The Shifting Wealth of Nations, a Latin American Perspective

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<ul><li> 1. The Shifting Wealth of Nations A Latin American Perspective Centre dAnalyse Stratgique PremierMinistre 23 September Paris, France Javier Santiso Director and Chief Economist OECD Development Centre</li></ul> <p> 2. Overview Decoupling or Rebalancing? 1 The Macroeconomic Anchoring in Latin America 2 A Key Partnership: Latin America and Asia 3 4 Looking at the Future 3. A fundamental shift </p> <ul><li>Emerging economies are refinding their position in the global economy - a rebalancing of the wealth of nations. </li></ul> <ul><li>We can no longer talk of decoupling , since the Centre is no longer the Centre, and the Periphery no longer Periphery. </li></ul> <ul><li>What impacts does this rebalancing have on current economic events? </li></ul> <p> 4. The perspective is shifting 5. The perspective is shifting 6. The perspective is shifting 7. The perspective is shifting 8. The perspective is shifting Joaqun Torres Garca - Amrica Invertida, 1943 9. Emerging countries increased presence in the world economy Source: OECD Development Centre, 2008; based on Maddison (2003 and 2007). </p> <ul><li>Chinas 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) </li></ul> <p> 10. A Global Rebalancing effect Source:OECD Development Centre, 2008; based on Maddison 2007 . 11. Source: OECD Development Centre, based on IMF with emerging countries increasingly driving growth </p> <ul><li>The composition of growth and output is changing.High contribution of Emergingcountriesis driving world growth.</li></ul> <p> 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 onWorld Development Indicators, 2008. Shift in World Merchandise Trade 14. Emerging Market Multinationals are growing in presence Source:OECD Development Centre, based onFortune 500, 2007 Source:OECD Development Centre, based onUNCTAD, World Investment Report, 2007 15. Traditional partners are becoming less important Source:OECD Development Centre, based onWITS/Comtrade 16. Emerging economies have accumulated foreign reserves Source:OECD Development Centre, based onEconomist Intelligence Unit 17. with the successive creation of Sovereign Wealth Funds </p> <ul><li>Increasingly important in the financial world, Sovereign Wealth Funds are predominantly an emerging world phenomenon. </li></ul> <p>Source:OECD Development Centre, based onDeutsche Bank 18. A predominantly emerging-world phenomenon Source:OECD Development Centre, based onDeutsche Bank Sovereign Wealth Funds (SWFs) by origin , 2008 Number Total assets (USD bn) Middle East7 1533 Asia 9 867 OECD10 489 Russia &amp; Central Asia4 177 Africa7 109 Latin America4 23 Pacific islands 6 1.2 Total 47 3,194 19. Overview Decoupling or Rebalancing? 1 The Macroeconomic Anchoring in Latin America 2 A Key Partnership: Latin America and Asia 3 4 Looking at the Future 20. Latin America has managed to anchor its macroeconomic stance Source: OECD Development Centre, based onThompson 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 Inflation (% change) 22. External position in the region has been reinforced Source: OECD Development Centre, based onThompson DataStream and EUI, 2008. Current Account Balance (% GDP) 23. Public debt has come down </p> <ul><li>Favourable external conditions have been exploited to accomplish remarkably good public debt management. </li></ul> <ul><li>Buybacks of external debt, international bonds in local currency </li></ul> <p>Source: OECD Development Centre, based on JP Morgan 24. coupled with a reduction ofthe debt service </p> <ul><li>Excellent debt management has improved public solvency and challenged the original sin .</li></ul> <p>Sovereign Debt Service, % of GDP Sovereign Debt Service, % of GDP Source: OECD Development Centre, based on JP Morgan 25. Overview Decoupling or Rebalancing? 1 The Macroeconomic Anchoring in Latin America 2 A Key Partnership: Latin America and Asia 3 4 Looking at the Future 26. A third pillar of growth: Asia </p> <ul><li>Trade with China and India is increasing all over the emerging world. </li></ul> <ul><li>For the first time, Latin American are faced with three centres of growth: The US, Europe and China. </li></ul> <p>Source:OECD Development Centre, Latin American Economic Outlook 2008 27. China - an increasingly important destination for EM exports Source: OECD Development Centre, 2008 based on WITS Comtrade 28. China and Commodity Prices </p> <ul><li>Chinese and Indian demand for commodities as well as commodity prices are on the increase.</li></ul> <ul><li>This is good news in the short term, both for Latin American and African exporters. It could be bad news in the long run. </li></ul> <p>Source:OECD Development Centre, Latin American Economic Outlook 2008 29. </p> <ul><li>Increasing commodity prices is benefiting a number of emerging country exports, though there is also a downside in terms of increasing food prices. </li></ul> <p>China and Commodity Prices Source : OECD Development Centre, based on World Bank, 2008 30. </p> <ul><li>Higher diversity in export destinations, but higher concentration in products exported. </li></ul> <p>Latin America Source: OECD Development Centre, Latin American Economic Outlook, 2008 31. Overview Decoupling or Rebalancing? 1 The Macroeconomic Anchoring in Latin America 2 A Key Partnership: Latin America and Asia 3 4 Looking at the Future 32. Effect of Recessions Source: OECD Development Centre, based on IMF 2008 33. Effect of Recessions Source: OECD Development Centre, based on IMF 2008 34. Emerging Countries and US GDP </p> <ul><li> Emerging Countries have been performing better so far </li></ul> <p>Source: OECD Development Centre, based on IMF. 35. Latin America and US GDP </p> <ul><li>There is however great difference in the US growth correlation between different Latin American countries. </li></ul> <ul><li>Also, Latin America appears to be less dependent on US growth as interaction with the Asian giants increases. </li></ul> <p>Source: OECD Development Centre, based on IMF. Source: OECD Development Centre, based on Credit Suisse 36. Source: OECD Development Centre, based onLatin American Consensus Forecasts , 2008.Note: The OECD is not an official provider for macroeconomic forecasts in Latin America. Datapresented is based onmonthly surveys in financial institutions. The economic consensus in the region is (still) positive 37. </p> <ul><li>Thank you! </li></ul> <ul><li>http://www.oecd.org/dev </li></ul>