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  • Author: Barbara Kotschwar
  • Publication Date: 04-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: In Latin America, inadequate transportation infrastructure has been identified as an increasingly important impediment to the region's further integration in global trade and a significant factor preventing countries from properly taking advantage of the multitude of regional, plurilateral, and bilateral trade agreements signed in the past decade and a half. This paper examines transport and communications infrastructure initiatives in Latin American and Asian regional trade arrangements and finds several lessons Asia can teach Latin America.
  • Topic: Development, Economics, International Trade and Finance, Communications, Infrastructure
  • Political Geography: Asia, Latin America
  • Author: Theodore H. Moran, Julia Muir, Barbara Kotschwar
  • Publication Date: 02-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: China's need for vast amounts of minerals to sustain its high economic growth rate has led Chinese investors to acquire stakes in natural resource companies, extend loans to mining and petroleum investors, and write long-term procurement contracts for oil and minerals in Africa, Latin America, Australia, Canada, and other resource-rich regions. These efforts to procure raw materials might be exacerbating the problems of strong demand; "locking up" natural resource supplies, gaining preferential access to available output, and extending control over the world's extractive industries. But Chinese investment need not have a zero-sum effect if Chinese procurement arrangements expand, diversify, and make more competitive the global supplier system. Previous Peterson Institute research (see Moran 2010) and new research undertaken in this paper, show that the majority of Chinese investments and procurement arrangements serve to help diversify and make more competitive the portion of the world natural resource base located in Latin America. For a more comprehensive analysis, the authors conduct a structured comparison of four Peruvian mines with foreign ownership: two Organization for Economic Cooperation and Development-based, and two Chinese. They examine what conditions or policy measures are most effective in inducing Chinese investors to adopt international industry standards and best-practices, and which are not. They distill from this case study some lessons for other countries in Latin America, Africa, and elsewhere that intend to use Chinese investment to develop their extractive sectors: first, that financial markets bring accountability; second, that the host country regulatory environment makes a significant difference; and third, that foreign investment is a catalyst for change.
  • Topic: Economics, International Trade and Finance, Natural Resources
  • Political Geography: China, Canada, Latin America, Australia
  • Author: Carmen M. Reinhart, Nicolas E. Magud, Kenneth S. Rogoff
  • Publication Date: 03-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The literature on capital controls has (at least) four very serious apples-to-oranges problems: (i) There is no unified theoretical framework to analyze the macroeconomic consequences of controls; (ii) there is significant heterogeneity across countries and time in the control measures implemented; (iii) there are multiple definitions of what constitutes a "success" and (iv) the empirical studies lack a common methodology-furthermore these are significantly "overweighted" by a couple of country cases (Chile and Malaysia). In this paper, we attempt to address some of these shortcomings by: being very explicit about what measures are construed as capital controls. Also, given that success is measured so differently across studies, we sought to "standardize" the results of over 30 empirical studies we summarize in this paper. The standardization was done by constructing two indices of capital controls: Capital Controls Effectiveness Index (CCE Index), and Weighted Capital Control Effectiveness Index (WCCE Index). The difference between them lies in that the WCCE controls for the differentiated degree of methodological rigor applied to draw conclusions in each of the considered papers. Inasmuch as possible, we bring to bear the experiences of less well known episodes than those of Chile and Malaysia. Then, using a portfolio balance approach we model the effects of imposing capital controls on short-term flows. We find that there should exist country-specific characteristics for capital controls to be effective. From this simple perspective, this rationalizes why some capital controls were effective and some were not. We also show that the equivalence in effects of price- vs. quantity-capital control are conditional on the level of short-term capital flows.
  • Topic: Development, Economics, International Trade and Finance, Markets
  • Political Geography: Latin America, Southeast Asia
  • Author: Jeffrey J. Schott
  • Publication Date: 08-2003
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The United States and Brazil are the largest economies in North and South America, respectively. A generation ago, both were relatively closed economies in terms of the proportion of their trade to gross domestic product (GDP), but for sharply different reasons. The US market was highly competitive except for some light manufactures (e.g., textiles, clothing, and footwear) and a few agricultural sectors with high border barriers. By contrast, Brazilian industry was largely uncompetitive and highly subsidized; important commodities like coffee provided the bulk of exports while a large share of the value of most industrial exports was attributable to export subsidies.
  • Topic: International Trade and Finance
  • Political Geography: United States, Brazil, South America, Latin America, Caribbean
  • Author: Gary Hufbauer, Jeffrey J. Schott
  • Publication Date: 06-2003
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Drawing on the 1989 Canada-US Free Trade Agreement (CUSFTA), the North American Free Trade Agreement (NAFTA) extended dispute settlement provisions to cover more ground. In fact, within NAFTA there are six dispute settlement systems. NAFTA Chapter 11 is designed to resolve investor-state disputes over property rights; Chapter 14 creates special provisions for handling disputes in the financial sector via the Chapter 20 dispute settlement process (DSP); Chapter 19 establishes a review mechanism to determine whether final antidumping (AD) and countervailing duty (CVD) decisions made in domestic tribunals are consistent with national laws; and Chapter 20 provides government-to-government consultation, at the ministerial level, to resolve high-level disputes. In addition, the NAFTA partners created interstate dispute mechanisms regarding domestic environmental and labor laws under the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAAL C), respectively. This chapter examines the first four dispute settlement systems; the NAAEC and NAALC systems are evaluated elsewhere in this book.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States, Latin America, North America
  • Author: Liliana Rojas-Suarez
  • Publication Date: 07-2002
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper focuses on identifying preconditions that will ensure the sustainability of a Free Trade Area of the Americas (FTAA). It argues that the macro, micro, and political conditions advanced in the literature to measure a country's ability to compete internationally, while necessary, are not sufficient to ensure the success and permanence of a free trade agreement. Instead, two additional financial conditions are needed. The first is that each partner in the free trade area needs to have sustainable public debts as determined by the achievement of credible and sustainable structural fiscal balances. The second is that exchange rate regimes across trading partners should be compatible in the sense that adverse shocks in one country do not generate a policy dilemma in other partners between abandoning their exchange rate system or the free trade area.
  • Topic: Economics, International Trade and Finance
  • Political Geography: South America, Latin America, Central America, Caribbean
  • Author: Liliana Rojas-Suarez
  • Publication Date: 05-2001
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The rating agencies' and bank supervisors' records of prompt identification of banking problems in emerging markets has not been satisfactory. This paper suggests that such deficiencies could be explained by the use of financial indicators that, while appropriate for industrial countries, do not work in emerging markets. Among the conclusions, this paper shows that the most commonly used indicator of banking problems in industrial countries, the capital-to-asset ratio, has performed poorly as an indicator of banking problems in Latin America and East Asia. This is because of (a) severe deficiencies in the accounting and regulatory framework and (b) lack of liquid markets for bank shares, subordinated debt and other bank liabilities and assets needed to validate the “real” worth of a bank as opposed to its accounting value.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: East Asia, Latin America