Brazil and The Shifting Wealth of Nations

Transcription

1 Brazil and The Shifting Wealth of Nations The Re-Balancing of the World Towards Emerging Markets ESADE Business School Javier Santiso, Professor of Economics and Director, ESADEgeo Ex Director General, OECD Director, Telefónica International. 1

2 1. The Shifting Wealth of Nations 2. Brazil Political Economy of the Possible 3. A Focus on China, Brazil and Latin America 2

3 Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition Growth Gap between Developing/Emerging & Advanced. Difference in Average Growth (%) Source: OECD Development Centre, 21 (based on Fosu, 21 OECD Development Centre Non-Resident Fellow Working Paper). 3

4 Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition Public Debt and Growth Dynamics. Average % of GDP Emerging and Developing Advanced Source: OECD Development Centre, 21 (based on IMF World Economic Outlook, Oct. 29) 4

5 Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition Reserve Holdings in USD Billion. Miles de millones Emerging and Developing Advanced Economies $6. 63% $5. $4. $3. 37% $2. $1. 2% 8% $ January 199 November 29 Source: OECD Development Centre, 21 (based on IMF data). 5

6 Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition 2. International reserves emerging countries 2. International reserves Developed countries USD billion Brazil China India Mexico Russia South Africa USD billion Germany France Netherlands Switzerland UK US Source: Based on Economist Intelligence Unit, 21. 6

7 Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition Public Debt and Sovereign Spreads Emerging Markets (big 5) Europe Risk Jan-8 Jan-8 Feb-8 Mar-8 Apr-8 May-8 Jun-8 Jul-8 Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Dec-8 Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Dec-9 Jan-1 Basis Points EM Markets: Embig weighted of Brazil, Mexico, Russia, Turkey & Phillipines Europe Risk: Median Greece, Ireland, Portugal and Spain 7

8 Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition Sovereign Credit Default Spreads. China Italy Indonesia Hungary South Africa Greece Morocco Ireland Ma Ap Ma Ju Jul Au Se Oc No De Ja Fe M A M Ju Ju A S O N D Ja F Basis Points Basis Points Mar- 9 May- 9 Jul- 9 Sep- 9 Nov- 9 Jan- 1 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Basis Points Basis Points Source: OECD Development Centre, 21 (based on Datastream data). 8

9 Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition Argentina Iceland Mar- 9 May- 9 Jul- 9 Sep- 9 Nov- 9 Jan- 1 Mar- 9 May- 9 Jul- 9 Sep- 9 Nov- 9 Basis Points Basis Points Jan- 1 India Spain Saudi Arabia United Kingdom Mar-9 Mar-9 Apr-9 May-9 May-9 Jun-9 Jul-9 Jul-9 Aug-9 Sep-9 Sep-9 Oct-9 Nov-9 Dec-9 Dec-9 Jan-1 Feb-1 Mar Apr- May Jun Jul-9 Aug Sep Oct- Nov Dec Basis Points Jan Feb Brazil Portugal Basis Points Source: OECD Development Centre, 21 (based on Datastream data). 9

10 Market Capitalization. Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition $25, Billion $2, Billion $15, Billion $1, Billion $5, Billion China Mobile AT&T Itau Unibanco BNP Paribas $12, Billion $1, Billion $8, Billion $6, Billion Petrobras Royal Dutch/Shell $2, Billion $18, Billion $16, Billion $14, Billion $12, Billion $1, Billion $8, Billion $6, Billion $4, Billion $2, Billion $7, Billion $6, Billion $5, Billion $4, Billion Tata Motors GM $4, Billion $3, Billion $2, Billion $2, Billion $1, Billion Source: OECD Development Centre, 21 (based on Datastream data). 1

11 Global Crisis and the Shifting Wealth of Nations: An Accelerator of Transition Miles de millones Vale S.A. Rio Tinto $15 $1 $5 $ Miles de millones Bradesco BBVA $8 $6 $4 $2 $ Miles de millones Miles de millones China Con. Bank JP Morgan $2 $15 $1 $5 $ Gazprom E.On $2 $15 $1 $5 $ Source: OECD Development Centre, 21 (based on Datastream data). 11

12 Global Crisis & Shifting Wealth of Nations: An Accelerator of Transition IPOs in 29: Largest 2 Asian vs. Total European. Miles de millones $4 $35 $3 $25 $2 $15 $ billion $1 $5 $ $7 billion LARGEST 2 Asian IPOs TOTAL European IPOs (147) OECD Development Centre, 21 (based on Dealogic data). 12

13 A Cognitive Crisis: The View from the South 13

14 A Cognitive Crisis: The View from the South 14

15 A Cognitive Crisis: The View from the South 15

16 A Cognitive Crisis: Rising South-South Linkages 2% Emerging/Developing Share of World Outward FDI flows 15% 1% 5% % Source: OECD Development Centre, 21 (based on IMF data) 16

17 New Investors are Emerging in Latin America: The Example of ADIA and Sovereign Wealth Funds ADIA s Investment Portfolio by Countries In March 21: Previ, the pension fund for Banco do Brasil SA employees, signed a memorandum of understanding with the sovereign wealth fund of Qatar to study a partnership in businesses in Brazil. Previ has also had talks on possible partnerships with the sovereign wealth fund of China. In 21, Singapore Temasek is staring investment operations in Brazil and Mexico, two countries where the SWF opened offices in 29. Opportunities also for major OECD multinationals: Santander raised Emirates funding from its listed subsidiary in Brazil. Source: Based on ADIA Annual Report,

18 Brazil tops the FDI destination ahead of Germany, France, Russia or Mexico 18

19 Brazilian multinationals are becoming global investors and the 21s will show more investment abroad 19

20 A Cognitive Crisis: Rising South-South Linkages $14 $12 $1 $8 $6 $4 $2 $- Exports + Imports South-North Trade 199= 25% of Southern Trade 29=4% of Southern Trade South-South Trade *data available for Q1-Q3 only Source: OECD Development Centre, 21 (based on IMF data) 2

21 $3 $2 $1 $ Brazilian Exports Miles de millones US China $15 $1 $5 $ Miles de millones $25 $2 $15 $1 $5 $ Indonesian Exports US China A Cognitive Crisis: Rising South-South Linkages Trade with the US vs. Trade with China $1 Indian Exports Miles de millones $8 $6 $4 $2 $ South African Exports Miles de millones US China US China Source: UN Comtrade data accessed via WITS, 21 21

22 1. The Shifting Wealth of Nations 2. Brazil Political Economy of the Possible 3. A Focus on China, Brazil and Latin America 22

23 Latin America experiences a major shift towards possibilism: The region became more open and exposed to exogenous shocks Source: OECD Development Centre calculations (based on the IMF's IFS database, Penn World Tables 6.2 and the World Bank's WDI database). 23

24 Latin America experiences a major shift towards possibilism: but the region built significant macro policy resilience. Source: OECD Development Centre calculations based on World Bank GDF and WDI databases, ECLAC Economic Indicators and Statistics database (BADECON), IMF IFS database, Institutional Investors and Datastream database. 24

25 Latin America experiences a major shift towards possibilism: fiscal and monetary policy became more effective and sustainable Source: Based on OECD, IMF, and National Ministries of Finance (Peru and Chile). 25

26 Latin America experiences a major shift towards possibilism: fiscal and monetary policy became more effective and credible EMBI spreads (basis points) Source: based Datastream, 21 26

27 Brazilian Growth in 28-21: Leading The Latin America Pack The very same year of the OECD global crisis, Brazil gets the investment grade The very same year of the global crisis in OECD countries, Brazil gets a record of 5 USD billion of FDI inflows 27

28 Brazilian Growth in 21: Leading The Latin America Pack Middle classes represent more than 5% of total population, 1 pp more than 5 years ago. 2 millon of people (1% of the population) have reached levels of 7 5 USD income over the past 5 years. Young brazilians and woman are the bulk of new incorporations. 28

29 Brazilian Growth in 21-23: Leading The Latin America Pack Brazil will catch up sooner than expected OECD countries Global Economics Commodities and Strategy Research End 29 Year in which Brazil will catch up with Estimated in 23 Estimated in 29 Italy France Germany Source: Based ongoldman Sachs,

30 Brazil still have challenges ahead (as Latin America) Public spending a on education and performance in PISA b 6 Finland Macao China Korea Average performance 5 4 Uruguay Lithuania Chile Brazil Mexico Argentina Colombia Spain Portugal Education spending per pupil is still five times lower in Latin America than in OECD countries... But quality is as big a problem as quantity Public spending per pupil in primary and secondary education in equivalent USD Notes: a) Public spending is calculated as average of available data since 2. b) Countries performance average on the PISA science scale Source: OECD Development Centre 28 based on PISA 26 Science Competences for Tomorrow s World and OECD and UNESCO World Educational Indicators, UNESCO's Institute of Statistics database. 3

31 Brazil still have challenges ahead (as Latin America) Income inequality before and after taxes and transfers (Gini coefficient, around 2) Source: Based on OECD Development Centre,

32 The Middle Class Bonus: Strong Supports for Democracy Source: Based on OECD Development Centre,

33 1. The Shifting Wealth of Nations 2. Brazil Political Economy of the Possible 3. A Focus on China, Brazil and Latin America 33

34 Latin America s economic fate is increasingly tied to China Latin America, US, and China GDP % oy a Latin China US Source: based on JP Morgan,

35 Latin America s economic fate is increasingly tied to China Latin America (ex Mexico): Commodity rally is driving exports higher Ex port grow th; oy a % Total commodity price index, oy a % Export growth Commodity prices Source: based on JP Morgan,

36 Latin America s economic fate is increasingly tied to China Exports to China as a share of total exports % Ecuador Mexico Colombia Venezuela Argentina Brazil Peru Chile Source: based on JP Morgan,

37 Latin America s economic fate is increasingly tied to China Latin America: Exports profile (% of total exports) Total Exports (% GDP) Commodity Exports Exports to US Exports to China Exports to EU Argentina 18,2 59,7 6,7 7,1 19, Brazil 9,7 55,4 1,2 13,2 22,2 Chile 3,5 74,8 11,3 23,1 22,1 Colombia 14,3 56,9 39,9 2,9 14,3 Ecuador 25,5 8,9 33,4,9 14,6 Mexico 26,2 2,9 8,6 1, 4,9 Peru 21,2 77,7 18,9 15,8 23,3 Venezuela 14,8 99,9 35,4 7,5 7,4 Latin America* 18,9 47,8 4,1 7,5 14, * GDP-weighted average Source: based on JP Morgan,

38 Latin America s economic fate is increasingly tied to China Latin America and China's term of trade are highly correlated Terms of trade indices; index 1996=1 Inv erted scale Latin America terms of trade China terms of trade Source: based on JP Morgan,

39 Latin America s economic fate is increasingly tied to China Breakdown of South America exports by destination % of total ex ports US EU China Source: based on JP Morgan,

40 Latin America s economic fate is increasingly tied to China China's export structure differs from Latin America's (except Mexico) Coefficient of specialization,8,6,4,2 Japan Brazil Chile Colombia Argentina,1,2,3,4,5,6 Venezuela Peru Coefficient of conformity US Thailand Korea Mexico Turkey Source: based on JP Morgan, 21. 4

41 Latin America s economic fate is increasingly tied to China China imports by region US$ bn 15 1 EU North America Latin America Source: based on JP Morgan,

42 Latin America not yet a major destination of China s FDI Latin America is not attracting as much FDI as other regions... Share of global FDI inflow s; % Source: based on JP Morgan,

43 Latin America not yet a major destination of China s FDI But it has the potential to attract more FDI inflows from China Chinese direct inv estments in specific regions; US$ bn Asia Latin America Africa Source: based on JP Morgan,

44 Bilateral Loans to Latin America are Setting New Links with China Recent Chinese bilateral loans to Latin America Country Year Institutions Amount (US$ bn) Instruments Argentina 29 Government 1, Currency swap Brazil 21 CDB 1 and Petrobras 1, Credit line 3 Ecuador 21 Exim Bank of China and Ecuador Government 1,7 Credit line linked to hydroelectric project Ecuador 29 PetroChina and PetroEcuador 1, Credit line Venezuela 21 PetroChina and CBD, PDVSA, Bandes, Govt 2, Credit line Venezuela 28 CDB 1 and Bandes 2 8, Credit line Source: based on JP Morgan,

45 Conclusion: Emerging Markets Leaders At the Top of OECD Multinationals and Business Schools More and more CEOs of Top OECD multinationals and BS More and more Multionationals mixing OECD and EM DNA s Indra Nooyi (India):CEO of Pepsico Vikram Pandit (India): CEO of Citibank. Carlos Ghosn (Brazil): CEO of Renault Nissan. Eduardo Leite (Brazil): Chairman of Baker& McKenzie. Mohamed El Erian (Egypt): CEO of PIMCO. Nitin Nohria (India): Dean of Harvard Business School. Sunil Kumar (India): Dean of Chicago Business School. Lakshmi N. Mittal (India): Chairman and CEO of Arcelor Mittal. Sergey Mikhaylovich Brin (Russia): Co-founder of Google. Carlos Brito (Brazil): Chairman and CEO of AB Inbev. Tidjane Thiam (French-Ivorian): CEO of Prudential. Paolo Rocca ( Italian-Argentinean): Chairman and CEO of Tenaris Alberto Weisser (Brazilian): Chairman and CEO of Bunge 45

46 Beyond Economics: A Re Balanced World Emerging Markets Leaders at the Top in International Organizations: Angel Gurría (México): Former Minister now Secretary General of the OECD. Based in Paris. Zhu Min (China): Former Deputy Governor of the People s bank of China as a special advisor of IMF Managing Director. Based in Washington DC. Juan Somavia (Chile): Director General of ILO. Based in Geneva. Justin Lin (China): Chief Economist of The World Bank Group. Based in Washington DC. 46

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