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High Levels of Inequality Putting Latin America’s Future Generations at Risk

MD Staff

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Returning economic growth across Latin America could mask serious economic challenges for future generations, according to the World Economic Forum’s Inclusive Development Index (IDI). The index seeks to provide leaders with a more accurate picture of an economy’s health based on inequality, debt and environmental burdens placed on future generations as well as economic growth.

The 2018 assessment was undertaken following two decades of solid economic activity. During this time, expansion of access to education and government transfers contributed to reducing the level of income inequality in Latin America. While these developments and measures have helped to narrow the income gap between skilled and unskilled workers, Latin America remains among the most unequal regions in the world.

“Economic approaches need to emphasize the well-being of future generations and inclusion as key priorities for Latin American economies, and many countries lag behind their peers according to the Inclusive Development Index. As countries move out of recession, they should seize the window of opportunity for speeding up reforms to this end,” said Margareta Drzeniek-Hanouz, Head of Future of Economic Progress, Member of the Executive Committee.

The index’s findings provide a fresh lens through which to examine the region’s economic challenges. While 2017 finished on a positive note with recessions ending in Brazil and Argentina, modest rises in economic activity and efficiency over the past five years and a projected growth rate of 1.7% in 2018 will be insufficient to alleviate the region’s sustainability concerns and support a robust rise in median living standards.

The World Economic Forum believes that building inclusive societies is essential for long-term economic growth. With elections in Brazil, Chile, Colombia, Costa Rica and Mexico in 2018, governments are urged to prioritize proactive strategies to further reduce levels of inequality and ensure the well-being of future generations.

Key findings

According to the index, the most inclusive Latin American economies are Panama, Uruguay, Chile, Costa Rica and Peru. Panama made great strides in reducing its carbon intensity of GDP, down 39.7% from five years ago. The country also has the second highest level of labour productivity in the region after Chile.

Adjusted net savings, which measures the true rate of savings in an economy after taking into account investments in human capital, depletion of natural resources and damage caused by pollution, has declined in one-half of the Latin American economies ranked in the index, with Bolivia, Brazil and El Salvador performing the worst on this indicator.

Moreover, public indebtedness as a share of GDP, which roughly illustrates the scale of borrowing by the current generation against the capacities of future ones, has increased in every country, notably in Brazil (+16%) and Mexico (+14.9%) over the last five years.

Although income inequality has declined in 14 out of the 16 Latin American countries ranked in this year’s IDI, the region accounts for 11 out of the 25 developing economies with the highest levels of income inequality.

Latin America’s largest economies

Ranking 23rd, Argentina’s overall score is supported by its performance on inclusion and intergenerational equity and sustainability. The indicators of economic growth and labour productivity are on the decline as the IDI data predate the current recovery. While Argentina’s income and wealth inequalities are relatively low compared with other Latin American countries, these disparities have been shrinking in recent years. The net income and wealth Gini indicators have dropped nearly 5% and 10%, respectively, over the last five years. Furthermore, the median household income in Argentina ranks in the top quintile of emerging economies in the sample. Although the employment rate is relatively low compared with the regional average, it has increased slightly despite the recent recession.

Mexico’s performance, ranking 24th among emerging economies, is driven by its higher score on intergenerational equity and sustainability. Through the lens of the IDI framework, this is in part due to a higher savings rate and low carbon intensity in national production. The country performs comparatively well across the board on growth and development factors, ranking 13th out of 74 emerging economies. It performs in the top quintile among Latin American countries in terms of labour productivity. In contrast, inclusion measures illustrate high levels of economic disparity, although they have shrunk over the last five years.

Brazil ranks 37th out of 74 emerging economies on this year’s IDI. Brazil’s overall score in the index is pulled up by its performance on intergenerational equity and sustainability. The country benefits from a highly favourable dependency ratio and relatively low carbon intensity. With the IDI data reflecting the period preceding the economic recovery, growth and development indicators, such as GDP per capita growth, labour productivity and employment rates, are trending negatively. Nonetheless, median household income levels appear to have improved throughout this period. Wealth concentration in Brazil is among the highest in both Latin America and emerging economies and has increased slowly over the past five years. With the Brazilian economy slowly recovering, growth and development factors in the IDI are expected to improve; trends may also be affected by the growth-enhancing reforms proposed by the government to address its fiscal constraints.

The Inclusive Development Index

The IDI is published by the World Economic Forum’s System Initiative on Shaping the Future of Economic Progress, which aims to enable sustained and inclusive economic progress. It seeks to achieve this through deepened public-private cooperation, thought leadership and analysis, strategic dialogue and concrete cooperation, including by accelerating social impact through corporate action. The Latin American countries ranked in this index are Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala Honduras, Mexico, Nicaragua, Panama, Peru, Paraguay and Uruguay.

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Americas

The future of Russia- Mexico Relations

Kester Kenn Klomegah

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Mexico has impressive bilateral relations with the Russian Federation. During the last decade, Mexico has been exploring new opportunities with its partners in this part of Europe, in particular, with Russia. In this interview, Ambassador Extraordinary and Plenipotentiary of Mexico to the Russian Federation, H.E. Norma Pensado Moreno, talks about the key priorities, challenges and the economic changes that could possibly influence future bilateral directions of Mexico-Russia.

What are your Government’s priorities in and expectations from the Russian Federation?

Mexico´s Government issued new objectives of foreign policy; one of them is building stronger relations with our partners beyond North America. In this endeavor, Eastern Europe plays a key role. Moreover, due to its dynamism during the last decade, Mexico has a special interest in exploring new cooperation opportunities with its partners in this part of Europe, in particular with Russia.

For Mexico and the Russian Federation, there is great potential in their bilateral relationship. In 2017 and 2018, considerable progress was made in its political dialogue and cooperation in various areas, but a real deepening still remains, mainly in the economic field, in order to match the size of its economies, being both among the 15 biggest in the world.

Both countries are of decisive importance in their respective regions. Within the group of Latin American countries, Mexico occupies an important place for Russia’s foreign policy agenda. For Mexico, Russia is a country with high political, scientific, cultural, energy, tourist, investment and commercial potential.

The bilateral dialogue between the two countries has focused on the Mechanism of Political Consultations, official reciprocal visits, exchange and cooperation (educational, cultural, scientific and technical), energy, economy, trade and tourism. Mexico and Russia agree on positions in many International Forums and on principles such as the promotion of multilateralism. In this context, they have prioritized the issues of international security, the pacific use of cosmic space, the fight against drug trafficking and transnational crime.

The bilateral relationship is in a very good dynamic, due to the presidential meetings in BRICS and APEC summits, as well as the meetings of foreign ministers, in August and November of 2017. The celebration of the V Joint Commission of Cooperation in Culture, Education and Sports took place last February after many years, and the VI Economic Commission Mexico-Russia is expected to take place during 2019.

In short, our Government priorities and expectations are to continue and deepen the cooperation Mexico and the Russian Federation have both in our bilateral relationship in all areas and in the multilateral agenda, as well as to exploring new cooperation in areas such as energy and telecommunications, in which Russia has strengths.

Do you have the same business agenda in other ex-Soviet republics where you are accredited?

I am also accredited as Ambassador to Armenia and Belarus. Overall, Mexico’s business agenda is similar in the three countries. We want to expand trade, promote investments and connect our business community to their counterparts in these countries through the organization of business missions and participation in commercial promotional events. It is also a common goal in the three countries to promote Mexico as a tourist destination.

However, we have also set specific goals based on the prospects identified in each country. Russia is a big country and it represents a wide scope of opportunities. In the case of our Armenian counterparts, we have talked about the many opportunities in the IT and renewable energies sectors. As for Belarus, we are aware of its potential in the production of tractors and agriculture machines as well as in its new industrial technologies. We need to do some work to translate this flow of information into real opportunities that can be explored by our business communities.

Could you please discuss the level of Russia’s economic engagement in Mexico? Is your Government satisfied with Russia’s investment interest as compared to, most probably, other foreign players in Mexico?

Both Russia and Mexico are conscious that there is significant room to grow in our bilateral economic relations given the size of our economies and the possibilities of complementarity. We want to increase economic exchanges and investments.

That said, I want to highlight that Russia has made significant steps regarding its economic engagement in Mexico. It is Mexico’s most important investment partner among Eastern European countries, with a total investment of $20.9 million between 1999 and 2017. There are Russian investments in more than 80 Mexican companies, in fields such as transportation, hotels, and mining.

In June 2017, as a result of Mexico’s public tender process in its oil industry, Lukoil was awarded an exploration and extraction contract in the Gulf of Mexico. In March 2018, the company announced that, in consortium with the Italian company Eni, it had been awarded another contract. This consolidates its presence in Mexico since it started to cooperate with Pemex in 2014.

Last year Minister of Trade and Industry visited Mexico heading a business delegation in sectors such as aerospace, automotive, equipment and energy. And this October, the Deputy Minister of Trade and Industry also went to Mexico with a delegation of companies in the construction sector. I can thus say that we see a positive trend in Russia’s engagement in Mexico and we hope it will remain.

On the other hand, how does Mexico engage Russia? How do you view the possibility of effective trade exchanges between the two countries?

Mexican investment in Russia is also growing. In 2017 Gruma, one of the biggest producers of tortillas and other agro products opened a plant in the Moscow region with an investment of $50 million. Other companies with presence in the country are Kidzania –with an entertainment center in the Moscow region- and Nemak –with a manufacturing center for automotive components in Zavolzhie, near Ulyanovsk. Also, the Mexican air company Interjet has acquired several Russian-developed units, the Sukhoi SuperJet-100.

In addition, different Mexican governmental agencies have been encouraging Mexican producers from the agricultural sector to explore opportunities in the Russian market. As a result, representatives from more than twenty companies have visited Russia in the last four months to get acquainted with potential partners. We had a big delegation in Moscow last June, within the framework of the FIFA World Cup, and the second one in mid-September, which attended the World Food fair in Moscow.

Therefore, I can confidently say that there is keen interest from the Mexican side to strengthen its economic ties with Russia. Our goal is to translate all these steps into a substantial growth in trade exchanges.

How is Mexico’s tourism business developing in Russia? Are the number of Russian tourists increasing compared to the previous years? What strategies have you adopted to further popularize your country’s recreational destinations?

One of the main priorities of the Government of Mexico is tourism. Thanks to the efforts of our government in this area, in 2017 Mexico ranked sixth in the world in reception of foreign tourists, according to the World Tourism Organization, with almost 40 million visitors (39.3 million). Out of this amount, only 37,300 Russian visitors entered Mexico by airplane (an increase of 21.5% in comparison to 2016); it means less than 0.1% of all the tourists we received last year; even if it is increasing, it does not correspond to the importance of Russia in the world.

We strive for having again the numbers we had in 2013 when almost 108,000 Russians visited Mexico. The good news is that in the first 8 months of 2018, Mexico received more Russian visitors than in the whole 2017. If this trend continues we will receive more than 50,000 Russian tourists at the end of the year -something not seen since 2014-, it means almost 65% more than two years ago.

For the coming years, we are confident that the number of Russians who will visit Mexico will continue increasing thanks to the actions implemented by the Government of Mexico to popularize my country in Russia, among them:

1) the organization or participation in events aimed at the main Russian tour operators; 2) the participation in tourism exhibitions in Russia;

3) the publication of brochures or information in Russian language including the version in this language of the Website of our Tourism Office, which will be in force in the next weeks.

In this framework, a key role play the recent visit to Russia of more than 45,000 Mexican football fans to attend the World Cup who brought with them our “Fiesta”, something that Russians liked very much and has motivated them to visit Mexico in the near future.

What are views about economic changes in Russia and the Eurasian region? And how would the changes possibly influence future directions in economic cooperation in Mexico?

We closely follow the economic developments in Russia, Armenia, and Belarus, including the regional integration efforts within the Eurasian Economic Union. We are aware of the challenges the countries are facing, but also of the opportunities that are being open. We want to focus on the opportunities. As I mentioned before, the interest in deepening economic relations is mutual and is growing. We will carry on with the work that has been done in the last years.

In the case of Russia, we have still to agree on a date for the next meeting of the Economic Intergovernmental Commission, which will be key to strengthen our cooperation framework. Experts from the two countries are engaged in processes that we hope will lead to the reopening of the Russian market for Mexican beef and seafood products. The trends are very positive, and we can remain optimistic in that regard.

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Venezuelan refugee crisis and how it is altering the surrounding regions

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Venezuela’s migration crisis has been in the news lately and recent UN polls show that nearly 2.3 million have already migrated from their homeland over the past few years. However, other estimates show a figure closer to four million Venezuelan immigrants.

This crisis is rapidly sinking its claws in the neighbouring countries and if the amount of people migrating keeps increasing, it might become the worst man-made disasters since the First and Second World Wars after the Syrian refugee crisis. The Syrian crisis gave birth to more than six million refugees, and although the number here is still around half of that toll, the Venezuelan crisis doesn’t seem to be slowing down anytime soon. The inflation over there is nearly a million percent – a number so absurd that the common people around the world are not able to even grasp the sheer magnitude of the situations developing every day in this country. The minimum monthly wage is a few American dollars, putting essentials like food – particularly rations like chicken – into the category of luxurious items. The economy has shrunk by half in five years. To explain the extent of this downfall, Girish Gupta – founder of Data Drum and former investigative, multimedia journalist in Venezuela/LatAm – tweeted: If you’d bought a million dollars in Venezuela’s local currency when President Nicolás Maduro came to power in 2013, it’d now be worth $3.40. Diseases that were once overcome – like measles and diphtheria – are making a comeback. Infant mortality rates are going up while approximately 1.3 million refugees who have already escaped Venezuela were suffering from malnourishment (according to UN officials).

However, these are not the last of the Venezuelans’ problems; the nations to whom the refugees sought to escape to are closing their doors on their faces – literally. Sunday saw Ecuador closing border crossings with Colombia to people who don’t have passports. This was seen as a certain way to reduce the bulk of refugees from entering other countries as passports are fairly difficult to obtain amidst the economical and political chaos. Jonnayker Lien, a migrant standing outside the Peruvian border with his entire family said, “Imagine people like us who have sold everything, down to our beds, to come here, and they close the door on us. We don’t know where to sleep, and we don’t have money to go back.” Crisis broke out in the town of Pacaraima, north Brazil, after local throngs started struggling against the refugees and pushed them back to the border. Already a penurious town, the locals resent sharing their remaining resources with these migrants. However, even a strong military force could not stop these migrants from coming into Brazil. Peru had twenty thousand migrants arriving in the past week.

An emergency regional summit has been called by officials from Ecuador where Venezuela and its neighbours could deal with the crisis. Yukiko Iriyama, a representative in Colombia for the U.N. refugee agency said, “The capacity of the region is overwhelmed. The magnitude of the situation really requires a regional comprehensive approach.” The recently implemented passport checks by Peru and Ecuador aimed to reduce the flow of refugees into the countries. However, all it did was reduce the legal way of entering into these nations and increased the illegal border crossings.  To deal with this disaster and the refugee predicament, representatives from Colombia, Ecuador and Peru will meet in Bogota next week. Christian Kruger, the head of Colombia’s migration authoritysaid in a statement, “The exodus of Venezuelan citizens is not a problem exclusive to Colombia, Peru, Ecuador or a single country. This is a regional problem and as such we must address it. Demanding passports from a nation that does not have them and whose government does not facilitate the issuance of this document is to encourage irregularity.” Peru is also calling a meeting at an individual level of the permanent council of the Organization of American States to discuss the migration.

The toll of migrants entering Colombia is around a million in fifteen months but nations like Chile, Brazil, Ecuador, Peru are also receiving these refugees. Low skilled Venezuelans have flooded some Latin American job markets to find work and send money back home. United Nations Secretary-General Antonio Guterres told Colombian Foreign Minister Carlos Holmes Trujillo that he will set up a UN team that will respond to the crisis. UN spokesman Stephane Dujarric said that Guterres “told him that he would put together an internal coordination mechanism to make sure that the UN regional response is well coordinated.” “This is something that is not uncommon in these types of crises,” he added. Dany Bahar of the Brookings Institution suggested declaring this as a refugee crisis in order to seek help, saying, “It is up to the United Nations, together with the Organization of American States, to step up and recognize this problem as a refugee crisis so that the world can turn the proper attention to it and provide solutions.” He also added that none of the nations in the regionhave taken the initiative to provide a sustainable solution to the problem.

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Americas

Trump: The Symbol of America’s Isolation in the World

Mohammad Ghaderi

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The president of the United States, who came to power in 2016 with the slogan of “Reviving Washington’s Power”, has become the messenger of failure and defeat of his country in the West Asian region and in the international system. The U.S. numerous military and political defeats in countries such as Syria, Yemen, Iraq and Lebanon were so outstanding that there’s no way Trump can brag about his achievements in the region.

On the other hand, many Democrats in the United States, and even the traditional Republicans, have been criticizing the President’s costly and barren foreign policy in West Asia. In such a situation, Trump attempts to attribute this failure to the country’s previous administrations and condemn them over what is happening in today’s world, especially in the West Asian region, and he blames Obama for Washington’s constant and extensive failures in this area.

Besides, Trump’s other projections about the hard conditions of the U.S. in West Asia are noteworthy. In his recent remarks, Donald Trump said that if he wasn’t at top of the U.S. political and executive equations, Iran would capture the Middle East (West Asia)! This is while Islamic Republic of Iran created stability in the West Asian region, and besides, has stood against the long-term, medium-term, and short-term and destructive goals of the United States and its allies in the region.

Trump’s strategic weakness in the West Asia is an important issue which can’t be easily overlooked. Of course this strategic weakness did exist during Obama’s presidency, but the truth is that it reached its peak during Trump’s presidency. And in the future, this weakness will bring severe blows to the United States.

The fact is that the strategic calculations of the United States in the West Asia region have all failed. And many of the pre-assumptions that Washington called them “strategic propositions”, have never turned into reality for some reasons, including the vigilance of the Resistance movement in the region. This is the reason why America is so confused in confronting the equations of West Asia.

Under such circumstances, the only way before the President of the United States is to leave the region and confess to his defeat; an issue that many American analysts and strategists have noted. It shouldn’t be forgotten that in spite of his campaign slogans for stopping the military intervention in the region, the current president of the United States has intensified conflicts and created constant security crises in West Asia.

The direct, perfect, and comprehensive support of Donald Trump for takfiri terrorists reflects this fact. Trump started his support for ISIL since the beginning of his presence at the White House in early 2017, and he stood for the terrorists until the fall of ISIL in Syria. Even now, Trump is attempting to revive terrorist and takfiri groups in Iraq and Syria.

Despite passing half of his presidency, Trump has claimed that the defeat in Yemen, Syria and Iraq was Obama’s legacy. There is no doubt that Obama and his two secretaries of state, Hillary Clinton and John Kerry, played a major role in creating terrorist and takfiri groups (especially ISIL), and committed bloodshed in Syria and Iraq.

There is also little ambiguity in the strategic, operational and even tactical defeat of the Obama administration in the battlefields of Syria, Iraq, and Yemen. However, Trump can’t deny his share in this defeat, and pretend as if he’s the messenger of the victory of the United States in these scenes! The fact is that Trump completed the military and political defeats of the United States in the West Asia region. Today, the United States is defeated in the battlefield, and can well see that its pieces had failed in these wars.

On the other hand, the White House has lost the political arena of the region. The failure of the United States in the Lebanese and Iraqi elections, on the one hand, and the popular support for the resistance groups in Yemen and Syria, has left Trump and his companions disappointed in the region. In such a situation, attributing the recent and ongoing defeats of the United States to the Obama administration is completely expectable, and at the same time, unacceptable!

Finally, we can see that just like Obama, George W Bush, Clinton, Bush, Reagan and Carter, Trump is stuck in this strategic miscalculation in the West Asian region. Undoubtedly, in his last days in power, Trump will also understand that there’s no way he can overcome this strategic weakness through Saudi and Emirati petrodollars.

However, it seems that the scope of Trump’s defeat in West Asia would be wider than the previous presidents of the United States. Undoubtedly, in the near future, Trump, John Bolton, Mike Pompeo and Nikki Haley will become the symbols of failure in the US foreign policy, especially in the West Asia. In other words, the president of the United States and his companions at the White House will have to admit to defeat in the West Asian region at a great expense, and this is exactly what frightens the American authorities.

first published in our partner Tehran Times

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