El Panorama agroIndustrial en América Latina y el Caribe
Jp morgan brasil 2011 presentación
1. Reflections on Latin American
Political Environment
Alvaro Uribe Velez
JP Morgan Latin American Advisory Council
2. Structure of the Key Note adress
The following notes have been prepared to answer
all the questions that are enumerated in the meeting
booklet.
The outline will be the following:
1. Regional Political Situation
2. Brazil role in the Americas
3. China’s influence in the region
4. Elections in Venezuela and Mexico (lessons from Peru)
5. Mexico-U.S Security Challenges
6. U.S Foreign Policy in the Region
7. Intra-regional trade
8. Colombian lessons for the region
3. What are the key political trends you see in Latin America today?
As global economic growth risks rise, focused on developed markets,
and Emerging Markets are ‘observers’ rather than active ‘participants’.
The regional current Political Map is a “Tale of two cities” like the Charles Dickens Book… (The
ALBA and the non Alba Model)
ALBA
(Leaders: Venezuela,
Ecuador, Bolivia,
Nicaragua and Cuba)
Anti-U.S
Anti-Free Trade
Lack of investment
Confidence
Weak institutions
Political Insecurity
Ideology driven
countries
Political Polarization
Modern Democratic Center Countries
(Brazil, Colombia, Peru, Chile, México,
Uruguay, Paraguay, Panamá, Republic
Dominican, Costa Rica, etc)
Cooperation with the U.S
Pro Free Trade
Investment Confidence
Independent Institutions
Political Stability
State Long Term Policies
and Mgt by Results
Organized Party Systems
The Democratic Center takes the lead:
• Investment grade countries are in this Group: Mexico,
Brazil, Chile, Colombia, Peru and Panama.
• Countries with more market access through FTA’S are
in this group
• Countries with more FDI are in this group
• Countries with more Middle Class Expansion are in
this group.
• Better fiscally sustainable social programs: Chile,
Mexico, Brasil and Colombia.
Only the group of Countries in the Democratic Center
will become the regional active participants of the
Emerging Markets Boom…some of the ALBA
Members will see some benefits, but without solid
long term development agendas, they will face
transitory profits…
4. The two cities explained
The magnificent 6 Vs The ALBA
Brazil, Mexico, Colombia, Chile, Peru and Uruguay
represent 70 per cent of the region’s population and
75% of the regional GDP.
This group of countries have common characteristics that
explain their outstanding performance:
The strengthening of Liberal Democracy
The adoption of an institutional Framework in favor
of foreign and national investment.
The construction of a sound and sustainable social
safety net.
The expansion of export markets and the
commercial integration with the World (FTA’s)
A public administration driven by results.
A sound Macroeconomic Administration driven by
fiscal and monetary prudence.
Better regulatory environment
Construction of strategic infrastructure.
The consolidation of an innovation agenda leaded by
an improvement in education.
A well capitalized financial sector and the constant
expansion of financial services.
Today countries like Panama, Dominican Republic,
Costa Rica, Salvador, Guatemala, Honduras, Belize,
Paraguay, as well as most of the Caribbean States, are
following that line of behavior
Venezuela
Inflation
Reduction in oil
production
Brain drain
Social conflict
Insecurity
Private initiative in
Jeopardy
Bolivia
Loss of citizen
support
Quality of live
deterioration
Lack of private
initiative.
Loss in private
investment
Ecuador
Press Liberties in
danger
Lack of long term
private
investment.
Political stability at
the expense of
higher tensions.
Oil driven political
power
Nicaragua
Institutional
deterioration
(Reelection
without
constitutional
authority)
Corruption
Private initiative:
Uncertainty
Shameful
Chavistas
5. What is the role of Brazil in the region today? Both politically -
pursuing a higher profile and more assertive foreign policy – and
economically - as the region’s largest, but also most ‘closed’ economy.
Political and Economic leadership: The challenges ahead (Six ideas to think
about)
Foreign Policy
Brazil needs to apply better leadership in UNASUR:
Less tolerance with regimes that are endangering
Democracy and Private Initiative.
Brazil needs to play an Active leadership in the fight
against Narco-Terrorism in the Region: Less
indifference to fight FARC and provide more support to
dismantle Drug Organizations (Brazil is the fastest
growing cocaine consumption market in the world)
Brazil is a key player to strengthen the
OAS.
Economic
Brazil must become an active leader in the
promotion of real trade integration
(Brazil was against ALCA in 2003-2004)
Brazil must carry a regional voice with Mexico
and Argentina in the G-20
Brazil must promote more regional investment in
its economy and allow regional products to access
its markets (Most countries in South America face
negative trade balances with Brazil)
6. Brazil also has its challenges
Good results but there are some worriying “TO DO BUSINESS” indicators
Area: 8,514,877 sq km
Population: 203,429,773 (July 2011 est.)
GDP: $2.172 trillion (2010 est.)
GDP Composition by Sector:
Services: 67.4% (2010 est.)
Industry: 26.8%
Agriculture: 5.8%
Unemployment Rate: 6.7% (2010 est.)
Exports: $201.9 billion (2010 est.)
Export Commodities: Transport
equipment, iron ore, soybeans, footwear,
coffee, autos
Export Partners: China 12.5%, US 10.5%,
Argentina 8.4%, Netherlands 5.4%,
Germany 4.1% (2009)
Imports: $181.7 billion (2010 est.)
Import Commodities: machinery,
electrical and transport equipment,
chemical products, oil, automotive parts,
electronics
Import Partners: US 16.1%, China
12.6%, Argentina 8.8%, Germany 7.7%,
Japan 4.3% (2009)
Country DB 2011 DB 2010
Mexico 35 41
Peru 36 46
Colombia 39 38
Chile 43 53
Argentina 115 113
Uruguay 124 122
Ecuador 130 127
Brazil 127 124
Venezuela 172 170
Doing
Business 2011
shows some
elementes that
affect Brazil as
a destiny for
investments
(127 out of 180
in the Doing
Business
Report)
1. Bureaucracy
2. Weak Infrastructure
3. Weak Technology
4. Preference to Local Companies
5. Complex tax system
7. Doing Business in Brazil
Brazil in comparison to the Region best and worst
performers
Indicator Brazil Chile Mexico Colombia Peru Venezuela
Starting a Business
(Proceadures)
15 8 6 9 6 17
Starting a Business
(Days)
120 22 9 14 27 141
Days for
Construction
Permits
411 155 105 50 188 395
Hours devoted to
pay taxes (Hours
per year)
2600 316 404 208 380 864
Days to enforce a
contract
616 480 415 1346 428 510
Enforcing Contracts
(Cost % Claim)
16.5 28.6 32 47.9 35.7 43.7
Cost to export US$
per Container
US$173
0
US$74
5
US$1420 US$1770 US$860 US$2590
8. How is Latin America managing the growth of China in the region, given the increased trade
and investment linkages? China is the destination for c.10% of LatAm exports today, and is the
largest trade partner for Brazil and Chile. LatAm was also the largest recipient of announced
Chinese outbound investment in 2010, focused on energy and mining.
China has become an engine for economic growth in the region
Latin America Best performers are highly dependent,
with the exception of Mexico, in commodity exports…
China has become a trigger of commodity exports
growth since 2000…
Country China Ranking as
a trading partner
Porcentage of
total exports 2010
Brazil 1 15%
Mexico 4 2.2%
Colombia 3 6.2%
Chile 1 16%
Peru 2 16%
Venezuela 2 7.9%
China’s influence as a trading
partner will continue to increase,
thus strenghthening its political
and diplomatic relations with the
regional key players…
9. China and Latin America in the
Emerging Markets boom…
The Emerging Markets Reality
1. Emerging economies have become engines of economic growth.
2. During the last three decades developing countries have experienced a
profound transformation driven by two components:
On the one hand a rapid demographic transition. Since 1980 the World
population has increased by 2.5 billion people and 95 percent of that growth
has taken place in the developing World.
The other element has been a dynamic period of sustainable economic growth.
In 1980 developing economies represented 33 percent of the World GDP and
today that number is closed to 46 percent.
3. By 2050 19 of the top 30 economies by GDP will be
countries that we currently describe as ‘emerging’
4. China and India will be the largest and third-largest
economies in the world.
5. Eight countries – India, China, Brazil, Russia, Indonesia,
Korea, Mexico and Turkey – will be responsible for most of
global growth up to 2025
6. Emerging economies will account for 68% of global growth
by 2030.
7. In 1980, 5% of goods were sourced globally. By 2000, this
was 20%. By 2025, it will be 50%.
8. In 1980, world exports accounted for one-sixth of global
GDP. Today it is a quarter. By 2030, it will have risen to a
third.
9. By 2030 the urban middle class will rise to 42% of the global
population. The number of people with daily income of $10
to $100 a day will rise from 1.8 billion today to 4.9 billion by
2030.
The demmand will continue…
According to FAO: Demand for food could increase
50% by 2030
Demand for water has been projected to rise by 30%
between 2000 and 2030
The International Energy Agency has said energy
needs will grow by 40% by 2030.
According to BP China represents 20.3% of
the World Energy Consumption (The world
largest energy consumer in 2010 for the first
time over the U.S)
Natural Gas consumption has experience its
strongest consumption rate since 1984 (7.4%)
Coal share in world energy consumption has
reached its highest level since 1970 (29.6%).
China represents 49% of the world coal
consumption.
In 2010 Global Bio fuel consumption grew by
13.4%
This situation opens new opportunities
for the region… (next Slide)
10. Latin America opportunities in the Emerging
Markets boom…
Population
Close to 600
million people
Average age
between 24 and
28
Per Capita
Income in PPP
close to
US$10.000
Poverty
reduction
64% of our population is a
expanding middle class.
During the last decade 40 million
people have left the poverty line
Life expectancy has increased
from 65 to 75 years.
Child mortality has been reduced
by 50 per cent.
Literacy rates are above 94%.
Mobile phone penetration has
increased by 78 per cent.
Internet access has increased by
33%
Healthcare coverage has
increased by 50 percent.
water and sanitation coverage
has reached 80%.
Commodities
in time of
Demand
10 percent of the
World oil reserves.
6 percent of the World
Gas reserves
Almost 50 percent of
the World cooper
reserves.
50 per cent of the
World silver reserves.
13% of the World iron
reserves
26% of the World
fertile land.
24% of the World
beef supply.
Bio Reserves
20 per cent of the
World Biodiversity
is concentrated in
the Amazon ring.
Almost 50% of the
World potable
water supply.
57% of the world
primary forest
This circumstances match with China’s interest as exporter and importer of
goods
11. The region faces Presidential elections next year in Mexico (July), Venezuela
(October). How important are these elections for the region, and what is the
potential for electoral surprises, similar to the June 2011 election of
Ollanta Humala as President of Peru?
The challenges for Venezuela Elections…
1. The most important challenge for the
Chavista Populist Model since 1999.
2. A unified opposition candidate can
become a strong challenger for
Chavez.
3. It is important for the opposition
candidate to conquer a great portion
of the Chavista base.
4. The return to the past will not be an
alternative…a new vision for
Venezuela must be the cornerstone
of the opposition candidate platform.
5. It is necesary for the opposition
candidate to preserve some social
programas stablished by Chavez
Leoporldo Lopez
40 year old
Former Mayor of
Chacao.
Despite IHRC
ruling Chavez
has baned his
campaign
Ernrique
Capriles 39 year
old Governor of
Miranda (The
second most
populated state
in the country)
Pablo Perez 42
year old
Governor of
Zulia (The most
populated State
and the highest
oil producer)
Maria Corina Machado 44
Year Old Member of the
National Assembly. Former
NGO activist and Chavez
regime denouncer.
Antonio Lerezma 56 year old
Mayor of the Caracas
Metropolitan Area. Defeated
Chavez candidate in the
elections and his authority was
dimished by transfering
functions to the Capital District
Mayor appointed by Chavez
A triumph from the opposition candidate would be the big surprise…however Chavez tradition of electoral fraud
remains the biggest risk for the Venezuelan Democracy.
12. Venezuela faces an opportunity for a
turning point…
The results of the Bolivarian Revolution…
The 5 parameters of a modern Democracy are currently in jeopardy…
Security
Human
Insecurity
Legal Insecurity
Political
insecurity
Individual
Liberties
Property rights at
risk
Limit freedom of
expression
Limit freedom of
press
Independent
institutions
Courts
controlled by
the Executive
Branch.
Independent
institutions are
controlled by the
Executive father
One Party
controls the
Parliament
Citizen
participation
Limited
Controlled
Instruments vital
for political
pressure.
Social
Cohesion
Class
polarization
Fiscal policy is
unsustainable
13. The Mexican elections are crucial for the
region…
Mexico must not give up in the fight against narco-terrorism…
1. President Calderon began a courageos
fight to dismantle the power and
influence of Drug Cartels.
2. The President has all the determination
but operational difficulties have
amerged: many police bodies,
restrictions to use the army, local
influence by Drug Cartels.
3. Leaders such as Vicente Fox has
proposed to dialogue and engage in a
peace process with Drug Cartels.
4. Leaders like Ernesto Zedillo are calling
for legalization as the option to reduce
drug related violence.
5. Many private sector leaders call the
situation Calderon’s war.
Enrique Peña Nieto:
Former Governor of
Estado de Mexico (Front
Runner)
Manlio Fabio Beltrones:
Former Governor of Sonora
and current Senate
Chairman
PRI
PAN
Josefina Vasquez Motta:
Former Minister of
Education, Member of
Congress (Front Runner)
Santiago Creel: Former
Minister of Gobernacion
during Vicent Fox
Government
Alonso Lujambio:
Current Education
Minister.
Ernesto Cordero:
Current Minister of
Finance and
Public Credit
PRD
Marcelo Ebrard: Current
Mexico City Mayor,
named the World Best
Mayor in 2010 by
International Mayors
Organization
Andres Manuel Lopez
Obrador: Former Mayor
of Mexico City and
Presidential Candidate
against Felipe Calderon
An alliance between PRI and PRD would be unstopable..but PAN with Josefina Vazquez Motta might become a
surprise if PRI and PRD are divided. Peña Nieto remains the front runner.
14. Some reflections about Humala victory
The 6 success factors…
1. I’m not Chavez my new name is Lula
2. The Center broke in small pieces: Toledo, Keiko, PPK, Castañeda
3. The AIDS Vs Cancer Debate and Vargas Llosa endorcement of Humala
4. An effective speech: Growth and prosperity have not reached the bottom
of the Pyramid.
5. The Anti-Fujimory campaign
6. A very well crafted media campaign
The Center Candidates attitude
became a Chronicle of a
Political Death Foretold…
A pollarizing division of PRI and PAN in Mexico without a clear majority might be the ground for political
surprises from PRD…however is to soon to tell…
15. Insights into the Mexican security situation, the challenges faced, and the policy
responses of the Mexican and US administrations. What are the risks that
success in Mexico only drives the problem further into Central America?
Mexico must face its security challenges and call for an organized regional action to
confront drug dealers and violence in Central America…
The 4 big challenges in Mexico
Reform the Police
Structure
Citizen participation
in the fight against
organized crime
Strengthen
intelligence
The security
challenge
Border affairs with
the U.S
•Drug Consumption
•Assault Weapons
The challenges for the U.S (Congressional Research Service)
1. Mexico is a major producer and supplier to the U.S. market of heroin,
methamphetamine, and marijuana, and the major transit country for more than
95% of the cocaine sold in the United States.
2. Mexico is also increasingly becoming a consumer of illicit drugs, particularly in
northern states where criminal organizations have been paying their workers in
product rather than in cash.
3. A small number of Mexican drug trafficking organizations control the most
significant drug distribution operations along the Southwest border.
4. U.S. government reports have characterized Mexican drug trafficking
organizations as representing the “greatest organized crime threat” to the
United States today.
An improvement in Mexico
must go hand im hand with an
improvement in Central
America, considering that
organized crime is inter-linked….
Country Homicide
s per
100K Hab
Violence cost as %
of GDP (Live years
lost due to
handicapped
circumstances)
Private sector losses
due to insecurity (%
sales)
Violence
costs as % of
GDP
Number of
gang
members
Number
of gangs
Honduras 43 1,31% 4.5% 9.6% 36.000 112
Guatemal
a
45 1.43% 3.9% 7.7% 14.000 434
El
Salvador
58 1.99% 4.5% 10% 10.500 4
Nicaragua 14 0.96% 3.1% 10% 4.500 268
Costa
Rica
8 0.58% 3.6% 2.660 6
Panamá 11 0.63% 2.5% 1.385 94
16. How has the role of the US in the region changed under the Obama
administration? How important is the recent final ratification of the
free trade accords between the US and Colombia, and Panama?
The evolution of U.S Latin America Relations…from Doctrines to specific
policies…
Doctrines
Monroe Doctrine
Teddy Roosevelt “BIG STICK”
Howard Taft “Pan-American Union”
FDR “Good Neighbor”
Ike Pan American Operation
Alliance for Progress
Carter “Human Rights Agenda”
Reagan Regional Cold War
Bush “War on Drugs” and trade
Clinton “NAFTA” & “FTAA”
Objectives
Protect the region from foreign invasions and strengthen the U.S
influence in the hemisphere
Exercise strategic control of the region applying hard power
(Military interventions in Nicaragua, DR, Haiti, etc)
Build and institutional and permanent diplomatic coordination
under the U.S Leadership.
Regional support for World War II and coordination to face the
Great Depression
Improve development assistance to prevent social turmoil
(Creation of the IDB)
Improve development assistance to prevent the communist
expansion.
Promote Human Rights policies to confront the emerging power of
dictatorships in the region.
Intervention in Nicaragua, Grenada and Panama.
Fight against Drug Cartels in the region concentrated in Colombia,
promotion of NAFTA and Unilateral Trade Preference Act.
Enactment of NAFTA, promotion of the FTAA (1993) and the
Andean Trade Preference Drug Enforcement Act.
Policies
Bush Vs Obama and the FTA’s… (Next slide)
17. Bush and Obama…a policy comparison
Two administrations and its strategic approaches…
Bush:
1. FTA’s with Chile, Colombia,
Peru, Panama, CAFTA, DR.
2. Actively supported the fight
against terrorism in Colombia.
3. Promoted the Democratic
Charter in the OAS (Signed in
Lima September 11 2001)
4. Politicaly confronted anti-democratic
regimes in the
region.
5. Stablished the Millenium
Corporation.
6. Debt Relief for Bolivia,
Nicaragua, Honduras, Haity
and Guyana.
Obama:
1. FTA’s with Colombia and
Panama took almost 3 years
to be ratified.
2. Actively supported the fight
against terrorism in Colombia.
3. Political tolerance with anti-democratic
regimes in the
region.
4. Weak speech against Drug
Cartels in the region.
5. Weak attitude towards the
security crisis in Mexico and
the U.S share of responsibility.
6. Humanitarian agenda
exclusively focused on Haiti
18. Why is trade within Latin America so low by global standards? The region
has opened up to global trade in recent decades, but trade within the region is
perceived to have lagged, despite the existence of a number of regional trade and
political organizations.
Intra-regional trade needs to be boosted urgently…
Intra-regional trade
dominates world trade:
• Trade within the EU
represents 72% of all
European Trade.
• 52% of Asian Exports
remained in Asia
• 48% of North
American Exports
remain in North
America
The 10 Point to do list:
1. Eliminate restrictions for Intra-Regional investments.
2. Ease red tape for regional entrepreneurs to register
corporations and do business.
3. Unify corporate regulations based on the world best
practices.
4. Promote intra-regional products in a more dinamic way.
5. Reduce trade burocratic barriers
6. Facilitate logistical for low quantities trade (Mailing,
curriers etc)
7. Integrate regional capital markets
8. Encourage intra-regional business development round
tables.
9. Simplify and unify taxing regimes
10. Consolidate intra-regional trade incentives.
19. Lessons from economic reform in Colombia. How applicable is Colombia’s
experience of fiscal consolidation, privatization, and encouragement of
foreign direct investment to the rest of the region?
Colombia has stablished a Democratic Center Platform that can be adapted to
different regional conditions (National and sub-regional)
Social
Cohesion
Investment
with
fraternity
Democratic
Security
Confidence
Security as a Democratic Value
Security for
all
Confront all
criminal
organizations
Security
without
martial law
Security with
freedoms and
human rights
protection
Security in
coordination
with the
people
Investment Target
Security:
Human
Legal
Political
Sound
Macroeconomics
Incentive
s
Access to
markets
Competitiveness
factors:
• Infrastructure
• Regulation
• Connectivity
• Logistical chain
Social Cohesion
Highest quality
in education
Universal
healthcare
Access to
Finance
Stable Jobs
and
entrepreneurial
spirit
Connectivity
20. What did Colombia achieve?
Pure Democratic Center results…
Ten historical changes
• Between 2002-2010 Colombia:
1. Reached the highest economic growth in more than 20 years.
2. The largest education, health and connectivity coverage in its
history.
3. The largest poverty reduction in Colombian history
4. The biggest FDI rates in history
5. The lowest violence records in 30 years
6. Expanded the middle class
7. Highest exports in Colombian History.
8. Paramilitary groups dismantled
9. FARC structure severely dismantled
10. Per Capita income more than doubled