Transcript Latin American Economic Outlook 2008

Latin American Economic
Outlook 2008
China and India: Angel or Devils
for Latin America?
Based on Chapter 4 of the Report
Javier Santiso
Director, OECD Development Centre

Rio de Janeiro, March 2008 
The OECD and Latin America:
An emerging commitment
•
•
Latin American market democracies matter for the OECD and its
member countries
The Latin American dimension at the OECD:
 Mexico: Member since 1994; Chile: candidate since May 2007;
Brazil: enhanced cooperation, May 2007
 Economic Surveys:
1992, 1995, 1997, 1998, 1999
2000, 2002, 2003, 2005, 2007
2003, 2005, 2007
2000, 2005, 2006
 Latin American Economic Outlook 2008
The Development Centre: A bridge between the
OECD and emerging regions
•
Membership of the Development Centre
With a Governing Board open to emerging countries, the
Development Centre provides a framework for dialogue
and experience sharing with regions all over the world.
•
Three Latin American countries are members of
the Centre:
– Mexico
– Chile
– Brazil
The Center is less and less the Center and the
Periphery less and the Periphery
Share of World GDP
0%
10%
20%
30%
40%
50%
1952
60%
70%
80%
USA
Europe
Japan
1978
USSR
China
India
2003
Source: OECD Development Centre, 2008; based on OECD Statistics.
For the first time, Major Outward FDI is coming
from Emerging Countries
•
Major share of FDI by
emerging multinationals from
emerging Asia, Latin America
and the Middle East.
Share of Outward FDI
20%
18%
16%
14%
•
•
New global players with
headquarters in emerging
countries.
OECD-based companies
increasingly targeted.
12%
Developing
economies
10%
Latin America and
the Caribbean
8%
China incl Hong
Kong
6%
India
4%
2%
•
In 2007 Outward FDI from
Russia peaked to USD 48 bn.
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
0%
Source: UNCTAD, World Investment Report 2007
For the first time, Major Outward FDI is coming
from Emerging Countries
Share of Outward
FDI
World Investment
Shares
100%
60%
95%
50%
90%
40%
85%
30%
80%
20%
75%
10%
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
Developed economies
-10%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
0%
70%
France
Germany
United Kingdom
United States
Japan
Source: UNCTAD, World Investment Report 2007
China: A Leading example of emerging markets
multinationals
Figure 1. China’s Outward Foreign Direct Investment (1979-2006)
18
15
US$ Billion
12
9
6
3
0
1979
1982
1985
1988
1991
1994
Data sources: Ministry of Commerce and China Statistics Bureau
1997
2000
2003
2006
Emerging multinationals are becoming global
players.
•
By the end of 2006, FDI outflows from emerging markets amounted to an
estimated $210 billion, increasing to an estimated $258 billion by the end of
2011 (World Investment Prospects to 2011). In 2006, developing countries
attracted $380 billion in foreign direct investment — more than ever before.
•
In 2006, total FDI outflows from these groups of economies reached $193
billion, or 16% of world FDI outflows. Total outward stock of FDI from
emerging markets for 2007 is estimated $1.6 trillion. The performance of
Brazilian, Russian, Indian and Chinese firms is indicative of this trend.
•
Chinese mainland outbound foreign direct investment reached $21.2 billion
in 2006 according to official statistics (representing a meager o,6% of the
world total in 2006 in terms of DFI stock.
Latin Multinationals are becoming global players:
the rising example of Brazil.
•
Brazil top 20 multinationals have USD 56 bn of assets abroad in 2007,
equivalent to half of the outward FDI stock. As a percentage of total assets,
the foreign assets of the Top 20 Brazilian firms range from 1% to 46%. Only
two have more than US$ 10 billion in foreign assets.
•
For the group as a whole, foreign assets were 20% of total assets in 2006,
compared to 12% in 2005 (Vale's acquisition of Inco). This compares to 33%
for the 100 largest multinationals from emerging countries in 2005.
•
Brazilian firms have embarked on investing more aggressively abroad. Over
the course of 2006, Brazilian outflows of foreign direct investment (FDI)
exceeded inflows for the first time ever totaling US$28.2 billion. The FDI
outflow was unusually large due to Vale's US$ 17 billion acquisition of Inco.
1
Trade Competition: An echo of the Asian boom
2
Specialisation: Evidence of a potential draw
3
Infrastructure: A key for competitiveness
Emerging economies are increasingly present
on the global scene but not everything is new
2.50E+07
China
2.00E+07
1.50E+07
USA
1.00E+07
5.00E+06
Latin
America
Source: OECD Development Centre, 2008; based on Maddison (2003) “The World Economy Historical Statistics”.
2020
1990
1960
1930
0.00E+00
1900
(million 1990 International dollars)
Comparative Levels of GDP, China, United
States and Latin America
China as a leading Asian Driver of world growth:
Extraordinary or back to normal?
China GDP (% of world total)
GDP in U$ (% of World GDP,
2005)
35
USA
30
25
Germany
20
15
France
10
Italy
5
2045
2001
1950
1900
1870
30
1820
20
1700
10
1600
0
1500
0
Canada
According to IMF estimates Chinese gross domestic product based on purchasing-power-parity
(PPP) amounts to 13.6% of 2005 world GDP (20.7% in the case of USA).
Source: OECD Development Centre, 2008; Based on: International Financial Statistics and Angus Maddison, 2007.
China has doubled its GDP in 8 years…without the
help of Money Doctors!
GDP in constant prices
U$ Millions
12000
10000
Brazil
China
Japan
Mexico
Korea
China
8000
6000
4000
2000
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
0
Source: OECD Development Centre, 2008; based on Datastream (Economist Intelligence Unit)
Chinese growth rates has been higher than those observed in Brazil and Mexico
during their take-offs glorious years.
Latin America’s share of the world output is
small when compared to Asia
GDP share of world output (WEO, 2005)
Emerging
Asia
9.1%
Korea/Japan
12.0%
US
28.0%
China
5.0%
Latam
4.7%
EU
30.3%
The rise of the Asian Giants impacts all Latin America
Economies: For the best or the worst
Descriptive Statistics on Trade for Selected Countries
Country
Share in
Latin
America
GDP (%)
2006 in PPP
Exports
GoodsServices
as % of GDP
Share of
Exports to
Asian Drivers
(Avg. 20002006)
Trade
Restrictiveness
Index
(WB-OTRI 2005)
Main Exports
Animal feed, fixed veg.
oils/fats, soft, heavy petrol, oil
oil crude, oil seeds
Iron ore, oil seeds, meat,
passenger cars, petrol/bitum.,
sugar
Copper, metal ore, fish,
fruit/nuts, pulp, wood
Argentina
12.8
23.6
9.7
22.8
Brazil
34.1
14.5
6.8
30.1
Chile
4.0
39.6
11.5
14.2
Colombia
7.7
21.1
0.9
25.3
Petrol, coal, coffee, heavy
petrol, crude materials, iron
Mexico
23.2
29.7
0.7
32.0
Petrol, passenger cars,
telecomms. equipment,
computer equipment
Peru
3.7
21.4
9.9
21.0
Metal ore, copper, heavy
petrol, animal feed, silver
Venezuela
4.0
32.9
0.2
21.8
Petrol, iron, aluminum
Source: Economist Intelligence Unit.
Increased Asian exports have nurtured fears in
Latin America
Latin American tariffs to China and the
rest of the World
Manufactured goods (SITC 6)
World
19.00
China
17.00
%
15.00
13.00
11.00
9.00
7.00
5.00
2000
2001
2002
2003
2004
2005
Note: Does not include NTB data.
Source: Latinobarómetro survey. Santiago de Chile,
2007.
Source: TRAINS Database (World Integrated Trade
Solution), Nomenclature STIC Revision 3, 2007.
2006
However FDI flows to China have not diverted
inward flows for other emerging markets
Outward FDI Flows
Inward FDI Flows
USD Millions
USD Millions
China
Latin America
Africa
Developing countries (right axis)
60000
1400000
China
Latin America
100000
400000
90000
350000
80000
1200000
Africa
50000
Developing countries (right axis)
1000000
40000
300000
70000
60000
250000
50000
200000
40000
150000
30000
100000
20000
800000
30000
600000
20000
400000
10000
200000
50000
10000
0
0
Avg. 19902000
2003
2004
2005
2006
0
0
Avg. 19902000
2003
Source: OECD Development Centre, 2008; based on UNCTAD.
2004
2005
2006
Latin America is endowed with natural resources
and dependent on the commodities’ cycle
Natural Resources as a percentage
of Latin American Exports
Commodities
% of country's exports
Oil
100
90
80
70
60
50
40
30
20
10
0
Agriculture & other
Venezuela
Chile
Peru
Argentina
Colombia
Brazil
Source: OECD Development Centre, 2008; Based on: National Balance of Payment.
Latin
America
Mexico
Direct export competition in third markets with China is
relatively low, although Mexico is on the spot
High compet.
Export Competition with China for selected countries (2000-05)
0.8
0.7
0.6
0.5
0.4
0.2
0.1
0.0
Thailand
Hungary
Korea, Rep.
Mexico
Malaysia
United States
Czech Republic
Singapore
Romania
Indonesia
Turkey
Poland
Philippines
Bulgaria
Croatia
Japan
India
Slovak Republic
Spain
Costa Rica
Pakistan
Brazil
El Salvador
Colombia
Guatemala
Argentina
Peru
Uruguay
Honduras
Russian…
Panama
Chile
Bolivia
Venezuela
Paraguay
Low compet.
0.3
Note: CS and CC coefficients calculated with exports of country i and exports of country j (China, India).
Source: OECD Development Centre, 2008; based on WITS Database,
2007.
Regarding competition with India in third markets, Latin
America has little to fear (for the moment).
High compet.
Export Competition with India for selected countries (2000-05)
0.8
0.7
0.6
0.5
0.4
0.2
0.1
Note: CS and CC coefficients calculated with exports of country i and exports of country j (China, India).
Source: OECD Development Centre, 2008; based on WITS Database,
2007.
Paraguay
Chile
Venezuela
Honduras
Bolivia
Philippines
Russian Federation
Malaysia
Japan
Singapore
Guatemala
Peru
Costa Rica
Mexico
Uruguay
Panama
Colombia
Hungary
United States
Argentina
Korea, Rep.
Czech Republic
Brazil
Spain
Poland
Slovak Republic
Indonesia
Croatia
El Salvador
Thailand
Pakistan
Romania
Bulgaria
0.0
Turkey
Low compet.
0.3
Trade complementarities and potentialities with
China remain unexplored today…
High compet.
Trade Opportunities with China for selected countries (2000-05)
0.8
0.7
0.6
0.5
0.3
0.2
0.1
0.0
United States
Korea, Rep.
Malaysia
Singapore
Thailand
Japan
Mexico
Philippines
Indonesia
China
Hungary
Czech Republic
Russian Federation
Argentina
Brazil
Colombia
Spain
Poland
Venezuela
Slovak Republic
Romania
Bulgaria
Croatia
El Salvador
India
Turkey
Costa Rica
Guatemala
Chile
Peru
Uruguay
Bolivia
Pakistan
Panama
Honduras
Paraguay
Low compet.
0.4
Note: Modified CS and CC coefficients calculated with exports of country i and imports of country j (China, India).
Source: OECD Development Centre, 2008; based on WITS Database, 2007.
Major economies in the region have a lot to win
from increasing trade with Indian partners
High compet.
Trade Opportunities with India for selected countries (2000-05)
0.8
0.7
0.6
0.5
0.3
0.2
0.1
0.0
Colombia
Venezuela
Russian Federation
Indonesia
Argentina
Mexico
Malaysia
United States
Peru
China
Korea, Rep.
Thailand
Guatemala
Singapore
Japan
Spain
Brazil
Czech Republic
Bolivia
Poland
Bulgaria
Hungary
Croatia
Slovak Republic
Romania
Philippines
Turkey
Costa Rica
Chile
Uruguay
El Salvador
Honduras
Pakistan
Panama
Paraguay
Low compet.
0.4
Note: Modified CS and CC coefficients calculated with exports of country i and imports of country j (China, India).
Source: OECD Development Centre, based on WITS Database, 2007.
1
Trade Competition: An echo of the Asian boom
2
Specialisation: Evidence of a potential draw
3
Infrastructure: A key for competitiveness
In which sector is Latin America specialised?
Let’s not forget intra-industry trade
Vollrath's Relative Comparative Advantage Index Latin America
2005 - Selected countries
Good
Product Name
Argentina
Brazil Chile Colombia Mexico Peru
Venezuela
Average LAC
0
Food & live animals
3.12
1.80
1.24
0.92
-0.16
0.61
-3.32
0.98
1
Beverages and tobacco
1.93
1.73
2.40
0.03
1.69
-1.48
-2.03
1.16
2
Crude mater.ex food/fuel
0.96
1.92
2.53
0.85
-0.63
2.65
-1.01
1.40
3
Mineral fuel/lubricants
1.57
-1.02
-2.30
3.43
1.36
-0.63
7.15
1.21
4
Animal/veg oil/fat/wax
4.28
1.40
-1.08
-0.34
-2.32
-0.51
-5.40
0.90
5
Chemicals/products n.e.s
-0.98
-1.33
-0.81
-1.04
-1.19
-2.04
-2.14
-1.17
6
Manufactured goods
-0.41
0.61
1.38
-0.40
-0.81
0.27
-0.90
-0.22
7
Machinery/transp equipmt
-2.06
-0.64
-3.57
-2.44
0.13
-3.93
-4.34
-0.71
8
Miscellaneous manuf arts
-1.27
-0.40
-2.52
0.07
0.27
0.21
-4.00
-0.21
9
Commodities nes
0.63
8.91
1.74
1.26
-1.21
9.78
2.04
0.81
n.e.s. = not elsewhere specified.
Note: Positive values of the index reveals a comparative advantage, whereas a negative indicates a comparative disadvantage.
Source: OECD Development Centre, based on WITS Database, SITC Revision 3 (three-digit classification) 2007.
India and China’s increasing demand can
have adverse effects
Increasing commodities prices
(1900-2005)
Agricultural Raw Materials
1 200
Food
1 000
Ores & Metals
800
600
400
2000
Coffee
Copper
Petroleum
1600
1200
800
400
200
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
0
2001
2003
2005
Rise in mineral exports from Latin America
(1998-2005)
Rise in Indian imports from Latin America
(1997-2005)
Sugar/mollasses/honey
1000
120 000
Copper ores/concentrates
800
$ millions
.
Fixed veg oil/fat, soft
600
400
100 000
Petroleum and products (left)
Copper ores/concentrates (right)
Nickel ores/concs/etc (right)
80 000
6 000
4 000
2 000
20 000
0
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: OECD Development Centre, based on WITS Database, 2007.
8 000
60 000
40 000
200
10 000
0
1998 1999 2000 2001 2002 2003 2004 2005
.
1998
$ millions
Aluminium
$ millions
$ millions
Price index (1970=100)
China’s and India’s rising demand for Latin American
commodities (1998-2005)
Product specialisation has increased
in the region in the last five years
Source: OECD Development Centre, 2008; Based on ECLAC and World Trade Integrated Statistics.
Latin America’s is increasingly looking
towards Asia for exports…
LATIN AMERICA: EXPORTS TO CHINA AS
PERCENTAGE OF TOTAL EXPORTS
1999
2005
Chile
Peru
Argentina
Brazil
Colombia
Venezuela
Ecuador
Mexico
0
2
4
6
8
Percentage
Source: OECD Development Centre 2008; and UNCTAD, 2007.
10
12
14
…which has made the region more resilient and
diversified geographically
High concen.
0.90
0.80
0.70
2000
0.60
2005
Low concen.
0.50
0.40
0.30
0.20
0.10
Source: OECD Development Centre, 2008; Based on CEPAL (2006) and World Trade Integrated Statistics.
Brazil
Argentina
Chile
Uruguay
Guyana
Peru
Paraguay
Nicaragua
Bolivia
Colombia
Costa Rica
LAC average
Panama
Ecuador
Guatemala
Honduras
Venezuela
Mexico
0.00
1
Trade Competition: An echo of the Asian boom
2
Specialisation: Evidence of a potential draw
3
Infrastructure: A key for competitiveness
Latin America’s performance on trade
infrastructure is poor
Cost to exports
Time for exports
2000
$ per container
40
35
25
20
15
1600
1200
800
400
10
5
Infrastructure Indicator
Regional performance in the infrastructure pillar
7
6
5
4
3
2
1
0
Latin America
and C.
India
Source: Based on Doing Business Report. World Bank, 2007.
China
Eastern Europe East Asian NIC's
China
Chile
Venezuela
Peru
India
Brazil
Mexico
Colombia
Argentina
Mexico
Brazil
China
Chile
Average LAC
Peru
India
Venezuela
Colombia
Average LAC
0
0
Argentina
Days
30
…and most of its competitors score
better on infrastructure
Infrastructure assesment
High level
7
Ports
6
Railways
5
4
Low level
3
2
1
Source: OECD Development Centre, 2008; based on CG/LA database. 2007.
Costa Rica
Brazil
Colombia
Ecuador
Mexico
Argentina
Panama
China
USA
0
A wake up call for reforms:
The proximity to export markets
Mexico benefits from its geographic proximity to its major
export markets:
• Lower transport and communication costs
• Access to FTA
• Just-in-time delivery
24 Days
4 Days
160 Km
11,700 Km
Shipping time
Mexico is more competitive in manufacturing more sophisticated products which require frequent
communication with the client or supplier and short reaction times.
Conclusion: For the first time ever the key question
for the region is China (Commodity Prices)
• The impact of China on the World Economy is increasing. Market
participants do not anticipate a considerable slowdown of this
economy.
• This is good news for Latin America given its growth trade
connexion with China.
Real GDP growth Outlook
Investment banks' forecast changes
China's and India's trade with Latin America
(US$ millions)
25000
12%
Forecast end-2007
Chinese Exports to LAC
10%
20000
Revised forecasts, feb-2008
Chinese Imports from LAC
8%
Indian Exports to LAC
15000
Indian Imports from LAC
6%
10000
4%
Source: OECD Development Centre, Latin American Economic Outlook, 2008
2005
2004
2003
2002
2001
2000
1999
1998
1997
China
1996
Japan
1995
Source: JP M o rgan, 2008
Eurozone
1994
0
US
1993
0%
1992
5000
2%
Conclusion: For the first time ever the key question
for the region is China (Commodity Prices)
• Chinese demand for Latin American commodities as well as
commodity prices are increasing.
• Good news in the short term. It could be a bad news in the long
run.
China’s and India’s rising demand for Latin American
commodities(US$ millions, 1998-2005)
Commodity Prices(100 Basis Index = 1975)
2000
1 200
1800
Agricultural Raw Materials
1 000
800
Food
Ores & Metals
1600
Aluminium
1400
Copper
1200
1000
Petroleum
800
600
600
400
400
1998
2001
2003
Source: OECD Development Centre, Latin American Economic Outlook, 2008
2005
Source: OECD Development Centre, Latin American Economic Outlook, 2008
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
1958
0
1954
0
1950
200
200
Latin American Economic
Outlook 2008
www.oecd.org/dev/leo
Thank you
Merci
Obrigado
Gracias