Business & Economics

Brazil’s President Dilma Rousseff riding towards a future of better infrastructure

As developed nations continue to stagnate and Asian tigers appear to be slowing down, Latin American countries remain resilient.  Brazil launched a campaign for competitiveness, Argentina’s trade surplus soars and Mexico’s middle class remains.  Even Haiti received praise for measures to improve its business environment.

Through a new campaign for competitiveness, President Dilma Rousseff is determined to reduce the business killing deficiencies in infrastructure and tax structure, known as the “Brazil Cost.”  She plans to continue reducing interest rates, below the historic low of 7.5 percent, while cutting certain taxes, increasing the rate of loan disbursements by 8 percent, and reducing electricity costs by 16.2 percent for consumers and 28 percent for industry.  Additionally, she has vowed more stimulus amid a 26 percent drop in job growth in the first half of 2012, as well as massive improvements in transportation infrastructure to break the ‘logistical bottlenecks’ that contribute to the “Brazil Cost.”

Moreover, her agenda includes an historic affirmative action law, which seeks to ensure that half of all students at Brazil’s 59 federal universities come from public schools.  The new bill, known as the Law of Social Quotas, was approved 80-1 by the Brazilian Senate in early August.  Officials expect the number of black students at these universities to rise from 8,700 to 56,000, a small step in the right direction in a country where 51 percent of citizens identify as black or mixed-race.

Further south, Argentina’s protectionist trade policy contributes to a growing trade surplus, while foreign investment continues.  President Cristina Fernandez has been widely criticized for her restrictions on imports, expropriation of foreign corporations and measures to ban the purchase of US dollars.  While she might have angered her trading partners – Japan, EU, and US filed complaints to WTO – her policies have not scared away all foreign investment and the nation’s trade surplus has doubled to $1.64 billion in August.   Procter and Gamble has agreed to invest $120 million in a new packaging plant, Monsanto will invest $329 million in a corn seed factory, and Russia’s state-owned Gazprom has agreed to supply liquefied natural gas (LNG) to Argentina’s YPF.

In 1960, eighty percent of Mexico’s population lived in poverty; today 62 percent identify as middle class and extreme poverty now effects less than a quarter of the population.  The change manifests most strongly in immigration, which reached net zero for the first time in 2011.  Though the recession lowered Mexico’s per capita income by 9.3 percent, economic opportunities and more stable employment at home have continued to outcompete with US alternatives.

Meanwhile, as Caribbean economies struggle to grow, Haiti received praise for new measures, which seek to improve the country’s business environment.  The government reduced the time it takes to acquire a construction permit from 1,110 days to 60 days and lowered the registry time for new businesses from 180 days to 10.  Another $300 million industrial park, funded by the US government and the Inter-American Development Bank (IADB), is set to create 60,000 jobs.

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Follow Up

Tiny Uruguay outshines neighbor Argentina with investors

A tale of two neighboring leftists

9 September, 2012

McClatchy Media

[Uruguay], the long-overlooked South American nation, which lacks Argentina’s flair for political melodrama and Brazil’s clout and ambition, finally is emerging from their shadows, becoming a darling among investors and even a model for democracy.

Uruguay was the only South American country in the “Full Democracy” category.  Its overall 17th rank was even ahead of the United States, at 19, and the United Kingdom, at 18.

Uruguay surpassed the United States in the index in civil liberties, functioning of government, and electoral process and pluralism.

Alberto Bernal, with Miami-based Bulltick Capital said, “[In Uruguay], It is not a question of ideology. You can be as much of a leftist as you want, but don’t change the rules of the game. If you say you are going to respect laws, then respect them.” By contrast, with Uruguay’s neighbor, “There is no certainty in Argentina, because you know the rules of the game could change.”


South America’s two largest economies reconciled union disputes and judicial rulings this week, allowing work to continue on major projects.

On Monday, a strike led by unions representing 90 percent of government employees ended in Brazil, on promises to raise public sector wages by 15.8 percent, over the next three years. In another development, work resumed on the Belo Monte dam after Brazil’s Supreme Court reversed a previous ruling that had suspended the project.  The hydro plant will be the world’s third largest, generating from 4,751 MW to 11,233 MW, depending on the flow of the Xingu River.  Upon completion, the project will flood 195 square miles of rainforest, affecting more than 66 communities.

“Stop Belo Monte”

On Tuesday, in Argentina, an alliance of government, unions, and business leaders agreed to raise the minimum wage by 25 percent amid continued inflation and slow economic growth. Monthly minimum wage will rise to 2,670 pesos (US$ 576) on Sept. 1 and to 2,875 pesos (US$ 621)            on  Feb. 1.

But other strikes continue elsewhere in the Americas.  Last week In Colombia, a hunger strike ended, in which four GM workers sowed their lips shut after being fired for contesting the automotive company’s health policy.  The hunger strike marked the culmination of nearly a year of protest.  Strikers accused GM of falsifying the medical records of factory workers, to absolve the company of responsibility for health complications derived from working at the plant.  On Aug. 22, after three weeks of fasting, GM agreed to mediation and protest leaders removed the stitches and dug into a meal of roast chicken and arepas (Colombian pancake).  Despite some progress, the strikers continue to occupy an area surrounding the US Embassy in Bogotá.

And in Chile, students have taken to the streets once more to demand the affordability of higher education.  Tuesday’s protests swelled to over 150,000 supporters.  Last year, students led more than 40 major demonstrations through the capital of Santiago.

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Follow Up

GM’s Hunger Games

Mediation fails to secure compensation for strikers

10 September, 2012

The American Prospect

Under mounting public pressure, Colmotores agreed to negotiations facilitated by the U.S. Federal Mediation and Conciliation Service on August 23.

The talks, however, did not result in GM rehiring the workers or compensating them for lost wages. After three and a half days of mediation, the talks were broken off last Friday. The hunger strike and U.S. protests have begun anew, and what happens next is anyone’s guess.

Colombian GM worker takes hunger strike to Washington

Strikers take the fight to GM’s its home turf

11 September, 2012

Joey O’Goreman, Colombia Reports

Colombian General Motors (GM) worker Jorge Parra is on hunger-strike again, and this time he is in Washington D.C.

After a mere three-and-a-half days the talks were broken off when GM refused to meet the protestors demands to be rehabilitated and retrained so they could resume working in the company.

“The only thing GM offered was $6,000 to share between the 12 workers, that is not even enough to buy a hot-dog stand,” said Parra.

On 21 Aug., Mitt Romney announced a trade policy “focused primarily, but not exclusively, on Latin America.”  The presidential hopeful outlined his desire to rekindle the flames of a Pan American free trade zone, a fire smothered in 2005 by opposition from Argentina, Brazil, Uruguay, Chile, Venezuela, Ecuador, Cuba, Nicaragua, Honduras, and Dominica.  The Free Trade Area of the Americas (FTAA) proposed in 1994 by President Clinton, would have created a 34 nation trading bloc – arguably the largest and most ambitious in the world, given the variability of development profiles among potential member states.

Widespread opposition to the plan contested the viability of free-trade between countries of such unequal economic power.  Latin American states feared the destruction of domestic production, in the face of highly competitive US firms.  The failed FTAA, partly inspired Venezuela, Bolivia, Ecuador, Cuba, Honduras, Nicaragua, and Dominica to form their own bloc, the Bolivarian Alternative for the Americas (ALBA): a trade agreement based on a reciprocal barter system.  Meanwhile, even US congress shied away from the proposal, over concerns that cheap labor costs in Latin America would lead to outsourcing, as well as the erosion of US agriculture to the farming giants of Brazil and Argentina.

The logo that never made it

Romney’s new plan seeks to build upon a network of smaller free-trade agreements (FTAs) already in place between the US and individual Latin American countries.  He proposes, joining these agreements to create a larger zone.  For example, separate FTAs between the US and Panama, and the US and Chile would be combined – requiring Chile and Panama to lower trade barriers with each other.

However, such a plan would most likely fail or produce an impotent version of an original proposal. Simply put, the US has little power to sway the Brazilian giant, which already scrambles to protect its resilient, yet troubled domestic industry.  Additionally, the US would bypass Argentina and other left-leaning ALBA states from an agreement.  Under these conditions, a Pan American free trade zone would include Chile, Colombia, Honduras, Panama, Costa Rica, Peru and Mexico.  But the US already has regional FTAs with Central America and Mexico, and Bilateral ones with Peru, Colombia, and Chile.  So essentially, a positive outcome means exactly what we already have, but under a different name.  Similarly, a negative outcome means exactly what we already have, plus another diplomatic failure.

Free Trade with the US is just plain unpopular.  The North American Free Trade Agreement (NAFTA) destroyed the livelihoods of hundreds of thousands of Mexican farmers at the gain of US industrial agriculture.  The Central American Free Trade Agreement (CAFTA) is not any better.  Moreover, increased economic power in Latin America combined with a historical distrust of US proposals, makes a comprehensive plan lead by the US extremely unlikely.  With Romney representing the hardline conservative face of US diplomacy in the Americas, Latin American leaders would be even more skeptical of a ‘mutually beneficial’ agreement.

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Follow Up

Peru Wants to Negotiate Free-Trade Pact With Indonesia

Peru finds new Asian partners

10 Septemeber, 2012


LIMA, Peru–Peru wants a free-trade pact with Indonesia, adding to the number of other trade liberalization agreements the Andean nation has signed in recent years.

“Indonesia is a large south-east Asian nation with about 250 million persons. It is a multicultural nation and has an extremely large market.”—minister-20120910-01096

Ever since Argentina expelled Spain’s Repsol from developing the country’s oil fields, trade relations between the two nations have deteriorated.  Spain has since retaliated by denying many Argentine imports, most notably biodiesel, which composes 20-30 percent of all Argentine trade with Spain.

In response to the Spanish announcement – meant to protect the local production of alternative energy – Argentina filed a complaint with the WTO.  Argentina’s Foreign Ministry contested the Spanish decision as “an attempt to stop developing countries gaining more control of global value chains and evolving beyond their role as suppliers of raw materials.”  The government lamented the potential loss of $1 billion per year in export earnings, lambasting the Spanish policy as “protectionist.”

While the new barriers do block developing countries such as Argentina and Indonesia from selling their biodiesel to Spain, the intention was not to suppress development.  When certain countries conduct poor trade relations with others, they are liable to retaliation.  Back in April, the Argentine Government seized all 57 percent of Spanish Oil Firm Repsol’s stake in the development of oil resources.  Nationalization, which replaced Repsol with state-owned YPF, was made without proper compensation.  Moreover, Argentina has repeatedly increased tariffs and raised import barriers over the last decade.

This year alone, Argentina has been hit by a triple complaint at the WTO, joining China, which faces a similar hat trick maneuver.  The EU, Japan, and the US have all cried foul play to the WTO.  They criticize Latin America’s No. 3 economy of a policy of “trade balancing,” which requires importers to purchase equivalently valued Argentine goods to make up the difference in trade.  Argentina is expected to post a $674 million surplus for July, on resilient farm exports, despite an ongoing drought.

The triple complaint reflects a larger trend of trade disputes arising in 2012.  So far, the WTO received 18 complaints this year, more than double the eight complaints filed over the previous year.  The spike in disagreements reflects global uncertainty in the face of continued Euro Zone crises and a potential slowdown in Asia.  Countries have leaned towards protectionism to combat rising and persistently high unemployment.

In Brazil, the economic boom among the middle class keeps churning, while the fortunes of the wealthy erode with the falling Brazilian stock market.  Since a peek on 13 Mar, 2012, Brazilian stock index Bovespa lost around 14 percent of its value.  The drop comes amid a slowdown in Asia, stoking fears of a global stagnation.  The country’s richest man, Eike Batista, lost half his $30 billion fortune as a result.  Similarly, stock in Brazilian iron mining giant Vale lost 32 percent of its value since last September.  For the country as a whole, last year’s 7.5 percent expansion in GDP is expected to be followed by a measly 1.5 percent for 2012.

Meanwhile, inflation is stable, unemployment continues to fall, and consumer confidence remains strong.  The domestic economy has yet to fear the troubles of outside world.  From 2001-2011, Brazil’s GDP per capita increased by about 30 percent, the product of rising demand in China coupled with increases in the minimum wage and social spending under President Luiz Inácio da Silva “Lula.”  Economic expansion and better wealth distribution have swelled the ranks of the middle class by more than 40 million over the same period.  Today, 105 million Brazilians classify as middle class, which together account for 46 percent of the country’s buying power.  The effect has encouraged a wave of consumer spending and investment in small business.  Those who once labored informally as nannies and housekeepers have used their extra wages and available credit to start their own enterprises.

A new small business owner serves a client at her salon in Paraisopolis, Sao Paulo’s largest slum

Back in 2000, there were 4.2 million small businesses with less than 100 employees, now there are 6.1 million firms with a similar size workforce.  Likewise, the number of large business has double to 60,000.

Economists worry that the optimism is tentative, as continued stagnation may eventually raise unemployment.  However, a bubble of resilient and upwardly mobile Brazilians may continue to compensate for falling demand in China – at least on the street level.  The success of middle income consumers could even trickle up the ladder to the elite, as their confidence flows back to large domestic manufacturers and retail companies.

So thank China for the influx of cash; but the Brazilians can take it from here.

Students at El Sistema Training Center

Since 1975, Venezuela’s El Sistema program has given impoverished Venezuelan children the opportunity to pursue classical music.  From preschoolers using paper cutouts of instruments to training the world-class Simón Bolivar Orchestra, the program has touched the lives of more than 300,000 children.

And these kids don’t mess around.  Watch them  take on Leonardo Bernstein’s Mambo.  For more, this short documentary profiles the program’s history and accomplishments.  Some notable successes include, Gustavo Dudamel – the conductor of the Los Angeles philharmonic and one of classical music’s rising stars.

El Sistema’s ability to produce world class talent from some of the least likely places has attracted support throughout Venezuela and the world.  Currently, President Hugo Chavez’s government spends $64 million, a year on the program.  Different versions of El Sistema have appeared in many countries.  This Cleveland Neighborhood adopted a similar approach under the same name.

A performance conducted by Gustavo Dudamel

A performance conducted by Gustavo Dudamel

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