Guido Mantega, the Brazilian Finance Minister, said recently that Brazil is in the middle of a currency war. His preoccupation with exchange rate appreciation is not directed to global imbalances, in general, or China, in particular. A more depreciated currency provides protection for domestic production, and makes domestic goods and services cheaper for foreigners. In that view, a stable but competitive (i.e. depreciated) real exchange rate (SCRER), as Roberto Frenkel and Lance Taylor call it, would be an essential tool in the development strategy in developing countries. The message is that competitiveness of domestic markets matters for development.
Brazil: Lula's Labor Legacy
Janine Berg, Guest Blogger
When Time magazine awarded Brazil’s President Lula the most influential world leader spot in its 2010 ranking of most influential people, Michael Moore, who wrote the excerpt on Lula, heralded the creation of the Bolsa Familia programme as well as the expansion of public education and health care. These are important achievements, but one of the great successes of Brazil of the past eight years that has gone largely unnoticed outside Brazil is the creation of 12.5 million formal jobs during his tenure. During the 2000s, formal job growth outpaced informal job growth by a three-to-one ratio, reversing the trend of growing informality that had marked the 80s and 90s. And all this occurred at the same time that the minimum wage doubled in real terms.
Brazil: Lula’s Labor Legacy
Janine Berg, Guest Blogger
When Time magazine awarded Brazil’s President Lula the most influential world leader spot in its 2010 ranking of most influential people, Michael Moore, who wrote the excerpt on Lula, heralded the creation of the Bolsa Familia programme as well as the expansion of public education and health care. These are important achievements, but one of the great successes of Brazil of the past eight years that has gone largely unnoticed outside Brazil is the creation of 12.5 million formal jobs during his tenure. During the 2000s, formal job growth outpaced informal job growth by a three-to-one ratio, reversing the trend of growing informality that had marked the 80s and 90s. And all this occurred at the same time that the minimum wage doubled in real terms.
Academic Experts Call for Reform of Investment Treaties
Gus Van Harten, Guest Blogger
Investment arbitration is a new field of law and lawyering. It disciplines governments in extraordinary ways, and regulates legislative choice and policy discretion on questions of profound public importance.
Yet the system is sometimes portrayed by practitioner-advocates as technical, obscure, or simply par-for-the-course. Debates are often dominated by lawyers and arbitrators with an obvious stake in the system’s perpetuation.
Not everyone who has expertise in investment law, arbitration and regulation supports the current arrangements, however. I am one of (now) 48 academics who has expressed concerns about the investment regime. (I do not speak for other supporters of the statement here; the statement speaks for itself and any elaborations expressed in this comment are in my name only.)
Lessons on Climate Change from the Pakistan Floods
There are many lessons from the recent floods in Pakistan. Here are just a few.
First, when natural calamity strikes, it can be– and nowadays more often than not it is– devastating. The tsunami that hit Indonesia and many other countries, the Haiti earthquake, and now the Pakistan floods illustrate that. In Pakistan, up to 20 million people have been affected, almost a million homes destroyed or damaged, 10 million were made homeless, and there is widespread damage to agriculture and related livelihoods.
Markets and Governments: Finding the Balance in Developing Countries
The recent global economic crisis has renewed interest in the debate over the role of the government in economic activities, in developed countries as well as developing countries. Rich countries had to stimulate their economies by injecting enormous amount of cash to deal with the financial crisis caused by the unregulated market and the activities of financial institutions. In the case of the United States, such injections amounted to over one trillion dollars. Yet, the International Financial Institutions continue to advocate a different policy for poor countries. The recommendation of the IMF to the Government of Malawi to impose pro-cyclical monetary and fiscal policies on the economy is only one example.
Small-Scale Farmers and Development: Assume a different economic model
One version of an old joke features a shipwrecked economist on a deserted island who, when asked by his fellow survivors what expertise he can offer on how they can be rescued, replies, “Assume we have a boat.”
In Mexico earlier this month, I was thinking that the real-life version of the economist’s solution is: “Assume we have employment.” But it’s no joke. A World Bank economist had just spoken during a seminar at Mexico’s National Autonomous University on Mexican farm policies in the wake of NAFTA. Earlier, I had presented my recent paper, “Agricultural Dumping Under NAFTA,” which came out in the new report “Subsidizing Inequality,” released in Spanish by the Woodrow Wilson Center and its Mexican partners.
Aileen Kwa on Europe's EPAs
In its Economic Partnership Agreements with ACP countries, the EU has pushed for African countries to significantly reduce tariffs in return for having access to the EU market. In an interview with Triple Crisis blogger Timothy A. Wise, Aileen Kwa of the South Centre discusses the dangers of the EPAs for African economies and offers possible solutions.
For background and more on the issue, see:
EPAs: The Wrong Development Model for Africa And Options for the Future
Need for Africa to Re-think the EPAs in Light of the Economic Crisis
Legal Analysis of Services and Investment in the Cariforum-EC EPA: Lessons for other Developing Countries
Aileen Kwa on Europe’s EPAs
In its Economic Partnership Agreements with ACP countries, the EU has pushed for African countries to significantly reduce tariffs in return for having access to the EU market. In an interview with Triple Crisis blogger Timothy A. Wise, Aileen Kwa of the South Centre discusses the dangers of the EPAs for African economies and offers possible solutions.
For background and more on the issue, see:
EPAs: The Wrong Development Model for Africa And Options for the Future
Need for Africa to Re-think the EPAs in Light of the Economic Crisis
Legal Analysis of Services and Investment in the Cariforum-EC EPA: Lessons for other Developing Countries
New Estimates of China’s Foreign Investment in Latin America
China’s foreign investment into Africa has been generating a great deal of controversy. Some argue that China is becoming the new colonial power over Africa, others see China as a key source of foreign exchange that may finally help spur long-run economic growth in Africa.
There has been relatively less discussion about China’s investment in Latin America, because it was thought that there was so little of it. A closer look reveals that Chinese FDI is larger than previously thought, and growing fast.
According to official Chinese statistics, foreign direct investment (FDI) to Latin America has been relatively limited—averaging just over $4 billion per year between 2003 and 2009. That is 3-4 percent of total FDI into the region over the same period. What is more, according to China, 96.7 percent of all Chinese FDI into Latin America during that period went to the Cayman Islands or the British Virgin Islands—two countries that would sink into the ocean if they had $3 billion per year in such investment. Peal away these two financial havens and the Latin American region only received about $126 million in Chinese FDI, or less than 1 percent of the annual total.