Saturday, January 31, 2009

More and more signs of the crisis

There are more and more signs of the unprecedented extent of the crisis and the impact that it can have on trade and investment (and thus on the external shock for developing countries). Air freight decreased in 2008 by 22.6, more than after September 11. Is this all bad? Will it result in a shift in trade towards services? Will it shift US imports from far places (US) to closer suppliers (Central America)?

Thursday, January 22, 2009

Regional Integration in Central America

Central America has been very active in promoting preferential trade agreements in the last few years, including CAFTA with the United States and the Association Agreement currently negotiated with the EU. In a recently published policy paper, Fernando Rueda and I notice some of the negative features of these agreements and insist on the opportunity that the EU has to promote a really development-friendly association. It should include structural funds and more policy freedom and flexibility.

In any case, this type of agreements can be one of the casualities of the current crisis... something that would not be bad news according to recent work on the subject (see the book coedited with Ken Shadlen).

Tuesday, January 20, 2009

Paying attention to Chile

Given the importance of Chile as Latin America's "success" story, recent events are very important:

a. The reduction in copper prices have resulted in a surprisingly quick move from trade surplus to trade deficit.  According to data from Oxford Analytica, the trade sbalance has gone from +US$23.7b (more than 14% of GDP) in 2007 to an estimated +$10.2b in 2008 and -2.4b in 2009.  This just shows that much of Chile's recent success was dependent on commodities--an old story in Latin America.

b. This month Chile announced a relatively generous stimulus plan financed with the stabilization fund.  This fund increased rapidly in the last few years thanks to high copper prices.   Chile may thus become a successful example of anti-cyclical policies supported by an intelligent use of commodity revenues.   Yet it may also be that these policies fail to maintain a relatively healty rate of growth or that Chile becomes unwilling to spend more of this money. 

In any case, it is clear that Chile is mounting a more intelligent response than Mexico's passive option... and that it has become the country to follow if we want to learn more abou the characteristics and likelihood of anti-cyclical policies in commodity-rich, Latin American countries.

Slim and globalization

The Mexican Carlos Slim could soon become the second major investor in the New York Times.  Is this a sign of globalization?  Will the Latin American rich invest more and more in the United States?  Will this reduce their interest in their own country?