tag:blogger.com,1999:blog-2854488794439436472024-03-19T14:32:50.329-07:00Latin America Economy WatchUnknownnoreply@blogger.comBlogger10125tag:blogger.com,1999:blog-285448879443943647.post-58779500651523150852008-01-23T02:20:00.000-08:002008-01-23T02:25:54.967-08:00Chile Is Riding The Storm!Chile's peso gained the most in a week yesterday after the Federal Reserve lowered its benchmark U.S. interest rate. The Fed lowered the overnight rate 0.75 percentage point to 3.5 percent, widening the spread with Chile's 6.25 percent key rate to 2.75 percentage points. This is the biggest difference since 2002.<br /><br />The rate cut is obviously going to translate itself into increasing appreciative forces in a number of emerging currency markets, among them the Chilean peso one. Indeed, if I had to list half a dozen emerging markets I thought would weather the storm better than others, Chile would definitely be there, as probably would Brzil (in Lat Am), Morocco and Turkey on Europe's southern fringe, and Thailand and India in Asia.<br /><br />As if to confirm my intuitions Chile's peso advanced the most yesterday since Jan. 11, rising 1.4 percent to 478.64 per dollar at 2:33 p.m. in New York, and extending its advance so far this year to 4.3 percent. The yield on Chile's 8 percent bonds due June 2015 was little changed at 6.64 percent, according to Deutsche Bank Chile. <br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw4F_aNZSFQJeJ6ujW_nTb-LTfzFMsqyRTVTiO8x7CyNGv-a8lXqzH-A0r-ZrIvkgu9DHZkedz1o-zj1Wr6xehOzLmDXTUH2ih3C_Chk92AjzJMjkZW-_0M6EKXVt9AftuNodgOyY8rkPc/s1600-h/peso+USD+2.jpg"><img id="BLOGGER_PHOTO_ID_5151884702058201682" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw4F_aNZSFQJeJ6ujW_nTb-LTfzFMsqyRTVTiO8x7CyNGv-a8lXqzH-A0r-ZrIvkgu9DHZkedz1o-zj1Wr6xehOzLmDXTUH2ih3C_Chk92AjzJMjkZW-_0M6EKXVt9AftuNodgOyY8rkPc/s400/peso+USD+2.jpg" border="0" /></a><br /><br />Concern that a slowdown in the U.S. economy will hurt demand for Latin American exports has put a certain restraint on gains in the region's currencies, and we are now about to see just how much "decoupling" has taken place in this particular corner of the globe.<br /><br />All of this is reflected in the very upbeat tone adopted by Chile's Finance Minister Andres Velasco, who is quoted by Bloomberg as saying that yesterday's decision by the U.S. Federal Reserve to cut its benchmark interest rate was a "good signal" for markets. Velasco asserted that Chile is well-prepared to deal with the coming international crisis, since the government of the country which is the world's biggest copper exporter has used revenue from record prices for the metal to pay down debt and accumulate a fiscal surplus of $19 billion. <br /><br /><blockquote>``The other day an investor remarked that when the tide goes out you see who's got their swimming suit on properly,'' Velasco said. ``I have no doubt that in this low tide, Chile will be seen to be very well-prepared and very well-dressed for whatever comes,'' The Fed's cut ``will contribute to the return of calm,'' the finance minister said, ``But there are no magic solutions. The world is living through, and will probably keep living through, a period of international volatility. We have to be very calm and very alert. In previous years we've saved, we've reduced debt, we've had a surplus, we've strengthened public and private finances,'' Velasco said. ``Sometimes people asked why we were doing all this, well now we see the answer and we see it very clearly.'' </blockquote><br /><br />According to Velasco Chile's government hasn't yet discussed cutting its target for budget surpluses. Senators from the ruling coalition were reported by local newspaper La Tercera to have called yesterday for the government to aim for a balanced budget, instead of an excess of 0.5 percent of gross domestic product. This move seems sensible, given the strong downside risk which exists at this point.<br /><a href="http://www.bloomberg.com/apps/news?pid=20601086&sid=aUsUMn6kc_EY&refer=news"></a><br /><br />Chile's central bank raised its benchmark lending rate to the highest in six years earlier this month as it seeks to curb the fastest inflation in a decade. Policy makers raised the benchmark rate a quarter point to 6.25 percent.The bank acted in response to inflation that climbed to an annual rate of 7.8 percent in December, driven by higher costs for food and transportation.<br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4zPXf2b80ReZDbbeldk9aDgrjGojyiHKPeuiCjo-r_A2wgiQAp-OLRzzZPucpnNzTpomGx_84hGt6zXPBU2O57arumma7pRVzk2eS706sm0Lcsr_9cexFgMqsU-wq852cHhZ9duPENwYY/s1600-h/chile+CPI.jpg"><img id="BLOGGER_PHOTO_ID_5151880230997246514" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4zPXf2b80ReZDbbeldk9aDgrjGojyiHKPeuiCjo-r_A2wgiQAp-OLRzzZPucpnNzTpomGx_84hGt6zXPBU2O57arumma7pRVzk2eS706sm0Lcsr_9cexFgMqsU-wq852cHhZ9duPENwYY/s400/chile+CPI.jpg" border="0" /></a><br /><br />In the short term Chile's inflation problem may well get worse before it gets better, but as external conditions steadily change I doubt this will be the main threat to Chile's economic stability, so some counter-cyclical internal demand management in advance of any coming shock would seem to me to be a pretty prudent move.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-285448879443943647.post-69716460607683968942008-01-23T01:55:00.001-08:002008-01-23T01:55:35.613-08:00Brazil Central Bank Likely to Keep Rates On HoldBrazil's central bank will probably keep its benchmark interest rate unchanged at 11.25% today for a third straight meeting as policy makers gauge whether the recent acceleration in inflation is sustained. Against the backdrop of rising prices and Brazil's fastest growth since 2004, central bank President Henrique Meirelles decided on Oct. 17 to pause after a string of 18 straight cuts, the longest cycle of easing since Brazil adopted inflation targets in 1999. <br /><br />Brazil's overnight rate has fallen by more than half over this period. The real interest rate, however, - or the difference between the 11.25 percent Selic benchmark lending rate and 4.46 annual inflation - is the sill highest in Latin America at 6.79 percent. <br /><br />Policy makers will probably take the view that a worldwide economic slowdown will reduce Brazil's inflation rate by cutting demand for commodities, even after consumer prices jumped the most in more than two years in December. Inflation accelerated to 0.74 percent last month, led by food, the fastest pace since October 2005.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjT8uigB8PB5XLmQ5y2Wb8cARsNRhqLEfEy-tmFAaYRuLup5QDh-2JJvJf9-u-wGecevo6w4NaShlIUv5j6vK3GxY1k20rJj70DZUck0lUf5lWSU9yvooxAVZji5zH318wXWzrJrECzgr7/s1600-h/brazil+inflation.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjT8uigB8PB5XLmQ5y2Wb8cARsNRhqLEfEy-tmFAaYRuLup5QDh-2JJvJf9-u-wGecevo6w4NaShlIUv5j6vK3GxY1k20rJj70DZUck0lUf5lWSU9yvooxAVZji5zH318wXWzrJrECzgr7/s400/brazil+inflation.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154671727811414642" /></a><br /><br /><br />Rather than raising the central bank is much more likely to say that it will continue to monitor inflation to see whether it threatens its 4.5 percent target.<br /><br />On the other hand, traders are forecasting higher rates. The yield on the interbank deposits future rate contract due January 2009 traded at 11.97 percent yesterday, above the current Selic rate.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-285448879443943647.post-48553085727013403852008-01-12T13:09:00.000-08:002008-01-12T14:01:53.938-08:00Argentina's Inflation EnigmaWell, make of it what you will is, I suppose, all you can say. Argentina released the latest data on the consumer prices index earlier this week, and according to the controversial Nacional Statistics and Census Office, Indec, retail price inflation was running at 0.9% in December, and at a year on year level for December of 8.5%.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaYa1Ayygb1cq0I56rYmJCGK-LGHlA7UdXSkad2obefdyZACq6P-d06ijAF6mLILe8gT3DsuPXf2s9MIjp0kUuhaqawmAcym4N7pESYbw9cqib9sx_Q6GKIZy1raJa4F4xF-TPi27wXtk/s1600-h/argentina+inflation.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaYa1Ayygb1cq0I56rYmJCGK-LGHlA7UdXSkad2obefdyZACq6P-d06ijAF6mLILe8gT3DsuPXf2s9MIjp0kUuhaqawmAcym4N7pESYbw9cqib9sx_Q6GKIZy1raJa4F4xF-TPi27wXtk/s400/argentina+inflation.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154706104729651906" /></a><br /><br /> <br />The CPI for Buenos Aires City and the metropolitan area shows that prices in 2007 rose less than in 2006 (9.8%), thus according to official statements inflation in Argentina is receding. But this is not a view many people outside the government are prepared to accept. The 8.5% figure is a long way from private economists estimates that inflation in 2007 was somewhere in the range between 17% (the optimists) and 22% (the more pessimistic).<br /><br />Indec has been in the eye of the storm for months now, with the Kirchner administration sacking several technical staff responsible for the index for not “correctly” interpreting cost of living data, replacing them by more compliant personnel, who were less statistical experts and rather more “telephone extensions”, as the Buenos Aires press put it.<br /><br />The Indec conflict has been ongoing with labor stoppages, official interventions, mutual threats and at the end of the day a general discrediting of the Argentine official statistics office.<br /><br />One of the principal concerns of the Kirchner/Fernandez administration has been and is concerned that double inflation will have a significant impact on sovereign bonds liabilities, given their floating interest rates adjusted by economic growth and inflation.<br /><br />To add to the scandal the regional Indec office in Mendoza province, which many consider apparently was doing a reasonable job, systematically calculated inflation as being higher than the official index, elaborated in the main office in Buenos Aires. But one of the first moves of the economic team of the Fernandez administration on taking office was to change all the staff at the Mendoza Indec office, and of course the inflation reading is now well aligned with the Buenos Aires data.<br /><br />Make what you want of it, but the December index shows that compared to November, health and medical attention jumped 3.5%; leisure, 2.4%; other goods and services, 1.9%; clothing, 0.9%; housing and basic services, 0.8%; transport and communications, 0.7%; food and beverage, 0.4% and education, 0.2%. On the other hand home maintenance and equipment actually decreased 1.5%.<br /><br />Wholesale prices in December increased 0.5% over November totaling 14.4% in the last twelve months and the construction index was up 0.7% in December.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjm7FMx0jeZW8TPidJAsclx0Tvfp7u1eFHCeCSaox3t-bShtqlP1ygyR_yf09oxYeZ6C1NaNmtHpo82eVx-sfv9Ug655uiCHkTtg8qpACM51_VQRCpckXGRNANUKJlsYdXasEgYlOZ6OXU/s1600-h/argentina+PPI.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjm7FMx0jeZW8TPidJAsclx0Tvfp7u1eFHCeCSaox3t-bShtqlP1ygyR_yf09oxYeZ6C1NaNmtHpo82eVx-sfv9Ug655uiCHkTtg8qpACM51_VQRCpckXGRNANUKJlsYdXasEgYlOZ6OXU/s400/argentina+PPI.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154707822716570322" /></a><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpFDtinFAOsXSGBvw1jMFqy3hBDUrdCtMEbHuXo6xSGJSK2oVDRMr2Xs0JP5y-fwHymC8aQVErhTtHJwXP_SMACREaxeXriT1_smwe0CiygQlK8USk6v5q5NK8CAOGF41-sqND1HG47lE/s1600-h/argentina+construction.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpFDtinFAOsXSGBvw1jMFqy3hBDUrdCtMEbHuXo6xSGJSK2oVDRMr2Xs0JP5y-fwHymC8aQVErhTtHJwXP_SMACREaxeXriT1_smwe0CiygQlK8USk6v5q5NK8CAOGF41-sqND1HG47lE/s400/argentina+construction.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154709699617278690" /></a><br /><br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmY6AYDVBgM0V3fgMLIz0uB-hOgphWqmr8vqVPPVJu3a3cCWiAS2eRm6o7Qz1f6cptGVTmDBn4a-zWaua4OLWOVsqV0wjUHjb9-FyAy4BagIJzVM-VKcUYbDVvGmvyNL8gka4mAGteuGY/s1600-h/peso+dollar.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmY6AYDVBgM0V3fgMLIz0uB-hOgphWqmr8vqVPPVJu3a3cCWiAS2eRm6o7Qz1f6cptGVTmDBn4a-zWaua4OLWOVsqV0wjUHjb9-FyAy4BagIJzVM-VKcUYbDVvGmvyNL8gka4mAGteuGY/s400/peso+dollar.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154712744749091570" /></a>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-285448879443943647.post-74325766256427962832008-01-12T11:50:00.000-08:002008-01-12T11:51:00.496-08:00Brazil Inflation December 2007Brazil's consumer prices rose at the fastest inter-monthly rate in over two years last month, making it harder for the central bank to further cut Latin America's highest benchmark lending rate. Consumer prices, as measured by the IPCA index, jumped 0.74 percent in December, the biggest increase since October 2005, the national statistics agency said. The gain, fueled by food prices, was almost twice the 0.38 percent increase in November and pushed the annual rate to 4.46 percent.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjT8uigB8PB5XLmQ5y2Wb8cARsNRhqLEfEy-tmFAaYRuLup5QDh-2JJvJf9-u-wGecevo6w4NaShlIUv5j6vK3GxY1k20rJj70DZUck0lUf5lWSU9yvooxAVZji5zH318wXWzrJrECzgr7/s1600-h/brazil+inflation.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjT8uigB8PB5XLmQ5y2Wb8cARsNRhqLEfEy-tmFAaYRuLup5QDh-2JJvJf9-u-wGecevo6w4NaShlIUv5j6vK3GxY1k20rJj70DZUck0lUf5lWSU9yvooxAVZji5zH318wXWzrJrECzgr7/s400/brazil+inflation.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154671727811414642" /></a><br /><br />Higher food prices accounted for most of the inflation increase, climbing 2.1 percent in December, the biggest gain since January 2003. Food prices climbed 10.8 percent last year and were responsible for almost half the increase in the annual rate, which accelerated for the first time in five years. <br /><br />The central bank ended a two year cycle of interest rate cuts on Oct. 17 2007, after inflation began to accelerate. With both economic growth and annual inflation picking up speed, the central bank is unlikely to make further reductions to the overnight rate, which is already at a record low of 11.25 percent, and may be forced to raise rates at some point this year. <br /><br />Brazil's central bank targets annual inflation of 4.5 percent. A plus or minus 2 percentage point range can be used to accommodate unexpected price shocks. ABN Amro expects inflation to quicken to 4.8 percent this year, up from an earlier forecast of 4.3 percent. <br /><br />The real gained 0.5 percent to 1.7501 per dollar at 12:15 p.m. New York time yesterday, following a gain of 20 percent last year.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_RGEquTuFPqIS3iZcSwj4QB90GFPgcQkg8bGBvZFOtfysHIlsDoa2ODA9x3hdZcYd7yESTmVSgLQZ2LPak-gDFHzHl9zV-BwM13_FefcS_pkib-amVYT51EJ2x9kZZTDm4ykZtYRY1_lp/s1600-h/USD+real.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_RGEquTuFPqIS3iZcSwj4QB90GFPgcQkg8bGBvZFOtfysHIlsDoa2ODA9x3hdZcYd7yESTmVSgLQZ2LPak-gDFHzHl9zV-BwM13_FefcS_pkib-amVYT51EJ2x9kZZTDm4ykZtYRY1_lp/s400/USD+real.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154679621961304738" /></a><br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgppxnYz2kjCT5EnHDkjvdfhGlrmOeiHyBJHqIs1vdzW7QomQuY1t7mKtKEEJpZ3Hp4_Ke8_1iwTCdeErxkZrNclTUksjxSEaM-mAbMBUskco4RM6nYV9vNbF1Z6wvbVmjZNz-fVOp8ZcyV/s1600-h/brazil+USD+GDP.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgppxnYz2kjCT5EnHDkjvdfhGlrmOeiHyBJHqIs1vdzW7QomQuY1t7mKtKEEJpZ3Hp4_Ke8_1iwTCdeErxkZrNclTUksjxSEaM-mAbMBUskco4RM6nYV9vNbF1Z6wvbVmjZNz-fVOp8ZcyV/s400/brazil+USD+GDP.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154679286953855634" /></a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-285448879443943647.post-65611468095599805262008-01-11T11:52:00.000-08:002008-01-12T11:52:43.994-08:00Chile's Central Bank Raises RatesChile's central bank raised its benchmark lending rate to the highest in six years as it seeks to curb the fastest inflation in a decade. Policy makers raised the benchmark rate a quarter point to 6.25 percent in a meeting yesterday.The bank acted in response to inflation that climbed to an annual rate of 7.8 percent in December, driven by higher costs for food and transportation. The question is, with the US Fed set to lower rates rapidly, will this move curb inflation, or attract funds which can only serve to accelerate it. With the Peso set to rise, dollar denominated loans are going to look increasingly attractive to Chilean clients.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjs7rsQv0ud_EPP4ikV6y-VuThrD0gGXMVgbCMKKKv10gONT6-nwDM0BpsNXIuDHVRJblPf_1XYzCQCXt9ksFjXSei23-lhVLzAxePWx22Vz400tMU9vIZmqe3GPFktS5_wzK-TVDSMLQ1o/s1600-h/chile+interest+rate.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjs7rsQv0ud_EPP4ikV6y-VuThrD0gGXMVgbCMKKKv10gONT6-nwDM0BpsNXIuDHVRJblPf_1XYzCQCXt9ksFjXSei23-lhVLzAxePWx22Vz400tMU9vIZmqe3GPFktS5_wzK-TVDSMLQ1o/s400/chile+interest+rate.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154141505508788658" /></a><br /><br /><br />It was the second consecutive monthly increase as the bank tries to bring inflation down to its target for two years from now: 3 percent plus or minus 1 percentage point. The bank's overnight lending rate has risen from a low of 1.75 percent in the first eight months of 2004. <br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4zPXf2b80ReZDbbeldk9aDgrjGojyiHKPeuiCjo-r_A2wgiQAp-OLRzzZPucpnNzTpomGx_84hGt6zXPBU2O57arumma7pRVzk2eS706sm0Lcsr_9cexFgMqsU-wq852cHhZ9duPENwYY/s1600-h/chile+CPI.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4zPXf2b80ReZDbbeldk9aDgrjGojyiHKPeuiCjo-r_A2wgiQAp-OLRzzZPucpnNzTpomGx_84hGt6zXPBU2O57arumma7pRVzk2eS706sm0Lcsr_9cexFgMqsU-wq852cHhZ9duPENwYY/s400/chile+CPI.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5151880230997246514" /></a><br /><br />December's inflation was a ``significant surprise,'' the central bank said after the meeting. ``Further additional adjustments may be necessary to guarantee that inflation converges with the target rate.'' <br /><br />The Chilean peso rose to its highest level versus the dollar since 1999 today on expectations the central bank would lift rates while the U.S. Federal Open Markets Committee cuts. <br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw4F_aNZSFQJeJ6ujW_nTb-LTfzFMsqyRTVTiO8x7CyNGv-a8lXqzH-A0r-ZrIvkgu9DHZkedz1o-zj1Wr6xehOzLmDXTUH2ih3C_Chk92AjzJMjkZW-_0M6EKXVt9AftuNodgOyY8rkPc/s1600-h/peso+USD+2.jpg"><img id="BLOGGER_PHOTO_ID_5151884702058201682" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw4F_aNZSFQJeJ6ujW_nTb-LTfzFMsqyRTVTiO8x7CyNGv-a8lXqzH-A0r-ZrIvkgu9DHZkedz1o-zj1Wr6xehOzLmDXTUH2ih3C_Chk92AjzJMjkZW-_0M6EKXVt9AftuNodgOyY8rkPc/s400/peso+USD+2.jpg" border="0" /></a><br /> <br /><br />Chile's economy grew 4.6 percent in November from a year earlier. It is the only Latin American country to have closed its income gap with the U.S. since 1990, as surging demand for the country's exports has stoked expansion, Finance Minister Andres Velasco told El Diario Financiero last week. <br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_66oya-VWAkH6ii2TMSwmlmu0pIjZngu7p2RXep2SUbcbxi_od5qocoFpIKeWFErtKI2Rtt8Ly_NTTdXEQ3BdyfrP2vCUbXNlZD2bOAUCWa2MtK1zDeUSOrGiVhBjblWwsAb_-Ss-tKj2/s1600-h/Chile+monthly+GDP.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_66oya-VWAkH6ii2TMSwmlmu0pIjZngu7p2RXep2SUbcbxi_od5qocoFpIKeWFErtKI2Rtt8Ly_NTTdXEQ3BdyfrP2vCUbXNlZD2bOAUCWa2MtK1zDeUSOrGiVhBjblWwsAb_-Ss-tKj2/s400/Chile+monthly+GDP.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154136514756790674" /></a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-285448879443943647.post-25580796058493762072008-01-10T11:52:00.000-08:002008-01-12T11:54:16.551-08:00Chile and the OECDChile has a thriving and well-managed economy although income levels are only 40 per cent of the western average, according to <a href="http://www.oecd.org/document/39/0,3343,en_2649_201185_39663335_1_1_1_1,00.html">a report from the Organisation for Economic Co-operation and Development</a> that is likely to reinforce Chile’s case for joining the 30-nation group.<br /><br /><br />More efficient government spending on education and social programmes, success in tackling the "black" economy and getting more women and young people into work will be crucial to maintaining Chile's strong economic growth, according to a new OECD report.<br /><br /><br />The OECD Economic Survey also says public finances are robust, growth is strong, and inflation, despite having risen recently, remains low. But labour productivity compares poorly with many OECD countries. Boosting productivity will require more business innovation and improving the education levels of the workforce.<br /><br /><br />Chile's healthy public finances are allowing increased spending on education, healthcare and other social programmes. Although educational attainment levels of Chilean pupils compare well with other Latin American countries, they are generally lower than in OECD countries. The report argues that extra money alone will not raise educational standards or enrolment and graduation rates. It calls for more focus on the quality of education through, for instance, greater attention to students from disadvantaged backgrounds and additional training programmes for teachers and school managers.<br /><br /><br />Improving education and skills is also key to discouraging people from working in the informal or "black" economy. About 20% of Chileans aged over 15 and working at least 20 hours a week did not have a formal labour contract in 2003, the latest year for which figures are available, says the report. Streamlining business registration and tax procedures would reduce the number of enterprises operating informally while the labour code could made more flexible. At the same time, social security schemes should be enhanced to encourage firms and their workers to be part of the formal economy. <br /> <br /><br />The percentage of women aged over 15 in the labour force has risen over recent years but remains relatively low at around 42%. Male participation in the workforce is about 73%. Increasing the number of women in paid employment would support Chile's long-term economic growth and help reduce poverty, the report says. It adds that further incentives could be provided by more flexibility in working time arrangements, adapting social security provisions and increasing publicly-funded child-care, especially for the poor. Policies to raise educational attainment would also help as participation is higher among better-educated women.<br /><br /><br />OECD countries have launched a drive to engage more closely with emerging economies worldwide. Chile is one of several countries, along with Estonia, Israel, Russia and Slovenia, which have been invited to open membership negotiations. OECD has also launched a process of "enhanced engagement" with major emerging economies including Brazil, China, India, Indonesia and South Africa, with a view to strengthening mutual links.<br /><br />The OECD in May invited Chile to begin negotiations on becoming a member, a process expected to take at least two years and separate from Monday’s report.<br /><br />The OECD report praised Chile’s strong economic growth – expected to be about 6 per cent next year – prudent fiscal policies and low, albeit rising, inflation. It also approved of the way it has been saving windfall copper revenue generated by record prices. <br /><br />It highlighted important reforms to the pension system that the government of Michelle Bachelet, the president, has undertaken. <br /><br />The report noted that a fifth of people over 15 who work more than 20 hours a week are in the informal economy. It was vital to change that to boost productivity and thus keep Chile growing sustainably. <br /><br />Chile should also make labour rules more flexible and provide access to affordable child care to boost the number of women in the workforce from about 42 per cent now.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-285448879443943647.post-39349409659055514702008-01-04T23:16:00.000-08:002008-01-04T23:17:14.672-08:00Chile Inflation December 2007Chilean consumer prices climbed more than expected in December, boosting expectations that policy makers will raise interest rates next week to slow what is now the fastest annual inflation rate in almost 12 years. Consumer prices rose 0.5 percent in December, the government-run National Statistics Institute said yesterday in Santiago. The annual rate rose to 7.8 percent, the highest level since June 1996. The month on month rate of 0.5% however was down on November's 0.9% rise as fresh food prices dropped 0.8% on the month.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4zPXf2b80ReZDbbeldk9aDgrjGojyiHKPeuiCjo-r_A2wgiQAp-OLRzzZPucpnNzTpomGx_84hGt6zXPBU2O57arumma7pRVzk2eS706sm0Lcsr_9cexFgMqsU-wq852cHhZ9duPENwYY/s1600-h/chile+CPI.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4zPXf2b80ReZDbbeldk9aDgrjGojyiHKPeuiCjo-r_A2wgiQAp-OLRzzZPucpnNzTpomGx_84hGt6zXPBU2O57arumma7pRVzk2eS706sm0Lcsr_9cexFgMqsU-wq852cHhZ9duPENwYY/s400/chile+CPI.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5151880230997246514" /></a><br /><br />Housing costs, including basic services, and transportation both rose 1.4 percent from the previous month, following a 21 percent increase in long-distance bus fares and a 16 percent rise in the price of airline tickets. Core inflation, which strips out the prices of minus fresh fruit, vegetables and fuel, accelerated 0.9 percent in the month and 6.3 percent from December last year, the institute said. <br /><br />The central bank voted unanimously last month to raise the benchmark interest rate by a quarter-point for the fourth time since July, citing an unexpected rise in inflation. Policy makers were concerned that faster inflation would spread across the economy and affect inflationary expectations, according to the minutes of the meeting released yesterday. <br /><br /> Chile's economy more than doubled dollar terms in the three years ending 2006 as surging demand for the country's exports stoked expansion of what is Latin America's fourth-largest economy. <br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiza9ikCRcQzYnHNFc52rztCUgOchCGA_9m0xLaKp5Z8ufCClGX16IM_k1lQ6pvfUmThAVyacAjM6KTDyCmKcC7l-v-ZQeG-EFitDdN-ZMhndfspBnEkteq_xkr4KJm4hh9GZ-IhUuI0_Wq/s1600-h/Chile+gdp+1.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiza9ikCRcQzYnHNFc52rztCUgOchCGA_9m0xLaKp5Z8ufCClGX16IM_k1lQ6pvfUmThAVyacAjM6KTDyCmKcC7l-v-ZQeG-EFitDdN-ZMhndfspBnEkteq_xkr4KJm4hh9GZ-IhUuI0_Wq/s400/Chile+gdp+1.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5151886836656947826" /></a><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg03No7lpIsQJH3e9scDzeaXVjksbPa4J0UkGrdHNopKV4BUgpMNYGYKh7z30XuenoXsQ654WKnw-_wIXjIhCrZyRUZIgDoMr191f74LTE2LcxvBnuRIvxkFVoUzCPNlygKQ4cMtdj1mL4-/s1600-h/chile+GDP+2.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg03No7lpIsQJH3e9scDzeaXVjksbPa4J0UkGrdHNopKV4BUgpMNYGYKh7z30XuenoXsQ654WKnw-_wIXjIhCrZyRUZIgDoMr191f74LTE2LcxvBnuRIvxkFVoUzCPNlygKQ4cMtdj1mL4-/s400/chile+GDP+2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5151886767937471074" /></a><br /><br /><br />Annual inflation has accelerated from 2.6 percent in 2006 to close out 2007 at a level that is almost double the central bank's target of 3 percent plus or minus 1 percentage point. <br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNJFYK5lo1og1Z77jimqG6vOdjRlmF2SL8iX6fc0q3_vNz818HLDUhhPI2ve_amqM7EfV4EitSnuDsjaypbLh4rAcoUU05iZXxYz47Rse7t0Xoqww5zF5fN-JuQtANh4ELRwFQnBNstQSi/s1600-h/chile+inflation.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNJFYK5lo1og1Z77jimqG6vOdjRlmF2SL8iX6fc0q3_vNz818HLDUhhPI2ve_amqM7EfV4EitSnuDsjaypbLh4rAcoUU05iZXxYz47Rse7t0Xoqww5zF5fN-JuQtANh4ELRwFQnBNstQSi/s400/chile+inflation.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5151887699945374338" /></a><br /><br /><br />The bank's monetary policy council has pushed up the overnight rate to 6 percent from 5 percent last June - up from as low as 1.75 percent in September 2004 - as the economy and inflation have accelerated. <br /><br /><br />The peso strengthened for a third day on the back of the news, rising 0.1 percent to 495.72 per dollar at 12:51 p.m. New York time from 496.42 per dollar late yesterday.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw4F_aNZSFQJeJ6ujW_nTb-LTfzFMsqyRTVTiO8x7CyNGv-a8lXqzH-A0r-ZrIvkgu9DHZkedz1o-zj1Wr6xehOzLmDXTUH2ih3C_Chk92AjzJMjkZW-_0M6EKXVt9AftuNodgOyY8rkPc/s1600-h/peso+USD+2.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw4F_aNZSFQJeJ6ujW_nTb-LTfzFMsqyRTVTiO8x7CyNGv-a8lXqzH-A0r-ZrIvkgu9DHZkedz1o-zj1Wr6xehOzLmDXTUH2ih3C_Chk92AjzJMjkZW-_0M6EKXVt9AftuNodgOyY8rkPc/s400/peso+USD+2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5151884702058201682" /></a><br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeCg3pJL07nwobqpXMTE34xuyo03UxuqXiHRDaZNzjgd2EGzJfAYnLJHIUaGKGlXjIOjic_OPcraRxXa8CNTat8TiVFtfvD_SJz3-OZ0aJktO62jRfachdtPLX3keZVVuDWu_tDgE9LjyZ/s1600-h/peso+USD+1.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeCg3pJL07nwobqpXMTE34xuyo03UxuqXiHRDaZNzjgd2EGzJfAYnLJHIUaGKGlXjIOjic_OPcraRxXa8CNTat8TiVFtfvD_SJz3-OZ0aJktO62jRfachdtPLX3keZVVuDWu_tDgE9LjyZ/s400/peso+USD+1.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5151884543144411714" /></a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-285448879443943647.post-33316962628413786762007-12-24T14:57:00.001-08:002007-12-24T14:57:33.876-08:00Merry Xmas and A Happy New YearWell, a Merry Xmas and a Happy New Year to all my readers. Thank you for taking the time and trouble to pass-by. This blog will now - failing major and surprising new developments in the global economy - be offline till the end of the first week in January, or till after the festival of <a href="http://es.wikipedia.org/wiki/Reyes_Magos">Los Reyes Magos </a>in Spain (for those of you who know what this is all about). Come to think of it, maybe this is just what our ever hopeful central bankers are in need of even as I write - some surprise presents from the three wise men - but I fear that this year if these worthy gentlemen do somehow show at the next G7 meet, the star in the east which draws them will not be the one described in the traditional texts, <a href="http://indianeconomy.org/2007/12/21/the-rise-and-rise-of-the-rupee-or-how-to-screech-a-galloping-elephant-to-a-halt-atop-of-a-dollar-bill/">but in all likelihood the rising star of India</a>.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjFml5sbqfYpEEcqqMHO4lAIkvF7ECrKxgVOjPMfoqUXISc6Sk6MuZgFxaykyNy3ag9zfmsTvyI7tBH9DaISTkpDRWeDL0bxzF61CFhPpqrTPM8EJ9iOCukCTla_YAhdBO6fN6DGmBHDKRs/s1600-h/libor.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjFml5sbqfYpEEcqqMHO4lAIkvF7ECrKxgVOjPMfoqUXISc6Sk6MuZgFxaykyNy3ag9zfmsTvyI7tBH9DaISTkpDRWeDL0bxzF61CFhPpqrTPM8EJ9iOCukCTla_YAhdBO6fN6DGmBHDKRs/s400/libor.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5147621083728492354" /></a><br /><br />Credit crunch, <a href="http://globaleconomydoesmatter.blogspot.com/2007/08/credit-tightening-or-liquidity-crunch.html">did someone use the expression credit crunch</a>?Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-285448879443943647.post-13706368443257577892007-12-20T12:29:00.000-08:002008-01-12T12:38:38.792-08:00Argentina October 2007 GDPArgentina's economy expanded more than economists forecast in October, climbing at the fastest pace in five months, led by higher industrial output as consumption and exports rose. The country's economy grew 9.4 percent in October from a year earlier, the National Statistics Institute said today. South America's second-biggest economy expanded 0.3 percent from September.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAjjoEVoxvCp6PpjUiUU9ze71AvwLUJCFAyWhSC-l4d6kJkNU8yP_FbAaRjCWUwyT1hxAa_Jp5f3000eS6VTg-hw01wBi_4RAk8Yf6qn2M30aeztEARCjDZHgCvZ1WsSjbF8Hya5MmAmU/s1600-h/argentina+monthly+gdp.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAjjoEVoxvCp6PpjUiUU9ze71AvwLUJCFAyWhSC-l4d6kJkNU8yP_FbAaRjCWUwyT1hxAa_Jp5f3000eS6VTg-hw01wBi_4RAk8Yf6qn2M30aeztEARCjDZHgCvZ1WsSjbF8Hya5MmAmU/s400/argentina+monthly+gdp.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5154691338632088242" /></a><br /><br /><br /><br />The economy is heading to its fifth straight year of growth, helped by a strong currency devaluation following the economic crisis in 2002. The impact of the currency correction has strengthened industries, making local goods cheaper in international markets. A drop in unemployment levels to a 15- year low has helped boost consumer's purchasing power, increasing demand for goods.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-285448879443943647.post-58931769745749542102007-10-29T03:16:00.000-07:002007-12-22T03:21:03.074-08:00Time To Cry For Argentina?Two issues - apart from the exceptionally high levels of recent economic growth - have dominated the economic landscape which formed the backdrop to Argentina's latest election: the price of tomatoes and the availability of energy.<br /><br />In many ways this is somehow typical of Argentine social and political life, the devil is always, or nearly always in the details, and the devil, in one form or another, is never, it seems, far away. As outgoing President Néstor Kirchner is quoted as saying at one point "It's not easy work helping Argentina find it's way out of hell, but in these past four years we've shown that it's absolutely possible to do so". So the moral is, it seems, that the devil makes hard work of life, but doesn't always win, unlike those who "adjust" the inflation numbers, who see to do so eternally.<br /><br />In fact the really big, big news which lies behind the recent electoral triumph of Cristina Fernandez isn't the technique in pruning inflation data, it is the fact that Argentina's economy has been expanding at a sustained annual pace of 5 per annum over the last four years, and is, if anything, accelerating at the present time, since the Argentine economy reportedly expanded at the fastest pace in three months in August (growing at annual rate of 9.2%), leading it onward and upwards toward a fifth straight year of 8% plusgrowth.<br /><br /><br /><br /><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjR2KhdQEFYND2E1hG9qUznrO7Cbky8FDErY3CpwiPecVSffyADjDn78R5WuaBaLKDss9bx05tnVAEe0vufYh4NHKB8BBcsuq7stAKbjTzjNcwj-izdQNJtaBTGdiuCDcY8MPRwaJ0HRN63/s1600-h/argentina+GDP.jpg"><img id="BLOGGER_PHOTO_ID_5126860970142162866" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjR2KhdQEFYND2E1hG9qUznrO7Cbky8FDErY3CpwiPecVSffyADjDn78R5WuaBaLKDss9bx05tnVAEe0vufYh4NHKB8BBcsuq7stAKbjTzjNcwj-izdQNJtaBTGdiuCDcY8MPRwaJ0HRN63/s400/argentina+GDP.jpg" border="0" /></a><br /><br />Of course the big issue here is just how sustainable all this is. Is the Argentine economy, as some would have it, on the verge of yet another of those hyper-inflationary spirals, or is there something different about Argentina's evolution, this time round?<br /><br />Certainly reasons why Argentina's "growth miracle" should not continue are hardly hard to come by. The first of these is the incipient rising inflation, and the government shenanigans in trying to hide it. The issue of food prices hit the headlines in grand style earlier this month when Argentine consumer groups launched a week-long boycott of tomatoes after prices reached almost $6 a kilo, making the salad vegatable which garnishes the nation’s dinner plates effectively more expensive than the meat it normally accompanies. The boycott itself took place amidst growing concerns about galloping food inflation and widespread criticism that the official inflation figures presented by the government were being manipulated as part of the run-up to this weeks elections.<br /><br />Food prices are now widely estimated to be rising at an annual rate of around 22.5 percent - or more than double the inflation rate which is to found in other sectors like clothing, or domestic appliances. The "say no to the tomato” campaigners handed shoppers a tomato in a bag marked "officially priced at 3.99 pesos ($1.30), don’t overpay”, an ironic reference to the official price recorded by Argentina’s much-questioned National Statistics Institute (Indec). Incumbent President Néstor Kirchner has defended Indec’s figures, most notably by describing them as "perfect”, but after months of apparent government manipulation of official data there are few who are still willing to swallow this. Independent economists expect inflation to end the year somewhere in the 15 to 20 percent region, or at double the rate which is to be found in the official government’s forecast. At the present time inflation is estimated by Goldman Sachs to be about double the official 8.6 percent rate, and the blame is put firmly on a 35 percent jump in government spending this year.<br /><br />To back their inflation claims Kirchner's critics have been pointing to a breakdown in the traditional relationship between price rises in Buenos Aires, the province that the government uses to gauge nationwide consumer prices, and prices in Mendoza province. In the 10 years up to 2006, annual inflation in Mendoza, a wine-producing region located in the foothills of the Andes, was on average 0.4 percent higher than in Buenos Aires. That gap however swelled to 9.2 percentage in the first seven months of 2007.<br /><br />Indeed in August Patricia Gimenez, the head of statistics for Mendoza province, initially reported inflation as running at 3.1%, more than double the official 1.5 per cent month-on-month rate, but the figures were later modified by the National Statistics Institute to show the lower rate 1.5% rate, according to the newspaper Clarin, and the earlier figure was attributed to an administrative error.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimYIlfwXj66JgUtmtuzoTiRwFQiBq_5AzSOXMBQjtsESZ5IIYV3XwGec2568W_ViZTs5UQGKk8AY1-LRohhN4mtl3t5j4exsrLd5aPPQnZv9iZE2znow7P84jm_y3BA2HaVIeEWKRIa6Ob/s1600-h/argentina+inflation.jpg"><img id="BLOGGER_PHOTO_ID_5126876556578480066" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimYIlfwXj66JgUtmtuzoTiRwFQiBq_5AzSOXMBQjtsESZ5IIYV3XwGec2568W_ViZTs5UQGKk8AY1-LRohhN4mtl3t5j4exsrLd5aPPQnZv9iZE2znow7P84jm_y3BA2HaVIeEWKRIa6Ob/s400/argentina+inflation.jpg" border="0" /></a> </p><p>As can be seen below, according to the government prepared Indec data, inflation would actually seem to have been slowing in Argentina so far this year.<br /><br /></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-TIekmoYB2kxY_TNLf0fwKsgqcq1ZuTCEQqY9DerKYeEpP4p8GH7BFnJbhqhjo251ZvTRzYwP1Ptwu78O52kBQpSNCwFZ1Rnt-CgPP5S10PvoKofnfJFJ0QTGMQhqP2KInMlYUVlX2hmD/s1600-h/argentina+price+inflation++2007.jpg"><img id="BLOGGER_PHOTO_ID_5127103953621967058" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-TIekmoYB2kxY_TNLf0fwKsgqcq1ZuTCEQqY9DerKYeEpP4p8GH7BFnJbhqhjo251ZvTRzYwP1Ptwu78O52kBQpSNCwFZ1Rnt-CgPP5S10PvoKofnfJFJ0QTGMQhqP2KInMlYUVlX2hmD/s400/argentina+price+inflation++2007.jpg" border="0" /></a><br /><strong>Argentine Factories Running on Empty?</strong></p><p><br />The second issue which has been bobbing steadily up and down in the background, and which has given lots of fuel to the sceptics, is the state of Argentina's infrastructure, and in particular the preparedness of its energy sector. Last July, and for the first time, even Néstor Kirchner himself was forced to concede that a major problem existed even to the extent of using the term “crisis” to describe the severe energy shortages that Argentinians had been experiencing, shortages which in fact forced the government to ration gas to thevery factories which have been fuelling all that recent GDP growth in an attempt to ensure that there was enough available for heating homes.<br /><br />One of the threads which runs through Argentina's current energy woes is, of course, the issue of climatic change. Lower than traditional rainfall has increasingly been causeing problems for hydro-electric dams, and both Argentina and Chile have relied to some considerable extent on hydroelectric power to meet their energy needs.<br /><br />There are, however, other issues, among them the relatively high level of energy interdependence among Latin American countries, and the relatively high level of political instability which characterises some of the countries concerned, most notably Bolivia and Venezuela. What all the interlocking and interdependence effectively means is that problems in one country are rapidly transmitted to another. At the end of June, for example, Argentina was only receiving 4.6 million cubic meters of the 7.7 million cubic meters of natural gas it needs daily from Bolivia.<br /><br />Argentina is not the only country affected by this situation. Whenever Bolivia cuts exports because of internal chaos (which is a not infrequent event), or becuase of technical problems caused by an investment deficiency (which are ongoing), then it is contractually obliged to service its Brazilian export contracts before it services Argentina. The resulting shortages then prompt Argentina to reduce its exports of Bolivian natural gas to Chile. Chile also is facing natural gas shortages, but cannot purchase directly from Bolivia because of the ongoing feud between the two countries over access to the ocean, which Chile took from Bolivia in 1884. Chile will soon construct liquefied natural gas ports to overcome its energy problems.<br /><br />Within both Chile and Argentina, residential consumption of natural gas (which in Argentina increased by a staggering 30 percent in May because of an early winter cold snap) is given priority over industrial use. This has led to shortages for power plants and factories in both countries, and also to the use of diesel and other petroleum-based fuels as a substitute for natural gas in those facilities capable of using multiple fuel types. That, in turn, has led to tremendous pollution problems, particularly in Santiago, and to diesel shortages that are affecting Argentine farmers during harvest (though the country's main crop, soy, has not been affected).<br /><br /><br />But is ever the case with Argentine economics, domestic political questions are never far away in the background, in this case in the form of Argentina’s ultra-cheap energy tariffs, which have helped fuel the increase in demand at the same time as they have helped the economy bounce back from virtual ruin in 2002. After four years of pretty spectacular GDP growth - averaging over 8 per cent per annum - Néstor Kirchner is now prepared to admits the dramatic economic growth has created "bottlenecks", but he has largely attempted to shift the blame onto energy companies for failing to invest enough to boost gas production, and transport companies for failing to deliver enough energy.<br /><br />From a more conventional economic point of view, of course, the issue of the government regulated tarrifs lies behind the issue of the lack of investment. So while external factors undoubtedly played some part in the recent energy trauma which has shaken Argentina, to some considerable extent the problems have "made in Buenos Aires" written all over them. Since coming to office four years ago, President Nestor Kirchner has refused to lift price controls on utilities. These controls were originally imposed during the financial crisis of 2001-2002 to avoid social unrest, and afterward they were continued in order to give the appearance of controlling inflation. However, these fixed prices have discouraged new investment in the country's ample natural gas fields, leaving Argentina cripplingly dependent upon Bolivian imports, even as economic (and hence industrial) growth in the region exacerbates energy shortages. Although Argentina's natural gas production has increased over the past few years, it has not increased enough -- and most of the increases have not come from the opening of new fields, but from existing ones that are rapidly maturing and will soon "top out". </p><p><strong>The Electoral Dynamics of Inflation Linked Bonds</strong><br /><br /><br />On another front, the widespread suspicion that the government of Néstor Kirchner has been manipulating the inflation data and the likelihood that his wife Cristina Fernandez would succeed him have been steadily transforming the Argentine bond market. Argentina's benchmark inflation-linked bonds have fallen 24 percent in the course of this year, making the country's debt market the worst performer among any of the emerging economies, according to data compiled by JPMorgan Chase, and has converted Argentine inflation-linked debt into the single worst long-term asset to be found in any of the emerging-markets. Yields on Argentina's 5.83 percent inflation-linked peso bonds due December 2033 have soared to 7.7 percent from 5.3 percent on Feb. 1, which is just shortly after Kirchner began making the personnel changes in the statistics office.<br /><br />About 40 percent of Argentina's $136 billion debt is in inflation-based securities, and the value of their their principal rises and falls along with the consumer price index. Merill Lynch estimates that Argentine bondholders may well have lost out on around $250 million in interest payments this year alone, and by steadily reducing the official rate the Argentine government stands to save something in the region of $5 billion in principal payments at maturity.<br /><br />Of course in electoral terms tampering with the index for the price of tomatoes is one thing, and tampering with it to reduce the size of overseas debt quite another. Whilst the polls show that most Argentines feel that consumer price increases are accelerating, and this obviously is a matter of concern for people who have lived through inflation which skyrocketed up towards the 20,000 percent level in the early 1990s, there are also other items on the household balance sheet which help to some extent to explain Cristina Fernandez's popularity. Like unemployment, which has fallen steadily in recent years.</p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitIshvSE9isUaMsPLBsrsBSS4FxKZrW343WwkPmZnEsygO7P-oVPOZoGiX99PAJ7plDHJW6YSt9c3DGnBaj7-cWoMa_5FvIwlp6q3ODM61T_Y6EO8Tkj_CUn0eOOPdF1PLXnSL7qkTCLRa/s1600-h/argentina+unemployment.jpg"></p></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitIshvSE9isUaMsPLBsrsBSS4FxKZrW343WwkPmZnEsygO7P-oVPOZoGiX99PAJ7plDHJW6YSt9c3DGnBaj7-cWoMa_5FvIwlp6q3ODM61T_Y6EO8Tkj_CUn0eOOPdF1PLXnSL7qkTCLRa/s1600-h/argentina+unemployment.jpg"><p><img id="BLOGGER_PHOTO_ID_5127066720550477922" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitIshvSE9isUaMsPLBsrsBSS4FxKZrW343WwkPmZnEsygO7P-oVPOZoGiX99PAJ7plDHJW6YSt9c3DGnBaj7-cWoMa_5FvIwlp6q3ODM61T_Y6EO8Tkj_CUn0eOOPdF1PLXnSL7qkTCLRa/s400/argentina+unemployment.jpg" border="0" /></a></p><br /><br /><br /><strong>Surviving The Emerging Markets Storm?</strong><br /><br /><br />In fact, despite the numerous tricky issues which arise in association with Argentina's sovereign bonds, the country itself and its financial markets have largely been spared the kind of problems which have been experienced in some of the other emerging markets like South Africa, Hungary or Turkey. One of the principal reasons for this is that now – and in stark contrast to the situation which characterised much of the 1990s – Argentina's economy is largely protected against external financial pressures by the presence of budget and current account surpluses, and with these a steady increase in foreign exchange reserves as well as a reduction in financing needs. In addition the rather poor reputation which Argentine national debt and institutional quality enjoy have meant that the peso, rather than appreciating against the dollar as many emerging currencies have found themselves doing, has in fact been trending slowly down. This has made it comparatively easy for the Argentine administration to maintain competitiveness and a trade surplus in the face of strong internal inflationary pressure.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjmnHvd_byaRwVL2Q570cwN7ZViCOQ1a78NSyHiG_OIsfNROTLSccS6LCc3HvwaBBoC5kNAUilspuJWpNs8PfzrAC2nwGPuV9FDp2mwLRPNP4ygmpnsb7EMncTBqBklD9Dd-phcwvreRw7k/s1600-h/argentina+trade+balance.jpg"><img id="BLOGGER_PHOTO_ID_5127056507118247986" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjmnHvd_byaRwVL2Q570cwN7ZViCOQ1a78NSyHiG_OIsfNROTLSccS6LCc3HvwaBBoC5kNAUilspuJWpNs8PfzrAC2nwGPuV9FDp2mwLRPNP4ygmpnsb7EMncTBqBklD9Dd-phcwvreRw7k/s400/argentina+trade+balance.jpg" border="0" /></a><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxSbk9QVPXOcVY9fZtDc8dQ2rkUsdGd943H1L6gbtR48bz_AHNDq7YBmpOlp9bp1oRzEOa9YgFkr2CVj-NhQmK7qJ8y6_GQb8bHqrc5KOVh88r7AOc5Y5ZHaUjL3TvVLUiM-BYP1V9bwB4/s1600-h/argentina+CA+balance.jpg"><img id="BLOGGER_PHOTO_ID_5127054119116431394" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxSbk9QVPXOcVY9fZtDc8dQ2rkUsdGd943H1L6gbtR48bz_AHNDq7YBmpOlp9bp1oRzEOa9YgFkr2CVj-NhQmK7qJ8y6_GQb8bHqrc5KOVh88r7AOc5Y5ZHaUjL3TvVLUiM-BYP1V9bwB4/s400/argentina+CA+balance.jpg" border="0" /></a><br /><br /><br /><br />In other word, the Argentina administration hasn't found it necessary to follow in the footsteps of some of the other emerging market countries and adopt a currency peg (something which in any event would be unthinkable in Argentina following the experience of the late 1990s), since market sentiment has done effectively done the work of weakening the peso for it. In fact the peso has fallen steadily against the dollar during the course of the last two years, at a rate which has steadily eaten up inflation but without causing any form of major financial disruption.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCPxlNx1Y6bCd00TudL-ANvpAKPBPaQqaUHWRnwl6QhGyXmAvM3tmGna6P1OVuqXbU5QdtlnEK4rXUFJo8pjGOU8nCeBGpidlcTDd_I8sEAeguLiIg-Gc252OkbgPqS-mgq7REaMsInXcq/s1600-h/peso+chart.jpg"><img id="BLOGGER_PHOTO_ID_5126710783725756322" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCPxlNx1Y6bCd00TudL-ANvpAKPBPaQqaUHWRnwl6QhGyXmAvM3tmGna6P1OVuqXbU5QdtlnEK4rXUFJo8pjGOU8nCeBGpidlcTDd_I8sEAeguLiIg-Gc252OkbgPqS-mgq7REaMsInXcq/s400/peso+chart.jpg" border="0" /></a><br />Moreover, Argentina’s real economy is much less vulnerable to external shocks than it used to be, and while it was affected by the market turmoil of last August, it has hardly been knocked off its orbit by it. Part of the explanation for this is that one of the consequences of the 2001 crisis has been that there have been few capital inflows into Argentina, and indeed there have been net capital outflows in recent years, a situation which stands in stark contrast with the high levels of foreign capital penetration which existed in the late 1990s. The consequence of this is, naturally, that the level of external debt has fallen steadily.<p><br /></p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEga60tOmwhwbZHlaa708EJ8AIOytv1AanP-DLv09k_6p5IzX_PK6VzQsJkR_hM3oeUgUaQ-UMwpRjUZi_V8wh8iAnOvbX6BVdoTgBvwpMr7xB0IQwLvfV66brj6SfDw2ZkRuRzzKrP_BlhI/s1600-h/argentina+net+external+debt.jpg"><img id="BLOGGER_PHOTO_ID_5127112534966624498" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEga60tOmwhwbZHlaa708EJ8AIOytv1AanP-DLv09k_6p5IzX_PK6VzQsJkR_hM3oeUgUaQ-UMwpRjUZi_V8wh8iAnOvbX6BVdoTgBvwpMr7xB0IQwLvfV66brj6SfDw2ZkRuRzzKrP_BlhI/s400/argentina+net+external+debt.jpg" border="0" /></a><br /><br />At the same time the level of public debt has been steadily reduced. Argentina's tax revenue was up 37.4 percent in August 2007 in comparison with August 2006, on the back of strongly rising wages and sustained consumer demand, and rose to 17.9 billion pesos ($5.7 billion) from 13 billion pesos a year earlier. Revenue from value-added taxes rose 43.3 percent to 1.8 billion pesos and income tax revenue grew 33.4 percent to 960 million pesos. So while government spending has increased significantly in this election year, the strong revenue inflows have enabled the administration to service the spending without increasing the level of public indebtedness.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiCO_00ExfX-I6mkH0n6dU_ITEUkH7fJNdTa7JWRcIePJVZYuy4JLJRYIr9nUVXd39LYyyibovPJ9DfqV92NBnVrD2M8bbAlnG6IaktYfiqb79HxS5GpN6KTRSjB2v_sdmvbwiZ56Arilc/s1600-h/argentina+public+debt.jpg"><img id="BLOGGER_PHOTO_ID_5127067339025768562" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiCO_00ExfX-I6mkH0n6dU_ITEUkH7fJNdTa7JWRcIePJVZYuy4JLJRYIr9nUVXd39LYyyibovPJ9DfqV92NBnVrD2M8bbAlnG6IaktYfiqb79HxS5GpN6KTRSjB2v_sdmvbwiZ56Arilc/s400/argentina+public+debt.jpg" border="0" /></a><br /><br />And the boom in Argentina is hardly a credit driven one. Argentine banks only lend the equivalent of about 40 percent of their deposit base, a figure which is roughly half the average rate prevalent across Latin America. At the present time loans by banks equal about 11 percent of gross domestic product, and again this is down from the level of around 30 percent which prevailed before the financial crisis.<br /><br />Indeed all of this recently lead Nestor Kirchner to chide Argentina's banks, who charge an average credit card interest rate which is roughly double that which is current in the United States, for example, urging them to cut finance charges and lend more, even vaguely threatening that if they didn't act, then the government would consider introducing rules to force them to do so.<br /><br />``Banks are too liquid, have lots of money saved, I'm glad they are solvent,'' he said recently in a speech at the presidential palace. ``But you have to give loans at low rates, otherwise I'll have to take some measures.''<br /><br />However, if we look at Argentine overnight interest rates, they are hardly high in comparison with those prevailing in some emerging markets given the level of inflation which prevails (even on the official version), and clearly it is totally unrealistic to imagine that the banking sector can offer rates of interest which fail to cover them for inflation.<br /><br /><br /><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJ6KJb48oEouUPYt4Qh6__beqR3ncaRygHdsz3tGHIq2e17U9kAImOX5dTMULzyaYLKrroB72YtCg_h9ZaWEFj5Hckigc-S-vi02puuECFvpMlwPVwqucfiOvT8tFE71uJWfrxRS_l_fZu/s1600-h/argentina+call+money+rate.jpg"><img id="BLOGGER_PHOTO_ID_5127104688061374690" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJ6KJb48oEouUPYt4Qh6__beqR3ncaRygHdsz3tGHIq2e17U9kAImOX5dTMULzyaYLKrroB72YtCg_h9ZaWEFj5Hckigc-S-vi02puuECFvpMlwPVwqucfiOvT8tFE71uJWfrxRS_l_fZu/s400/argentina+call+money+rate.jpg" border="0" /></a><br /><br />But while the central bank administered overnight rates are far from high, annual credit card interest rates, in comparison, rosen to 26.85 percent on average in July, up from 25.93 percent last December. Rates for personal loans rose to 24.74 percent from 24.56 percent over the same period. By way of comparison we could note that the average fixed rate for credit cards in the United States is currently in the region of 13.5 percent. </p><p>So if Argentina is badly governed, and infrastructurally and institutionally is far from being a shining example to others, what exactly is going on. Why should Argentina have done so badly at the end of the 1990s, when it was being a model student, and why should it be doing so notably well today, when on many counts it is doing exactly the opposite of what the textbook recommends.</p><p> </p><p><strong>It's the Demography Silly!</strong></p><p>Well undoubtedly there are many reasons for this, and China's rpaid growth and demand for Argentina's agricultural products would be high on the list, but if I could single out one factor which I think stands out above all the others it would come in a single word: demographics. So let's take a quick look at why.<br /><br /></p><p>First off, and as is evident, Argentina's fertility rate has been falling for many years, and is now about to go below replacement level.</p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhikjdLJV8w1N6BI0prcMiH3MYW90vlkIWVxLUrsLmvE-2_ELsuwU4GJs0l3XHHdYA7pjavbZe03NNNvbgv2VfWysbJr-77V_4ikFA9woMksDsN7e09a2Gw23G9fsJnKf5k3fqDtbBzCN-5/s1600-h/argentina+TFR.jpg"><img id="BLOGGER_PHOTO_ID_5127073098576912562" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhikjdLJV8w1N6BI0prcMiH3MYW90vlkIWVxLUrsLmvE-2_ELsuwU4GJs0l3XHHdYA7pjavbZe03NNNvbgv2VfWysbJr-77V_4ikFA9woMksDsN7e09a2Gw23G9fsJnKf5k3fqDtbBzCN-5/s400/argentina+TFR.jpg" border="0" /></a> </p><p><br /><br />This fall in the fertility rate has lead to a steady easing off in the rate of increase in the number of children born, and since 2000 the number has levelled off, and even begun to decline slightly.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVMKToe7Gfr2uGDMqFCF94HueIkHf1auWRgLIL8NjpFUhMFisoGFsPUoBkS6g9IEbSGwaEslAzp7RJfULv033Bdcgs9iGizXbMILuuIPDyOF-X-AOlb8L3gbEXYcMnsoJdsFS8_crd2EOR/s1600-h/argentina+live+births.jpg"><img id="BLOGGER_PHOTO_ID_5127069374840266898" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVMKToe7Gfr2uGDMqFCF94HueIkHf1auWRgLIL8NjpFUhMFisoGFsPUoBkS6g9IEbSGwaEslAzp7RJfULv033Bdcgs9iGizXbMILuuIPDyOF-X-AOlb8L3gbEXYcMnsoJdsFS8_crd2EOR/s400/argentina+live+births.jpg" border="0" /></a><br /><br />At the same time life expectancy has been improving, and most notably life expectancy among the young and poor, where we can note the steady decline in infant mortality which has again been taking place.<br /><br /></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxdxzLuPn24jDWMoRN4zs0gMt_7yTbv4znNYIbQmnxjPWtnyHBOCoTJ8WLxJTXdTBdf3bH_KA7qp5-dzA07IwcdTk7sF7KgeZzkd8AAvvERyCsoX0NwTEb366ZbWBGnIQUgFxyDDwb5811/s1600-h/argentina+infant+mortality.jpg"><img id="BLOGGER_PHOTO_ID_5127070031970263202" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxdxzLuPn24jDWMoRN4zs0gMt_7yTbv4znNYIbQmnxjPWtnyHBOCoTJ8WLxJTXdTBdf3bH_KA7qp5-dzA07IwcdTk7sF7KgeZzkd8AAvvERyCsoX0NwTEb366ZbWBGnIQUgFxyDDwb5811/s400/argentina+infant+mortality.jpg" border="0" /></a> </p><p>As a result of these processes Argentina's population is still increasing, but again at a much slower rate than hitherto.<br /><br /><br /></p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisD17MKf2oeDLRSr0LeQZlp2J7BVGAzheSt2zwLyPR7jEwQc0oDSYNNa33pZs5gAgEsoL8iFLRHkoTHH5zOTssvrrCBqROyY1oIy8cTYvMiKUEDieSonoRPW7frzx98IJCeENZppyIHvaN/s1600-h/argentina+population.jpg"><img id="BLOGGER_PHOTO_ID_5127053058259509266" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisD17MKf2oeDLRSr0LeQZlp2J7BVGAzheSt2zwLyPR7jEwQc0oDSYNNa33pZs5gAgEsoL8iFLRHkoTHH5zOTssvrrCBqROyY1oIy8cTYvMiKUEDieSonoRPW7frzx98IJCeENZppyIHvaN/s400/argentina+population.jpg" border="0" /></a><br /><br />One consequence of all of this is that the percentage of the population in the 0 to 14 age group has been declining steadily from the high point reached at the end of the 1980s.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMVOxBoq8yliC5ziTxmCjwFRrJgwsmyNDyGG2cZZLkvzM2ibclIWxikS4n2ZNWqZw1b-MoLnbpK4X_-1no_3n6rUtDufwRVn2HivL1VwfXS2f0XX5wsCnbwHDmangrE7fz8VMj83J_oyBW/s1600-h/argentina+0+to+14.jpg"><img id="BLOGGER_PHOTO_ID_5127068614631055490" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMVOxBoq8yliC5ziTxmCjwFRrJgwsmyNDyGG2cZZLkvzM2ibclIWxikS4n2ZNWqZw1b-MoLnbpK4X_-1no_3n6rUtDufwRVn2HivL1VwfXS2f0XX5wsCnbwHDmangrE7fz8VMj83J_oyBW/s400/argentina+0+to+14.jpg" border="0" /></a><br />All of this is producing profound changes in Argentina's age structure, changes which are associated with what is known in an economic context as the demographic dividend. These hanges can be seen reasonably clearly in the following population pyramides for 1990, 2000 and 2010. We can see how the shape of the pyramid begins to change, and particularly in the third pyramid how the steady stabilisation, and then decrease, in the number of children born means that the generation size starts to shrink. It is the appearance of this change at the base of the pyramid which is the most typical indicator of the presence of the demographic dividend.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBdzCAqB5ChYLGndHaMx3UEzTbVGYqE7lGM8rCe7jSvWIIS2bXAMU_OVJn8eO60E5mdzh5EvuUyGrXW9b0gMYbiIc_GNfDFJzJErlZbIxOwQjYeI_EaQy3iwNnz_HHxc0sTtv2XsdpjkEF/s1600-h/argentina+1990.jpg"><img id="BLOGGER_PHOTO_ID_5127044541339361234" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBdzCAqB5ChYLGndHaMx3UEzTbVGYqE7lGM8rCe7jSvWIIS2bXAMU_OVJn8eO60E5mdzh5EvuUyGrXW9b0gMYbiIc_GNfDFJzJErlZbIxOwQjYeI_EaQy3iwNnz_HHxc0sTtv2XsdpjkEF/s400/argentina+1990.jpg" border="0" /></a><br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJFCCgVxnwDz1mZUz13LE7bgaiKWg92TgorxGg89njbt_hHn6t2pjkpVavNUoELg_QBmfWJASIyGJ1wVdieqadcchc6WvbU3pbDsDZdqi9MX59ui1rDPORLlZhK8B7OzTw5hqQ2Xf1ZIUL/s1600-h/argentina+2000.jpg"><img id="BLOGGER_PHOTO_ID_5127046680233074674" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJFCCgVxnwDz1mZUz13LE7bgaiKWg92TgorxGg89njbt_hHn6t2pjkpVavNUoELg_QBmfWJASIyGJ1wVdieqadcchc6WvbU3pbDsDZdqi9MX59ui1rDPORLlZhK8B7OzTw5hqQ2Xf1ZIUL/s400/argentina+2000.jpg" border="0" /></a><br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfuUlg9K1dtjp0nx-eOg0D5AyhH2MNtVvr8_GCd8ZZQrALJQeQOCV6Mjc1xIBqimoDXKH0J6IQer_dTtBr7i29TqUDH4_iNBJ7AhK1IPA_FFpYdQbXE_GC4MqiZPHYYepHZZYCjUFaycNp/s1600-h/argentina+2010.jpg"><img id="BLOGGER_PHOTO_ID_5127051838488797186" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfuUlg9K1dtjp0nx-eOg0D5AyhH2MNtVvr8_GCd8ZZQrALJQeQOCV6Mjc1xIBqimoDXKH0J6IQer_dTtBr7i29TqUDH4_iNBJ7AhK1IPA_FFpYdQbXE_GC4MqiZPHYYepHZZYCjUFaycNp/s400/argentina+2010.jpg" border="0" /></a> <p></p>One of the reasons why this moment is so favourably in economic terms is the impact it has on saving and investment. Basically the relative decline in the proportions of young children frees off a greater proportion of national resources for saving and investment, and it is this process which means that the dependence on external funding begins to decline. A similar process can be observed in China, and is now being observed in India.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPnYaKFZNXfTafOLKEB01cCjj5C3DBY8pO1xq4PUoHLuFmhsTj0mfo6HuPITbF6RcxQ3TSLDoZC6HG6ngSxhjn8CuzKMavNDQcYnGsZtzeIzNWYFuxWZwDB8BqQkQn-rhPWx-BwYcpiZwf/s1600-h/argentina+saving+and+investment.jpg"><img id="BLOGGER_PHOTO_ID_5127065977521135698" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPnYaKFZNXfTafOLKEB01cCjj5C3DBY8pO1xq4PUoHLuFmhsTj0mfo6HuPITbF6RcxQ3TSLDoZC6HG6ngSxhjn8CuzKMavNDQcYnGsZtzeIzNWYFuxWZwDB8BqQkQn-rhPWx-BwYcpiZwf/s400/argentina+saving+and+investment.jpg" border="0" /></a><br /><p> </p><p>So to end where I started, with the question - should we be crying for Argentina? My answer would be most definitely no. There may be a lot, a hell of a lot, wrong with the way Argentina is being run, and some of the issues have been adressed in this post. But the underlying situation in Argentina is far from being a tragic one this time round. Clearly Argentina needs to move away from these 'old practices' of manipulating the statistical system. Clearly Argentina needs to attract Foreging Direct Investment in order to modernise the energy sector and its infrastructure generally. But the situation is far from being a hopeless one, and reform is not only possible but probable. Not only that, more by accident than design Argentina may go into the next global growth slowdown better equipped to be able to withstand the pressure than many others. If so this will also be a test, a test for the relative importance of institutional quality when measured against the driving force of demographic tailwinds. The outcome promises of this testto be interesting, very interesting for all of us.</p>Unknownnoreply@blogger.com0