Global Market Brief and Labor Risk Index 2012

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The Global Market Brief & Labor Risk Index is based on detailed analysis of hard metrics of 30 unique labor market, socio-economic, and political factors, layered with localized expertise of in-country consultants.
The analysis aggregates the individual factors into 9 core risk variables: 5 macro variables and 4 labor variables that are each assigned a score on a 10-point scale projecting the degree of risk over the next
90 days. Each risk variable is also assessed as to whether it is trending negative or positive.

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Global Market Brief and Labor Risk Index 2012

  1. Think ouTside.GlobalMarket Brief& Labor Risk Index2012 ple re porT only olog y samm eThod
  2. Global Market Brief & Labor Risk Index 2012This is meThodology sample reporT only.To subscribe to the global market Brief & labor risk index, visit kellyocg.com/marketbrief
  3. conTenTs3 preface: Teresa carroll, sVp – centers of excellence, kelly services & ian Bremmer, president, eurasia group4 methodology72 about sponsors The Americas Asia Pacific Europe and Eurasia Middle East and Africa6 overview 17 overview 34 overview 60 overview7 risk index 18 risk index 35 risk index 61 risk index8 argentina 19 australia 36 Baltics 62 algeria9 Brazil 20 china 37 Belgium 63 egypt10 canada 21 hong kong 38 czech republic 64 ghana11 chile 22 india 39 denmark 65 israel12 cost rica 23 indonesia 40 France 66 kuwait13 ecuador 24 Japan 41 germany 67 morocco14 mexico 25 malaysia 42 hungary 68 Qatar15 united states 26 new Zealand 43 ireland 69 saudi arabia 27 pakistan 44 italy 70 south africa 28 philippines 45 luxembourg 71 united arab emirates 29 singapore 46 netherlands 30 south korea 47 norway 31 Thailand 48 poland 32 Vietnam 49 portugal 50 romania 51 russia 52 serbia 53 spain 54 sweden 55 switzerland 56 Turkey 57 ukraine 58 united kingdomcover: roof of the hans otto Theater in potsdam, germany © Andreas LeversThis material was produced by Eurasia Group in collaboration with Kelly Outsourcing and Consulting Group (KellyOCG®). This is intended as general background research and is not intendedto constitute advice on any particular commercial investment, trade matter, or issue, and should not be relied upon for such purposes. Eurasia Group is a private research and consulting firm.© 2012 KellyOCG and Eurasia Group.
  4. conTenTs4 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas asia paciFicPreface europe Latin America. European countries transitions in a decade will result and eurasia middle easT will continue to tighten their belts in conservative policymaking, but and aFrica even as that response further slows major political instability is unlikely aBouT sponsors growth. Some countries in Asia will despite headlines. Elsewhere have to rely on disaster spending, in the Asia-Pacific region, leftist infrastructure development, and opposition parties look well placed foreign investment to mitigate to win a majority in South Korea, slowing growth. Growth in the while state elections in India will global economy will depend on serve as bellwether for later national emerging markets nations: China elections. In Sub-Saharan Africa, and Indonesia in Asia, Ghana in elections in Ghana and the ruling sub-Saharan Africa, and those party conference in South Africa will nations in the Middle East whose set the stage for intensifying labor ➔ If 2011 was marked by economies are supported by high oil prices. agitation. And in Latin America, crises—the Arab spring, the elections in Mexico will likely European financial crisis and The coming year will also be return the opposition Institutional Japan’s triple disaster—2012 will be defined by political transitions. Revolutionary Party (PRI) to power, characterized by political transitions Some of the largest economies in while in Venezuela the outlook for and global economic risk. The the world will focus on elections economic and political stability eurozone’s sovereign debt crisis, in 2012, including the US, France,Teresa carroll, ian Bremmer, looks bleak no matter who wins thesVp – centers president, as well as a slowdown in the global Russia, and possibly Japan. In presidential election there.of excellence, eurasia group economy, will bring uncertainty to China, elite competition during onekelly services economies from Asia to Africa and of the most important leadership ■ ■ ■
  5. conTenTs5 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas asia paciFicMethodology europe For all variables, scores range factors such as crime, military flexibility, assessing the regulatory and eurasia middle easT from 1 to 10, where 1 is ‘high spending, terrorism, domestic environment that employers face and aFrica risk’ and 10 is ‘low risk’. and inter-state armed conflict, in managing human resources, aBouT sponsors and security alliances. the ability of labor to influence macro-poliTical/ macroeconomic environment: This policymaking, and the near-term counTry risk indicator captures the current health potential for changes in the political environment: This labor regulatory environment. of the macroeconomic environment indicator measures the strength by aggregating the risks of short- and durability of the regime and labor availability: The labor term and long-term economic the government through factors availability indicator incorporates instability. Short-term factors include including the cohesiveness of the migration, urban population, the economic and fiscal performance, government and the opposition, the size of the labor force, the extent while long-term factors take in degree to which the government to which women participate in the the structure of the economy, has popular support, and the labor force, and unemployment. the environment for the private ➔ The Global Market Brief & strength and transparency of sector, and demographic trends. labor quality: The quality of labor Labor Risk Index is based on detailed government institutions. analysis of hard metrics of 30 unique policy environment for foreign is measured by the education social environment: This labor market, socio-economic, and investment: This indicator measures and skill level of a labor force, the indicator captures the presence political factors, layered with localized how hospitable a country is to general health of the population, and intensity of, and the potential expertise of in-country consultants. foreign investors by identifying and labor productivity. for, social conflict. Factors include and assessing any constraints on income inequality, ethnic/class The analysis aggregates the labor contentment: This or barriers to economic activity, conflict, urban population growth individual factors into 9 core risk indicator assesses the likelihood rates, and issues that can arise augmented by observing the degree variables: 5 macro variables and 4 of labor discontent by combining from poor government service to which the economy is already a labor variables that are each assigned the existence or potential of provision, such as high infant destination for foreign investment. a score on a 10-point scale projecting near-term labor unrest with the mortality and low literacy rates. the degree of risk over the next misery index, which incorporates 90 days. Each risk variable is also security environment: This laBor risk unemployment and inflation rates. assessed as to whether it is trending indicator captures internal and labor market flexibility: This negative or positive. external security risks, including indicator captures labor market ■ ■ ■ In addition to assessing the current risk environment, this report also takes into consideration the trajectory of risk trends. Arrows alongside risk scores explain where risks are likely to show a very positive trend (X X), positive trend (X), negative trend ( Y), very negative trend (Y Y ), or remain unchanged (blank) over the 1-year period of the report.
  6. conTenTs6 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas overview Overview: risk index increasing severance pay, as well and Venezuela will maintain argentina as unemployment and disability unorthodox economic policies Brazil The Americas benefits. And Mexico’s labor laws are likely to be overhauled and direct intervention in their economies. That said, the ability canada chile costa rica after the election—particularly of some governments to respond ecuador if the PRI wins—to make work may be hindered by political mexico contracts more flexible. In contrast, stalemate, particularly in the US. united states although the US election will asia paciFic ➔ There are three major Despite slowing growth, labor europe draw attention to the issue of and eurasia elections in 2012, in Mexico, markets are expected to remain immigrants, any changes in visa middle easT Venezuela, and the US. In tight in some well-performing and aFrica policies are likely to be small. Mexico, the election is likely to sectors. It is already difficult for aBouT sponsors bring the opposition Institutional Across the Americas, economic employers to find skilled labor in Revolutionary Party (PRI) back to growth is expected to slow in 2012 Brazil’s energy and infrastructure power, while in Venezuela and the because of the eurozone crisis sectors and in Canada’s mining US, the incumbents are likely to and heightened uncertainty about and oil sectors. In Chile, where win another term—although this global growth. Many countries significant strikes hit the mining is by no means assured in either in the region will continue to sector in 2011, tight labor case. In the run-up to the election markets may embolden workers implement pragmatic economic in Venezuela, President Hugo to seek greater concessions policies in an effort to manage from employers in 2012. Chavez is likely to focus the labor slowing growth, but countries code more on social issues by such as Argentina, Ecuador, ■ ■ ■
  7. conTenTs7 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas overviewThe americas – risk index summary TaBle 2012 risk index argentina macro risks laBor risks Brazil Foreign canada political social security economic Flexibility availability Quality contentment investment chile costa rica Argentina 6 7 9 4 Y 4 Y 4 5 6 2 Y ecuador mexico Brazil 7 7 8 X 6 Y 6 5 5 5 7 united states asia paciFic Canada 10 9 9 5 X 8 7 6 7 6 europe and eurasia Chile 6 Y 7 Y 9 6 7 6 5 Y 7 4 middle easT and aFrica Colombia 6 7 6 5 6 6 5 X 5 3 aBouT sponsors Costa Rica 6 7 9 Y 4 Y 6 Y 7 5 6 5 Y Ecuador 5 5 7 5 Y 3 Y 4 4 4 5 X El Salvador 5 Y 6 6 Y 3 Y 5 7 4 4 6 Mexico 7 7 7 Y 5 6 6 X 6 6 7 Panama 6 Y 6 8 6 X 7 X 5 5 X 5 3 United States 7 8 9 6 X 7 8 6 8 5 Venezuela 5 7 6 3 X 2 Y 3 Y 5 5 3 X north america 8 8 8 5 7 7 6 7 6 central & south 6 7 8 5 5 5 5 5 4 america americas 6 7 8 5 6 6 5 6 5For all variables, scores range from 1 to 10, where 1 is ‘high risk’ and 10 is ‘low risk’. Very positive trend positive trend negative trend Very negative trend
  8. conTenTs8 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas overview Brazil risk index reduce Brazil’s perennially high real skilled labor, particularly in the argentina interest rates. It will maintain tight construction and energy sectors, Brazil fiscal policies and keep the 2012 will continue to be driven by canada chile primary surplus target at 3.1% of the substantial investments costa rica ➔ President Dilma Rousseff GDP, though it will face difficulties planned in each of these areas. ecuador will continue to approach meeting it. If growth remains mexico tepid, policymakers are likely to The congressional calendar united states macroeconomic policy this year turn to the National Development will be somewhat curtailed as asia paciFic with the same pragmatism she Bank to boost lending or further national politicians stump for europe demonstrated during her first and eurasia loosen restrictions on credit growth allies in municipal elections this middle easT year in office. Policymakers will October. Even so, congress will Real wages will get a significant and aFrica to stimulate the economy. face mounting pressure to adopt aBouT sponsors likely approve a new oil royalty boost in 2012 because the stimulus measures given a weak Labor markets remain tight, with distribution framework (though minimum wage will climb external environment and a November unemployment at legal challenges will delay by 14%, which will drive slowdown in GDP growth from 5.2%, the lowest level in nine new bid rounds until 2013), wage increases throughout 7.5% in 2010 to an estimated years. Though slowing industrial the economy. Though wage pass a public sector pension 3.1% in 2011 and 3.5% in 2012. production could bring slight hikes are a major driver of reform, and make progress on But fears that the government relief in 2012, this would most service sector inflation and microeconomic reforms to facilitate will trade inflation for growth are likely not signal a downturn consensus 2012 inflation infrastructure investments. overblown. The economic team will but a cooling of an overheated expectations are above the keep using the global downturn to labor market. Demand for ■ ■ ■ 4.5% center of the central bank’s targeted inflation band, Low risk 10 MACRO RISKS LABOR RISKS the government is bound by 9 its commitment made in early 8 2011 and is unlikely to anger 7 labor by reneging on it. 6 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment Very positive trend country macro risks Positive trend country labor risks Negative trend central & south america Central & South America Very negative trend americas Americas
  9. conTenTs9 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas overview Mexico risk index past two years. In the event of a facilitate decisive policymaking. argentina more pronounced global Brazil economic downturn, the The campaign will bring a flurry canada current government’s ability of finger-pointing and promises chile costa rica to pursue countercyclical fiscal to revamp the current strategy ➔ Expectations about Mexico’s ecuador measures would be constrained of fighting the drug cartels, but 2012 GDP have declined somewhat mexico by the upcoming election. a tactical shift is unlikely, even if united states because of a sluggish US economic the PRI wins. The government will asia paciFic recovery. The manufacturing The ruling National Action Party continue to rely on a heavy military europe sector—buoyed by strong and eurasia (PAN) could make a competitive run presence, close cooperation with middle easT automobile production, competitive and aFrica in July’s presidential contest, but the US, the growing role of the If Pena Nieto becomes wages and low transport costs for president, Mexico could face aBouT sponsors the opposition candidate Enrique federal police, and a push to fully goods to the US—will continue to Pena Nieto of the Institutional a more promising reform implement a 2008 judicial reform drive the expansion, although the Revolutionary Party (PRI) remains outlook compared to the past more quickly and effectively. In the service sector is also expected to favored; in late 2011, he led by decade. Labor reform is one of meantime, overall levels of violence support the economy. Employment 20 points with 44% support. It is the first items on the agenda will remain high, although a peak will continue to grow at a decent possible that the PRI could also and could advance quickly. has probably been reached. Any future labor proposal is pace (close to 3.0%–4.0%), win a working majority in both likely to include a series of albeit at a lower rate than in the houses of congress, which would ■ ■ ■ changes aimed at diversifying the ways workers can be hired, with the ultimate goal Low risk 10 MACRO RISKS LABOR RISKS of making employer/worker 9 contract terms more flexible. 8 7 6 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment Very positive trend country macro risks Positive trend country labor risks Negative trend north america North America Very negative trend americas Americas
  10. conTenTs10 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas asia paciFic Overview: overview are well placed to win a majority in use spending on infrastructure risk index Seoul, while Hong Kong may see development and other programs australia Asia Pacific an actual race for chief executive. And in India, all eyes are on to attract foreign investment. china hong kong india bellwether state elections and the Security will also matter in 2012. indonesia transfer of power from Congress North Korea’s leadership transition Japan party leader Sonia Gandhi to a and Kim Jong-un’s efforts to malaysia new generation headed by her consolidate power pose serious new Zealand pakistan son Rahul. Legislative gridlock in risks to the region. Meanwhile, philippines ➔ A number of elections and Japan could prompt Prime Minister China will find that its neighbors are singapore political transitions in the Asia- Yoshihiko Noda to call an election less enamored with the country’s south korea Pacific region in 2012 will mean for the lower house of the Diet. economic heft and more wary of its Thailand a focus on domestic issues amid strategic intentions; governments Vietnam uncertainty stemming from the Many governments in the region europe from Tokyo to Manila will welcome and eurasia eurozone crisis and the global are revising economic forecasts for Washington’s efforts to reengage middle easT 2012 downward (with the exception and aFrica economic slowdown. As China Asia both economically and aBouT sponsors embarks on its most important of China, Vietnam, and Indonesia). militarily. Lastly, the drawdown of political transition in a decade, Japan, New Zealand, and Thailand US forces from Afghanistan could jockeying among elites will lead may mitigate some of the effects of limit the ability of diplomatic to risk aversion in policymaking. a global economic slowdown with efforts to forge peace in the region Elections will also dominate politics additional spending on rebuilding and damage regional economic in South Korea, Hong Kong, and efforts after recent natural disasters, integration and trade prospects. India, as well as Japan if a snap but authorities in Singapore, the election is held. Opposition parties Philippines, and Malaysia will ■ ■ ■
  11. conTenTs11 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas asia paciFicasia paciFic – risk index summary TaBle 2012 overview risk index macro risks laBor risks australia Foreign china political social security economic Flexibility availability Quality contentment investment hong kong india Australia 7 9 9 7 X 10 6 5 Y 7 7 Y indonesia Bangladesh 5 4 6 4 Y 3 4 5 2 1 Japan malaysia China 5 6 Y 8 7 Y 4 5 7 7 X 5 Y new Zealand Hong Kong 6 8 9 7 Y 10 7 7 9 5 Y pakistan philippines India 5 4 5 6 Y 5 X 6 5 3 3 Y singapore Indonesia 5 6 8 5 X 5 X 5 6 5 3 Y south korea Thailand Japan 7 Y 9 9 4 X 8 6 5 8 7 Vietnam Malaysia 6 Y 7 9 6 6 X 6 5 7 X 6 europe and eurasia New Zealand 9 X 10 10 7 X 9 7 6 Y 7 6 middle easT and aFrica Pakistan 2 Y 3 1 Y 3 Y 5 5 3 2 2 aBouT sponsors Philippines 5 5 7 4 Y 5 5 6 X 5 6 Singapore 9 9 9 8 Y 8 7 5 Y 8 9 South Korea 6 Y 9 8 6 Y 7 X 6 6 7 5 Sri Lanka 7 6 9 3 3 Y 6 4 6 2 Thailand 4 Y 6 Y 8 5 Y 6 6 Y 7 7 8 Vietnam 5 X 6 9 4 X 4 X 5 6 5 5 south asia 5 4 5 4 4 5 4 3 2 east asia (ex. Japan) 6 7 8 6 6 6 6 7 6 pacific 8 9 9 6 9 6 5 7 7 asia paciFic 6 7 8 5 6 6 6 6 5For all variables, scores range from 1 to 10, where 1 is ‘high risk’ and 10 is ‘low risk’. Very positive trend positive trend negative trend Very negative trend
  12. conTenTs12 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas asia paciFic Japan overview despite stimulus provided by Party of Japan (DPJ) does not risk index disaster recovery spending. control the Diet’s upper house. australia china On the political front, legislative The Diet session beginning in hong kong gridlock will constrain bold January provides two major india ➔ Prime Minister Yoshihiko indonesia reforms in 2012, but broad opportunities for opposition Noda appears better positioned Japan demographic shifts and obstruction—the fiscal year than recent predecessors to survive malaysia globalization are putting enormous 2012 budget and debate over new Zealand politically, but the opposition will pressure on Japan to embrace a consumption tax hike to cover pakistan work in 2012 to undermine his greater economic openness over rising social welfare costs. If Noda’s philippines government and push for early approval numbers remain strong, his singapore the medium and long term. A An amendment to the Worker elections. If the economy can south korea mildly positive economic outlook opponents will likely compromise Dispatch Act will probably Thailand bounce back from an estimated on the budget to avoid a snap will not offset tension within pass during the upcoming Vietnam contraction of 0.4% to 2.0% in and across political parties and election. Clashes over a tax increase Diet session. Responding to europe and eurasia 2011, Noda will be better able entrenched interest groups. Major will be acute, however, potentially pressure from advocates of more middle easT to engage in legislative battles. opposition parties, especially resulting in an election anyway. If flexibility in the labor market, and aFrica Unfortunately, unemployment is the Liberal Democratic Party Noda’s support wanes, he is likely the DPJ dropped the near- aBouT sponsors not forecast to drop significantly (LDP) and Komeito, can flex to step down or feel compelled total bans it had proposed on below the 4.9% rate seen in 2011, their muscles on budget matters to call an election by summer. employing temporary workers and deflation is expected to persist because Noda’s Democratic ■ ■ ■ in manufacturing as well as “registered” temporary workers (paid when dispatched). This Low risk 10 MACRO RISKS LABOR RISKS change eliminates concerns 9 that the law would restrict the 8 ability of Japanese companies 7 to meet their labor needs 6 5 without having to hire more 4 costly permanent workers. 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment Very positive trend country macro risks Positive trend country labor risks Negative trend pacific Pacific Very negative trend asia pacific Asia Pacific
  13. conTenTs13 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas asia paciFic New Zealand overview will hurt export sectors. The IMF reform policy agenda. Although the risk index estimated 2012 growth at 3.8%, Nationals did not win an outright australia while the OECD recently lowered majority, they secured their best china hong kong its forecast from 4.1% to 2.5%. performance in decades and quickly india ➔ The country’s economy Unemployment stood at 6.6% for moved to form a government in indonesia continues its slow recovery and the September quarter (1 July –30 association with smaller parties. In Japan will remain vulnerable to a global September 30), 0.2 percentage particular, Key views his election as malaysia new Zealand slowdown precipitated by events points higher than the same period a mandate to advance his economic pakistan in Europe and the US. GDP last year. The flat unemployment plan, which includes sales of energy philippines growth in 2011 is expected to be numbers are supported by a flat companies and airlines as well as singapore Trade promotion is expected close to 2%, boosted mainly by wage growth for the quarter, cuts in welfare payments to help south korea to be a major initiative of Thailand post-earthquake reconstruction suggesting that the central bank balance the government’s budget. the Key government, which Vietnam efforts and spending on the will keep interest rates low (2.5%) Key has pledged to return the will support job creation in europe rugby world cup. Reconstruction for the foreseeable future. budget to surplus by 2014–2015 and eurasia export sectors. The prime spending in 2012 will continue to middle easT at the latest, and investors and minister will look to finalize a and aFrica benefit both the economy and A fresh mandate for Prime Minister businesses will generally find free trade agreement with the aBouT sponsors job creation, although a relatively John Key’s National government comfort in Key’s policy agenda. US, and he will help advance strong New Zealand dollar and in the 26 November elections the Trans-Pacific Partnership, a weak external environment signals a move toward an economic ■ ■ ■ both of which are goals that the Labor opposition also supports. The offsetting factor Low risk 10 MACRO RISKS LABOR RISKS over the next year or two, 9 however, will be a slowdown 8 in the export and tourism 7 sectors as the European and 6 5 US economies struggle. 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment Very positive trend country macro risks Positive trend country labor risks Negative trend pacific Pacific Very negative trend asia pacific Asia Pacific
  14. conTenTs14 | gloBal markeT BrieF & laBor risk index 2012 preFace meThodology The americas asia paciFic Overview: europe the required spending cuts and tax support. But pursuing serious and eurasia overview increases may further slow already economic reforms is especially Europe and Eurasia struggling economies. On the other hand, few governments have hard in tough economic times. risk index Baltics Belgium the financial resources to embark The eurozone crisis hurt a number czech republic on aggressive stimulus spending of incumbent governments, and denmark some of these countries have France to jump-start their economies. ➔ The eurozone’s sovereign germany new governments as a result. hungary debt crisis will continue to put the Several governments are turning A few moved leftward in recent ireland countries of Europe and Eurasia to structural reform of their elections. Denmark, for instance, italy under considerable economic and economies, either on their own luxembourg elected a center-left coalition fiscal pressure in 2012. Many of initiative (Sweden, Denmark, netherlands after a decade with a center-right norway these countries face both a debt Hungary, and Poland) or under government. But others moved poland problem and a growth problem, pressure from markets and lenders rightward. After seven years in portugal and the potential solutions to one (Italy and Portugal). Both Italy and romania power in Spain, the Socialists were may exacerbate the other. Many russia Portugal have new governments badly defeated by a center-right serbia governments—including in the (Italy’s appointed, Portugal’s party. Two of the most important spain UK, France, Italy, and Spain—are elected) that appear committed elections in the region, in France sweden pursuing austerity programs in an to pushing through necessary but switzerland and Russia, are due in early 2012. effort to reduce their deficits and painful structural changes and Turkey ukraine contain sovereign debt levels. But have a good measure of popular ■ ■ ■ united kingdom middle easT and aFrica aBouT sponsors

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