Latin American Economic Outlook 2008

Transcription

1 Latin American Economic Outlook 28 Javier Santiso Acting Director Chief Development Economist OECD Development Centre Brussels, 13 th December 27

2 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 27; Brazil: enhanced cooperation, May 27 Economic Surveys: 1992, 1995, 1997, 1998, , 22, 23, 25, 27 23, 25, 27 2, 25, 26 Latin American Economic Outlook 28

3 The Development Centre: A bridge between the OECD and emerging regions Membership of the Development Centre With a Governing Board open to OECD non-member countries, the Development Centre provides a framework for dialogue and experience sharing with emerging regions all over the world. Three Latin American countries are members of the Centre: Mexico Chile Brazil

4 Latin American Economic Outlook: The key tools Informal Advisory Board: Scholars and policy makers from Latin America and OECD countries enrich the analytical work of the project. Research and Publications: The Development Centre collaborates with OECD experts, international organisations and various Latin American think-tanks. Dialogue Forum: Key government officials from OECD and Latin American countries share experiences about the design and implementation of public policies.

5 I Fiscal Policy and Legitimacy II Pensions, Capital Markets and Corporate Governance III Multinationals, Telecommunications and Development IV China, India and the Challenge of Specialisation

6 Quintile annual growth in GDP per capita Quintile annual growth in GDP per capita Quintile annual growth in GDP per capita Quintile annual growth in GDP per capita Economic growth is slower than in other regions and it has left out the poor Latin America change Q1 Q2 Q3 Q4 Q GDP per capita by quintile Sub-Saharan Africa growth Q1 Q2 Q3 Q4 Q GDP per capita by quintile Developing Asia change Q1 Q2 Q3 Q4 Q GDP per capita by quintile OECD* growth Q1 Q2 Q3 Q4 Q GDP per capita by quintile Source: OECD Development Centre, 27. Based on IMF, Globalization and Inequality, 27. OECD* includes: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Korea, Netherlands, Norway, Singapore, Spain, Sweden, UK, US.

7 Gini coefficient (early 25 or closest year) Improvements in inequality are slight or non existent 65% 6% 55% 5% 45% Changes in inequality during the last decade deteriorations Paraguay Ecuador Argentina Venezuela Costa Rica Uruguay Bolivia Brazil Honduras Dominican, R. Colombia Nicaragua Panama Chile Guatemala Mexico Peru El Salvador improvements 4% 4% 45% 5% 55% 6% 65% Gini coefficient (early 199s) Source: OECD Development Centre, 27. Based on CEPALSTAT y ECLAC s Panorama Social de América Latina 26.

8 Gini coefficient Points of Gini change (% change in inequality) Fiscal policy plays a very limited redistributive role, especially taxation Public spending is a key instrument for tackling inequality Inequality before and after taxes and transfers The effects of taxes and transfers Source: OECD Development Centre, 27. Based on data by Goñi, López, and Servén (26)

9 Gini coefficient There is no Latin curse: Quality of fiscal policy is not a matter of DNA Fiscal policy is more efficient in Europe (even in its Latin countries) in reducing inequalities and stimulating social cohesion Inequality before and after taxes and transfers Source: OECD Development Centre, 27. Based on data by Goñi, López, and Servén (26).

10 Democratic performance (% satisfied with democracy) Fiscal policy can help democratic consolidation in Latin America It is not simply a technical matter 5 45 Costa Rica Uruguay Ecuador Mexico Venezuela Nicaragua Argentina Bolivia Brazil Panama Colombia Guatemala El Salvador Honduras Chile 15 1 Peru Paraguay Fiscal legitimacy (% who trust taxes are well spent) Source: OECD Development Centre, 27. Based on Latinobarómetro (23).

11 Fiscal legitimacy (% trust taxes well spent) Social cohesion is becoming an increasingly important issue in the region Uruguay Venezuela El Salvador Dominican Republic Chile Honduras Argentina Nicaragua Colombia Paraguay Brazil Costa Rica Panama Mexico Guatemala Peru Ecuador Bolivia Inequality (Gini coefficient 2s) Source: OECD Development Centre, 27. Based on Latinobarómetro (23, 25) and ECLAC s Panorama Social

12 Mathematics Score (PISA 23) Improving public spending is crucial (efficiency and progressivity) Improving the efficiency and equity of public spending is a crucial challenge for the region 6 Education Expenditures and Performance 55 5 Slovak Republic Poland Spain Norway United States Thailand Uruguay Indonesia Mexico Tunisia Brazil 3-5, 1, 15, 2, 25, 3, Annual expenditure on educational institutions per student (21) in equivalent US dollars converted using PPPs, by level of education, based on full-time equivalents Source: OECD Development Centre, 27. Based on PISA (23) and OECD Education at a Glance (25)

13 Transparency can lead towards more consistent policies Tax Revenue (24 % GDP) In democratic societies debate, dialogue and compromise are key elements for policy 5 Sweden 4 Italy France Brazil Spain 3 Turkey Argentina Slovak Rep. Korea Uruguay Ireland Switzerland United States 2 1 Haiti Venezuela Colombia Nicaragua Ecuador Mexico Peru Bolivia Costa Rica Chile Media quality and independence (Index: -3=Not free, 31-6=Partially free, 6-1 Free) Source: OECD Development Centre, 27. Based on Freedom House (27) and ECLAC and OECD Revenue Statistics (27).

14 I Fiscal Policy and Legitimacy II Pensions, Capital Markets and Corporate Governance III Multinationals, Telecommunications and Development IV China, India and the Challenge of Specialisation

15 Pension Reform in Latin American Countries Latin America is at the forefront of pension reform. Chile launched the process in 1981 and many countries in Latin America and Eastern and Central Europe have found inspiration in the Chilean experience. More efforts are needed in refining the mechanisms in various countries to improve: 1) commercial practices 2) competence and administration of pension funds 3) investment regulations and 4) the contributions paid by members. Improving the social dimension of pension reform is also necessary to: 1) extend coverage 2) ensure timely payment of contributions 3) enhance efficiency of management of funds and 4) reduce costs to members.

16 Saving / GDP (%) Pension reform has had a mixed impact on national savings Argentina Chile Colombia Mexico Peru 32 Chile 28 Mexico 24 2 Colombia Mexico 16 Argentina Peru Colombia Argentina Peru 12 Chile Years since start of Reform Source: OECD Development Centre (27), based on World Bank Development Indicators.

17 But they have become a force for the development and deepening of financial markets Pension Fund Assets as percentage of GDP, 26 % 1% 2% 3% 4% 5% 6% 7% 8% 9% 1% Chile Brazil Colombia Peru Argentina Mexico Hungary Czech Rep. Estonia Latvia United States UK Canada Japon Spain France Latin America Other Emerging Economies Advanced Economies Source: OECD Development Centre (27), based on Global Pension Statistics database.

18 I Fiscal Policy and Legitimacy II Pensions, Capital Markets and Corporate Governance III Multinationals, Telecommunications and Development IV China, India and the Challenge of Specialisation

19 USD Millions Latin American economies are becoming global financial actors Some countries, like Brazil, have more outward 1 than inward flows of FDI Foreign Direct Investment Flows in Latin America Outward Inward Source: OECD Development Centre, 27. Based on UNCTAD World Investment Report 26, CEPAL La inversión extranjera en América Latina y el Caribe 26 and Economist Intelligence Unit estimations.

20 Latin America is the world s first destination for FDI in telecommunications Source: OECD Development Centre, based on PPI Database, World Bank Source: Information and Communications for Development 26, World Bank

21 Investment in telecommunications has accompanied a marked increase in connectivity The number of telephone lines has multiplied by 1 in Latin America, to some extent because of foreign investment Foreign Investment in Telecommunications and connectivity Cumulative Foreign Investment in Telecommunications (in USD billion) Telephones per 1 inhabitants Source: OECD Development Centre, based on SEDLAC (27) and IADB (27) data.

22 Mobile telephony has played a key role in increasing coverage Lines per 1 inhabitants 5 Mobile Landline Broadband Source: OECD Development Centre, based on ITU, 26, World Telecommunications Database

23 Chile Argentina Brasil Costa Rica México Paraguay Bolivia Perú Nicaragua Haití However, the connectivity boom has not benefited all in the same way Inequality is high: a quarter of poor households have a telephone at home, 3 times less than high-income households 1 Proportion of the population with a telephone at home Richest quintile Poorest quintile Source: OECD Development Centre, based on SEDLAC surveys.

24 Much remains to be done in order to guarantee contestable markets Perfect competition Monopoly Source: OECD Development Centre, based on companies data.

25 I Fiscal Policy and Legitimacy II Pensions, Capital Markets and Corporate Governance III Multinationals, Telecommunications and Development IV China, India and the Challenge of Specialisation

26 Emerging economies are increasingly present on the global scene When the OECD was founded, its member countries accounted for 75% of world GDP, today they represent 55% of world GDP Source: OECD Development Centre, based on Maddison (23) The World Economy Historical Statistics

27 % of exports % of exports China and India could be angels rather than demons for Latin America s commercial development Asian countries competition * vs. Chinese exports to US, %, 25 6% 5% 4% 3% 2% 1% % Latin American countries competition* vs. Chinese main export products, 25 *Value of exports to US from China in same product categories as country s exports, as % of country s total exports to US *Arithmetic average of the following indexes: CC= and CS= 1 n 1 - å a it - a 2 where ajt and ait equals the share of item n over total exports of countries j (China) and i in time t. å n å n ( a ) n it a a 2 n it å n n jt ( a ) n jt 2 n n jt Source: C.HJ.Kwan, Nomura Institute of Capital Markets Research Source: OECD Development Centre, 26 Based on Working Paper by Blázquez, Rodríguez and Santiso, 26

28 $ millions $ millions. $ millions. $ millions Price index (197=1) The Asian boom has had a strong impact on the trade balance of several Latin American countries China s and India s rising demand for Latin American commodities ( ) Increasing commodities prices (19-25) Agricultural Raw Materials Food Ores & Metals 2 16 Aluminium Copper Coffee Petroleum Rise in Indian imports from Latin America ( ) Rise in mineral exports from Latin America ( ) Sugar/mollasses/honey Copper ores/concentrates Fixed veg oil/fat, soft Petroleum and products (left) Copper ores/concentrates (right) Nickel ores/concs/etc (right) Source: OECD Development Centre, based on WITS Database, 27.

29 The rise of China and India also represents a wake-up call: The challenges of specialisation Latin America risks to fall on an excessive raw-material specialisation Source: OECD Development Centre, 27. Based on WITS and Comtrade data.

30 Exploiting comparative advantages: The proximity to export markets Mexico benefits from its geographic proximity to its major export markets 24 Days 4 Days 11,7 Km 16 Km Shipping time Mexico is more competitive in manufacturing more sophisticated products which require short delivery times

31 Infrastructure Indicator Colombia Venezuela India Peru Average LAC Chile China Brazil Mexico Argentina Colombia Argentina Average LAC Mexico Brazil India Peru Venezuela Chile China Days $ per container Infrastructure is a serious drawback for Latin America s trade development Time for exports Cost of exports Regional performance in the infrastructure pillar Latin America and C. India China Eastern Europe East Asian NIC's Source: Doing Business Report. World Bank, 27.

32 Latin American Economic Outlook 29 and more Fiscal Policy and development. Innovation and development. Migration and development.

33 Latin American Economic Outlook 28 Javier Santiso Acting Director Chief Development Economist OECD Development Centre Brussels, 13 th December 27