Prevention of Money Laundering and of the Financing of Terrorism to Ensure the Integrity of Financial Markets in Latin America and the Caribbean

This paper reviews the current status of the international fight against money laundering and the financing of terrorism, highlighting the importance of its prevention for economic and financial stability in Latin America and the Caribbean. It synthesizes the recent history of international legislation and agreements with respect to the issues, and presents the framework of public and private sector actors engaged in combating these threats. It reviews Latin American and Caribbean countries’ compliance with the Financial Action Task Force (FATF) (40 + 9) Recommendations, and analyzes the region’s performance with respect to their third round Mutual Evaluation Reports.

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.

The employment situation in Latin America and the Caribbean: Crisis in the labour markets and countercyclical responses

As predicted in the first bulletin, produced jointly by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labour Organization (ILO), the impact of the economic crisis continued to be felt in Latin America and the Caribbean during the second quarter of 2009. Regional exports of goods and services contracted in response to sluggish demand on international markets, while remittances and foreign direct investment flows continued to fall, credit lost its buoyancy and the total wage bill diminished, owing mainly to job losses. As a result, the growth forecasts of many countries had to be adjusted downwards. Since the end of 2008, the countries of the region had started to implement countercyclical policies —albeit with significant differences— in an effort to use public spending to counter flagging investment and consumer-spending levels and boost aggregate demand. In this second bulletin, ECLAC and ILO show how the impact of the crisis has deepened in labour markets in the region in the first half of the year and examine existing options and the outcome of public-infrastructure and emergency employment programmes designed to mitigate the impact of the crisis on the labour market. The unemployment rate has risen in practically all countries compared with the previous year and this situation worsened further in the second quarter, when urban unemployment exceeded the rate of the corresponding period in 2008 by 1 percentage point (to stand at 8.5%, up from 7.5%), while in the first quarter, the variation was 0.6 of a percentage point. Labour indicators also point to an increase in informality, a decline in employment with social protection and a decrease in full-time employment. Labour-market trends observed in the first half-year, together with the forecast for a 1.9% decline in regional GDP in 2009, suggest that the average annual rate of urban unemployment in the region will be close to 8.5%. This forecast is slightly less pessimistic than the estimate given in the first bulletin; this is attributable to the fall in the participation rate in the first half-year to levels that are expected to remain low for the rest of the year. Without this reduction in the labour supply, due largely to the “discouragement effect”, the annual average urban unemployment rate would stand at between 8.8% and 8.9%. Thus, the open urban unemployment figure would increase by 2.5 million and if the “discouraged job-seekers” are included, then the number of additional persons not finding a niche in the urban labour market would climb to 3.2 million. In the region, as in the rest of the world, there are signs that the crisis may have reached bottom in the middle of the year. In many countries, production levels have ceased their decline and there are indications of an incipient recovery leading to cautious optimism that there may be a moderate upturn in labour markets in the fourth quarter. The pace of recovery will vary from one country to the next and is expected to be gradual at best. Even with the return to a growth path, there should be no illusion that the labour problems will immediately disappear. First, the recovery in employment is expected to lag behind the upturn in economic activity. Second, since economic growth is likely to remain moderate in the short term and well below the rates recorded between late 2003 and mid-2008, demand for labour and consequently the generation of good-quality jobs will continue to be weak. Thus, countries should not relax their efforts to defend and create decent jobs, but rather should take steps to improve the effectiveness and efficiency of available instruments. In this way, the region will be in a better position not only to confront the challenges of economic recovery, but also to strengthen the foundations for social inclusion and for advancing under more favourable conditions towards fulfilment of the Millennium Development Goals.

Employment Situation in Latin America and the Caribbean: Universal social protection in labour markets with high levels of informality

The Employment Situation in Latin America and the Caribbean is a twice-yearly report prepared jointly by the Economic Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC) and the Office for the Southern Cone of Latin America of the International Labour Organization (ILO).

Confidence and the Stock Market: An Agent-Based Approach

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Estudo e análise estatística no mercado de ações brasileiro

The objective of this paper is to verify and analyze the existence in Brazil of stylized facts observed in financial time series: volatility clustering, probability distributions with fat tails, the presence of long run memory in absolute return time series, absence of linear return autocorrelation, gain/loss asymmetry, aggregative gaussianity, slow absolute return autocorrelation decay, trading volume/volatility correlation and leverage effect. We analyzed intraday prices for 10 stocks traded at the BM&FBovespa, responsible for 52.1% of the Ibovespa portfolio on Sept. 01, 2009. The data analysis confirms the stylized facts, whose behavior is consistent with what is observed in international markets.

ESSAYS ON INTERNATIONAL RESEARCH AND DEVELOPMENT SPILLOVERS

The dissertation consists of three essays on international research and development spillovers. In the first essay, I investigate the degree to which differences in institutional arrangements among Sub-Saharan African countries determine the extent of benefits they derive from foreign research and development spillovers. In particular, I compare the international research and development spillovers for English common law and French civil law Sub-Saharan African countries. I show that differences in the legal origin of the company law or commercial codes in these countries may reflect the extent of barriers they place in the paths of firms that engage in the investment process. To tests this hypothesis, I constructed foreign R&D spillovers variable using imports as weights and employed the endogenous growth framework to estimate elasticities of productivity with respect to foreign R&D spillovers for a sample of 17 English common law and French Civil law Sub-Saharan African countries over the period 1980-2004. My results find support for the hypothesis. In particular, foreign R&D spillovers were higher in the English common law countries than in the French civil law countries. In the second essay, I examine the question of whether technical cooperation grants and overseas development assistance grants induce R&D knowledge spillovers in Sub-Saharan African countries. I test this hypothesis using data for 11 Sub-Saharan African countries over the period 1980-2004. I constructed foreign R&D spillovers using the technical cooperation grants and overseas development assistance grants as weights and employed the endogenous growth framework to provide quantitative estimates of foreign R&D spillover effects in 11 Sub-Saharan African countries. I find that technical cooperation grants and overseas development assistance grants are major mechanisms through which returns to R&D investments in G7 countries flows to Sub-Saharan African countries. However, their influence has declined over the years. Finally, the third essay tests the hypothesis that the relationship between a country's exporters and their foreign purchasing agents may lead to the exchange of ideas and thereby improve the manufacturing process and productivity in the exporting country. I test this hypothesis using disaggregated export data from OECD countries. The foreign R&D capital stock in this essay was constructed as exports weighted average of domestic R&D capital stock. I find empirical support for the hypothesis. In particular, capital goods exports generate more learning effects and therefore best explain productivity in OECD countries than non-capital goods exports.

Challenges for Brazilian MNCs' international human resources management

Multinationals from emerging countries such as Brazil now take the path of internationalisation where early movers have already been. However, these companies have to develop new tools to deal with their own challenges, since they come from countries with different historical backgrounds and specificities. This paper explores challenges for Brazilian MNCs in terms of HRM when operating abroad. It presents the results of six cases of Brazilian MNCs through a grounded theory study. Results show these companies had to deal with their former economic turbulence, shortage of qualified workforce to work internationally and the need to develop HRM competencies to operate globally.

Bioremediation of PAHs - Limitations and soultions

Introduction 1.1 Occurrence of polycyclic aromatic hydrocarbons (PAH) in the environment Worldwide industrial and agricultural developments have released a large number of natural and synthetic hazardous compounds into the environment due to careless waste disposal, illegal waste dumping and accidental spills. As a result, there are numerous sites in the world that require cleanup of soils and groundwater. Polycyclic aromatic hydrocarbons (PAHs) are one of the major groups of these contaminants (Da Silva et al., 2003). PAHs constitute a diverse class of organic compounds consisting of two or more aromatic rings with various structural configurations (Prabhu and Phale, 2003). Being a derivative of benzene, PAHs are thermodynamically stable. In addition, these chemicals tend to adhere to particle surfaces, such as soils, because of their low water solubility and strong hydrophobicity, and this results in greater persistence under natural conditions. This persistence coupled with their potential carcinogenicity makes PAHs problematic environmental contaminants (Cerniglia, 1992; Sutherland, 1992). PAHs are widely found in high concentrations at many industrial sites, particularly those associated with petroleum, gas production and wood preserving industries (Wilson and Jones, 1993). 1.2 Remediation technologies Conventional techniques used for the remediation of soil polluted with organic contaminants include excavation of the contaminated soil and disposal to a landfill or capping - containment - of the contaminated areas of a site. These methods have some drawbacks. The first method simply moves the contamination elsewhere and may create significant risks in the excavation, handling and transport of hazardous material. Additionally, it is very difficult and increasingly expensive to find new landfill sites for the final disposal of the material. The cap and containment method is only an interim solution since the contamination remains on site, requiring monitoring and maintenance of the isolation barriers long into the future, with all the associated costs and potential liability. A better approach than these traditional methods is to completely destroy the pollutants, if possible, or transform them into harmless substances. Some technologies that have been used are high-temperature incineration and various types of chemical decomposition (for example, base-catalyzed dechlorination, UV oxidation). However, these methods have significant disadvantages, principally their technological complexity, high cost , and the lack of public acceptance. Bioremediation, on the contrast, is a promising option for the complete removal and destruction of contaminants. 1.3 Bioremediation of PAH contaminated soil & groundwater Bioremediation is the use of living organisms, primarily microorganisms, to degrade or detoxify hazardous wastes into harmless substances such as carbon dioxide, water and cell biomass Most PAHs are biodegradable unter natural conditions (Da Silva et al., 2003; Meysami and Baheri, 2003) and bioremediation for cleanup of PAH wastes has been extensively studied at both laboratory and commercial levels- It has been implemented at a number of contaminated sites, including the cleanup of the Exxon Valdez oil spill in Prince William Sound, Alaska in 1989, the Mega Borg spill off the Texas coast in 1990 and the Burgan Oil Field, Kuwait in 1994 (Purwaningsih, 2002). Different strategies for PAH bioremediation, such as in situ , ex situ or on site bioremediation were developed in recent years. In situ bioremediation is a technique that is applied to soil and groundwater at the site without removing the contaminated soil or groundwater, based on the provision of optimum conditions for microbiological contaminant breakdown.. Ex situ bioremediation of PAHs, on the other hand, is a technique applied to soil and groundwater which has been removed from the site via excavation (soil) or pumping (water). Hazardous contaminants are converted in controlled bioreactors into harmless compounds in an efficient manner. 1.4 Bioavailability of PAH in the subsurface Frequently, PAH contamination in the environment is occurs as contaminants that are sorbed onto soilparticles rather than in phase (NAPL, non aqueous phase liquids). It is known that the biodegradation rate of most PAHs sorbed onto soil is far lower than rates measured in solution cultures of microorganisms with pure solid pollutants (Alexander and Scow, 1989; Hamaker, 1972). It is generally believed that only that fraction of PAHs dissolved in the solution can be metabolized by microorganisms in soil. The amount of contaminant that can be readily taken up and degraded by microorganisms is defined as bioavailability (Bosma et al., 1997; Maier, 2000). Two phenomena have been suggested to cause the low bioavailability of PAHs in soil (Danielsson, 2000). The first one is strong adsorption of the contaminants to the soil constituents which then leads to very slow release rates of contaminants to the aqueous phase. Sorption is often well correlated with soil organic matter content (Means, 1980) and significantly reduces biodegradation (Manilal and Alexander, 1991). The second phenomenon is slow mass transfer of pollutants, such as pore diffusion in the soil aggregates or diffusion in the organic matter in the soil. The complex set of these physical, chemical and biological processes is schematically illustrated in Figure 1. As shown in Figure 1, biodegradation processes are taking place in the soil solution while diffusion processes occur in the narrow pores in and between soil aggregates (Danielsson, 2000). Seemingly contradictory studies can be found in the literature that indicate the rate and final extent of metabolism may be either lower or higher for sorbed PAHs by soil than those for pure PAHs (Van Loosdrecht et al., 1990). These contrasting results demonstrate that the bioavailability of organic contaminants sorbed onto soil is far from being well understood. Besides bioavailability, there are several other factors influencing the rate and extent of biodegradation of PAHs in soil including microbial population characteristics, physical and chemical properties of PAHs and environmental factors (temperature, moisture, pH, degree of contamination). Figure 1: Schematic diagram showing possible rate-limiting processes during bioremediation of hydrophobic organic contaminants in a contaminated soil-water system (not to scale) (Danielsson, 2000). 1.5 Increasing the bioavailability of PAH in soil Attempts to improve the biodegradation of PAHs in soil by increasing their bioavailability include the use of surfactants , solvents or solubility enhancers.. However, introduction of synthetic surfactant may result in the addition of one more pollutant. (Wang and Brusseau, 1993).A study conducted by Mulder et al. showed that the introduction of hydropropyl-ß-cyclodextrin (HPCD), a well-known PAH solubility enhancer, significantly increased the solubilization of PAHs although it did not improve the biodegradation rate of PAHs (Mulder et al., 1998), indicating that further research is required in order to develop a feasible and efficient remediation method. Enhancing the extent of PAHs mass transfer from the soil phase to the liquid might prove an efficient and environmentally low-risk alternative way of addressing the problem of slow PAH biodegradation in soil.

International Agricultural Trade under Regulatory Asymmetry: An Economic Analysis of SME Export Behavior

Over the last three decades, international agricultural trade has grown significantly. Technological advances in transportation logistics and storage have created opportunities to ship anything almost anywhere. Bilateral and multilateral trade agreements have also opened new pathways to an increasingly global market place. Yet, international agricultural trade is often constrained by differences in regulatory regimes. The impact of “regulatory asymmetry” is particularly acute for small and medium sized enterprises (SMEs) that lack resources and expertise to successfully operate in markets that have substantially different regulatory structures. As governments seek to encourage the development of SMEs, policy makers often confront the critical question of what ultimately motivates SME export behavior. Specifically, there is considerable interest in understanding how SMEs confront the challenges of regulatory asymmetry. Neoclassical models of the firm generally emphasize expected profit maximization under uncertainty, however these approaches do not adequately explain the entrepreneurial decision under regulatory asymmetry. Behavioral theories of the firm offer a far richer understanding of decision making by taking into account aspirations and adaptive performance in risky environments. This paper develops an analytical framework for decision making of a single agent. Considering risk, uncertainty and opportunity cost, the analysis focuses on the export behavior response of an SME in a situation of regulatory asymmetry. Drawing on the experience of fruit processor in Muzaffarpur, India, who must consider different regulatory environments when shipping fruit treated with sulfur dioxide, the study dissects the firm-level decision using @Risk, a Monte Carlo computational tool.

Gold and the Stock Market: 3 Essays on Gold Investments

This thesis gives an overview of the history of gold per se, of gold as an investment good and offers some institutional details about gold and other precious metal markets. The goal of this study is to investigate the role of gold as a store of value and hedge against negative market movements in turbulent times. I investigate gold’s ability to act as a safe haven during periods of financial stress by employing instrumental variable techniques that allow for time varying conditional covariance. I find broad evidence supporting the view that gold acts as an anchor of stability during market downturns. During periods of high uncertainty and low stock market returns, gold tends to have higher than average excess returns. The effectiveness of gold as a safe haven is enhanced during periods of extreme crises: the largest peaks are observed during the global financial crises of 2007-2009 and, in particular, during the Lehman default (October 2008). A further goal of this thesis is to investigate whether gold provides protection from tail risk. I address the issue of asymmetric precious metal behavior conditioned to stock market performance and provide empirical evidence about the contribution of gold to a portfolio’s systematic skewness and kurtosis. I find that gold has positive coskewness with the market portfolio when the market is skewed to the left. Moreover, gold shows low cokurtosis with the market returns during volatile periods. I therefore show that gold is a desirable investment good to risk averse investors, since it tends to decrease the probability of experiencing extreme bad outcomes, and the magnitude of losses in case such events occur. Gold thus bears very important and under-researched characteristics as an asset class per se, which this thesis contributed to address and unveil.

Twitter data analysis for financial markets

Over the time, Twitter has become a fundamental source of information for news. As a one step forward, researchers have tried to analyse if the tweets contain predictive power. In the past, in financial field, a lot of research has been done to propose a function which takes as input all the tweets for a particular stock or index s, analyse them and predict the stock or index price of s. In this work, we take an alternative approach: using the stock price and tweet information, we investigate following questions. 1. Is there any relation between the amount of tweets being generated and the stocks being exchanged? 2. Is there any relation between the sentiment of the tweets and stock prices? 3. What is the structure of the graph that describes the relationships between users?

Dégradation des forêts et stock de carbone dans la biomasse épigée de la forêt dense humide de Manompana - Nord Est de Madagascar

L’estimation du stock de carbone contenu dans les forêts peut être effectuée de plusieurs manières. Les méthodes les plus connues sont destructives et nécessitent l’abattage d’un grand nombre représentatif d’arbres. Cette représentativité est difficilement atteinte dans les forêts tropicales, présentant une diversité d’espèces exceptionnelles, comme à Madagascar. Afin d’évaluer le niveau de dégradation des forêts, une étude d'images par télédétection est effectuée au moyen de l’analyse du signal radiométrique, combinée à un inventaire non destructif de biomasse. L’étude de la dynamique du paysage proposé est alors basée sur une correction atmosphérique d’une image SPOT 5, de l’année 2009, et sur une classification semi supervisée de l’occupation des sols, combinant une classification préliminaire non supervisée, un échantillonnage aléatoire des classes et une classification supervisée avec un maximum de vraisemblance. La validation est effectuée à l’aide de points indépendants relevés lors des inventaires de biomasse avec des valeurs du stock de carbone bien précises. La classification non supervisée a permis de ressortir deux classes de forêt dénommées « peu dégradée » et « dégradée ». La première désigne l’état climax (le stock de carbone a atteint une valeur qui varie peu) alors que la seconde est caractérisée par un taux de carbone plus faible que le niveau climax, mais qui peut être atteint sans perturbation. Cette première classification permet alors de répartir les placettes d’inventaire dans chaque classe. La méthode d’inventaire recueille à la fois des données dendrométriques classiques (espèce, densité, hauteur totale, hauteur fût, diamètre) et des échantillons représentatifs de branches et de feuilles sur un arbre. Ces différents paramètres avec la densité de bois permettent d’établir une équation allométrique de laquelle est estimée la biomasse totale d’un arbre et conséquemment de la formation forestière. Par la suite, la classification supervisée a été effectuée à partir d’échantillons aléatoires donnant la valeur de séparabilité des classes, de la classification finale. De plus, les valeurs de stocks de carbone à l’hectare, estimées de chaque placette, ont permis de valider cette classification et d’avoir une évaluation de la précision. La connaissance de ce niveau de dégradation issue de données satellitaires à haute résolution spatiale, combinées à des données d’inventaire, ouvre le champ du suivi interannuel du stock de carbone et subséquemment de la modélisation de la situation future du stock de carbone dans différents types de forêts.