Shipping costs: a rising challenge to the region's competitive development

This issue of the FAL Bulletin examines the impact of shipping costs on the exports of five Latin American and Caribbean countries by analysing the difference between the unit value of goods at the port of origin and at the port of destination, in three of the region's main external markets.

Recent increases in shipping costs and their impact on exports from Latin America

This issue of the FAL Bulletin is based on a study prepared by ECLAC which works out a provisional approach for estimating the impact of increases in freight rates on exports from Latin America during the last few quarters. The total cost of exports from the region reflects the increases in three different components: the quantities exported, the prices of the goods and the freight charges. The influence of each of these is estimated.The information bases used are comprised of data obtained from the World Trade Organization (WTO), the United Nations Conference on Trade and Development (UNCTAD), the Economic Commission for Latin America and the Caribbean (ECLAC) (International Transport Database) and the authors own direct compilation. The conclusion is that total exports from Latin America varied by US$ 5.72 billion in the first half of 2004 compared with the first half of 2003; of this amount, US$ 2,105,000,000 correspond to the variation in price and quantity and US$ 3,615,000,000 represent the increase in export freight rates. When compared with the first half of 2002, the variation is in excess of US$ 8 billion.

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.

Using ecological thresholds to evaluate the costs and benefits of set-asides in a biodiversity hotspot

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)

Productivity and costs of Beller-Buncher and forest processor in stands of eucalypts in first cut

The rationalization of forest harvesting and minimization costs is a constant search by the managers involved in this process, making them decide practices which are economically viable to optimize that operation. This study aimed to evaluate technically and economically the performance of feller-buncher and the forest processor in stands of eucalypts in first cut. The technique analysis included time and movements, productivity, efficiency operational and mechanical availability. The economic analysis included the parameters operational cost, harvesting cost and energy consumption. Aiming the optimization the cost of forest harvesting, the system composed by feller-buncher and processor forest presented itself as a technically and economically viable alternative to harvesting eucalypt in first cut or stands that do not have bifurcated trees.

Costs and benefits of reproducing under unfavorable conditions: an integrated view of ecological and physiological constraints in a cerrado shrub

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)

Response to comment on "Using ecological thresholds to evaluate the costs and benefits of set-asides in a biodiversity hotspot"

Finney claims that we did not include transaction costs while assessing the economic costs of a set-aside program in Brazil and that accounting for them could potentially render large payments for environmental services (PES) projects unfeasible. We agree with the need for a better understanding of transaction costs but provide evidence that they do not alter the feasibility of the set-aside scheme we proposed.

The impact of physical activity on mitigation of health care costs related to diabetes mellitus: findings from developed and developing settings Diabetes mellitus and physical exercise

Over the last decades, the prevalence of diabetes mellitus (DM) has been increasing globally such that nowadays the disease constitutes an important outcome related to early mortality among adults. In parallel with the high prevalence, healthcare costs related to DM treatment have increased significantly, exacerbating its burden on modern society. The scientific literature points out that obesity and physical inactivity have a central role in the development of most DM cases. In fact, either physical exercise practice or an increase in the level of physical activity, constitute relevant tools in the guidelines for treatment of the disease. On the other hand, the effect of physical activity on the economic consequences of DM is not completely clear. The identification of the actual burden of lifestyle changes on the reduction of healthcare costs related to DM is relevant, primarily for developing nations, where it could represent a cheaper strategy for treating the disease and its complications than paying for drug treatment, which is commonly related to collateral effects. That being said, the prevention of DM and other diseases and consequently the mitigation of the costs related to these outcomes seem to depend essentially on the promotion of healthy habits. The aim of the present review was therefore to discuss recent evidence on the effects of physical activity/exercise on mitigation of health care cost related to DM.

Incorporating Varying Test Costs and Fault Severities into Test Case Prioritization

Test case prioritization techniques schedule test cases for regression testing in an order that increases their ability to meet some performance goal. One performance goal, rate offault detection, measures how quickly faults are detected within the testing process. In previous work we provided a metric, APFD, for measuring rate of fault detection, and techniques for prioritizing test cases to improve APFD, and reported the results of experiments using those techniques. This metric and these techniques, however, applied only in cases in which test costs and fault severity are uniform. In this paper, we present a new metric for assessing the rate of fault detection of prioritized test cases, that incorporates varying test case and fault costs. We present the results of a case study illustrating the application of the metric. This study raises several practical questions that might arise in applying test case prioritization; we discuss how practitioners could go about answering these questions.

Grain Storage Costs and Rental Rates

Trends in Grain Storage - Commercial grain storage eliminates the need to monitor grain conditions and, hence, offers the peace of mind that unsold grain will remain in condition. There may be a cost trade-off between this reduced storage risk and the cost of on-farm storage.

Costs and benefits of freezing behaviour in the harvestman Eumesosoma roeweri (Arachnida, Opiliones)

Animals present an enormous variety of behavioural defensive mechanisms, which increase their survival, but often at a cost. Several animal taxa reduce their chances of being detected and/or recognized as prey items by freezing (remaining completely motionless) in the presence of a predator. We studied costs and benefits of freezing in immature Eumesosoma roeweri (Opiliones, Sclerosomatidae). Preliminary observations showed that these individuals often freeze in the presence of the syntopic predatory spider Schizocosa ocreata (Araneae, Lycosidae). We verified that harvestmen paired with predators spent more time freezing than when alone or when paired with a conspecific. Then. we determined that predator chemical cues alone did not elicit freezing behaviour. Next, we examined predator behaviour towards moving/non-moving prey and found that spiders attacked moving prey significantly more, suggesting an advantage of freezing in the presence of a predator. Finally, as measure of the foraging costs of freezing, we found that individuals paired with a predator for 2 h gained significantly less weight than individuals paired with a conspecific or left alone. Taken together, our results suggest that freezing may protect E. roeweri harvestmen from predatory attacks by wolf spiders, but at the cost of reduced food and/or water intake. (C) 2009 Elsevier B.V. All rights reserved.

Treatment-resistant depression increases health costs and resource utilization

Objective: Major Depressive Disorder (MDD) is a debilitating condition with a marked social impact. The impact of MDD and Treatment-Resistant Depression (TRD+) within the Brazilian health system is largely unknown. The goal of this study was to compare resource utilization and costs of care for treatment-resistant MDD relative to non-treatment-resistant depression (TRD-). Methods: We retrospectively analyzed the records of 212 patients who had been diagnosed with MDD according to the ICD-10 criteria. Specific criteria were used to identify patients with TRD+. Resource utilization was estimated, and the consumption of medication was annualized. We obtained information on medical visits, procedures, hospitalizations, emergency department visits and medication use related or not to MDD. Results: The sample consisted of 90 TRD+ and 122 TRD-patients. TRD+ patients used significantly more resources from the psychiatric service, but not from non-psychiatric clinics, compared to TRD-patients. Furthermore, TRD+ patients were significantly more likely to require hospitalizations. Overall, TRD+ patients imposed significantly higher (81.5%) annual costs compared to TRD-patients (R$ 5,520.85; US$ 3,075.34 vs. R$ 3,042.14; US$ 1,694.60). These findings demonstrate the burden of MDD, and especially of TRD+ patients, to the tertiary public health system. Our study should raise awareness of the impact of TRD+ and should be considered by policy makers when implementing public mental health initiatives.

Arbitrage-Free Conditions and Hedging Strategies for Markets with Penalty Costs on Short Positions

We consider a discrete-time financial model in a general sample space with penalty costs on short positions. We consider a friction market closely related to the standard one except that withdrawals from the portfolio value proportional to short positions are made. We provide necessary and sufficient conditions for the nonexistence of arbitrages in this situation and for a self-financing strategy to replicate a contingent claim. For the finite-sample space case, this result leads to an explicit and constructive procedure for obtaining perfect hedging strategies.

Paternal Care Decreases Foraging Activity and Body Condition, but Does Not Impose Survival Costs to Caring Males in a Neotropical Arachnid

Exclusive paternal care is the rarest form of parental investment in nature and theory predicts that the maintenance of this behavior depends on the balance between costs and benefits to males. Our goal was to assess costs of paternal care in the harvestman Iporangaia pustulosa, for which the benefits of this behavior in terms of egg survival have already been demonstrated. We evaluated energetic costs and mortality risks associated to paternal egg-guarding in the field. We quantified foraging activity of males and estimated how their body condition is influenced by the duration of the caring period. Additionally, we conducted a one-year capture-mark-recapture study and estimated apparent survival probabilities of caring and non-caring males to assess potential survival costs of paternal care. Our results indicate that caring males forage less frequently than non-caring individuals (males and females) and that their body condition deteriorates over the course of the caring period. Thus, males willing to guard eggs may provide to females a fitness-enhancing gift of cost-free care of their offspring. Caring males, however, did not show lower survival probabilities when compared to both non-caring males and females. Reduction in mortality risks as a result of remaining stationary, combined with the benefits of improving egg survival, may have played an important and previously unsuspected role favoring the evolution of paternal care. Moreover, males exhibiting paternal care could also provide an honest signal of their quality as offspring defenders, and thus female preference for caring males could be responsible for maintaining the trait.