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The World Economic Forum on Latin America

Exclusive blog by Dr. Christiane Hanna Henkel, Correspondent, Neue Zürcher Zeitung (NZZ)

Doubts over dinner…

“Latin America looks so good – better than ever before”, I was told on Sunday by an emerging market researcher; a bright guy from one of the top US-American investment-banks. I met him at the Annual Meeting of Inter American Development in Belo Horizonte (nice horizons), Brazil, which ended this Wednesday. Indeed, macroeconomic indicators look impressive: inflation is down, current accounts are running surpluses, foreign currency reserves are piling up and sovereign debt is declining. The region, once the home of nasty macroeconomic management is finally following school-book macroeconomic policies.

When the last World Economic Forum on Latin America took place in 2002 in Rio de Janeiro, Latin America had just witnessed the crisis of Argentina defaulting on it’s sovereign debt (the biggest default ever in the word) and Brazil had just stepped back from the verge of default.

Now in 2006 things look much brighter. A big chunk of the money which investors have pumped in the emerging markets has gone to Latin America, with lots of that to Brazil. The region is growing for the third year in the row at an average rate well above 4 percent. Brazil is experiencing its longest growth cycle in 15 years. If it lasts just a little longer - until mid 2007 - it would be its longest growth cycle in 25 years.

To cut a long story short: Trust in the region is back.

But is it really? Doubts can come over dinner….

At the beginning of this week, I attended a dinner organized by the Institute of International Finance, a global association of financial institutions. During entrée (rosy shining shrimps) I talked to my neighbor on the left and during the main course to the one on my right. Both are highly respected analysts in Brazil.

Well, the guy to my left expressed the strong belief that the Brazilian leftwing President Lula da Silva will, after having been re-elected during the upcoming presidential-elections in October, do a really good job. Amid a lacking majority in congress he will team up with the PMDB, one of the bigger parties in Brazil. The government will then push through a couple of the much needed reforms and general management will be highly effective and efficient, benefiting from the operational experience gained during the first term. Brazil will finally witness the long awaited growth miracle (a sustainable growth of course).

Then having advanced to the main course – the mere look of which (meat, brown sauce, pale potatoes) should have alerted me to the upcoming shift in sentiment - I turned to my neighbor on the right...

That was the moment when I was shaken in my cautiously optimistic belief that Latin American is a more or less stable region and that there is no immediate danger of  a slippage.

Lula will be re-elected, that was as far the expert to my right agreed to the expert to my left. But then he drew a heavily disturbing picture of Brazil’s immediate future: The formed political coalition will not be able to attract able politicians, the ministries will be filled up with mediocre staff. Some market jitters (falling commodity prices, rising interest rate in the US, more cautions investors) and pressure arising from the people in the streets will drive the weak government to take wrong decisions in economic policies. The whole story will end up with Lula being driven out of office – either through him stepping down or being impeached.

Two prestigious analysts – two totally different opinions. I kind of lost my direction that evening and surely lost my appetite (the mango-bedded, rich chocolate cake stayed untouched!).

Let’s take Brazil just as an example for Latin America as a whole. Much progress has been made, but are the institutions really so stable that a way back is not thinkable anymore? Has it reached the degree of stability that might weather the next storm?

Well, the debate is on at meetings like that of the mighty IDB or at the exclusive World Economic Forum Latin America. But, more than 20 million people seem to have found the answer already. This is the number of Latin American emigrants – now living mostly in the USA. They have decided to leave the their homes in Mexico, Brazil, Ecuador or elsewhere in the region.
They did not see any chances that their governments would provide them with the chances to lead a decent life.

Only when they start coming back to their home countries, might it be time to say that the trust is back in the region… 

The World Economic Forum on Latin America

Exclusive blog by Julio Gama, Deputy Editor, Revista AméricaEconomia

Yes, what you do for a living really matters…   

What could be more important for a person than his or her job? You might think about your health, family and spare time. It is true; those are good reasons for living, however your job is probably what is going to determine how wealthy you are, the quality of education you can afford to give your children and how far you can go on vacation. Like it or not, your job drives your life.

In a lot of cases - let's say in big Latin American cities or in Miami, where I live - most people choose to live close to their work to avoid the traffic.

So, your job determines even the place where you live, whether in US, Europe or Latin America.

Latin America is the focus of this blog. After two years of growth, we have many questions regarding the labour market in the region. We have seen and heard about globalization, but how is Latin America positioned in the world? Where does the comparative advantage of Latin America countries lie? How can the region benefit from the current outsourcing trend? How do we convert the huge informal economy (and jobs) into formal workers?

To try to answers these questions and forecast the future of the region, one of the panels of the World Economic Forum in Sao Paulo, will be discussing The Jobs of the Future, on April 5, 2006. That will be an excellent opportunity to listen to suggested solutions brought by the speakers, which include some of the most important executives in the region, such as Jorge Vergara Madrigal, president of Omnilife, from Mexico; and Roger Agnelli, president of Companhia Vale do Rio Doce, from Brazil.

The next generation of jobs drives us to an endless discussion; but I would also like to focus on the topic of piracy. Last week I had lunch with the head for Latin America of Business Software Alliance (BSA), Nicholas Ware, and the numbers he showed me were quite impressive.

According to a recent study prepared by BSA, 66 percent of all software used in the region is illegal. If the region reduces its piracy by 10 points, it would add US$ 12 billion to its economy, create 44,000 new jobs and increase the local industry revenues by US$ 8.5 billion. According to the same study this small reduction in piracy would generate an additional US$ 1.2 billion in tax revenue to Latin America.

The study has shown that piracy has a direct relation to job creation and both are big problems to the region. To follow this discussion, I would like to pose you a question: Why do you think the local governments don’t put more efforts in combating the piracy and use these actions as a tool to reduce the unemployment rate in the region?

Podcast: George Soros, a brief conversation

A brief conversation with George Soros after his press conference, we talk about France, Europe, and why he wanted to share a negative vision about the US in Davos.

Podcast: George Soros on the US Economy decline

George Soros shares with us why he is so worried about the US and answers the questions of the press on his vision of the world.

First Challenges identified

The big debate has finally begun around the theme of regional identities and struggles and the first conversations identifying the key challenges have begun to take place in small intimate groups, discussion panels and in the big townhall debate.

The first day of the 2006 Annual Meeting was dedicated to identify the key challenges for each of the major themes of this year's event.

With regards to regional identities and struggles , the main challenges identified, with potential global impact, that face the five major world regions over the coming 12-18 months were:

1. Institution and Governance:  Pushing through the reform agenda, democratization, transparency and building a sense of regional identity and community.  The new “conservative” wave of political leadership. 
2. Security: Taming social unrest through integration, militarization of rouge states and the development of a new breed of terrorism
3. Economics: The long oil boom and the repercussion on global economy. The winners and the loosers, Market reforms
4. Development Struggle: new models of the welfare state for the 21^st century, reform of the labour market and changing balance of demographic population of nations ( local vs immigrants),

Key regional questions that need to be addresssed in the next 12-18 months the most pressing ones identified were:

In terms of k

1. Europe:  How can the European Union clearly define the region’s priorities to ensure that the European Union can work.  Solving the key governance and leadership issue are key to ensuring the ecomomic development of the region in face of a european identity crises

2. Middle East: How can governments in the middle east ensure that their elections are not simply “window dressing” exercises benefiting simply national elites?  How can the long oil boom ensure regional development and stabilty. 

3. Latin America: How can, or will, the new regional political alliances arising from the coming to power of conservative goverments make sure that the market the reforms accomplished thus far are continued?

4. Africa: How can african governments keep the reform agenda moving forward to ensure good public and corporate governance practices become wide spread and they create the structures necessary for strong intra-regional trade aimed at  economic development.

The real question however is what are the mechanisms for change that each region needs to adopt  in order to provide concrete solutions to the key challenges identified?  Are interntational bodies or umbrella organisations going to be able to provide the answers or are the transformations needed only able to be done at a local level?   

Global economic imbalances...

Hi everyone,

I look forward to our interaction and discussions.

As part of the Global Leadership Program in the Forum I am working on Latin America now. My background spans from some years in the Central Bank of Mexico, some  Structured Finance in Emerging Markets to some enterpreneurial experiences...

Best regards,

Emilio Lozoya

Welcome to Regional Struggles Action Group

Welcome to the World Economic Forum Action Group Blog. This action group, formed in our Annual Meeting 2006 focuses on Regional Identities and Struggles. The aim of the Action Group  is to address how the business community can positively impact the regional economic growth and prosperity of Europe, Asia, Latin America, Middle East and Africa. Topics we hope to discuss (and disagree on) are: - Labor movements, regional immigration, economic and social integration - Social reform: combatting poverty and disease - National identity and religious struggles - New regional balance and emerging hotspots - Emergence, or not, of new leadership So, now it's time to introduce ourselves: two Mediterranean inquisitive minds (an Italian and a Lebanese) who usually write and think in less dry terms ( it's really late right now!!!!!) who will try to navigate you through the thousands of different sessions where the best minds will try providing real answers to serious questions! Jokes aside, we will try to be faithful reporters on the discussions we witness in Davos, on the one side, and critical analyzers on the other. We are hoping to keep you informed and entertained- and we promise to report the fashion faux-pas of the day. Hope you do the same! Thea Chiesa and Diana El-Azar (of course, you knew we were women from all our exclamation marks!)