Capital flows to Latin America: first quarter 2005

Includes bibliography

Capital flows to Latin America: first quarter 2006

Includes bibliography

Capital flows to Latin America: quarterly developments

Includes bibliography

Capital flows to Latin America: recent developments

Includes bibliography

Capital flows to Latin America: recent developments

Includes bibliography

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.

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.

Brazil’s Northeast Financing Constitutional Fund: Differentiated effects on municipal economic growth

This article investigates the effects of the investments made by the Northeast Financing Constitutional Fund (FNE) on the economic growth of that region's municipalities in the decade of 2000. To that end, it uses an empirical framework based on growth models that make it possible to form convergence clubs according to the municipalities' initial development level. The results corroborate the empirical strategy and reveal the existence of four groups of municipalities, in which investment flows through the FNE have different effects on growth. In general, the FNE produces positive and significant effects in most municipalities of the Northeast, except for those whose gross domestic product (GDP) per capita was either very low or very high at the start of the decade, in which case its effects are not significant.

Economic Survey of Latin America and the Caribbean 2005-2006

Incluye Bibliografía

Capital Flows to Latin America and the Caribbean: Recent Developments

This document, prepared by the Economic Commission for Latin America and the Caribbean (ECLAC) Washington Office, presents and analyzes the most recent developments (first half of 2015) concerning capital flows to Latin America and the Caribbean.

Capital Flows to Latin America and the Caribbean: Recent Developments

This document, prepared by the Economic Commission for Latin America and the Caribbean (ECLAC) Washington Office, presents and analyzes the most recent developments (third quarter of 2015) concerning capital flows to Latin America and the Caribbean.

The Making of a Shiite Bourgeoisie in Lebanon Political Mobilisation, Economic Resources and Formation of a Social Group

The thesis analyses the making of the Shiite middle- and upper/entrepreneurial-class in Lebanon from the 1960s till the present day. The trajectory explores the historical, political and social (internal and external) factors that brought a sub-proletariat to mobilise and become an entrepreneurial bourgeoisie in the span of less than three generations. This work proposes the main theoretical hypothesis to unpack and reveal the trajectory of a very recent social class that through education, diaspora, political and social mobilisation evolved in a few years into a very peculiar bourgeoisie: whereas Christian-Maronite middle class practically produced political formations and benefited from them and from Maronite’s state supremacy (National Pact, 1943) reinforcing the community’s status quo, Shiites built their own bourgeoisie from within, and mobilised their “cadres” (Boltanski) not just to benefit from their renovated presence at the state level, but to oppose to it. The general Social Movement Theory (SMT), as well as a vast amount of the literature on (middle) class formation are therefore largely contradicted, opening up new territories for discussion on how to build a bourgeoisie without the state’s support (Social Mobilisation Theory, Resource Mobilisation Theory) and if, eventually, the middle class always produces democratic movements (the emergence of a social group out of backwardness and isolation into near dominance of a political order). The middle/upper class described here is at once an economic class related to the control of multiple forms of capital, and produced by local, national, and transnational networks related to flows of services, money, and education, and a culturally constructed social location and identity structured by economic as well as other forms of capital in relation to other groups in Lebanon.

Running Hot and Cold: Economic Liberalization and Foreign Direct Investment in Latin America by Sector

This article examines the effects of market–oriented economic reforms on foreign direct investment (FDI) flows to Latin America from 1985 to 2006. In contrast with most existing scholarship, we disaggregate FDI into its destination in the primary resource, manufacturing, and service sectors allowing us to determine that different kinds of investments exhibit distinct behavior. Notably, manufacturing FDI appears to be erratic; previous investment is not a predictor of current investment. FDI across sectors is associated with varying policy environments, with service and primary resource investment attracted to hosts with policies associated with more stable economic and political contexts. Overall, manufacturing FDI appears to function more like “hot” portfolio investment and is less likely to provide some of the positive spillover effects thought to be associated with more permanent FDI. These findings have an array of implications for economic, development, and industrial policies throughout Latin America and the developing world.

Pakistani Migration to the United States:An Economic Perspective

The 9-11 attack on the US brought a set of changes in overseas migration from Pakistan. One such change is the sharp increase in remittances sent from the United States. The paper argues that the characteristics of remittances from the United States differ from those originating in the Middle East. Just as the overseas Pakistani communities are diversified, the nature and characteristics of remittances are heterogeneous, depending on where they come from and who sends them. While the importance of remittance flows from the United States is rising, not much academic attention has been paid to this issue because of a lack of data. To better understand the reasons behind the increase in US remittances, and in order to evaluate their sustainability, household surveys are necessary.