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Economic Outlook for Latin America: Uncertainty and Risks but with Opportunities

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[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] W [/yt_dropcap]hile the economic performance of Latin America is expected to be better this year and next compared to 2016, uncertainties and risks could get in the way of the opportunities, leaders from government, finance and international organizations concluded in a session on the economic outlook for the region at the 2017 World Economic Forum on Latin America.

“The region is pulling out of recession,” said David A. Lipton, First Deputy Managing Director of the International Monetary Fund (IMF) in Washington DC. “The region has the chance to make important strides.” He pointed out that the global context is favourable, with growth momentum picking up on the back of a rise in industrial production around the world. “It’s time for the region to make the most of an opportunity.” Growth in the region could run to 2.5-2.7% in the short term, he added.

“The region is going to grow after two years of contraction,” Alicia Bárcena Ibarra, Executive Secretary, United Nations Economic Commission for Latin America and the Caribbean (ECLAC), agreed. “We have curbed inflation.” But, she cautioned, “the region faces a very uncertain context. What the region hasn’t been able to underpin enough is its investments.” Latin America is difficult to analyse as a whole because of the different situations in each country, but “structural gaps persist that are very complex”. Countries should assess their fiscal space carefully, she advised, noting that more than 14 countries in the region have already undergone tax reforms that have offset in part the drop in non-tax revenue.

“We see upside and downside risks,” Lipton remarked. The uncertainties around the new US administration and its policy decisions, especially in trade, are a concern. Latin American countries would do well to build greater links among themselves, increase intra-regional trade and boost links with other regions and emerging markets, he said.

The word that best describes the outlook for Mexico is “uncertainty”, Guillermo Ortiz, Chairman, BTG Pactual Latin America at Banco BTG Pactual SA, concurred. The rhetoric during the US election was “highly disruptive” for Mexico, he observed. But “I believe we are in a much better situation – those in the US who are in charge of the bilateral agenda are experienced people who know the country very well.”

“The main risk for Panama and the region is the lack of certainties,” Dulcidio De La Guardia, Minister of Economy and Finance of Panama, said. He too argued that the rhetoric of the US presidential campaign does not reflect what is really happening. “We have seen far more reasonable steps taken than what we heard.”

In Brazil, Ortiz reckoned, “something very significant is happening”. The country is exiting its worst recession and the new leadership is poised to deliver a stabilized economy. “The most important issue is to ensure the stability of public finances. There is now a cap in total spending and they are focusing on social security. Inflation is dropping significantly. Brazil will have lower inflation than Mexico. I can’t remember when that last happened. Brazil will show modest growth this year but next year might surprise us with far higher growth.”

Argentina is another turnaround tale in Latin America. “We inherited enormous problems,” Nicolas Dujovne, Minister of the Treasury of Argentina, acknowledged. But since he came into office in 2015, President Mauricio Macri has implemented reform policies that have yielded significant results. Its fiscal consolidation plans have been deliberate. “Fiscal gradualism is not a slogan to procrastinate in fiscal terms,” Dujovne explained. “It is a strategy.” The administration will be focusing on tax reform after upcoming mid-term elections. “This government was confronted with a very difficult situation and has taken the right approach,” Lipton observed. “It is off to a good start and headed in the right direction.”

Asked about corruption across the region, Ortiz predicted that the problem would be “the defining issue” of the presidential elections in Mexico next year. “Corruption is clearly a tax paid by the poor but you have to be certain that, when cleaning your house, you are not knocking it down,” De La Guardia warned. “The fight against corruption hasn’t gone too far,” Dujovne asserted. “Any level of corruption affects investment and the credibility of a country.” “We live in a culture of privileges. But we need to install a culture of shared prosperity – or else we won’t be able to move ahead,” Bárcena concluded.

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ADB, Uzbekistan Renew Development Partnership with New 5-Year Strategy

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The new country partnership strategy, from 2019–2023, supports the Government of Uzbekistan's ongoing reforms to help the economy’s transition towards a more inclusive and market-driven growth path. Photo:ADB

The Asian Development Bank (ADB) has endorsed a new Country Partnership Strategy (CPS) for Uzbekistan. The 5-year partnership strategy, from 2019–2023, supports the government’s ongoing reforms to help the economy’s transition towards a more inclusive and market-driven growth path.

Although Uzbekistan is experiencing economic growth, it faces significant challenges, including tackling growing youth unemployment, creating quality jobs, developing the private sector, improving public infrastructure, and maximizing the country’s potential as a hub for transport, trade, and regional cooperation in Central Asia.

Under the new CPS, ADB will support the government’s long-term objectives to improve the quality of people’s lives and enable the creation of quality jobs. Its country operations will support private sector development, reduce economic and social disparities, and promote regional cooperation and integration.

ADB will help make cities and villages outside Tashkent more livable through rural development and improving access to finance of small and medium-sized enterprises, particularly those owned or led by women. ADB will also support the livestock, horticulture, and irrigation sectors to create jobs and improve sources of income. ADB will boost its support for regional cooperation initiatives, benefiting Uzbekistan. It will promote regional power trade within the Central Asia Power System and regional connectivity along major corridors of the Central Asia Regional Economic Cooperation (CAREC) countries.

“ADB’s new partnership strategy is closely aligned with the government’s objectives to provide a more inclusive and sustainable future to the people of Uzbekistan. Through the CPS, we will continue our support in improved water supply and sanitation, better roads and railways, enabling horticulture production and export, efficient irrigation systems, and supply of reliable electricity for homes and businesses,” said ADB Country Director for Uzbekistan Ms. Cindy Malvicini. “People will have improved health care services, particularly for mothers and children. ADB will also help the government provide young people with the latest skills needed to find jobs.”

ADB will support efforts to create a more conducive environment for the private sector through public–private partnership projects. Uzbekistan’s economy is heavily dominated by state-owned enterprises, limiting opportunities for the private sector. ADB will also help key state-owned companies to improve their financial management and governance.

The CPS is in line with ADB’s Strategy 2030, which sets the course for the bank to effectively respond to the changing needs of the Asia and Pacific region. In Uzbekistan, ADB will strengthen governance and institutional capacity; address remaining poverty and reduce inequalities; promote rural development; and foster regional cooperation and integration.

Since joining ADB in 1995, Uzbekistan has received 72 loans totaling $7.7 billion, including two private sector loans totaling $225 million. ADB also provided $6 million in equity investment, $218 million in guarantees, and $93.1 million in technical assistance grants. In 2018, ADB committed five loans totaling $1.1 billion to improve power generation efficiency, primary health care services, access to finance for horticulture farmers and businesses, access to drinking water in the western part of Uzbekistan, and economic management in the country.

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Human Rights

Moratorium call on surveillance technology to end ‘free-for-all’ abuses

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Surveillance technology should be banned immediately until “effective” national or international controls are put in place to lessen its harmful impact, a UN-appointed independent rights expert said on Tuesday.

David Kaye, who’s the United Nations Special Rapporteur on freedom of opinion and expression, made the appeal as he prepared to present his latest report to the Human Rights Council in Geneva.

He highlighted that while States were largely responsible, companies appeared to be “operating without constraint” too, in a “free for all” private surveillance industry environment.

“Surveillance tools can interfere with human rights, from the right to privacy and freedom of expression to rights of association and assembly, religious belief, non-discrimination, and public participation,” the Special Rapporteur said in statement. “And yet they are not subject to any effective global or national control.”

Surveillance linked to detention, torture, extrajudicial killings

According to Mr. Kaye’s report, the surveillance of journalists, activists, opposition figures, critics and UN investigators can lead to arbitrary detention.

It has also been linked to torture and possibly to extrajudicial killings, the Special Rapporteur said, citing various ways that States and other actors monitor individuals who exercise their right to freedom of expression.

These include hacking computers, networks and mobile phones, using facial recognition surveillance and other sophisticated surveillance tools to shadow journalists, politicians, UN investigators and human rights advocates.

Among the Special Rapporteur’s recommendations is an appeal to States to adopt domestic safeguards to protect individuals from unlawful surveillance, in line with international human rights law.

In particular, Mr. Kaye calls for the development of publicly-owned mechanisms for the approval and oversight of surveillance technology.

In addition, countries should strengthen export controls and provide assurances of legal redress to victims.

“It is imperative that States limit the uses of such technologies to lawful ones only, subjected to the strictest sorts of oversight and authorisation,” he said. “And that States condition export of such technologies on the strictest human rights due diligence”.

Companies operate in ‘free-for-all’ snooping environment

Addressing the issue of corporate responsibility, Mr. Kaye insisted that companies should adhere to their human rights responsibilities, as they “appear to be operating without constraint”.

To remedy this, firms should disclose data transfers, conduct “rigorous” human rights impact assessments, and avoid transfers to States unable to guarantee compliance with human rights norms, the Special Rapporteur said.

“The private surveillance industry is a free for all,” Kaye noted, “an environment in which States and industry are collaborating in the spread of technology that is causing immediate and regular harm to individuals and organisations that are essential to democratic life – journalists, activists, opposition figures, lawyers, and others.

“It is time for governments and companies to recognise their responsibilities and impose rigorous requirements on this industry, with the goal of protecting human rights for all,” Mr. Kaye said.

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Mini Grids Have Potential to Bring Electricity to Half a Billion People

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Mini grids, previously viewed as a niche solution, can provide electricity to as many as 500 million people by 2030, helping close the energy access gap, according to a new World Bank report. The combination of falling costs, dramatic increase in quality of service, and enabling policies has made mini grids a scalable option to complement grid extension and solar home systems.

Mini Grids for Half a Billion People: Market Outlook and Handbook for Decision Makers is the most comprehensive study on mini grids to date. It provides policy makers, investors, and developers with insights on how mini grids can be scaled up.  It takes stock of the global market and industry, analyses costs and technological innovations, and shows the importance of microfinance and income-generating uses of electricity.  

Compared with main grid and solar home systems, mini grids are a more viable solution for areas with high population density and medium electricity demand. Extending main grid to serve remote communities is often prohibitively expensive. Globally, at least 19,000 mini grids are already installed in 134 countries, representing a total investment of $28 billion and providing electricity to around 47 million people. Most are deployed in Asia, while Africa has the largest share of planned mini grids.

At present the total mini grid investment in countries with low levels of electricity access in Africa and Asia totals $5 billion. It is estimated that $220 billion is needed to connect 500 million people to 210,000 mini grids in these regions by 2030. Across the globe, countries need to actively mobilize private sector investment. This can be achieved by setting up policies that support comprehensive electrification programs, promoting viable business models, and providing public funding, for example through performance-based grants.

Mini grids are now one of the core solutions for closing the energy access gap. We see great potential for mini grid development at scale and are working with countries to actively mobilize public and private investment,” said Riccardo Puliti, Senior Director of Energy and Extractives at the World Bank. “The World Bank has been scaling up its support to mini grids while helping countries develop comprehensive electrification programs. Our commitments to mini grids represent about one-quarter of total investment by the public and private sector in our client countries. The Bank’s portfolio spans 37 mini grids projects in 33 countries, with a total commitment of more than $660 million. This investment is expected to leverage an additional $1.1 billion in cofinancing.”

In addition to being cost-efficient, mini grids have many other benefits. They have positive environmental impacts: 210,000 mini grids powered by solar energy would help avoid 1.5 billion tons of CO2 emissions globally. They also offer national utilities a win-win solution in the electricity sector by paving the way for more financially viable future grid expansion.

By the time the main grid arrives, significant demand for electricity would already exist and customers would have greater ability to pay through the generation of productive uses made possible by mini grids.

Funding for the report was provided by the World Bank’s Energy Sector Management Assistance Program (ESMAP).

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