Training in the inland freight transportation sector in Latin America

This issue of the FAL Bulletin covers training in the inland freight transportation and logistical operations sector in Latin America and its role in productivity and competitiveness.

Freight rates, the maritime cycle and transport capacity in late 2006

The previous edition of the FAL bulletin presented the price indices of maritime transport in three main market segments. This edition includes an analysis of the maritime cycle and trends in the transport capacity of the routes that in turn serve the routes of Latin America and the Caribbean.

Changes in maritime transport supply and demand

This FAL bulletin reviews changes in water transport supply and demand in three markets: containers, dry bulk and liquid cargo (dirty and clean) over the past several years.

Competitiveness and efficiency in land transport

One of the consequences of the opening of the worlds economies - an integral part of globalization - is increased focus on the efficiency and costs of transport services (on which competitiveness is largely dependent). Countries with inefficient and costly transport services lose out, in terms of economic activity and income, to those with more appropriate transport services. The issue is particularly important in Latin America, where exports mainly consist of bulk consignments of products with comparatively low value/quantity ratios and transport costs are a major determining factor of c.i.f. prices.The determination of competitiveness indices in the long term, however, also needs to include the costs of pollution, congestion and accidents, in addition to the transport costs usually considered as part of the price of freight. Competitiveness, efficiency and the global costs of transport were the main subjects of an international seminar organized in conjunction with the Chilean Institute of Engineers and held on 9 and 10 September 2004 at the Headquarters of the Economic Commission for Latin America and the Caribbean (ECLAC).

Towards diversification of the tourism sector: A recreational demand study of yachting and marina services in the Caribbean

Includes bibliography.

Economic Survey of the Caribbean 2013: Improved economic performance with reduced downside risks

Includes bibliography.

Social mobility and the demand for income redistribution in Latin America

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.

The employment situation in Latin America and the Caribbean: Crisis, stabilization and reactivation: performance of the labour market in 2009

Following a five-year period during which economic and social performance in Latin America and the Caribbean surpassed anything seen in recent decades, the global economic and financial crisis not only hurt macroeconomic variables but also impacted heavily on labour markets in the region’s countries. Between 2003 and 2008 employment rates had risen considerably, especially in the formal sector, but the crisis spelled a reversal of this trend. Nevertheless, the region was better prepared than it had been in previous crises, since it had achieved a sound fiscal footing, a good level of international reserves and low rates of inflation. This meant that the authorities had the space to implement countercyclical policies on both fiscal and monetary levels. Be this as it may, faced with the worst global crisis since the Great Depression of the 1930s, these measures could only attenuate the impact on the region’s economies —they could not prevent it altogether. Furthermore, the crisis struck with notable differences among subregions and countries depending on the nature of their trade integration, and not all the countries had the fiscal space to implement vigorous countercyclical policies. As discussed in this third ECLAC/ILO bulletin, the crisis did less damage to the region’s labour markets than had been feared at the beginning of last year, thanks to the implementation of public policies geared towards employment, as reviewed in the two previous bulletins. This bulletin offers an additional analysis from the perspective of gender equality. Moreover, some countries in the region, notably Brazil, managed to rapidly stabilize and revive economic growth, with positive effects on labour variables. The fact remains, however, that millions in Latin America and the Caribbean lost their jobs or were obliged to accept more poorly paid employment in more precarious conditions. The macroeconomic data indicate that recovery is under way and is stronger and occurring more rapidly than foreseen one year ago. In fact, regional growth in 2010 may well exceed the 4.1% forecast at the end of 2009. Consequently, although the unemployment rate may be expected to record a modest drop, it may not return to pre-crisis levels. The upturn is taking many different forms in the countries of the region. In some, especially in South America, recovery has benefited from the buoyancy of the Asian economies, whose demand for natural resources has driven large increases in exports, in terms of both volume and price. Countries whose economies are closely tied to the United States economy are benefiting from the recovery there, albeit more slowly and with a certain lag. Conversely, some countries are still suffering from major disequilibria, which are hampering their economic reactivation. Lastly, Chile and Haiti were both victims of devastating earthquakes early in the year and are therefore facing additional challenges associated with reconstruction, on top of their efforts to sustain an economic upturn. Despite the relatively favourable outlook for regional growth in 2010, great uncertainty still surrounds the global economy’s recovery, which affects the region’s economic prospects over the longer term. The weakness of the recovery in some regions and the doubts about its sustainability in others, as well as shocks that have occurred in international financial markets, are warning signs which authorities need to monitor continuously because of the region’s close integration with the global economy. In addition, a return to growth does not directly or automatically mean higher employment rates —still less decent working conditions. Although some labour indicators have performed reasonably favourably since the end of last year, the countries still face daunting challenges in improving the labour market integration of millions in Latin America and the Caribbean who are not seeing the fruits of renewed growth. This is why it is important to learn the lessons arising from the policies implemented during the crisis to offset its impact on labour markets. With this third joint bulletin, ECLAC and ILO continue to pursue their objective of affording the region the information and analyses needed to face these challenges, as regards both trends in the region’s labour markets and the corresponding policy options.

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.

An assessment of the economic impact of climate change on the Energy Sector in Trinidad and Tobago

The energy sector is a dominant one in Trinidad and Tobago and it plays an important role in the twin-island republic‟s economy. In 2008, the share of the energy sector in gross domestic product (GDP) amounted to approximately 48% while contributing 57% to total Government revenue. In that same year, the sector‟s share of merchandise exports was 88%, made up mainly of refined oil products including petroleum, liquefied natural gas (LNG), and natural gas liquids (Central Bank of Trinidad and Tobago, 2009). Trinidad and Tobago is the main exporter of oil in the Caribbean region and the main producer of liquefied natural gas in Latin America and the Caribbean. The role of the country‟s energy sector is, therefore, not limited to serving as the engine of growth for the national economy but also includes providing energy security for the small island developing States of the Caribbean. However, with its hydrocarbon-based economy, Trinidad and Tobago is ranked seventh in the world in terms of carbon dioxide (CO2) emissions per capita, producing an estimated 40 million tonnes of CO2 annually. Almost 90% of these CO2 emissions are attributed directly to the energy sector through petrochemical production (56%), power generation (30%) and flaring (3%). Trinidad and Tobago is a ratified signatory to the United Nations Framework Convention on Climate Change and the Kyoto Protocol. Although, as a non-Annex 1 country, Trinidad and Tobago is not required to cut its greenhouse gas emissions under the Protocol, it is currently finalizing a climate change policy document as well as a national energy policy with specific strategies to address climate change. The present study complements the climate change policy document by providing an economic analysis of the impact that climate change could have on the energy sector in Trinidad and Tobago under the Intergovernmental Panel on Climate Change alternative climate scenarios (A2 and B2) as compared to a baseline situation of no climate change. Results of analyses indicate that, in the short-run, climate change, represented by change in temperature, is not a significant determinant of domestic consumption of energy, electricity in particular, in Trinidad and Tobago. With energy prices subsidized domestically and fixed for years at a time, energy price does not play a role in determining electricity demand. Economic growth, as indicated by Gross Domestic Product (GDP), is the single major determinant of electricity consumption in the short-run. In the long-run, temperature, GDP, and patterns of electricity use, jointly determine electricity consumption. Variations in average annual temperature due to climate change for the A2 scenario are expected to lead to an increase in electricity consumption per capita, equivalent to an annual increase of 1.07% over the 2011 baseline value of electricity consumption per capita. Under the B2 scenario, the average annual increase in electricity consumption per capita over the 2011 baseline value is expected to be 1.01%. The estimated economic impact of climate change on electricity consumption for the period 2011-2050 is valued at US$ 142.88 million under the A2 scenario and US$ 134.83million under the B2 scenario. These economic impact estimates are equivalent to a loss of 0.737% of 2009 GDP under the A2 climate scenario and a loss of 0.695% of 2009 GDP under the B2 scenario. On the energy supply side, sea level rise and storm surges present significant risks to oil installations and infrastructure at the Petroleum Company of Trinidad and Tobago (PETROTRIN) Pointe-a-Pierre facilities (Singh and El Fouladi, 2006). However, data limitations do not permit the conduct of an economic analysis of the impact of projected sea level rise on oil and gas production.

Exports from the Brazilian automotive sector to the Southern Common Market: Trade diversion or cost reduction?

The automotive sector is one of the sectors in which trade between mercosur countries has grown most strongly. This article examines the possibility that trade diversion occurred in that sector during the period 1991-2010, assuming that product costs fell as a result of market expansion. The analysis is based on the concepts of “cost reduction” and “trade suppression” coined by Corden (1972), which capture the effects of economies of scale. Indices of regional orientation and revealed comparative advantages are used in combination to assess whether the trade bloc is evolving in line with comparative advantages. The results suggest efficiency gains for automotive-sector products, exports of which from Brazil to mercosur grew more vigorously because the expanded and relatively protected market made it possible to exploit the economies of scale that are characteristic of the automotive industry.