates. For the sugar-cane sub-sector these are: drainage and irrigation upgrade, purchase of new machinery for planting and harvesting, developing and replanting climate tolerant sugar-cane. The rice-paddy sub-sector will benefit from adaptive strategies, which include maintenance of drainage and irrigation systems, research and development, as well as education and training. Adaptation in the fisheries sub-sector must include measures such as, mangrove development and restoration and public education. The analysis of the coastal and human settlements sector has shown that based upon exposed assets and population, SLR can be classified as having the potential to create catastrophic conditions in Guyana. The main contributing factor is the concentration of socioeconomic infrastructure along the coastline in vulnerable areas.

The tourism sector and the global economic crisis: development implicatins for the Caribbean

Over the past two years the global economy has experienced substantial economic turmoil, resulting in severe economic contraction. While there has been a recent return to growth, this situation has impacted all economic sectors worldwide. In the highly tourism-dependent region of the Caribbean, the impact of the global economic crisis has been most notable on the tourism sector, which, from the early 1990s, became the key driver of economic growth for the region. The eventual emergence of this sector reflects an economic development history which was previously underpinned by the export of agricultural commodities, and subsequently by the adoption of the import substitution industrialization model as promulgated by Arthur Lewis. This was further stimulated by spectacular economic contraction in Caribbean economies during the 1980s as a result of changes in the global terms of trade for commodities, generally low levels of competitiveness for manufactured goods, as well as weak institutional and governance frameworks. Ultimately, many economies began to reflect fiscal and balance of payments constraints. By the end of the 1990s, too, evidence of declining competitiveness even in the tourism sector began to become apparent particularly when evaluated under the framework of the Butler Tourism Area Life- Cycle (TALC) model. The recent economic crisis, therefore, provides an opportunity to reflect on the overall approach to economic development in the Caribbean, and to assess the implications of the region’s response to the crisis. This analysis makes the case for the future development of the sector to be based on two broad strategies. The first is to deepen the integration of the tourism sector into the broader economy through the diversification of the regional tourism product, as well as the enhancement of linkages with other sectors, while the second is to expand the tourism sector into a total service economy through the introduction of new services. Considering linkages, the development of clusters and value chains to support the tourism sector is identified with respect to agriculture and food, handicraft, and furnishings. Among the new services identified are education, wellness, yachting and boating, financial services, and information and communications technologies (ICT). This overall strategy is deemed to be better suited to the macroeconomic realities of the Caribbean, where high labour costs and other structural rigidities require a high-valued specialty tourism product in order to sustain the sector’s global competitiveness.

Adiós al viento de cola: se abre un nuevo ciclo de ajuste estructural

En este documento se analiza la problemática del desarrollo basado en industrias de commodities. Al respecto se postula que los enfoques tradicionales no son suficientes para entender las especificidades de estos procesos y sugiere que un marco conceptual adecuado debería tomar en cuenta la evolución simultánea de tres esferas distintas de la sociedad: la organización industrial del sector productivo; la estructura y comportamiento del aparato regulatorio y la organización social de las comunidades en las que se lleva a cabo la explotación de los recursos.

The Evolution of Modal Split in Freight Transport in South America, 2000-2013

This FAL Bulletin analyzes data on commodities traded and the modes of transport used between nine South American countries, during 2000, 2006, 2010 and 2013. The aim is to identify the current modal split in intraregional freight transport in South America, and to ascertain the level and evolution of trade flows, imbalances and the burden of transport and insurance costs. The authors conclude with some policy recommendations.

Hacia una nueva gobernanza de los recursos naturales en América Latina y el Caribe

El desafío del desarrollo en América Latina y el Caribe es trascendental, por las diferentes dimensiones que lo componen, sus objetivos e instrumentos y los obstáculos que lo condicionan. En esa línea, este libro constituye una contribución al debate sobre el desarrollo, en particular sobre uno de sus retos más grandes, la gobernanza de los recursos naturales. En el caso de los recursos naturales no renovables, el desafío de la gobernanza es aún mayor, debido a su propia naturaleza de recursos agotables, que exige un tratamiento en extremo cuidadoso, que atienda a los criterios más apreciados del desarrollo sostenible y que considere las necesidades de las generaciones futuras como un componente esencial de las decisiones. La gobernanza vigente de los recursos naturales no ha logrado llevar a la región a un proceso virtuoso para el aprovechamiento sostenible de esa riqueza. Como se sostiene a lo largo del libro, la región requiere una nueva gobernanza de los recursos naturales que asegure que los beneficios de su explotación sean sostenibles, que haga un aporte concreto al desarrollo pleno y que contribuya a disminuir las desigualdades existentes.