Transcript Hourly Compensation Growth

Presentation to Acer Group, Inc.
Topics in Emerging Financial
Markets: Direct Investment
Alan Jaffe • Yelena Leyderman
Alex Raytburg • Elina Stunis
Hourly Compensation Growth: Historical Trends
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1975
1977
1979
1981
Taiwan
1983
1985
1987
Mexico
1989
1991
1993
1995
Portugal
1997
1999
2001
Sri Lanka
2003
Hourly Compensation Growth: Other Factors
The Next 5 Years
 Projections Methodology

Growth
Taiwan
11.80%
2003 Wage
$9.15
Mexico
0.96%
$1.92
Sri Lanka
2.28%
$0.53
Portugal
5.56%
$7.18
Compound Growth Rate Calculation
 Comparison with the United States

In 1998 US Labor Cost was $18.56

By 2003 it will rise even higher
 Exchange Rate Issues
 Union Strength, Labor Specialization
 Logistics
 Labor Productivity: “Real Wage Rate”
Economic Statistics: Competitiveness Rankings
Country
MICI Ranking *
1999
1998
Competitiveness Ranking **
1999
1998
1997
Portugal
29
33
27
26
29
Mexico
34
39
31
32
32
Sri Lanka
50
43
48
39
48
 * These rankings are based on counties’ infrastructure, education, and technological progress
Notes
 ** The overall ranking is based on the country’s economic conditions, such as government
savings rate, reliability of banking sector and the overall stability of the economy.
Economic Statistics: At a Glance
Growth Rates (% )
Sri Lanka
Mexica
5.0
4.5
4.0
3.5
Portugal
3.0
2.5
2.0
1.5
1.0
0.5
0.0
P opu
r
Labo
n
lat io
Portugal
Notes
Mexico
GD P
Sri Lanka
Agriculture
Industry
Services
 Trade policies in Portugal are likely to be brought in alignment with the common EU rules.
 Trade policies in Mexico follow NAFTA policies.
Exchange Rates: A Time Series Analysis
Since 1990, the situation was very different for the four sample currencies.
Rate
MXN:
Currency
Crisis
350.0
250.0
PTE/XEU
SLS
150.0
TWD
50.0
1990
Notes
1993




1996
Mexico experienced a significant devaluation in 1994-95
Portugal joined the European Union and has hitched its hopes to the Euro
Taiwan tracked Portugal rather closely throughout the period
And Sri Lanka has steadily eroded relative to the USD
1999
Political Risk: Rankings
Rating
(10/98)
Corruption
Socioeconomic
Conditions
Internal
Conflict
Country
80
Law &
Ethnic Bureaucracy
Order Tensions
Quality
Taiwan
50
75
100
67
84
75
91
Portugal
84
67
100
84
100
75
68
Mexico
50
84
58
33
84
75
59
Sri Lanka
67
84
25
50
17
50
 In Sri Lanka, “…The Tigers have been waging a bloody guerilla campaign to
establish a homeland for the island Tamil Hindu minority. This conflict has
claimed 61,000 people and displaced more than a million of the country’s 19
million inhabitants…”
Political Risk (Continued)
 Degree of political stability (elections,
party agendas)
 Civil wars or guerilla activity
 Respect for law and order (functioning
court system)
 Strong tradition of civilian government
(no juntas in recent history)
 Anti-foreign feelings
 Overall “feel” of the nation...
Numerous Factors Have to Be Weighed Properly
Political
Risk
Wage Growth
Productivity
Investment
Decision
Economic
Factors
Trade
Barriers
Corruption
Infrastructure/
Communications
Analysis of the Various Aspects of the Decision
Decision Factors Breakdown
Economic &
Financial
Labor & Productivity
 Wage Growth
 GDP Growth
~25%
 Trade Barriers
 Financial Markets
 Ties with Clients
~50%
 Productivity Growth
 Population Growth
Political & Social
~25%
 Domestic Tranquility
 Corruption
 Faith in Government
Key Objectives:
 Safety of Investment
 Returns on the Investment
 Long-Term Future of the Investment
 Foreign Policy
And the Winner Is…