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The increase in South Korean trade with Latin American countries has allowed the Republic of Korea to reach Japan's exchange figures with the region.

Throughout 2018, South Korea's trade with Latin America exceeded USD 50 billion, putting itself at the same level of trade maintained by Japan and even for a few months becoming the second Asian partner in the region after China, which had flows worth USD 300 billion (half of the US trade with its continental neighbours). South Korea and Japan are ahead of India's trade with Latin America (USD 40 billion).

ARTICLE / Jimena Villacorta

Latin America is a region highly attractive to foreign markets because of its immense natural resources which include minerals, oil, natural gas, and renewable energy not to mention its agricultural and forest resources. It is well known that for a long time China has had its eye in the region, yet South Korea has also been for a while interested in establishing economic relations with Latin American countries despite the spread of new protectionism. Besides, Asia's fourth largest economy has been driving the expansion of its free trade network to alleviate its heavy dependence on China and the United States, which together account for approximately 40% of its exports.

The Republic of Korea has already strong ties with Mexico, but Hong Nam-ki, the South Korean Economy and Finance Minister, has announced that his country seeks to increase bilateral trade between the regions as it is highly beneficial for both. "I am confident that South Korea's economic cooperation with Latin America will continue to persist, though external conditions are getting worse due to the spread of new protectionism", he said. While Korea's main trade with the region consists of agricultural products and manufacturing goods, other services such as ecommerce, health care or artificial intelligence would be favourable for Latin American economies. South Korean investment has significantly grown during the past decades, from USD 620 million in 2003, to USD 8.14 billion in 2018. Also, their trade volume grew from USD 13.4 billion to 51.5 billion between the same years.

Apart from having strong ties with Mexico, South Korea signed a Free Trade Agreement with the Central American countries and negotiates another FTA with the Mercosur block. South Korea would like to join efforts with other Latin American countries in order to breathe life into the Trans-Pacific Partnership, bringing the US again into the negotiations after a change of administration in Washington.

Mexico

Mexico and South Korea's exports and imports have increased in recent years. Also, between 1999 and 2015, the Asian country's investments in Mexico reached USD 3 billion. The growth is the result of tied partnerships between both nations. Both have signed an Agreement for the Promotion and Reciprocal Protection of Investments, an Agreement to Avoid Income Tax Evasion and Double Taxation and other sectoral accords on economic cooperation. Both economies are competitive, yet complementary. They are both members of the G20, the OECD and other organisations. Moreover, both countries have high levels of industrialization and strong foreign trade, key of their economic activity. In terms of direct investment from South Korea in Mexico, between 1999 and June 2019, Mexico received USD 6.5 billion from Korea. There are more than 2,000 companies in Mexico with South Korean investment in their capital stock, among which Samsung, LG, KORES, KEPCO, KOGAS, Posco, Hyundai and KIA stand out. South Korea is the 12th source of investment for Mexico worldwide and the second in Asia, after Japan. Also, two Mexican multinationals operate in South Korea, group Promax and KidZania. Mexico's main exports to South Korea are petrol-based products, minerals, seafood and alcohol, while South Korea's main exports to Mexico are electronic equipment like cellphones and car parts.

Mercosur

Mercosur is South America's largest trading economic bloc, integrated by Argentina, Brazil, Paraguay and Uruguay. With a GDP exceeding USD 2 trillion, it is one of the major suppliers of raw materials and agricultural and livestock products. South Korea and Mercosur launched trade negotiations on May 2018, in Seoul. Actually, the Southern Common Market and the Republic of Korea have been willing to establish a free trade agreement (FTA) since 2005. These negotiations have taken a long time due to Mercosur's protectionism, so the Asian country has agreed on a phased manner agreement to reach a long-term economic cooperation with the bloc. The first round of negotiations finally took place in Montevideo, the Uruguayan capital, in September 2018. Early this year, they met again in Seoul to review the status of the negotiations for signing the Mercosur-Korea trade agreement. This agreement covers on the exchange of products and services and investments, providing South Korean firms faster access to the Latin American market. The Asian tiger main exports to South America are industrial goods like auto parts, mobile devices and chips, while its imports consist of mineral resources, agricultural products, and raw materials like iron ore.

Among Mercosur countries, South Korea has already strong ties with Brazil. Trade between both reached USD 1.70 billion in 2019. Also, South Korean direct investments totaled USD 3.69 billion that same year. With the conclusion of the trade agreement with the South American block, Korean products exported to Brazil would benefit from tariff eliminations, as would Korean position trucks, and other products going to Argentina. It would also be the first Asian country to have established a trade agreement with Mercosur.

Central America

South Korea is the first Asian-Pacific country to have signed a FTA with Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama). According to Kim Yong-beom, South Korean Deputy Minister of Economy and Finance, bilateral cooperation will benefit both regions as state regulatory powers won't create unnecessary barriers to commercial exchange between both. "The FTA will help South Korean companies have a competitive edge in the Central American region and we can establish a bridgehead to go over to the North and South American countries through their FTA networks", said Kim Hak-do, Deputy Trade Minister, when the agreement was reached in November 2016. Also, both economic structures will be complimented by each other by encouraging the exchange between firms from both regions. They signed the FTA on February 21st, 2018, after eighth rounds of negotiations from June 2015 to November 2016 that took place in Seoul, San Salvador, Tegucigalpa and Managua. Costa Rica also signed a memorandum of understanding with South Korea to boost trade cooperation and investment. This partnership will create new opportunities for both regions. South Korean consumers will have access to high-quality Central American products like grown coffee, agricultural products, fruits like bananas, and watermelons, at better prices and free of tariffs and duties. Additionally, Central American countries will have access to goods like vehicle parts, medicines and high-tech with the same advantages. Besides unnecessary barriers to trade, the FTA will promote fair marketing, ease the exchange of goods and services, to encourage the exchange businesses to invest in Central America and vice versa. Moreover, having recently joined the Central American Bank for Economic Integration (CABEI) as an extra-regional member, has reinforced the development of partner-economic projects around the region.

Opportunity

The Republic of Korea faces challenges related to the scarcity of natural resources, there are others, such as slower growth in recent decades, heavy dependence on exports, competitors like China, an aging population, large productivity disparities between the manufacturing and service sectors, and a widening income gap. Inasmuch, trade between Latin America and the Caribbean and the Republic of Korea, though still modest, has been growing stronger in recent years. Also, The Republic of Korea has become an important source of foreign direct investment for the region. The presence of Korean companies in a broad range of industries in the region offers innumerable opportunities to transfer knowledge and technology and to create links with local suppliers. FTAs definitely improve the conditions of access to the Korean market for the region's exports, especially in the most protected sectors, such as agriculture and agro-industry. The main challenge for the region in terms of its trade with North Korea remains export diversification. The region must simultaneously advance on several other fronts that are negatively affecting its global competitiveness. It is imperative to close the gaps in infrastructure, education and labor training.

Categories Global Affairs: Asia EconomicsTrade and Technology Articles Latin America

Pandemic reinforces value of production centres in the same sub-regions

Free trade zones in Central America and the Caribbean have been an important engine for the region's economies. Favoured by the increasing globalisation of recent decades, they could now be boosted by a phenomenon in the opposite direction: "glocalisation", the desirability of having production centres in the same sub-region, close to major markets, in order to avoid the problems in distant supply chains seen during this Covid-19 crisis that has affected transport and communications so much. The two leading Latin American free trade zone countries, the Dominican Republic and Costa Rica, offer affordable and sufficiently skilled labour at the doorstep of the United States.

One of the Dominican Republic's free trade zones [CNZFE].

One of the free trade zones of the Dominican Republic [CNZFE] ▲ One of the free trade zones of the Dominican Republic [CNZFE].

article / Paola Rosenberg

The so-called free trade zones, also known in some countries as free zones, are strategic areas within a national territory that have certain tax and customs benefits. In these zones, commercial and industrial activities are carried out under special export and import rules. It is a way of boosting investment and employment, as well as production and exports, thus achieving the economic development of a part of the country or of the country as a whole.

Free trade zones are important in Latin America, and in the case of the smaller economies they are the main production and export hubs. According to agreement with the association of Free Trade Zones of the Americas (AZFA), there are some 3,500 free trade zones in the world, of which 400 are in Latin America, representing 11.4% of the total. Within this region, they are particularly important in the countries of Central America and the rest of the Caribbean basin. They are particularly important in the Dominican Republic and Costa Rica, as well as in Nicaragua, El Salvador, Colombia and Uruguay (also in Puerto Rico).

These countries benefit from having abundant (especially trained in the Costa Rican case) and low-cost labour (especially in the Nicaraguan case), and this close to the United States. For manufacturers wishing to enter the US market, it may be interesting to invest in these free trade zones, taking advantage of tax benefits and labour conditions, while their production will be geographically very close to their destination.

The latter is gaining ground in a post-Covid-19 world. The trend towards sub-regionalisation, in the face of the fractured dynamics of globalisation, has been highlighted for other areas of the American continent, as in the case of the Andean Community, but it also makes a great deal of sense for greater integration between the United States and the Greater Caribbean. Insofar as the US moves towards a certain decoupling from China, the free trade zones of this geographic area may also become more relevant.

 

Reproduced from report graphic of the association Free Trade Zones of the Americas (AZFA), 2018

Reproduced from report graphic of the association Free Trade Zones of the Americas (AZFA), 2018

 

Export processing zones

Free zones can be export-oriented (external market), import substitution-oriented (internal market) or both. The former may have a high industrial component, either seeking diversification or relying on maquilas, or emphasising logistics services (in the case of Panama's free zones).

Free zones for exporting products have been particularly successful in the Dominican Republic and Costa Rica. As the AZFA indicates, of the 31,208 million dollars exported from Latin American free zones in 2018, the first place went to the Dominican Republic, with 5,695 million, and the second to Costa Rica, with 4,729 million (the third place went to Puerto Rico, with 3,000 million). Exports from the Dominican Republic's free trade zones accounted for 56% of all exports from that country; in the case of Costa Rica it was 48% (third in the ranking was Nicaragua, with 44%).

The Dominican Republic is the country with the largest issue number of free zones (71 multi-company zones) and its 665 companies generated the largest number of direct jobs (165,724). Costa Rica has 48 free zones (in third position, after Nicaragua), and its 343 companies generated 93,496 direct work jobs (in fifth position).

In terms of the profitability for the country of this economic modality , for every dollar exempted between 2010 and 2015, Costa Rica's free trade zones generated an average of 6.2 dollars and those of the Dominican Republic 5 dollars (El Salvador ranked second with 6 dollars).

As regards Costa Rica specifically, a late 2019report by the Costa Rican foreign trade promotion agency, Procomer, put the contribution of free trade zones at 7.9% of GDP, generating a total of 172,602 jobs work, both direct and indirect, with an annual growth of issue jobs averaging 10% per year between 2014 and 2018. These areas account for 12% of the country's formal private sector employment . An important fact about the contribution to development of the local Economics is that 47% of the purchases made by firms located in free trade zones were from national companies. An important social dimension is that the zones contributed 508 million dollars to the Costa Rican Social Security Fund in 2018.

The Dominican Republic's free trade zone regime is particularly applauded by the World Bank, which describes the country as a pioneer in this subject instrument of productive and commercial promotion, presenting it as "the best known success story in the western hemisphere". agreement According to the statistics of the committee National Free Trade Zones Export Zones (CNZFE), these have contributed 3.3% of GDP in recent years, thereby contributing to the significant growth of the country's Economics in recent years (one of the highest fees in the region, with an average of over 6% until the onset of the current global crisis). The geographical proximity to the United States makes its free trade zones ideal for US companies (almost 40% of investment comes from the US) or for companies from other countries that want to export to the large North American market (34% of exports go to the US).

Categories Global Affairs: Economics , Trade and Technology Articles Latin America

The trade dependence between the two countries - greater in the case of Brazil, but the Chinese also need certain Brazilian products, such as soybeans - ensures understanding between the two countries.

The relationship between Brazil and China has proved to be particularly pragmatic: neither Jair Bolsonaro has revised his ties with the Asian country as he promised before becoming president (in his first year in office he has not only kept Brazil in the BRICS but even made a highly publicised official trip to Beijing), nor has Xi Jinping punished partner for accusing him of mismanaging the coronavirus pandemic, as has happened with other countries. The convenience of mutual trade relations, revalued by the trade war between China and the US and the current global crisis, has prevailed.

Jair Bolsonaro and Xi Jinping in Beijing in October 2019 [Planalto Palace].

Jair Bolsonaro and Xi Jinping in Beijing in October 2019 [Planalto Palace].

article / Túlio Dias de Assis

visit After years of criticising the "perverse communist government in Beijing", Jair Bolsonaro surprised people at the end of October with a state visit to the Forbidden City, which he himself specially publicised on social networks. On that trip he gave Xi Jinping the shirt of the Club de Regatas do Flamengo (the football team that at the time represented Brazil in the Copa Libertadores, which he would end up winning) and expressed his total conviction that he was in a capitalist country. In November he hosted a BRICS summit in Brasilia.

Bolsonaro's policy towards China had already begun to change shortly after he became president in January 2019, in contrast to his anti-China messages during the election campaign.

In fact, diplomatic relations between the two countries date back to the time of the board Military sample of which Bolsonaro is so proud. In 1974 Brazil recognised the People's Republic of China as the only China, thus allowing, despite being unaware of it at the time, the creation of a huge trade link between the two nations of continental proportions. Since then, as China's openness to China progressed, relations between China and Brazil have increased, so that for almost a decade now China has been Brazil's main trading partner, partner . China's dependence on Brazil is also notable in relation to certain products, such as soya, although for the Chinese, Brazil is the twentieth largest trader partner , since logically they are economies of very different sizes.

When in 1978 Deng Xiaoping decided to open China's Economics to the rest of the world, China's GDP was close to $150 billion, 75% of Brazil's, which was already over $200 billion. Four decades later, in 2018, Brazil's GDP was $1.8 trillion and China's was $13.6 trillion.

Soybeans and pigs

Brazil's greatest commercial and even political rapprochement with China occurred during the presidency of Luiz Inácio 'Lula' da Silva, during which the BRICS was formed, a club that helped create a greater level of economic and diplomatic proximity between member countries. This rapprochement led China to become Brazil's leading trade partner in exports and imports. Brazil's sales to China almost double exports to the US.

Although trade with Brazil represents less than 4% of the total value of goods that China imports annually, the South American country continues to be an important commercial partner for the People's Republic, due to the fact that the main product imported from Brazil is soya, one of the instructions of the per diem expenses habitual of a large part of the Chinese population. More than half of the soya imported by China comes from Brazil and the tendency is for this to increase, mainly due to the trade war with the US - the second main exporter of soya to China -, making Brazil practically the breadbasket of the Middle Kingdom. China is the destination for more than 70% of Brazilian soybean production.

Dependence on China, from the Brazilian consumer's perspective, was accentuated at the end of 2019 due to an exorbitant rise in meat prices. The average between the different Brazilian states hovered between 30% and 40% compared to previous months. Producers were able to substantially increase their profits in the short term deadline, but the popular classes openly protested against the uncontrolled price of a product that is very present on the average Brazilian's regular per diem expenses . The rise in prices was due to a combination of factors, including an outbreak of swine fever that devastated much of China's production. Faced with a shortage of supply in its domestic market, China was forced to diversify its suppliers, and in the midst of a trade war with the US, China had no choice but to turn to Brazil's agricultural potential, one of the few countries capable of meeting China's huge demand for meat. During this period - a brief one, as it gradually returned to the previous status - Brazil managed to obtain a certain coercive power over the Asian giant.

Huawei and credits

Brazil is extremely dependent on China at status subject technology: more than 40 per cent of Brazil's purchases from China are machinery, electronic devices or parts thereof. In the last decade, with the arrival of the smartphone and fibre-optic revolution in Latin America, Brazil decided to make a greater commitment to Chinese technology, thus becoming one of the main international markets for the now controversial Huawei brand, which has come to dominate 35% of the Brazilian mobile phone market. While the US and Europe were wary of Huawei and from the outset placed limits on its markets, Brazil saw Chinese technology as a cheaper way to develop and never let itself be swayed by suspicions of Chinese government interference in subject of privacy. Several deputies of the PSL (Bolsonaro's former party) even visited China in early 2020 to evaluate the possibility of acquiring Chinese facial recognition equipment to help state security forces fight organised crime, proposal which was ultimately rejected by parliament.

With the rise of the controversy over the risks of espionage that the use of the Chinese multinational's technology could pose, some voices have warned of the threat that Huawei's contracting could pose to quite a few government agencies and offices: a couple of embassies and consulates, part of the infrastructure of the Chamber of Deputies, and even the headquarters of the Public Prosecutor's Office and the Federal Justice in some federal states. Although given the lack of accusatory evidence against Huawei, little has been done by the government about it; only the cancellation of some purchases of Huawei devices.

Brazil is the country that has received the second largest amount of public loans from China in Latin America: 28.9 billion dollars (Venezuela is the first with 62.2 billion dollars), distributed in eleven loans between 2007 and 2017, nine of which come from the Bank of China development and another two from the Export-Import Bank of China. Although this is a large amount, it represents a very small percentage of Brazil's public debt, which now exceeds one trillion dollars. Most of the loans granted by Beijing have been earmarked for the construction of infrastructure for resource extraction. In addition, Chinese companies have invested in the construction of two ports in Brazil, one in São Luís (Maranhão State) and the other in Paranaguá (Paraná State).

The rhetoric of the coronavirus

Bolsonaro soon realised his dependence on China and opted for a policy of accommodation towards Beijing, far from his campaign messages. Once again, Brazil opted for pragmatism and moderation, as opposed to ideology and radicalism, in terms of Itamaraty (Ministry of Foreign Affairs) policy. Likewise, in the face of the instability caused by the US-China trade war and Trump's current weak position, Bolsonaro demonstrated pragmatism by not closing himself off to high-potential trade partners because of his ideology, as was seen last November at the BRICS summit in Brasilia.

But at times, rhetoric emerges that is in keeping with the original thinking. In the wake of the coronavirus pandemic, Bolsonaro has in some messages copied Trump's anti-China narrative. A good example is the exchange tweet exchange between Eduardo Bolsonaro, a federal deputy and the president's eldest son, and the Chinese ambassador, Yang Wanming. The former compared the coronavirus to the Chernobyl accident, insinuating total irresponsibility, negligence and concealed information on the part of the Chinese Communist Party. The ambassador responded that the president's son "on his last trip to the US did not contract the coronavirus, but a mental virus", referring to his ideological proximity to Trump.

However, all this status seems to have calmed down after a phone call between the presidents of both countries, in which both reaffirmed their commitments, especially those of a commercial and financial nature. Moreover, once again Bolsonaro seems to be following the Itamaraty's traditional line of neutrality, despite the constant insistence of his instructions in blaming China for the current tragedy. It is clear that economic dependence on China remains much stronger than the ideological principles of Bolsonaro's political base, however Trumpist it may be.

Categories Global Affairs: Economics , Trade and Technology Articles Latin America

Artistic image of a Pakistani Rupee [Pixabay].

▲ Artistic image of a Pakistani Rupee [Pixabay].

COUNTRY RISK REPORT / M. J. Moya, I. Maspons, A. V. Acosta

 

[Download the report]

 

EXECUTIVE SUMMARY

The government of Prime Minister (PM), Imran Khan, was slowly moving towards economic, social, and political improvements, but all these efforts might be hampered by the recent outbreak of the COVID-19 virus since the government must temporarily shift its focus and resources to keeping its population safe. Additionally, high logistical, legal, and security challenges still generate an uncompetitive operating environment and thus, an unattractive market for foreign investment in Pakistan. 

Firstly, in relation to the country's economic outlook, Gross Domestic Product (GDP) was expected to gradually recover around 5% in the upcoming years. However, according to latest estimates, this growth will suffer a negative impact and fall to around 2%, straining the country's most recent recorded improvements. On the other hand, in the medium to long-term, Pakistan will benefit from the success of the China-Pakistan Economic Corridor (CPEC), which is a strategic economic project aiming to improve infrastructure capacity in the country. Pakistan is also facing an energy crisis along with a growing demand from a booming population that hinder a proper economic progress. 

Secondly, Pakistan's political future will be shaped by Khan's ability to transform his short-term policies into long-term strategies. However, in order to achieve this, the government must tackle the root causes of political instability in Pakistan, such as long-lasting corruption, the constant military influence in decision-making processes, the historical discussion among secularism and Islamism, and the new challenges posed by the COVID-19 pandemic. Still, PM Khan's progressive reforms could represent the beginning towards a "Naya Pakistan" ("New Pakistan").  

Thirdly, Pakistan's social stability is contextualized within a high risk of terrorist attacks due to its internal security gaps. The ethnic dilemma among the provinces along with the government's violent oppression of insurgencies will continue to impede development and social cohesion within the country. This will further aggravate in light of a current shortage of resources and the impacts of climate change. 

In addition, in terms of Pakistan's security outlook, the country is expected to tackle terrorist financing and money laundering networks in order to avoid being blacklisted by the Financial Action Task Force (FATF). Nonetheless, due to a porous border with Afghanistan, Pakistan faces drug trafficking challenges that further destabilize national security. Finally, the turbulent Indo-Pakistani relation is the most significant conflict for the South Asian country. The disputed region of Jammu and Kashmir, a possible nuclear confrontation, and the increase of nationalist movements along the Punjab region, hamper regional and international peace.  

Categories Global Affairs: Asia Economics , Trade and Technology Reports

In addition to the return to the Moon and Mars, asteroid travel programmes are also being accelerated [NASA].

In addition to the return to the Moon and the arrival on Mars, asteroid travel programmes are also being accelerated [NASA].

GLOBAL AFFAIRS JOURNAL / Javier Gómez-Elvira

 

[8-page document. downloadin PDF]

 

INTRODUCTION

Since time immemorial, human beings have imagined themselves outside the Earth, exploring other worlds. One of the first stories dates back to the 2nd century A.D. Lucian of Samosata wrote a book in which his characters reached the moon thanks to the impulse of a whirlwind and there they developed their adventures. Since then, one can find numerous science fiction novels or stories set on the Moon, on Mars, on other bodies in our Solar System or even beyond. Somehow they all lost a bit of their fiction in the middle of the last century, with the first steps of an astronaut on our satellite. Unfortunately, however, what seemed to be the beginning of a new era did not go beyond 5 missions over 2 years.

The first stage began when President Kennedy uttered his famous phrase: "We choose to go to the Moon.... We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win, and the others, too". Although perhaps the end was written in the beginning: the only goal was to prove that the US was the technological leader over the USSR, and when this was achieved the project stopped.

Categories Global Affairs: Economics, Trade and Technology Documents from work Global Space

Scene about anchoring on an asteroid to develop mining activity, from ExplainingTheFuture.com [Christopher Barnatt].

Scene about anchoring on an asteroid to develop mining activity, from ExplainingTheFuture.com [Christopher Barnatt].

GLOBAL AFFAIRS JOURNAL / Emili J. Blasco

 

[8-page document. downloadin PDF]

 

INTRODUCTION

The new space degree program is based on more solid and lasting foundations - especially economic interest - than the first one, which was based on ideological skill and international prestige. In the new Cold War there are also space developments that obey the strategic struggle of the great powers, as was the case between the 1950s and 1970s, but today the aspects of exploration and defence are joined by commercial interests: companies are taking over from states in many respects.

However debatable it may be to speak of a new space age, given that since the emblematic launch of Sputnik in 1957, there has been no end to scheduled activity in different regions of space, including human presence (although manned trips to the Moon have ended, there have been trips and stays in Earth's orbit leave ), the fact is that we have entered a new phase.

Hollywood, which so well reflects the social reality and generational aspirations of the times, serves as a mirror. After a time without special space-related productions, since 2013 the genre is experiencing a resurgence, with new nuances. Films such as Gravity, Interstellar and Mars illustrate the moment of take-off of a renewed ambition which, after the short horizon of the shuttle programme - acknowledged as a mistake by NASA, as it focused on the Earth's orbit leave -, is linked to the logical sequence of perspectives opened up by man's arrival on the Moon: instructions lunar, manned trips to Mars and the colonisation of space.

At the level of the collective imagination, the new space age starts from the square where the previous one "ended", that day in December 1972 when Gene Cernan, Apollo 17 astronaut, left the moon. Somehow, in all this time there has been "the sadness of thinking that in 1973 we had reached the peak of our evolution as a species" and that afterwards it stopped: "while we were growing up we were promised rocket backpacks, and in exchange we got Instagram", notes the graphic commentary of one of the co-writers of Interstellar.

Something similar is what George W. Bush had expressed when in 2004 he commissioned NASA to start preparing for man's return to the moon: "In the last thirty years, no human being has set foot on another world or ventured into space beyond 386 miles [621 kilometres in altitude], roughly the distance from Washington, DC, to Boston, Massachusetts".

The year 2004 could be seen as the beginning of the new space age, not only because manned trips to the Moon and Mars are now back in NASA's sights, but also because it was the first milestone in private space exploration with the experimental flight of SpaceShipOne: it was the first private pilot's access to orbital space, something that until then had been considered the exclusive domain of the government.

The American priority then shifted from the Moon to some of the asteroids and then to Mars, with the journey to our satellite once again taking first place on the diary space website. By returning to the Moon, the idea of a "return" to space exploration takes on a special significance.

Categories Global Affairs: Security and defence EconomicsTrade and Technology Documents from work Global Space

One of the main instruments for combating poverty loses its relevance between the end of the "golden decade" and the beginning of the "second lost decade".

So-called Conditional Cash Transfers (CCTs) -submission of money to disadvantaged families with a commitment to schooling, medical check-ups or other basic requirements that, along with improving household incomes, sought to promote the options of the younger generation - have over the last two decades helped to significantly increase the class average in Latin America. But once beyond the subsistence level, citizens have recently begun to demand improved services, such as teaching, healthcare or transport - as seen in the protests of recent months in the region - to which CCTs no longer provided an answer. Just as countries were thinking of readapting their policies in response to this change in perspective, the Covid-19 crisis threatened to throw millions of people back into poverty, so cash transfers became necessary again, this time without conditionalities.

Beneficiaries of Brazil's Bolsa Família, one of the pioneering conditional cash transfer programmes [Gov. of Brazil].

Beneficiaries of Brazil's Bolsa Família, one of the pioneering conditional cash transfer programmes [Gov. of Brazil].

article / María Gabriela Fajardo

The first Conditional Cash Transfer (CCT) programmes in Latin America, a pioneer region in the implementation of this instrument, were developed in the mid-1990s in Brazil and Mexico with the intention of "transforming and halting the intergenerational transmission of poverty through the development of human capacities in the most vulnerable families", as stated by a report of ECLAC (United Nations Economic Commission for Latin America and the Caribbean). status The CCTs were designed to provide support to families in poverty or extreme poverty with under-age children. The submission of this monetary aid (also non-monetary) was provided as long as the families complied with basic conditions of health, Education and nutrition for the children.

The implementation of CCTs spread rapidly throughout the region. In 1997, only four countries had any of these programmes: Brazil (Bolsa Escola), Ecuador (Bono Solidario), Honduras (Programa de Asignación Familiar) and Mexico (Progresa). A decade later, almost all Latin American countries had adapted the initiative.

Although in some cases this tool has been controversial, given that some governments have been able to use it as "an instrument of social policy and its targeting is discussed as a strategy to address actions that must operate under restricted budgets", according to the aforementioned report of ECLAC, the truth is that CCTs are considered to have contributed to the socio-economic progress of the region. Alejandro Werner, director for the Western Hemisphere of the International Monetary Fund (IMF), recently pointed this out. "In the last 15 years," he said, giving part of the credit to CCTs, "important progress has been made in the topic area of poverty alleviation and reduction of income maldistribution. In this way, Latin America is probably the region where we see the greatest improvement in income distribution".

agreement Between 2002 and 2014, a time known in Latin America as the "golden decade" (a consequence of the commodities boom ), the poverty rate in the region fell from 45.4% to 27.8%, so that 66 million people overcame that status, according to the Social Panorama of Latin America 2019 published by ECLAC. Additionally, the extreme poverty rate decreased from 12.2% to 7.8%. However, since 2015, the level of poverty and extreme poverty began to increase, patron saint which has continued since then, albeit moderately. For 2019, ECLAC predicted an increase in poverty and extreme poverty to fees of 30.8% and 11.5%, respectively, so that 27 million more people returned to poverty compared to 2014. 

The challenge: from extreme poverty, to the class average

This slight reversal indicates that many who in that "golden decade" gained access to the class average , making this sector of the population a majority for the first time, find themselves in a high Degree of vulnerability. At the same time, these people have seen their expectations of subsequent progress and access to better services from the state unmet after their previous status of survival. The new challenge in many countries was to make public policies revolve around other factors that would allow the consolidation of these people in the class average . This neglect generated discontent that contributed to the large protests in several Latin American countries at the end of 2019.

The increased demands of a better-off population made structural deficiencies more evident. "The region's structural deficiencies have become more evident and their solution is part of the demands of broad social groups, particularly the new generations", according to report Social Panorama. In particular, ECLAC warned about "segmented access to quality public and cultural services".

In Werner's words, "having achieved such a significant reduction in the reduction of poverty also generates an important challenge for policy makers in Latin America, since the design of social policies has to be oriented towards attending to other factors, not to the reduction of extreme poverty. It is not that we have to forget about that, but clearly the challenge now is to focus also on addressing those segments of the population that are no longer in poverty, which are class average ". After underlining the precariousness of this large group of the population that has moved up the social ladder, the IMF's manager for the Western Hemisphere indicated that "clearly the instruments to address this vulnerability are different from the conditional transfer schemes that were implemented in the past", and specifically cited access to quality health and Education .

However, states have faced the need for this paradigm shift without budgetary support. It is evident that the state has little capacity to respond to the new needs of the vulnerable population affected by low levels of education, few opportunities at work and the inefficiency of the pension system.

The countries have found that economic growth, which between 2000 and 2013 hovered jointly around 2%, has been weakening since 2014. Thus, real GDP per capita in the region has declined by 0.6% per year. The causes of this decline in economic growth can be classified into two factors, as Werner explained. Firstly, structural causes have inhibited potential growth due to "low investment, slow productivity growth, a poor business climate Pass , the leave quality of infrastructure and Education". Second, cyclical causes include weak global economic growth and low commodity prices; uncertainty in large regional economies such as Brazil and Mexico, sudden economic stops in stressed economies such as Argentina and Ecuador, and social tensions in the last quarter of 2019.

Coronavirus

The emergence of the Covid-19 pandemic has worsened the economic outlook for Latin America and the Caribbean, for which the April 2020 report forecasts a 5.2% drop in GDP this year. Although the IMF estimates a recovery of 3.4% in 2021, this will not be enough to allay fears of a new "lost decade". In his most recent intervention to comment on these data, Werner warned that between 2015 and 2025 GDP per capita "will be flat".

To cope with this new status, socially aggravated by the health crisis and the suffering of so many people, governments are resorting to direct cash transfers, no longer conditional, to vulnerable households. In a way, it is a return to a stage of need that was even earlier, before the CCTs were extended. It is a return to the urgency of the 1980s, known in Latin America as the lost decade, when countries had to apply shock measures to get out of a severe public debt crisis.

development The president of the Inter-American Development Bank (IDB), Luis Alberto Moreno, believes that it is still too early to speak of a second lost decade, but agrees that the time is ripe for unconditional transfer programmes. "The big question is whether everything we have achieved in the last 15 years in terms of reducing poverty and extreme poverty, with the incorporation of some Latin Americans into the middle classes, is going to be lost or whether, on the contrary, the capacity of the social systems and the governments' drive to increase the debt and the public expense will cushion the effects," Moreno affirms. All the countries "are strengthening the transfer programmes that were developed almost two decades ago, and which have been very successful", although "in this case they will not be conditional, in order to preserve the income of many families".

Categories Global Affairs: Economics , Trade and Technology Articles Latin America

The changes, although significant in some cases, will not substantially alter trade flows between the three countries.

The new Free Trade Agreement between the United States, Canada and Mexico is now ready for implementation, following ratification by the congresses of the three countries. The revision of the previous treaty, which came into force in 1994, was called for by Donald Trump on his arrival at the White House, citing the trade deficit generated for the US in relation to Canada and especially Mexico. Although some significant corrections have been introduced, following the main American approaches, it does not seem that the revised agreement will substantially modify trade flows between the three countries.

Presidents Peña Nieto, Trump and Trudeau sign the agreement free trade agreement in November 2019 [US Gov.]

▲ Presidents Peña Nieto, Trump and Trudeau sign the free trade agreement in November 2019 [US Gov.]

article / Marcelina Kropiwnicka

On 1 January 1994, the North American Free Trade Agreement (NAFTA) entered into force. More than twenty years later and under the administration of President Donald Trump, the three partner countries opened a review process of agreement, now called the Free Trade Agreement between the United States, Canada and Mexico (to which each country has given a different acronym: the Mexicans call it T-MEC or TMEC, the Americans USMCA and the Canadians CUSMA).

The text of the TMEC finally ratified by the three countries is broadly consistent with the old NAFTA. However, there are particular distinctions. Thus, it includes stricter rules of origin in the automotive and textile sectors, an updated labour value content requirement in the automotive sector, increased US access to Canadian supply-managed markets, novel provisions related to financial services, and a specification on the establishment of free trade agreements with non-market economies. The joint goal is to encourage production in North America.

New developments negotiated in 2017-2018

The three parties began negotiations in the summer of 2017 and after just over a year they concluded a agreement, signed by the presidents of the three countries in November 2018. The main novelties introduced until then were the following:

1) The agreement revises the regional value content (RVC) percentage for the automotive industry. Under NAFTA, at least 62.5% of an automobile had to be made from North American parts. The TMEC raises the percentage to 75% with the intention of strengthening the countries' manufacturing capacity and increasing the strength of work in the automotive industry.

2) Along the same lines, to support employment in North America, the agreement contains new trade rules of origin to boost higher wages by mandating that 40-45% of auto manufacturing be done by workers earning at least $16 per hour on average by 2023; that's roughly three times the pay a Mexican worker normally receives today.

3) Apart from the automotive industry, the dairy market will be opened to ensure greater access for US dairy products , a demand core topic for Washington. Currently, Canada has a system of domestic quotas that were put in place to protect its farmers from foreign skill ; however, under the new TMEC agreement , changes will allow the US to export up to 3.6% of Canada's dairymarket ,an increase of 2.6% from the original NAFTA provision. Another achievement core topic for Trump was the negotiation of Canada's elimination of what are known as itsmilk classes 6 and 7.

4) Another new aspect is the sunset clause. NAFTA had an automatic sunset clause or a pre-determined end date for the agreement, which meant that any of the three parties could withdraw from the agreement, after a six-month notice of withdrawal notice ; if this did not occur, the agreement remained indefinite. However, the TMEC foresees a duration of 16 years, with the option to meet, negotiate and revise the document after six years, as well as the possibility to renew the agreement after 16 years.

5) The three-country pact also includes a chapter on work that anchors labour obligations at the core of agreement , making enforcement more demanding.

Reforms in Mexico

Precisely to make that last point more credible, US and Canadian negotiators demanded that Mexico make changes to its labour laws to speed up the process of approval and ratification of the TMEC by lawmakers in Washington and Ottawa. US House leaders had doubted Mexico's ability to comply specifically with the labour rights points of agreement. One of President Trump's main objectives in the renegotiation was to reassure US workers that the status of skill would be overcome.

Mexican President Andrés Manuel López Obrador sent a letter to the US congress guaranteeing the implementation of a four-year plan to ensure the achievement of adequate labour rights. López Obrador committed to an outlay of $900 million over the next four years to change the labour justice system and ensure that disputes between workers and employers are resolved in a timely manner. Mexico has also invested in the construction of a Federal Centre for Labour Conciliation and Registration, where labour disputes will be addressed prior to a court hearing.

Obrador showed his commitment to labour reforms by ensuring at least a 2% increase in theminimum wage in Mexico. Most importantly B is that the requirement for direct voting of union leaders will change the way workers' organisations function. With direct elections, decisions on collective agreements will be more transparent. Mexico's plan to improve the working environment will start in 2020.

What's new in 2019 to facilitate ratification

Faced with demands on the US congress , especially from the Democratic majority, to ratify the treaty, negotiators proceeded with two major revisions to NAFTA. One of them aimed primarily at revising a large number of provisions relating to intellectual property, pharmaceuticals and the digital economy:

6) The intellectual property rights chapter seeks to address US concerns to spur innovation, generate economic growth and support jobs work. For the first time, according to the US Trade Representative, the additions include: strict rules against circumvention of technological protection measures for music, movies and digital books; strong protections for pharmaceutical and agricultural innovation; broad protections against theft of trade secrets; and authority for officials to stop suspected counterfeit or pirated goods from official document .

7) A new chapter on digital trade has also been included that contains stricter controls than any other international agreement , strengthening the foundation for the expansion of trade and investment in areas where the US has a competitive advantage.

8) The final draft removes a 10-year guarantee of intellectual property protection for biological medicines, which are some of the most expensive medicines on the market. It also removes granting an additional three years of IP exclusivity for medicines for which a new use is found.

A second group of last minute changes makes reference letter for greater environmental and labour protections:

9) Environment covers 30 pages, outlining obligations to combat trafficking in wildlife, timber and fish; strengthen law enforcement to stop such trafficking; and address critical environmental issues such as air quality and marine litter. New obligations include: protection of various marine species, implementation of appropriate methods for environmental impact assessments, and alignment with obligations under seven multilateral environmental agreements. In particular, Mexico is agreement to improve surveillance to stop illegal fishing, and the three countries agree to stop subsidize fishing for overfished species. To increase environmental accountability, Democrats in the US House of Representatives called for the creation of an inter-agency oversight committee. However, the treaty does not address climate change issues.

10) To ensure that Mexico delivers on its labour promises, House Democrats forced the creation of an interagency committee to monitor the implementation of Mexico's labour reform and compliance with labour obligations. Despite the new and unique 'LVC' requirement, a labour value content rule, it will still be difficult to impose a minimum wage on Mexican automakers. However, US Democrats hope that the condition will force automakers to buy more supplies from Canada or the US, or cause automakers' wages in Mexico to rise.

The finally ratified agreement will replace the one that has been in force for 25 years. Overall, the move from NAFTA to the TMEC should not have a drastic effect on the three countries. It is a progressive agreement that will entail slight changes: certain industries will be affected, such as the automotive and dairy industries, but only to a small extent. In the long run deadline, given the changes introduced, wages should increase in Mexico, which would reduce Mexican migration to the US. Businesses will be affected in the long run deadline, but with back-up plans and new redesigns, the transition process will hopefully be smooth and mutually beneficial.

Categories Global Affairs: North America EconomicsTrade and Technology Articles

Night view of Shanghai [Pixabay].

▲ Night view of Shanghai [Pixabay].

COMMENT / Jimena Puga

China's new Foreign Investment Law, which came into force on 1 January 2020, aims to accelerate the country's economic policy reforms to open up the domestic market and remove obstacles and contradictions of the previous law, goal as its main objective. As stated by the President of the People's Republic statement , the new rule aims to build a market based on stability, transparency, predictability and fair skill for foreign investors. Moreover, the Chinese authorities claim that this new law represents a fundamental part of the state's policy to open up to the world and attract more foreign direct investment.

The draft of the rule, drafted in 2015, created high expectations among Chinese reformers and foreign investors for a change in the country's foreign investment policy regime. And its publication in 2019, the year at the end of which the US and PRC presidents agreed to a hiatus in the trade war in which they are both engaged, signalled a breakthrough in this change.

However, the reality is different. Beijing's stance on foreign investment remains significantly different compared to the conception of investment in the international arena, but parts of the reformist sector of society know that the government cannot afford to miss the opportunity for improvement after the gradual slowdown of domestic investment in the Chinese market over the last decade.

On the contrary, and taking into account the image that the Middle Kingdom has sought to project to the world since the opening of the regime, it might be thought that President Xi Jinping and the leaders of the Communist Party would have seized the opportunity to give a facelift to a new policy that, in comparison with the labyrinthine and previous law, would be systematic and perceived in a more friendly way by investor countries, as a means to revive the declining rates of economic progress. The Asian power's new approach to the free market is therefore a smokescreen based on the establishment of protocols that vaguely define the limits of the rights enjoyed by foreign investors.

As a complement to the content of the foreign investment law, the regulation highlights its promotion and protection and details the necessary measures to ensure its effective implementation. It promotes investment by protecting the rights and interests of investors, standardising the administration of foreign investment, improving the environment for business establishments, as well as promoting the advancement of market opening with a broader scope.

Specifically, the precept stipulates that foreign-invested enterprises shall enjoy the same favourable policies as domestic companies. In addition, it details measures to protect business confidentiality and improve the mechanism for presentation of suggestions from foreign firms to the authorities.

It also sets out and clarifies the implementation of a negative listing mechanism for foreign investment access and details the registration and notification system for this subject of investments. Finally, it also regulates the investment policies for companies established in Hong Kong, Macao and Taiwan, and the legal responsibilities for violations of these regulations.

From a strictly legal point of view, article 2 of the precept defines the concept of foreign investment as "the activity of investing directly or indirectly carried out by foreign natural persons, companies or other organisations", and also contemplates four circumstances that are considered part of this investment subject :

  • Who establishes a business in the territory of China either alone or with another investor

  • Whoever acquires participations, shares... or other rights and interests of a business in the territory of China

  • Who invests in any new project in China, either alone or with another investor

  • Whoever invests in any other manner stipulated by law, administrative regulations or provisions of the State committee

The term "business foreign investment" refers to a business incorporated in Chinese territory under Chinese law and with all or part of its investment financed from a foreign investor.

However, as mentioned above, despite the important innovations of this law, many questions remain unanswered. For example, it does not specify what indirect investment is. Nor does it specify the scope of "foreign natural person": what about Chinese who acquire another nationality, and what about foreigners who acquire Chinese citizenship? Moreover, the legislator also fails to clarify whether investment from Hong Kong, Macao or Taiwan will be considered foreign investment.

Articles 4 and 28 of the new law state that China will adopt the management system of pre-establishment of national treatment (a principle that guarantees foreign investors and their investments access to markets without disadvantages, and thus on the same terms as domestic investors). And the Negative List system for foreign investment, which consists of special administrative measures for foreign investment access to certain fields. In other words, the government will treat all foreign investments outside the Negative List as domestic.

This Negative List system was first tested in the Shanghai SEZ and expanded across the country in 2018. Both article 4 and 28 clarify that the new Negative List will be promulgated prior to agreement of the committee of State. This means that neither ministers nor local governments will be able to place restrictions on foreign investment. What's missing? If investors want access to the sectors restricted under the Negative List, they must receive authorisation from the Ministry of Commerce, a procedure that the legislator does not include in rules and regulations.

On the other hand, Articles 34 and 37 of the new law establish the system of communication on the establishment of new investments for management and their organisation.

From agreement with these points, foreign investors are obliged to communicate all relevant information to the trading department regulated by the business Registration System or the business Credit Information System advertising . Penalties for non-compliance are also set out in these articles. But once again, in this field there is a lack of requirements as to how and what content is required for the communication of information to the department trading system.

This new turn in economic policy translates, once again, into a strategy by which Beijing aims to project itself on the international stage as a powerful and innovative economic power, trying to hide the slowdown in its domestic market and the damage suffered from the trade war against Washington. However, given the loopholes analysed in the aforementioned articles and their vague and ambiguous wording, foreign companies will have to wait to determine what this reform actually entails after its implementation at internship.

Categories Global Affairs: Asia EconomicsTrade and Technology Comments

The port of Chancay, at position of the state shipping company Cosco, will be operational in 2022.

The Chinese pronounce it almost like Shanghai, but it is not in China but in Peru. The port of Chancay, 75 kilometres from Lima, is to become the first Chinese logistics hub for the Pacific side of Latin America. It is the only port in the region for the state shipping company Cosco, which once established its European gateway in Piraeus entrance and is now preparing its access of goods to South America via Chancay. The infrastructure represents an investment of 3 billion dollars.

Computer design of the facilities of the new port of Chancay, 75 kilometres north of Lima [Volcan].

Computer design of the facilities of the new port of Chancay, 75 kilometres north of Lima [Volcan].

article / Gabriela Pajuelo

The port of Chancay aims to become one of China's main connections with the countries on the west coast of South America, serving as a bridge for the growing trade in goods from this region to Asia-Pacific. Through the company Terminales Portuarios Chancay, China's Cosco Shipping Ports is contemplating an initial investment of 1.2 billion dollars for the first phase of project - construction of new dykes to gain ground to the sea, achieving a greater depth (16 metres) and surface area for operations (one million containers). The total investment will be USD 3 billion; the entrance is expected to be operational by 2022.

Since 2014, China has been Peru's leading trade partner partner , replacing the United States. In 2017, China was the destination of 26% of Peru's exports (11.7 billion dollars) and the origin of 23% of its imports (8.75 billion). Chinese interest is focused on minerals, the largest Peruvian export sector, and therefore the port of Chancay is emerging as the main exit point for these raw materials to China. Return freight will bring Chinese manufactures, not only to Peru but also to neighbouring countries.

Beijing's interest in Peru's raw materials has already led to a free trade agreement between the two countries in 2009, which was improved last year, signature . It is a relationship that has not been complicated by the granting of large loans that the recipient country then finds difficult to refund: Peru has only received loans from Chinese public lenders to the value of 50 million dollars in 2009, which places it at the bottom of the list of recipients of Chinese loans in Latin America.

Cosco took over 60% of Terminales Portuarios Chancay for $225 million in the first half of 2019, sharing a partnership with Peruvian miner Volcan, which owns the remaining 40%. This is the first port that the large Chinese state-owned shipping company will control in its entirety in the Western Hemisphere, as its presence in the port of Seattle, in the USA, is limited to the operation of one terminal. Cosco has 34 terminals worldwide, 11 of which are outside China (in Spain it has a presence in the ports of Valencia and Bilbao). Other Chinese companies also have a terminal in the region, such as in the mouths of the Panama Canal (China is the second most important Username of this inter-oceanic waterway, after the USA), or are involved in port expansion works, such as in Itaqui (Brazil). Beijing has also expressed interest in managing entire ports - the case of La Unión in El Salvador -but Chancay is the first realisation in this sense.

The new port of Chancay, almost 1,000 hectares in size, will include an entrance complex, an underground viaduct tunnel and an operational port area. This will have a container terminal with two berths, and a bulk, general cargo and roll-on/roll-off terminal with two additional berths. According to the company, the port will reach an annual cargo handling capacity of one million TEU (Twenty-foot Equivalent Unit). It should be added that the port complex will have the capacity to unload Triple E vessels, considered the second largest container ships in the world.

The multi-port is located 75 km north of Lima and will be connected to the centre of the country via a road to Oyón and Ambo, in the Peruvian Andes. This road infrastructure, with a public investment of 450 million dollars, represents a decentralisation effort on the part of the Peruvian government.

The port of Chancay could pose a serious challenge skill to the Callao Port Terminal, managed by DP World Callao (business subsidiary of Dubai Ports World), APM Terminals and Transportadora Callao. This is the de facto port of Lima and is the country's main port in terms of traffic and storage capacity, with a port movement in 2018 of 2.3 million TEUs and 56 million tonnes, representing 51% of the national total.

 

Cosco Shipping Ports terminals worldwide [Cosco Group].

Cosco Shipping Ports terminals worldwide [Cosco Group].

 

The Minister of Transport and Communications, María Jara Risco, has announced a plan to double the storage capacity of the port of Callao, but there are questions as to whether this will be enough to compete with the new port of Chancay. The President, Martin Vizcarra, sample is convinced that the two facilities can work in a complementary way, and that the new infrastructure will help to decongest the lorry traffic at the capital's area .

Chinese investment, however, has given rise in some quarters to talk of "chequebook diplomacy", a concept that refers to the use of investments or loans to establish favourable relations with countries occupying strategic positions in regions of geopolitical interest. While infrastructure such as Chancay is highly interesting for the recipient country, it may be obliged to refund in other ways, perhaps by allowing the exploitation of mineral resources. Apart from that, there are internal Chinese regulations, which oblige their companies with port terminals in the rest of the world to host the navy if necessary.

China's growing influence in the Western Hemisphere worries the US. Its own vice-president, Mike Pence, warned Latin American countries that these investments represent a potential threat, because at the very least they establish an excessive dependence on trade and credit ties with China, generating a high trade deficit and high debt. They may also, according to Pence, negatively affect issues such as environmental protection and respect for protected areas. 

The Pentagon has spoken in more dramatic terms. In February 2019, Admiral Craig Faller, head of the Southern Command, warned that in the future "China could use its control of deep-water ports in the Western Hemisphere to increase its global operational position".

Categories Global Affairs: Economics , Trade and Technology Articles Latin America

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