Archive for the ‘Economic’ Category

What is the Fiscal Cliff? And How It Can Drive America into Recession | Kapitall   Leave a comment

“Now that President Obama has won a second term in office, the attention of Wall Street has immediately turned onto the looming fiscal cliff. To underline the importance of the issue, asset manager Blackrock along with several other state pension boards took out full page advertisements on the eve of the election in the Wall Street Journal, New York Times and Washington Post to warn of the impending disaster.

Furthermore, on October 18, CEOs of major banks including JP Morgan, Goldman Sachs and Bank of America, signed an open letter pressing Congress and the President to “reach a bipartisan deal to avoid” the looming fiscal cliff. As it stands, should current laws stay exactly the same going into 2013, commentators are almost certain that the fiscal cliff will bring about another recession in the United States.

 

Just what is this fiscal cliff, and why is it so important for investors?

Essentially, the fiscal cliff represents a series of fiscal stimulus that will expire on the stroke of midnight on Dec 31, 2012. The four main drivers of the fiscal cliff are 1) the expiry of the Bush tax cuts, 2) expiry of the payroll tax cut, 3) ending of the emergency unemployment compensation passed in 2008 and 4) automatic budget cuts due to the Budget Control Act.

The expiry of the package of tax cuts, spending stimulus, and emergency benefits will all occur in 2013 and it is expected to contract the economy immediately by more than US$500 billion (>3% of GDP), almost guaranteeing the end of the economic recovery and ushering in a new recession.

AN : so the question in bold is a question which leads one to think. And questions demand answers. And answers take thoughts turned into words. But for the ” Ah Ha ! Eureka moment ” to strike …the picture settles the matter. Those little projections on top there…those are people….and people…that is a loooong way down from the cliff……

http://goo.gl/8Qgjx

via What is the Fiscal Cliff? And How It Can Drive America into Recession | Kapitall.

Posted November 7, 2012 by arnoneumann in Economic, Visualization

Tagged with , ,

BBC News – Viewpoint: Manuel Castells on the rise of alternative economic cultures   Leave a comment

“Newsnight economics editor Paul Mason interviewed Prof Castells in front of an audience at The London School of Economics for BBC Radio 4’s Analysis about his latest book Aftermath: The Cultures of the Economic Crisis.

Prof Castells suggests we may be about to see the emergence of a new kind of capitalism, with businesses growing out of the counter-cultures of the last 20 years. Here are some extracts from their conversation. :

Paul Mason: How big is this culture change?

“It is fundamental because it triggers a crisis of trust in the two big powers of our world: the political system and the financial system.

People don’t trust where they put their money and they don’t trust those who they delegate in terms of their vote.

It’s a dramatic crisis of trust and if there is no trust, there is no society.

“What we are not going to see is the economic collapse per se because societies cannot work in a social vacuum. If the economic institutions don’t work, if the financial institutions don’t work, the power relations that exist in society change the financial system in ways favoured to the financial system and it doesn’t collapse. People collapse, not the financial system.

“The notion is the banks are going to be alright, we are not going to be alright. So there is a cultural change. A big one. Total distrust in the institutions of finance and politics.

“Some people start already living differently as they can – some because they want alternative ways of life, others because they don’t have any other choice.

“What I refer to is about the observation of one of my latest studies on people who have decided not to wait for the revolution – to start living differently – meaning the expansion of what I call in a technical term ‘non-capitalist practices’.

“They are economic practices but they don’t have a for-profit motivation – such as barter networks; such as social currencies; co-operatives; self-management; agricultural networks; helping each other simply in terms of wanting to be together; networks of providing services for free to others in the expectation that someone will also provide to you. All this exists and it’s expanding throughout the world.”

Continue reading the main story

AN : Profound treatise ! Do read the whole article and delve further into what is actively happening in this transformational, disruptive thinking area of real economics.

http://goo.gl/6Prdv

via BBC News – Viewpoint: Manuel Castells on the rise of alternative economic cultures.

Disney Buys ‘Star Wars’ Producer Lucasfilm for $4 Billion – Bloomberg   Leave a comment

Walt Disney Co. (DIS) agreed to buy George Lucas’s Lucasfilm Ltd. for $4.05 billion in cash and stock, adding “Star Wars” and “Indiana Jones” to a roster of film hits including “The Avengers” and “Finding Nemo.”

Lucas, 68, the sole owner, will receive half in cash and the balance in stock, becoming a major investor in the film, theme-park and TV company, according to a statement today from Burbank, California-based Disney. The first of a new trilogy of “Star Wars” films will be released in 2015, Disney said.

The deal brings Disney, which paid a combined $11 billion for Pixar and Marvel in the past decade, two of Hollywood’s most lucrative franchises. The “Star Wars” films have generated $4.54 billion in worldwide ticket sales, second to Warner Bros.’ “Harry Potter,” according to Box Office Mojo. “Indiana Jones” pictures have collected $1.95 billion.

“Dating all the way back to Walt Disney’s day, we learned the value of great content, characters, storytelling and great imaginary worlds,” Chief Executive Officer Robert Iger said in an interview.

The acquisition complements Iger’s focus on sequels and film franchises, fitting the same profile as the Marvel purchase three years ago.

“If Disney is really trying to focus on the tent-pole, event pictures, and given that this is something that has huge carryover value in the parks and merchandise business, it certainly makes sense,” said Matthew Harrigan, an analyst at Wunderlich Securities in Denver. “This is just the paradigm of the sustainable Hollywood franchise.”

AN : This report underscores the need to have those who are economic-centric understand the value of creativity and the creative arts. Yes ultimately it is about pure ejoyment of the expression of our God given talents , but it is also that such creative expression can be measured and monetized.

Too much emphasis is laid on economics as a driver. George Lucas, Steve Jobs  et al opened whole new worlds, so to speak ,with their ways of thinking and what they thought up.

In another blog , ( http://www.nakedcapitalism.com/2012/10/randy-wray-the-worlds-worst-central-banker.html ) the author reviewed commentary about the Central Banker for Argentina :

“The head of the Argentine Central Bank—Mercedes Marco del Pont–has been awarded the distinction as “the world’s worst central banker”. By whom, you might ask? Well, by Wall Street’s sycophantic press. Wall Street hates Mercedes. The woman, not the car.

Why? Well, for one thing she’s a woman. Wall Street hates female heads of central banks (take a look at the list of the top ten worst—3 out of 10 are female; then take a look at the 10 best, of which all but one are males.)

But that’s not anywhere near the most important reason. Ms. Marco del Pont kicked off the conference with a rousing talk, defending her central bank’s recent move away from a single mandate (inflation target) to pursuit of multiple mandates: financial stability, employment creation, and economic development with social equity.  

When Central Bankers begin to get the message and get out the message that economics is not enough…we are onto something.

Creativity has tremendous value….Lucas would surely attest to that.

http://goo.gl/BI8lf

via Disney Buys ‘Star Wars’ Producer Lucasfilm for $4 Billion – Bloomberg.

Posted October 30, 2012 by arnoneumann in creativity, Economic, Thinking

Tagged with , , , ,

Is Your Region Innovative, Productive, Creative, or Just Populated?   Leave a comment

Growth is a mantra that cities, as well as nations and states, everywhere quest after. A growing number of economists caution that growth for growth’s sake does not necessarily equate to higher living standards or increased happiness. A blue-ribbon international commission headed by Nobel Prize-winning economists Joseph Stiglitz and Amartya Sen has called for new, broader measures of economic performance and social progress. Plus, not all “growth” is the same. I’ve previously called attention to “growth without growth,” the misguided notion that adding population equals economic growth. ”

via Is Your Region Innovative, Productive, Creative, or Just Populated? – Jobs & Economy – The Atlantic Cities.

AN : we need to measure ourselves, our Cities and Countries with scales and aspects that do not only focus on fiscal and numerical aspects. Education opportunites, arts, cultural and recreational amenities, nature and sport venues etc are extremely meaningful. Why are they most often overlooked ? Probably because the trained individuals are trained in the thoughts and tools of economic measures. The article provokes us to more such aspects.

http://goo.gl/FGJUH

Posted October 25, 2012 by arnoneumann in Cities, creativity, Economic, Innovation

Tagged with , , ,

Richard Florida: Creativity Is the New Economy   Leave a comment

 

 

AN : Richard Florida’s ” The Rise of the Creative Class Revisited” was released at the end of June. Huff Post , by permission ,excerpted from the 3rd chapter and the posting here shares insight from that.

Richard Florida: Creativity Is the New Economy.

http://www.huffingtonpost.com/richard-florida/creativity-is-the-new-eco_b_1608363.html?utm_hp_ref=tw

 

BRIIC is a better BRIC | MINING.com   Leave a comment

Back in 2001 when tech weary investors first started noticing the allure of the emerging markets, Goldman Sachs analyst Jim O’Neill coined the acronym “BRIC” to collectively refer to Brazil, Russia, India and China, then considered the top tier of the emerging economies. The BRIC countries became a symbol of the shift in economic power from the G7 countries to the developing world. For much of the first decade of the 21st Century, the BRICs lived up to their billing. They largely led the world in GDP growth and delivered rock solid returns to those wise enough to invest early. See our current analysis of Latin American rail in our latest Global Investor Newsletter

Over the years, with investors continuously seeking the next wave in emerging markets, other clever acronyms came and went, but none caught on quite like the BRIC. In the investment world nothing is static, and at Euro Pacific Capital we feel it’s time for a change. But the BRICs don’t need to be abandoned, just expanded. In particular, it needs another “I” as in Indonesia. In other words, we think the “BRIC” bloc should now be the “BRIIC” bloc. For a variety of reasons, Indonesia has earned the right to be considered as a premiere destination for emerging market investment.

Most investors don’t realize that Indonesia is the 4th most populous country in the world, with more people than Brazil or Russia, two other charter nations in the BRIC club. They also may be unfamiliar with Indonesia’s enormous under developed natural resources, including oil/gas, coal, tin, gold, wood and rubber. Indonesia’s economy is well-balanced, with a large consumption component and limited reliance on exports to the developed world. Impressively, retail sales in Indonesia doubled from 2009 to 2012 (yes, doubled in three years) which we attribute to an improving labor market, favorable demographics, strong growth in wages and high consumer confidence. Meanwhile, developed markets struggle with high unemployment, an aging workforce, stagnant wages, and low consumer confidence. It’s no wonder retail sales in the US and Europe, struggling to grow 1% per year, create a stark contrast to Indonesia.

While Indonesia’s economy is still small relative to the other BRICs (roughly half the size of Brazil and Russia), it does have an economic growth rate that puts it well into the mix. According to the IMF, for the 17 year period between 1990 and 2007, Indonesia grew at an annual rate of 7.54%. While this is less than China (13.3%) and India (7.6%), it is more than Brazil (6.1%) or Russia (4.92%). The country is the largest economy in Southeast Asia and is a member of the G-20 group of the world’s major economies. ”

via BRIIC is a better BRIC | MINING.com.

Posted March 10, 2012 by arnoneumann in BRICS, Economic, Uncategorized

Tagged with , , ,

Pesek: Krugman Take on $12 Trillion Question Rings True – Bloomberg   Leave a comment

A fiery debate has broken out over an issue many thought had long been settled: Japan (JGDPAGDP)’s economy is sliding toward irrelevance.

The freshest evidence, reported earlier this week, is the first annual trade deficit in 31 years. It means, at the very least, that the huge pool of domestic savings that Japan uses to finance its staggering national debt might instead start going to support a trade deficit, an ominous sign.

Not necessarily a problem, says Eamonn Fingleton, a long- time observer who recently wrote an op-ed in the New York Times headlined “The Myth of Japan’s Failure.” His argument that Japan is a model worth emulating generated a huge buzz. So much, in fact, that it prompted a rebuttal from Nobel laureate and Times columnist Paul Krugman, who’s considerably less enamored with Asia’s No. 2 economy. Fingleton then rebutted the rebuttal.

Who’s right? I’m more in Krugman’s camp than Fingleton’s. Japan’s toxic mix of too much debt, too little growth, too many old people and too few babies will end badly if Tokyo doesn’t get its act together.

It’s important, though, to highlight where Fingleton is right. Japan is pretty close to a model society. It is an incredibly safe, clean, efficient, predictable and consistently quirky place for an expatriate to reside. Japan is reasonably egalitarian, its people have one of the highest standards of living and enjoy the longest life spans, and its cities feature the best infrastructure anywhere. On a more superficial level, Japanese cuisine arguably blows away all others.

Japanization Myth

It’s worth noting that, in some ways, the U.S. only wishes it could become Japan someday. All the chatter about “Japanization” takes on apocalyptic tones: lost decades, debilitating debt levels, zero interest rates forever, financial chaos and existential despair. Although those worries are valid, Japan never unraveled the way skeptics expected.

Crime didn’t skyrocket, homelessness didn’t explode, Arab Spring-like social instability never materialized. Workers and companies merely adjusted, living off their savings. Japan brought a whole new meaning to the concept of muddling through.

Could the U.S. pull off what Japan has? I doubt it. The key to Japan’s ability to withstand 20 years of stagnation is roughly $15 trillion of household savings. Many Americans couldn’t live two months without a paycheck. Japan, by contrast, is anything but a basket case.

Yet here is where Fingleton’s argument falls apart. In 1995, he published “Blindside: Why Japan Is Still on Track to Overtake the U.S. by the Year 2000.” Today, the real blindside among Japan bulls is thinking that what worked for Japan yesterday will work tomorrow.

Since its asset bubble burst more than 20 years ago, policy makers have worked frantically to keep the postwar boom alive. For years, pundits fretted about Japan’s zombie companies. The real zombie is Japan’s economic playbook.

The only reason Japan has any growth can be traced to its growing public debt, the world’s largest relative to the size of the economy, and the free money provided by the central bank. The economic equivalent of steroids is what holds Japan Inc. together, Krugman argues, not its organic vitality. To flourish, Japan needs to ease regulations, tap its female workforce and liberalize immigration. Lawmakers are doing none of the above.

There’s still a powerful aversion to change, and herein lies the nation’s Achilles’ heel. The Olympus Corp. (7733) scandal showed how corporate cronyism safeguarded an insular old-boys club. The radiation leaking from Tokyo Electric Power Co. reactors in Fukushima was a reminder of how dangerously top-down Japan is in a bottom-up economic world.

via Pesek: Krugman Take on $12 Trillion Question Rings True – Bloomberg.

Posted January 27, 2012 by arnoneumann in Economic, Japan

Tagged with , ,

What the Banda Islands Tell Us About World Trade | The Curious Capitalist | TIME.com   Leave a comment

Though it is hard to tell by visiting the Bandas today, these miniscule islands played a pivotal role in global economic history. That’s because of what grows on them: nutmeg. For centuries, the Bandas were the primary source of the world’s nutmeg, once the condiment equivalent of gold. Prized for its supposed medicinal powers, nutmeg commanded outrageous prices inEurope, and awarded outrageous profits to anyone who controlled its supply. Finding the Bandas, and the rest of the nearby Spice Islands, was the main motivation behind Europe’s age of exploration. The dream of the Bandas sent the Portuguese around the Cape of Good Hope and Christopher Columbus accidentally towards America. The British and Dutch fought over the islands, and the Dutch, the eventually victors, grew fat off its monopoly of the nutmeg trade. One famous tale shows just how valuable these islands once were. In a peace treaty after a war fought in the mid-1660s, the English let the Dutch keep one island in the Bandas, called Run, that they had claimed. As part of the settlement, the Dutch recognized British control over another small island on the other side of the planet –Manhattan.

That deal seems ridiculous to us today.New York turned into the world’s financial capital, the Big Apple of the most important economy, covered with skyscrapers, luxury apartments and some of the best museums, theaters and universities anywhere. Meanwhile, Run is a rocky backwater covered with banana palms, nutmeg trees and a cluster of huts. While New Yorkers deal in high finance and international publishing, the residents of the Bandas still harvest nutmeg as they had centuries ago. Seeds can be seen drying in the sun outside of nearly every home. There are few signs in the Bandas today of their glorious history, beyond a handful of crumbling forts. And though the locals aren’t desperately poor – how can you be, when mangoes hang heavily from trees along village walkways – they’re not getting rich off their cherished nutmeg either. Now that the spice is a common ingredient, readily found in every supermarket across the U.S. and Europe, it has lost its value and could never command the lofty prices of yesteryear.

There is perhaps no better example in history of how trade rewards and punishes. When the Bandas had a clear comparative advantage over the production of a good in heavy demand – in other words, uncontested superiority over the technology, know-how and physical facilities (the trees) needed to make highly prized nutmeg – these islands could demand astronomical prices for their output and influence the course of global trade and world history. But no comparative advantage, no matter how secure it may seem or long it may last, can be perpetuated indefinitely. Though the Dutch went to great lengths to preserve their grip on the nutmeg trade, the high prices inevitably attracted competition. The British eventually figured out how to grow nutmeg in their own empire, global production increased, and the Bandas lost their unique comparative advantage. The islands descended from the pinnacle of the global economy into the isolated, anonymity of today.

The Bandas vanished from the global economy because they never changed with changing technology and consumer tastes. As the Bandas lost their dominance in the nutmeg trade, they needed to do something else – maybe capitalize on their farmers’ extensive knowledge of nutmeg to “move up the value chain” and shift into processing it into some new, more useful product. But that never really happened. To be fair to the locals, they did not possess the power to determine their own affairs. The Dutch ruled, and they were more interested in sucking what wealth they could from the islands back to Europe than developing a healthier local economy in the Bandas. Yet even since Indonesia’s independence, little effort has been made to turn the Bandas into much more than a bunch of nutmeg groves. There is talk of encouraging a tourism industry, but it remains mainly talk. That rickety propeller plane that flew us to the Bandas can never carry in enough brave tourists to make much of a difference to the local economy.

So, you ask, why is the story of the Bandas relevant to us today?

Read more: http://curiouscapitalist.blogs.time.com/2011/12/28/what-the-banda-islands-tell-us-about-world-trade/#ixzz1i60Idq00

via What the Banda Islands Tell Us About World Trade | The Curious Capitalist | TIME.com.

Posted December 31, 2011 by arnoneumann in Economic

Tagged with , , , ,

A new banking crisis: You can bank on it – Opinion – Al Jazeera English   Leave a comment

“You can bank on a banking crisis. You can bank on bankers who are primarily interested in their own portfolios. 

You can bank on banks remaining key behind-the-scenes players in our politics and outspoken when they sense that regulators are moving in on their permanent party of payouts.

You can bank on their outrage when someone, anyone, suggests that they should pay their fair share or that their greed has to be checked or practices punished.

Bankers are circling their guilded wagons to fight off attacks on many fronts.

In the public arena, they are increasingly fed up with the “imbecilic” – stronger language to come – critics from the likes of Occupy Wall Street that they fear are inspiring public hostility to the lords of finance.

There have even been protests at recruiting conferences on campuses where the MBA’s used to stand in line for a chance to rake in the outsized salaries that awaited kids blessed as bankster-worthy.

In-depth coverage of the global movement

This is upsetting to Jamie Dimon, the $23m a year CEO of JP Morgan Chase, who is taking umbrage, telling an investor’s conference: “Acting like everyone who’s been successful is bad and because you’re rich you’re bad, I don’t understand it.”

Bernard Marcus, a co-founder of Home Depot, and self-described “job creator” didn’t mince his words, according to Bloomberg News.

“If successful business people don’t go public to share their stories and talk about their troubles, they deserve what they’re going to get.” He said he isn’t worried that speaking out might make him a target of protesters.

“Who gives a crap about some imbecile?” Marcus said. “Are you kidding me?”

Marcus and Diamon and the small .01 per cent of the one per cent they are part of are not kidding about fighting back either. The protesters may piss them off, but they are fighting a deeper trench warfare now against regulators and central banks who say they want to save them from themselves.

Comments David Dayan on the website Firedog Lake:

“It should come as no surprise that this coterie of self-pitying “job creators” lines up pretty perfectly with right-wing Republicans and free-market fundamentalists. Just because this attitude completely crashed the economy about three years ago doesn’t mean they should be made to feel bad about it, however.”

He cites an article on the Roman Empire which says that, even with all its slaves, it had a more equitable income distribution than the US has today. Writes Tim DeChant:

“To determine the size of the Roman economy and the distribution of income, historians Walter Schiedel and Steven Friesen pored over papyri ledgers, previous scholarly estimates, imperial edicts and Biblical passages. Their target was the state of the economy when the empire was at its population zenith, around 150 CE. Schiedel and Friesen estimate that the top one per cent of Roman society controlled 16 per cent of the wealth, less than half of what America’s top one per cent control.”

Keeping wealth concentrated seems to be what the bankers do – but sometimes with enough excess and irresponsibility to bring themselves down.

In Washington, the Federal Reserve Bank, ironically founded and run by the very banks who have been blessed with secret subsidies in the trillions, fears another financial crisis driven by a banking crisis.

They want American banks to hold more capital – and to keep it more easily accessible. According to the New York Times, they have already compromised with pressure from their clients, adding that “the final capital rules were unlikely to be more stringent than international limits that were still under development. That is a small victory for banks who warned that they would be severely disadvantaged if capital requirements here were stricter than those governing overseas banks.”

Meanwhile, overseas, the same battle royale is underway. In England, regulators are considering new rules that would outlaw investment banking by commercial banks. This is the very problem that America’s Glass-Steagal Act was passed to prevent in the l930s.

When that law was “modernised” – ie dumped as unnecessary – by Congress with Bill Clinton’s blessing, the banks rushed into the game of largely unregulated speculation with disastrous consequences clear for all to see.

The international regulators have their own too big to fail list of 29 banks they call “G Sifis” to insure higher capital levels. The risky banks that first opposed the designation, are now using it to market themselves as safer. Go figure!

While many in the world support a tax on financial transactions, the US bank lobby has killed it here. They also colluded with subprime lenders, and before them, red-lining discriminatory lenders to scalp borrowers and promote fraudulent loans with little push back by politicians who were clearly bought off.

In Switzerland, Europe’s bank capital, a central banker trying to make the industry more prudent has come under sustained personal attack by his colleagues.

The New York Times reports:

Mr (Phillip M) Hildebrand, the president of the Swiss central bank, was called “arrogant” and “egotistical” by bankers quoted anonymously in the pages of Swiss newspapers. His supposed sin: Wanting banks to hold extra capital. The fact that Mr Hildebrand was himself a former hedge fund manager in New York seemed only to heighten the sense that he had betrayed his profession.

“He’ll never find another job in Switzerland”, the Swiss newspaper Der Sonntag quoted an unnamed high-ranking banker as threatening Mr. Hildebrand in 2010.

The unusually bitter attacks on a central bank chief were a measure of what was at stake. Mr Hildebrand, 48, had a high-visibility role in a struggle between bankers trying to preserve their most lucrative business practices and regulators trying to defuse a system that, many believe, nearly blew up the world economy.

This very public food fight offers a window into why bankers are fighting – and often winning their war on politicians and the public. They are relentless in pursuit of their interests and have the ability to pay for the best law firms and PR flacks.

The bankers are trying to come with theories for our depressing economic woes that places the blame on everyone but them. Fedhead Ben Bernanke says it was all a “global savings glut” that did us in. Hence, anyone that was more of a saver than an investor is responsible.

Hyun Song Shin, another Princeton professor, says bullocks to his colleague Benanke in a detailed paper refuting his strawman, arguing the crisis was caused by “a ‘global banking glut’, ie the rise in cross-border lending, than the ‘global savings glut’.”

Without falling down the rabbit hole of endless well-footnoted debates, the truth is that millions of savers have seen their savings shrink and most bankers, thanks to bailouts and cheap money, watched their holdings rise.

Blaming the victim for the crime has a long and dishonourable history,

As bad as the economy gets, and most forecasters suggest little hope for a rebound in the year ahead, even as there are blips of “positive data”, the bankers seem determined to save themselves if and when the ship sinks.

They already own the lifeboats.

The challenge facing the 99 per cent is how to organise more broadly and build the political muscle to break up the big banks, dissolve the “zombies” (failed banks on borrowed time) among them and rebuild an economy that works for all of us.”

via A new banking crisis: You can bank on it – Opinion – Al Jazeera English.

Posted December 26, 2011 by arnoneumann in banking, Banking System, Economic

Tagged with , , ,

Latin America may split into Pacific and Atlantic blocs | Truth About Trade and Technology – Truth About Trade and Technology   Leave a comment

“President Barack Obama’s recent announcement that he will seek to create what may be the world’s largest trading bloc along the Pacific rim raises an interesting question in this part of the world: whether we will see a de facto split of Latin America into a Pacific bloc and an Atlantic bloc.

It may be already happening. Obama’s recent proclamation that “the United States is a Pacific country” and his announcement that Washington will seek to dramatically expand the nine-member Trans-Pacific Partnership (TPP) has shaken world trade negotiations.

International economists agree that it is the biggest thing happening in world trade talks right now.

Under the plan, the TPP — it currently includes, among others, the United States, Australia, New Zealand, Singapore, Vietnam, Chile and Peru — would be expanded to include Japan, the world’s third largest economy, as well as Mexico and Canada, and perhaps even South Korea. Japan, Mexico and Canada have announced they are interested in joining the group.

The new Asia-Pacific trading bloc would be the most ambitious of its kind, since it would eliminate customs duties and set common standards for investments, labor and environmental regulations.

Although they will not say it publicly, in addition to enhancing trade, the United States wants to counter-balance China’s growing economic weight in Asia, and Mexico wants to offset Brazil’s clout in Latin America.

In Latin America, four Pacific rim countries — Mexico, Colombia, Peru, and Chile — have already agreed to start their own sub-regional group aimed at taking advantage of the new Asia-Pacific trade opportunities.

At a Dec. 5 summit in Merida, Mexico, the four countries — plus Panama, which participated as an observer — agreed to officially launch their trade bloc, known as the Alliance of the Pacific, on June 4, 2012, in Chile.

Members of the Alliance pledged to combine their stock exchanges, and set a gradual timetable for the total elimination of tariffs of goods and services by 2020 or 2025.

Mexico’s economy secretary Bruno Ferrari told me in a telephone interview that “we are entering an era of trade blocs” that will replace the era of bilateral free trade agreements. Countries either team up with others to create supply chains that produce goods more competitively, or risk being left behind, he said.

“When Mexico signed its first free trade agreement a few decades ago, there were 40 free trade agreements in the world. Today, there are 290,” Ferrari told me. “This means that we are seeing an erosion of the free trade agreements’ importance, since you are competing with more countries that enjoy your same customs preferences.”

Ferrari added, “With no doubt, TTP is the most important trade agreement in the works today in the world. It is therefore paramount that Mexico be part of it.”

In a separate interview, Colombian Trade Minister Sergio Diaz-Granados told me that one of the central goals of the Alliance, in addition to facilitating intra-regional trade, will be “to increase Latin America’s participation in the Asia-Pacific rim, which will be the most dynamic economic zone in the next 20 years.”

My opinion: Ideally, Latin American countries should seek to create a single trading bloc from Mexico to Argentina. According to a recent Inter-American Development Bank study, intra-regional trade in Latin America is a pitiful 20 percent of the region’s total trade, compared with 46 percent in Asia and 67 percent in Europe.

But there are no signs of that happening. The Dec. 3 summit in Caracas, Venezuela, that created the Community of Latin American and Caribbean Nations (CELAC) was filled with poetic speeches about regional unity, but did not include any concrete measures to speed up economic integration. In fact, economy ministers didn’t even participate.

In 2012, we are likely to see a further consolidation of the Chile-Peru-Colombia-Mexico bloc, with the possible future addition of Central American countries, all of which have free trade deals with the United States and want to insert themselves further into the emerging TPP.

On the other hand, Brazil, Argentina, Uruguay and Venezuela, which in recent years have benefitted from record commodity export prices, are likely to continue exporting their raw materials to China and India, and in Venezuela’s case to the United States, without feeling much urgency to join larger trading blocs.

I hope I’m wrong about this, but despite all the talk about Latin America’s integration in recent weeks, we may soon see a Latin America of the Pacific, and a Latin America of the Atlantic.”

via Latin America may split into Pacific and Atlantic blocs | Truth About Trade and Technology – Truth About Trade and Technology.

Posted December 19, 2011 by arnoneumann in Economic, Trade

Tagged with , , ,

%d bloggers like this: