The Shifting Wealth of Nations - OECD · 2021. 4. 25. · A fundamental shift • Emerging economies are refinding their position in the global economy - a rebalancing of the wealth

The Shifting Wealth of Nations

A Latin American Perspective

Seminario ADI 2008Las clases medias en América Latina

3 October – Barcelona, Spain

Javier Santiso

Director and Chief Economist

OECD Development Centre

2

Decoupling or Rebalancing?1

The Macroeconomic Anchoring in Latin America2

A Key Partnership: Latin America and Asia3

Overview

4 Looking at the Future

A fundamental shift

• Emerging economies are refinding their position in theglobal economy - a rebalancing of the wealth of nations.

• We can no longer talk of “decoupling”, since the Centre isno longer the Centre, and the Periphery no longerPeriphery.

• What impacts does this rebalancing have on currenteconomic events?

4

The perspective is shifting

5


6


7


8


Joaquín Torres García -América Invertida, 1943

9

Emerging countries’ increased

presence in the world economy

0

5

10

15

20

25

190

0

193

0

196

0

199

0

20

20

Tri

llio

ns

US

D

Comparative Levels of GDPChina, United States and Latin America

USA

China

Latin

America

Source: OECD Development Centre, 2008; based on Maddison (2003 and 2007).

0

1

2

3

4

5

6

7

8

17

00

17

15

17

30

17

45

17

60

17

75

17

90

18

05

18

20

18

35

18

50

18

65

18

80

18

95

19

10

19

25

19

40

19

55

19

70

19

85

20

00

20

15

20

30

Comparative Chinese and US GDPlog 1990 $

log US log US China

• China’s economy is estimated to overtake the US by 2015 even when you account for a slow-down in growth as the technological frontier is reached (Maddison 2007/ OECD Development Centre)

10

A Global Rebalancing effect…

Source: OECD Development Centre, 2008; based on Maddison 2007.

0

10

20

30

40

50

60

1700 1820 1952 1978 2003 2030

Developed worldshare of world GDP, %

0

10

20

30

40

50

60

1700 1820 1952 1978 2003 2030

China and IndiaShare of world GDP, %

China India

11Source: OECD Development Centre, based on IMF

…with emerging countries

increasingly driving growth

• The composition of growth and output is changing. High contribution of Emerging countries is driving world growth.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Contribution to global GDP growth

Developed countries

Emerging and developing countries

12

Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).

Note: Emerging countries refer to Latin American and Asian only.

Emerging economies have become

major actors in mobilising capital

13

Trade patterns have evolved

substantially after BRICs entry

Source: OECD Development Centre, based on World Development Indicators, 2008.

5%

14%

16%

62%

3%

1996

8%

21%

17%

51%

2%2006

Low and middle income to low and middle income

Low and middle income to high income

High income to low and middle income

High income to high income

Unspecified

Shift in World Merchandise Trade

14

Emerging Market Multinationals are

growing in presence

0

20

40

60

80

100

120

140

160

180

Un

ited

Sta

tes

Ja

pa

n

Fra

nce

Ger

ma

ny

Bri

tain

Ch

ina

Ca

na

da

Th

e N

eth

erla

nd

s

So

uth

Ko

rea

Sw

itze

rla

nd

Ita

ly

Sp

ain

Au

stra

lia

Ind

ia

Sw

eden

Ta

iwa

n

Bel

giu

m

Bra

zil

Mex

ico

Ru

ssia

Global Fortune 500Companies by country, 2007

0

5

10

15

20

25

30

35

40

Top non-financial EMNCsby country (ranked by foreign assets, 2007)

Source: OECD Development Centre, based on Fortune 500, 2007

Source: OECD Development Centre, based on UNCTAD, World Investment Report, 2007

15

Traditional partners are

becoming less important

0%

5%

10%

15%

20%

25%

30%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Emerging Countries Exports to US and Europeshare of total

Europe 25 USA

Source: OECD Development Centre, based on WITS/Comtrade

16

Emerging economies have

accumulated foreign reserves…

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

m

i

l

l

i

o

n

$

International reserves,selected emerging countries

Brazil

China

India

Mexico

Russia

South Africa

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

198

8

199

0

199

2

199

4

199

6

199

8

20

00

20

02

20

04

20

06

International reserves,selected developed countries

Germany

France

Netherlands

Switzerland

UK

US

Source: OECD Development Centre, based on Economist Intelligence Unit

17

…with the successive creation of

Sovereign Wealth Funds

1.43.2 4.2

1617.9

2123.4

36.3

4245

63.5

0

10

20

30

40

50

60

70

Hedge funds SWF Reservesex gold

Insurancecompanies

Pension funds

Investmentfunds

Public debt securities

Private debtsecurities

Stock market capitalisation

World GDP Bank assets

B

i

l

l

i

o

n

$

Asset size, 2007

• Increasingly important in the financial world, Sovereign Wealth Funds are predominantly an emerging world phenomenon.

Source: OECD Development Centre, based on Deutsche Bank

18

A predominantly emerging-world

phenomenonSovereign Wealth Funds (SWFs) by origin , 2008

NumberTotal assets (USD bn)

Middle East 7 1533

Asia 9 867

OECD 10 489

Russia & Central Asia 4 177

Africa 7 109

Latin America 4 23

Pacific islands 6 1.2

Total 47 3,194

Source: OECD Development Centre, based on Deutsche Bank

19




Overview


20

Latin America has managed to

anchor its macroeconomic stance

Source: OECD Development Centre, based on Thompson DataStream and EUI, 2008.

Primary Fiscal Balance (% GDP)

21

GDP growth comes in hand with

credible economic policies

Source: OECD Development Centre, based on ECLAC database 2008

-20%

0%

20%

40%

60%

80%

100%

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

Argentina

Ecuador

Venezuela

Peru

Inflation (% change)

22

External position in the region has

been reinforced

Source: OECD Development Centre, based on Thompson DataStream and EUI, 2008.

Current Account Balance (% GDP)

23

Public debt has come down…

• Favourable external conditions have been exploited to accomplishremarkably good public debt management.

• Buybacks of external debt, international bonds in local currency…

0

2

4

6

8

10

12

14

16

18

20

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2008F

Total Emerging Markets External Debt (% of GDP)

Source: OECD Development Centre, based on JP Morgan

24

… coupled with a reduction of

the debt service• Excellent debt management has improved public solvency and

challenged the “original sin”.

Sovereign Debt Service, % of GDP Sovereign Debt Service, % of GDP

Source: OECD Development Centre, based on JP Morgan

25




Overview


26

A third pillar of growth: Asia

• Trade with China and India is increasing all over the emerging world.

• For the first time, Latin American are faced with three centres of growth: The US, Europe and China.

Source: OECD Development Centre, Latin American Economic Outlook 2008

0

10000

20000

30000

40000

50000

60000

70000

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

USD

Th

ou

san

ds

Chinese and Indian Trade with Latin America

Chinese Exports to LAC

Indian Exports to LAC

Chinese Imports from LAC

Indian Imports from LAC

27

China - an increasingly important

destination for EM exports

0

10

20

30

40

50

60

70

80

90

Exports to US % of total 1995 and 2006

1995 2006

Source: OECD Development Centre, 2008 based on WITS Comtrade

0

5

10

15

20

25

Exports to China % of total, 1995 and 2006

1995 2006

28

China and Commodity Prices

• Chinese and Indian demand for commodities as well as commodity prices are on the increase.

• This is good news in the short term, both for Latin American and African exporters. It could be bad news in the long run.

0

2

4

6

8

10

12

1999 2000 2001 2002 2003 2004 2005 2006

Bill

ion

s

China’s demand for Latin American commodities (1998-2005)

Petroleum and products Metal ores/metal scrap Food and live animals

Source: OECD Development Centre, Latin American Economic Outlook 2008

29

Increasing commodity prices is benefiting a number of emerging country exports, though there is also a downside in terms of increasing food prices.

0

50

100

150

200

250

300

350

400

450

500Petroleum

Copper

Aluminium

Gold

0

50

100

150

200

250

300

350

400

450

500

Cocoa

Tea

Coffee (robusta)

Coffee (arabica)

China and Commodity Prices

Source: OECD Development Centre, based on World Bank, 2008

30

Higher diversity in export destinations, but higher concentration in products exported.

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Ven

ezu

ela

Ecu

ad

or

Ch

ile

Pa

na

ma

Bo

liv

ia

Per

u

Pa

rag

ua

y

Ho

nd

ura

s

Gu

ya

na

Uru

gu

ay

Co

lom

bia

Co

sta

Ric

a

Mex

ico

Gu

ate

ma

la

Bra

zil

Export Concentration in Products for Latin America

Herfindahl Hirschman Index

2001 2006

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

Mex

ico

Ven

ezu

ela

Ho

nd

ura

s

Gu

ate

ma

la

Ecu

ad

or

Pa

na

ma

LA

C a

ver

ag

e

Co

sta

Ric

a

Co

lom

bia

Bo

liv

ia

Nic

ara

gu

a

Pa

rag

ua

y

Per

u

Gu

ya

na

Uru

gu

ay

Ch

ile

Arg

enti

na

Bra

zil

Lo

w c

on

ce

n.

H

igh

co

nc

en

.

Export Concentration by Destination, Latin America

Herfindahl Hirschman Index

2000 2005

Latin America

Source: OECD Development Centre, Latin American Economic Outlook, 2008

31




Overview


32

Effect of Recessions

0

1

2

3

4

5

6

7

GD

P g

row

th %

Africa and US/EMU recessions

-4

-2

0

2

4

6

8

10

GD

P g

row

th %

Latin America and US/EMU recessions

Source: OECD Development Centre, based on IMF 2008

33

Effect of Recessions

-8

-6

-4

-2

0

2

4

6

8

10

12

GD

P g

row

th %

Mexico and US/EMU recessions

-10

-5

0

5

10

15

GD

P g

row

th %

Brazil and US/EMU recessions

Source: OECD Development Centre, based on IMF 2008

34

Emerging Countries and US GDP

-4

-2

0

2

4

6

8

197

0

197

1

197

2

197

3

197

4

197

5

197

6

197

7

197

8

197

9

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Growth rates: US and Emerging Countries, %

United States Emerging

• …Emerging Countries have been performing better so far

Source: OECD Development Centre, based on IMF.

35

Latin America and US GDP• There is however great difference in the US growth correlation between different Latin

American countries.• Also, Latin America appears to be less dependent on US growth as interaction with the

Asian giants increases.

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Growth CorrelationLatin America and the United

States

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

19

70

19

73

19

76

19

79

19

82

19

85

19

88

19

91

19

94

19

97

20

00

20

03

20

06

US and Latin American growth, %

Latin America

United States

Source: OECD Development Centre, based on IMF. Source: OECD Development Centre, based on Credit Suisse

36

Source: OECD Development Centre, based on Latin American Consensus Forecasts, 2008.

Note: The OECD is not an official provider for macroeconomic forecasts in Latin America. Data presented is based on

monthly surveys in financial institutions.

The economic consensus in the

region is (still) positiveR eal G DP Co nsu m e r Pr ic es C urrent A cc oun t]

% inc rea se % inc rea se Ba la nce U SD bn

A rg entin a 6.2 10.4 4 .7

B oliv ia 4.5 9.1 1 .3

B raz il 4.7 4.1 -3 .6

C hile 4.9 3.6 4 .3

C olom bia 5.4 4.4 -6 .8

C ost a R ic a 5.1 7.7 -1 .4

D om inic an R epub lic 4.7 5.7 -1 .4

E c ua dor 2.2 3.2 0 .5

M exico 3.2 3.8 -12 .8

P an am a 7.5 3.9 -1 .8

P arag ua y 4.1 7.2 -0 .4

P eru 6.8 2.3 1 .1

U rug ua y 4.7 6.2 -0 .4

V en ez ue la 6.0 20.9 14.4

L a tin Am eric a 4.5 5.6 -2 .0

37

Thank you!

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The Shifting Wealth of Nations - OECD · 2021. 4. 25. · A fundamental shift • Emerging economies are refinding their position in the global economy - a rebalancing of the wealth