the shifting wealth of nations: a latin american perspective
DESCRIPTION
This presentation by Javier Santiso, Director of OECD Development Centre, was presented in the framework of France 2025, a project launched by Eric Besson, French Secretary of State for Strategic Planning, Public Policy Evaluation and the Development of the Digital Economy, which aims to draft the different future development scenarios for the country and recommend winning strategies for the next fifteen years.TRANSCRIPT
The Shifting Wealth of Nations
A Latin American Perspective
Centre d’Analyse Stratégique – Premier Ministre
23 September – Paris, France
Javier Santiso
Director and Chief Economist
OECD Development Centre
2
Decoupling or Rebalancing?1
The Macroeconomic Anchoring in Latin America2
A Key Partnership: Latin America and Asia3
Overview
4 Looking to the Future
A fundamental shift
• Emerging economies are returning to their historicalposition in the global economy - a rebalancing of thewealth of nations.
• “Decoupling” is not an appropriate concept, since theCentre is no longer the Centre, and the Periphery nolonger Periphery.
• What impacts does this rebalancing have on currenteconomic events?
4
The perspective is shifting
5
The perspective is shifting
6
The perspective is shifting
7
The perspective is shifting
8
The perspective is shifting
Joaquín Torres García -América Invertida, 1943
9
Emerging countries’ increased
presence in the world economy
0
5
10
15
20
25
190
0
193
0
196
0
199
0
20
20
Tri
llio
ns
US
D
Comparative Levels of GDPChina, United States and Latin America
USA
China
Latin
America
Source: OECD Development Centre, 2008; based on Maddison (2003 and 2007).
0
1
2
3
4
5
6
7
8
17
00
17
15
17
30
17
45
17
60
17
75
17
90
18
05
18
20
18
35
18
50
18
65
18
80
18
95
19
10
19
25
19
40
19
55
19
70
19
85
20
00
20
15
20
30
Comparative Chinese and US GDPlog 1990 $
log US log US China
• China’s economy is estimated to overtake the US by 2015, even accounting for a slow-down in growth as the technological frontier is reached (Maddison 2007/ OECD Development Centre)
10
A Global Rebalancing effect…
Source: OECD Development Centre, 2008; based on Maddison 2007.
0
10
20
30
40
50
60
1700 1820 1952 1978 2003 2030
Developed worldshare of world GDP, %
0
10
20
30
40
50
60
1700 1820 1952 1978 2003 2030
China and IndiaShare of world GDP, %
China India
11Source: OECD Development Centre, based on IMF
…with emerging countries
increasingly driving growth
• The composition of growth and output is changing
High contribution of Emerging countries is driving world growth.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Contribution to global GDP growth
Developed countries
Emerging and developing countries
12
Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).
Note: Emerging countries refer to Latin American and Asian only.
Emerging economies have become
major actors in mobilising capital
13
Trade patterns have evolved
substantially after BRICs entry
Source: OECD Development Centre, based on World Development Indicators, 2008.
5%
14%
16%
62%
3%
1996
8%
21%
17%
51%
2%2006
Low and middle income to low and middle income
Low and middle income to high income
High income to low and middle income
High income to high income
Unspecified
Shift in World Merchandise Trade
14
Emerging Market Multinationals are
growing in presence
0
20
40
60
80
100
120
140
160
180
Global Fortune 500Companies by country, 2007
0
5
10
15
20
25
30
35
40
Top non-financial EMNCsby country (ranked by foreign assets, 2007)
Source: OECD Development Centre, based on Fortune 500, 2007
Source: OECD Development Centre, based on UNCTAD, World Investment Report, 2007
15
Traditional partners are
becoming less important
0%
5%
10%
15%
20%
25%
30%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Emerging Countries Exports to US and Europeshare of total
Europe 25 USA
Source: OECD Development Centre, based on WITS/Comtrade
16
Emerging economies have
accumulated foreign reserves…
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
m
i
l
l
i
o
n
$
International reserves,selected emerging countries
Brazil
China
India
Mexico
Russia
South Africa
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
198
8
199
0
199
2
199
4
199
6
199
8
20
00
20
02
20
04
20
06
International reserves,selected developed countries
Germany
France
Netherlands
Switzerland
UK
US
Source: OECD Development Centre, based on Economist Intelligence Unit
17
…with the successive creation of
Sovereign Wealth Funds
1.43.2 4.2
1617.9
2123.4
36.3
4245
63.5
0
10
20
30
40
50
60
70
Hedge funds SWF Reservesex gold
Insurancecompanies
Pension funds
Investmentfunds
Public debt securities
Private debtsecurities
Stock market capitalisation
World GDP Bank assets
B
i
l
l
i
o
n
$
Asset size, 2007
• Increasingly important in the financial world, Sovereign Wealth Funds are predominantly an emerging world phenomenon.
Source: OECD Development Centre, based on Deutsche Bank
18
A predominantly emerging-world
phenomenonSovereign Wealth Funds (SWFs) by origin , 2008
NumberTotal assets (USD bn)
Middle East 7 1533
Asia 9 867
OECD 10 489
Russia & Central Asia 4 177
Africa 7 109
Latin America 4 23
Pacific islands 6 1.2
Total 47 3,194
Source: OECD Development Centre, based on Deutsche Bank
19
Decoupling or Rebalancing?1
The Macroeconomic Anchoring in Latin America2
A Key Partnership: Latin America and Asia3
Overview
4 Looking to the Future
20
Latin America has managed to
anchor its macroeconomic stance
Source: OECD Development Centre, based on Thompson DataStream and EUI, 2008.
Primary Fiscal Balance (% GDP)
21
GDP growth comes in hand with
credible economic policies
Source: OECD Development Centre, based on ECLAC database 2008
-20%
0%
20%
40%
60%
80%
100%
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Argentina
Ecuador
Venezuela
Peru
Inflation (% change)
22
External position in the region has
been reinforced
Source: OECD Development Centre, based on Thompson DataStream and EUI, 2008.
Current Account Balance (% GDP)
23
Public debt has come down…
• Favourable external conditions have been exploited to accomplishremarkably good public debt management.
• Buybacks of external debt, international bonds in local currency…
0
2
4
6
8
10
12
14
16
18
20
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2008F
Total Emerging Markets External Debt (% of GDP)
Source: OECD Development Centre, based on JP Morgan
24
… coupled with a reduction of
the debt service• Excellent debt management has improved public solvency and
challenged the “original sin”.
Sovereign Debt Service, % of GDP Sovereign Debt Service, % of GDP
Source: OECD Development Centre, based on JP Morgan
25
Decoupling or Rebalancing?1
The Macroeconomic Anchoring in Latin America2
A Key Partnership: Latin America and Asia3
Overview
4 Looking to the Future
26
A third pillar of growth: Asia
• Trade with China and India is increasing all over the emerging world.
• For the first time, Latin American is faced with three centres of growth: The US, Europe and China.
Source: OECD Development Centre, Latin American Economic Outlook 2008
0
10000
20000
30000
40000
50000
60000
70000
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
USD
Th
ou
san
ds
Chinese and Indian Trade with Latin America
Chinese Exports to LAC
Indian Exports to LAC
Chinese Imports from LAC
Indian Imports from LAC
27
China - an increasingly important
destination for EM exports
0
10
20
30
40
50
60
70
80
90
Exports to US % of total 1995 and 2006
1995 2006
Source: OECD Development Centre, 2008 based on WITS Comtrade
0
5
10
15
20
25
Exports to China % of total, 1995 and 2006
1995 2006
28
China and Commodity Prices
• Chinese and Indian demand for commodities as well as commodity prices are on the increase.
• This is good news in the short term, both for Latin American and African exporters. It could be bad news in the long run.
0
2
4
6
8
10
12
1999 2000 2001 2002 2003 2004 2005 2006
Bill
ion
s
China’s demand for Latin American commodities (1998-2005)
Petroleum and products Metal ores/metal scrap Food and live animals
Source: OECD Development Centre, Latin American Economic Outlook 2008
29
Increasing commodity prices are benefiting a number of emerging country exports, though there is also a downside in terms of increasing food prices.
0
50
100
150
200
250
300
350
400
450
500Petroleum
Copper
Aluminium
Gold
0
50
100
150
200
250
300
350
400
450
500
Cocoa
Tea
Coffee (robusta)
Coffee (arabica)
China and Commodity Prices
Source: OECD Development Centre, based on World Bank, 2008
30
Higher diversity in export destinations, but higher concentration in products exported.
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Ven
ezu
ela
Ecu
ad
or
Ch
ile
Pa
na
ma
Bo
liv
ia
Per
u
Pa
rag
ua
y
Ho
nd
ura
s
Gu
ya
na
Uru
gu
ay
Co
lom
bia
Co
sta
Ric
a
Mex
ico
Gu
ate
ma
la
Bra
zil
Export Concentration in Products for Latin America
Herfindahl Hirschman Index
2001 2006
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Mex
ico
Ven
ezu
ela
Ho
nd
ura
s
Gu
ate
ma
la
Ecu
ad
or
Pa
na
ma
LA
C a
ver
ag
e
Co
sta
Ric
a
Co
lom
bia
Bo
liv
ia
Nic
ara
gu
a
Pa
rag
ua
y
Per
u
Gu
ya
na
Uru
gu
ay
Ch
ile
Arg
enti
na
Bra
zil
Lo
w c
on
ce
n.
H
igh
co
nc
en
.
Export Concentration by Destination, Latin America
Herfindahl Hirschman Index
2000 2005
Latin America
Source: OECD Development Centre, Latin American Economic Outlook, 2008
31
Decoupling or Rebalancing?1
The Macroeconomic Anchoring in Latin America2
A Key Partnership: Latin America and Asia3
Overview
4 Looking to the Future
32
Effect of Recessions
0
1
2
3
4
5
6
7
GD
P g
row
th %
Africa and US/EMU recessions
-4
-2
0
2
4
6
8
10
GD
P g
row
th %
Latin America and US/EMU recessions
Source: OECD Development Centre, based on IMF 2008
33
Effect of Recessions
-8
-6
-4
-2
0
2
4
6
8
10
12
GD
P g
row
th %
Mexico and US/EMU recessions
-10
-5
0
5
10
15
GD
P g
row
th %
Brazil and US/EMU recessions
Source: OECD Development Centre, based on IMF 2008
34
Emerging Countries and US GDP
-4
-2
0
2
4
6
8
197
0
197
1
197
2
197
3
197
4
197
5
197
6
197
7
197
8
197
9
198
0
198
1
198
2
198
3
198
4
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Growth rates: US and Emerging Countries, %
United States Emerging
• …Emerging Countries have been performing better so far
Source: OECD Development Centre, based on IMF.
35
Latin America and US GDP• There is however great difference in the US growth correlation between different Latin
American countries.• Also, Latin America appears to be less dependent on US growth as interaction with the
Asian giants increases.
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Growth CorrelationLatin America and the United
States
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
US and Latin American growth, %
Latin America
United States
Source: OECD Development Centre, based on IMF. Source: OECD Development Centre, based on Credit Suisse
36
Source: OECD Development Centre, based on Latin American Consensus Forecasts, 2008.
Note: The OECD is not an official provider for macroeconomic forecasts in Latin America. Data presented is based on
monthly surveys in financial institutions.
The economic consensus in the
region is (still) positive
2008 2009 2008 2009 2008 2009
Argentina 6.6 4.2 9.5 10.7 6.4 4.1
Bolivia 4.9 4.2 17.0 11.7 1.8 1.6
Brazil 4.8 3.8 6.5 4.9 -27.9 -37.0
Chile 3.9 4.1 8.0 4.6 1.0 -1.9
Colombia 4.9 4.6 6.5 4.9 -6.1 -7.9
Costa Rica 3.8 3.7 13.4 10.0 -2.3 -1.9
Dominican Republic 5.2 4.0 11.5 7.3 -2.4 -1.8
Ecuador 2.2 2.5 9.5 6.3 3.6 2.2
Mexico 2.5 2.8 5.5 4.1 -7.4 -11.7
Panama 7.5 6.4 9.2 6.8 -2.2 -2.3
Paraguay 4.8 3.6 11.1 8.8 0.2 0.1
Peru 8.3 6.6 5.4 3.8 -1.8 -2.8
Uruguay 6.1 4.1 9.3 6.5 -0.7 -0.7
Venezuela 4.9 3.5 31.5 29.4 32.1 22.6
Latin America 4.3 3.7 8.7 7.1 -5.5 -37.5
Real GDP
% increase
Consumer Prices
% increase
Current Account]
Balance USD bn
37
Thank you
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