the shifting wealth of nations: a latin american perspective

of 37 /37
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

Author: oecd-development-centre-paris

Post on 14-Jan-2015

2.706 views

Category:

Economy & Finance


2 download

Embed Size (px)

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

  • 1. The Shifting Wealth of NationsA Latin American Perspective Javier Santiso Director and Chief EconomistOECD Development CentreCentre dAnalyse Stratgique Premier Ministre 23 September Paris, France

2. Overview 1 Decoupling or Rebalancing?2 The Macroeconomic Anchoring in Latin America3 A Key Partnership: Latin America and Asia4 Looking to the Future 2 3. A fundamental shift Emerging economies are returning to their historical position in the global economy - a rebalancing of the wealth of nations. Decoupling is not an appropriate concept, since the Centre is no longer the Centre, and the Periphery no longer Periphery. What impacts does this rebalancing have on current economic events? 4. The perspective is shifting 4 5. The perspective is shifting 5 6. The perspective is shifting 6 7. The perspective is shifting 7 8. The perspective is shifting Joaqun Torres Garca - Amrica Invertida, 1943 8 9. Emerging countries increasedpresence in the world economy Chinas 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)Comparative Chinese and US GDP Comparative Levels of GDP log 1990 $ China, United States and Latin America825Trillions USD 7 China20 6515 4 USA 3102 5 1Latin America 00 1790 1700 1715 1730 1745 1760 17751805 1820 1835 1850 1865 1880 1895 1910 1925 1940 1955 1970 1985 2000 2015 20301960 1990 19001930 2020log US log US China9 Source: OECD Development Centre, 2008; based on Maddison (2003 and 2007). 10. A Global Rebalancing effect China and IndiaDeveloped worldShare of world GDP, % share of world GDP, % 60605050ChinaIndia 404030302020101000 17001820 1952 19782003 2030 1700 1820 1952 1978 2003 2030Source: OECD Development Centre, 2008; based on Maddison 2007. 10 11. with emerging countries increasingly driving growth The composition of growth and output is changingHigh contribution of Emerging countries is driving world growth. Contribution to global GDP growth 90% 80% Developed countries 70% Emerging and developing countries 60% 50% 40% 30% 20% 10% 0%19961997 1998 1999 20002001 2002 200320042005 2006 2007 11 Source: OECD Development Centre, based on IMF 12. Emerging economies have becomemajor actors in mobilising capitalNote: Emerging countries refer to Latin American and Asian only. Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit). 12 13. Trade patterns have evolved substantially after BRICs entryShift in World Merchandise Trade19962006 Low and middle income to 3%5% 2%8% low and middle income 14% Low and middle income to 21% high incomeHigh income to low and 16% middle income51% High income to high income 62% 17% UnspecifiedSource: OECD Development Centre, based on World Development Indicators, 2008. 13 14. Emerging Market Multinationals are growing in presence Global Fortune 500Top non-financial EMNCsCompanies by country, 2007 by country (ranked by foreign assets, 2007)40 18016035140301202510020 80 15 60 10 40 5 20 00 Source: OECD Development Centre, based on Fortune Source: OECD Development Centre, based on 500, 2007 UNCTAD, World Investment Report, 2007 14 15. Traditional partners are becoming less important Emerging Countries Exports to US and Europeshare of total 30% 25% 20% 15% 10% 5% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Europe 25USASource: OECD Development Centre, based on WITS/Comtrade 15 16. Emerging economies have accumulated foreign reservesInternational reserves, International reserves,selected emerging countriesselected developed countries 2,000,000 2,000,0001,800,000 1,800,000 1,600,000 1,600,000 m i1,400,000 1,400,000 lBrazilGermany1,200,000 1,200,000 lChina France i 1,000,000 1,000,000India Netherlands o 800,000Mexico 800,000Switzerland n 600,000Russia 600,000UK $ 400,000South Africa 400,000US200,000 200,0000 01992 19981988 19941990 1996 2000 200420062002 Source: OECD Development Centre, based on Economist Intelligence Unit16 17. with the successive creation ofSovereign Wealth Funds Increasingly important in the financial world, Sovereign Wealth Funds are predominantly an emerging world phenomenon.70 Asset size, 200763.5 60B 50 i4542 l l 40 36.3 i o 30 n23.421 20 17.9 16 $10 3.2 4.21.4 0 Hedge funds SWF Reserves InsurancePension Investment Public debt Private debt Stock market World GDP Bank assetsex gold companies funds fundssecuritiessecurities capitalisationSource: OECD Development Centre, based on Deutsche Bank17 18. A predominantly emerging-world phenomenon Sovereign Wealth Funds (SWFs) by origin , 2008Total assets Number (USD bn) Middle East71533 Asia 9867 OECD10489 Russia & Central Asia4177 Africa 7109 Latin America4 23 Pacific islands6 1.2Total 47 3,194Source: OECD Development Centre, based on Deutsche Bank18 19. Overview 1 Decoupling or Rebalancing?2 The Macroeconomic Anchoring in Latin America3 A Key Partnership: Latin America and Asia4 Looking to the Future 19 20. Latin America has managed to anchor its macroeconomic stance Primary Fiscal Balance (% GDP) Source: OECD Development Centre, based on Thompson DataStream and EUI, 2008. 20 21. GDP growth comes in hand withcredible economic policies Inflation (% change)100% Argentina80% EcuadorVenezuela60% Peru40%20% 0%1996199719981999200020012002200320042005200620072008 -20% Source: OECD Development Centre, based on ECLAC database 200821 22. External position in the region hasbeen reinforced Current Account Balance (% GDP) Source: OECD Development Centre, based on Thompson DataStream and EUI, 2008. 22 23. Public debt has come down Favourable external conditions have been exploited to accomplish remarkably good public debt management. Buybacks of external debt, international bonds in local currencyTotal Emerging Markets External Debt(% of GDP) 2018161412108 6 4 20 19981999 2000 2001 20022003 2004 2005 2006 2007F 2008F Source: OECD Development Centre, based on JP Morgan 23 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 GDPSource: OECD Development Centre, based on JP Morgan24 25. Overview 1 Decoupling or Rebalancing?2 The Macroeconomic Anchoring in Latin America3 A Key Partnership: Latin America and Asia4 Looking to the Future 25 26. A third pillar of growth: Asia70000Chinese and Indian Trade with Latin America Chinese Exports to LAC Trade with China and India is 60000 Indian Exports to LAC increasing all over the Chinese Imports from LACemerging world. 50000 Indian Imports from LAC USD Thousands 40000 For the first time, Latin American is faced with three 30000 centres of growth: The US, Europe and China. 20000 100000 199219931994 19951996 19971998 19992000 20012002 200320042005 20062007 Source: OECD Development Centre, Latin American Economic Outlook 200826 27. China - an increasingly importantdestination for EM exports Exports to US Exports to China % of total 1995 and 2006% of total, 1995 and 2006 90 258070 206015 504010 3020 5 100 01995 20061995 2006 Source: OECD Development Centre, 2008 based on WITS Comtrade 27 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. Chinas demand for Latin American commodities (1998-2005)12 Billions10 8 6 4 2 019992000 200120022003 20042005 2006Petroleum and products Metal ores/metal scrap Food and live animals Source: OECD Development Centre, Latin American Economic Outlook 200828 29. China and Commodity PricesIncreasing commodity prices are benefiting a number of emerging countryexports, though there is also a downside in terms of increasing food prices.500 500PetroleumCocoa 450 450Copper Tea 400 400 Coffee (robusta)Aluminium 350Gold 350 Coffee (arabica)300 300250 250200 200150 150100 1005050 00Source: OECD Development Centre, based on World Bank, 200829 30. Latin AmericaHigher diversity in export destinations, but higher concentration in productsexported.Export Concentration in Products Export Concentration by for Latin America Destination, Latin America High concen.0.90 0.9 Herfindahl Hirschman Index Herfindahl Hirschman Index0.80 0.8 200020052001 20060.70 0.70.60 0.6 Low concen. 0.50 0.50.40 0.4 0.30 0.3 0.2 0.200.10.100.00.00 Paraguay MexicoPeruHonduras Ecuador GuyanaUruguay PanamaGuatemalaBolivia Chile ColombiaCosta RicaBrazil Venezuela VenezuelaArgentinaUruguayEcuadorPeruPanamaChileBrazilMexico Honduras Nicaragua Paraguay GuyanaGuatemalaLAC averageColombia Bolivia Costa Rica Source: OECD Development Centre, Latin American Economic Outlook, 2008 30 31. Overview 1 Decoupling or Rebalancing?2 The Macroeconomic Anchoring in Latin America3 A Key Partnership: Latin America and Asia4 Looking to the Future 31 32. Effect of Recessions Africa and US/EMU recessions Latin America and US/EMUrecessions 7 10 6 8 5 6 GDP growth % GDP growth % 4 4 3 2 2 0 1 -2 0 -4Source: OECD Development Centre, based on IMF 2008 32 33. Effect of RecessionsMexico and US/EMU recessionsBrazil and US/EMU recessions1215108 106 GDP growth % GDP growth % 45200-2-4 -5-6-8 -10Source: OECD Development Centre, based on IMF 2008 33 34. Emerging Countries and US GDP Emerging Countries have been performing better so farGrowth rates: US and Emerging Countries, % 8 6 4 2 0 1971 197219981988 19731975197719901994 19951996 1999 1978 1980 19831984 1986 198919821992 1993 19702000 1974197619792002 2004 20061985 1991 1997 1981 19872001 2003 2005 2007 -2 -4United States Emerging Source: OECD Development Centre, based on IMF.34 35. Latin America and US GDP There is however great difference in the US growth correlation between different LatinAmerican countries. Also, Latin America appears to be less dependent on US growth as interaction with theAsian giants increases. US and Latin American growth, % Growth Correlation 10.00Latin America and the United States8.00 50% 40%6.00 30% 20%4.00 10% Latin America0% United States -10%2.00 -20% -30%0.00 -40% 1979 19911970 197319761982 198519881994 19972000 20032006 -2.00 -4.00Source: OECD Development Centre, based on IMF.Source: OECD Development Centre, based on 35 Credit Suisse 36. The economic consensus in theregion is (still) positiveReal GDPConsumer Prices Current Account]% increase % increaseBalance USD bn 20082009 200820092008 2009 Argentina6.6 4.29.510.76.44.1 Bolivia4.9 4.2 17.011.71.81.6 Brazil 4.8 3.86.5 4.9-27.9-37.0 Chile3.9 4.18.0 4.61.0 -1.9 Colombia 4.9 4.66.5 4.9 -6.1 -7.9 Costa Rica 3.8 3.7 13.410.0 -2.3 -1.9 Dominican Republic 5.2 4.0 11.5 7.3 -2.4 -1.8 Ecuador2.2 2.59.5 6.33.62.2 Mexico 2.5 2.85.5 4.1 -7.4-11.7 Panama 7.5 6.49.2 6.8 -2.2 -2.3 Paraguay 4.8 3.6 11.1 8.80.20.1 Peru 8.3 6.65.4 3.8 -1.8 -2.8 Uruguay6.1 4.19.3 6.5 -0.7 -0.7 Venezuela4.9 3.5 31.529.4 32.1 22.6Latin America4.33.7 8.7 7.1-5.5-37.5 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 36monthly surveys in financial institutions. 37. Thank youhttp://www.oecd.org/dev 37