Financial market traders kicking their heels for much of this year over the (to them) maddening lack of volatility have at last been given something to work with. Several commodity prices have dived lower over the past few months, setting off reactions across a range of different markets.

The usual response would be to worry about emerging markets across the board, particularly net commodity exporters, which have been benefiting from juicy export earnings over the past decade. Indeed, if the current movements mark the end of the up phase of a commodity super-cycle, emerging markets could be in for a tough time for a long while. Ghana and Zambia, which recently called in the IMF after falls respectively in gold and copper prices punched holes in their fiscal and current account positions, are cautionary tales.

Yet there are two reasons to be cautious about hurtling to sweeping conclusions. Continue reading »

Africa is, or has been, rising: on that most people seem agreed. The question is: which parts, and for how long?

The two-decade period of growth enjoyed by many sub-Saharan African economies has raised hopes and doubts in equal measure. It could be another episode of temporary natural resource earnings fuelling growth, which will fall as commodity prices drop and interest rates rise. (The travails of Ghana and Zambia provide some support for this notion.) Or has there been the kind of genuine diversification that could survive a serious shift in the terms of trade? Continue reading »

Raising a standard against happiness is never going to be popular, but here goes.

The mountain kingdom of Bhutan has got a lot of mileage out of its practice, first adopted in 1972, of using a broad “Gross National Happiness” (GNH) measure of its people’s welfare rather than a narrow measure like income.

According to the many people who have fallen in love with the idea – the UN went as far as declaring March 20 the “International Day Of Happiness” – a holistic approach to welfare reflects more accurately the many dimensions of wellbeing in the human condition. The philosophy has been urged upon rich and developing economies alike as the proper goal of government policy. Continue reading »

“Anyone who says that Africa is missing the Millennium Development Goals is missing the point.” You might expect such a tart statement about a canonical organising principle of development policy to come from one of the aid industry’s many curmudgeonly sceptics.

That it came instead from Jan Vandemoortele, a Belgian economist who helped create the United Nations MDGs in the first place, raises questions whether propagating a single set of targets to drive government policy across the entire developing and emerging world is worth doing at all. The “sustainable development goals”, successors to the MDGs, are currently being developed, but the unfortunate signs are that they will be yet more complex and yet less meaningful than the originals.

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Pity any Russians wanting to sit down to their regular Sunday lunch of kangaroo steak, medium-rare. Thanks to the trade restrictions Vladimir Putin announced last week, Australia – along with the EU, US, Norway and Canada – found its food exports to Russia blocked forthwith.

As it happens, uninterrupted access to the Russian market is not something any food producer can take for granted. Russia, Australia’s largest market for kangaroo meat, also suspended trade (on bogus health grounds) between 2009 and 2013. And while Australian kangaroo exporters may bound off happily into other markets, Moscow’s consumers will struggle to source their marsupials from Russia’s remaining trading partners. Continue reading »

When a country cuts power to its aluminium smelters so its people can watch the World Cup on TV, you have to conclude that its economic policy isn’t all about investing for the future.

Ghana this week called in the International Monetary Fund after a depreciation in its currency threatened to turn into a rout. The episode is an excellent illustration of the injunction to be careful what you wish for, in this case Ghana’s discovery of oil. Its fellow minerals exporter, copper-rich Zambia, has also called in the IMF.

The two nations have become object lessons in how easy outside financing and high but volatile export prices give countries enough rope to strangle themselves. Their experience is unlikely to be a bad as similar countries in previous decades, but it still represents another chapter in the sad history of resource-dependent economies going wrong. Continue reading »

Argentina’s national motto is En unión y libertad (In Union and Liberty). Should it, perhaps, consider changing it to Sui Generis?

Having found a variety of ways throughout its history to break new ground in macroeconomic and sovereign debt mismanagement, Buenos Aires this week may be forced into a new one.

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Of course, it all goes back to Peter the Great at the turn of the eighteenth century. On the one hand, the Russian Tsar worked in the Dutch shipyards incognito to import modern boatbuilding techniques to his empire. On the other, he systematically seized the estates of unhelpful nobles in a manner which suggested that western European notions of property rights had yet to sink in.

Russia’s traditional simultaneous fascination with and repulsion towards foreign ideas and institutions, the latter generally winning out at times of stress, is reflected in the difficulties the EU and US have encountered in trying to shift Moscow’s behaviour in Ukraine.

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Some things in life happen often enough that they take on a reassuring familiarity. Germany win the World Cup. Belgium struggles to form a government. And India throws stones at a deal at the World Trade Organisation.

Having already in effect pushed the demolition button on the Doha round of world trade talks in 2008, India is now being obstreperous over a tiny part of the deal that managed to crawl out of the wreckage – a “trade facilitation” agreement supposedly making it easier to do business across borders. It has threatened to block the agreement over a completely unrelated issue of particular interest to itself, a commitment to “food security” which will in effect hand Delhi yet another tool to enforce agricultural protectionism. Indeed, it was over a similar issue that hopes for Doha as a comprehensive deal died in 2008.

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If you’re an emerging market and there’s a geoeconomic grouping you’re looking for, you’ve got a few to choose from. In Asia there is Asean - ten countries in search of common ground. In Latin America there is Mercosur - five countries in search of common tariffs. And from the Atlantic west to the Black Sea there is Asia-Pacific Economic Co-operation – four adjectives in search of a noun.

But none of these has the distinction of having been a marketing campaign by Goldman Sachs got out of control. The Brics nations, apparently noticing a small clearing in the densely-thicketed field of international relations, seized on the designation to set up their own diplomatic process. The sixth leaders’ summit will take place next week in Fortaleza, Brazil, with the host nation hopefully performing better than at its other major international gathering.

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The nerdier parts of Washington DC have been riveted over the last week by a fight over one of the duller institutions in the city: the Exim Bank, the US’s export credit agency. The battle threatens the very existence, at least in its current form, of the agency that promotes US exports by insuring foreign buyers.

The battle is generally portrayed as a domestic ideological affair that pits true believers in unregulated markets (at least on this issue) against true believers in business. Yet the context inescapably includes other exporting economies, particularly in emerging markets. The stakes for the Exim Bank’s defenders have only been raised by the aggressive use of similar export credit agencies (ECAs) by emerging economies and most particularly China. It remains remarkable that the same US Congress that regularly inveighs against unfair Chinese export competition is also contemplating abolishing the agency that may help redress the balance.

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It has now been three weeks since the ECB moved, enough time at least to assess the effect on asset prices if not on the real economy. Will the bank’s actions benefit EMs, particularly those in central and eastern Europe (CEE) with strong financial links through which liquidity might be expected to flow? Will the ECB, as the Fed’s quantitative easing (QE) is widely acclaimed to have done, push investors grazing in the dry savannahs of developed country asset classes out into the fecund yet mysterious forests of the emerging markets in a hunt for yield?

The initial answer seems to be: not much. Neither eurozone nor emerging eastern Europe assets have exactly been set on fire by the ECB’s action. Three weeks later, the euro – which might have been expected to weaken rapidly after a big ECB easing – has largely reversed its initial moderate falls against the dollar and also against CEE currencies (of which more later). European equities first rose and then retreated. And while equities in emerging Europe had risen by about 5 per cent by mid-June, this largely seems to reflect a cooling of the Ukraine crisis, and they too have fallen back since. Continue reading »

As a coordinated entity, the BRICS grouping of emerging markets has produced little except inspiring the name of a widely-read blog.

Next month, the five governments – Brazil, Russia, India, China and South Africa – are planning to erect an actual edifice amid the swirling mists of rhetoric with the launch of a development bank dedicated to filling some of the gigantic hole in the financing of infrastructure and growth in fast-growing emerging economies.

The BRICS are seeking to avoid some of what they say are the faults of the World Bank and regional development banks – too much rich country dominance and too many conditions attached to lending. But that leaves the exact function and operation of the BRICS bank open to a great deal of political jockeying and uncertainties over how it is run.

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Ever eager to point out exemplars, the World Bank this week made a point of praising Mexico as one of the few countries where “ambitious and advanced reform agendas” were aiming to transform the economy.

Mexico has already passed some laws liberalising the labour market and improving education, but the centrepiece of President Enrique Peña Nieto’s reform effort is to introduce competition into public and private monopolies: the energy sector, dominated by the state-owned Pemex, and telecoms, where Telmex has been in a hugely powerful position ever since the system was privatised in 1990.

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Last week, Alexander Lukashenko, president of Belarus, bafflingly announced he would sign a decree that would return to the status quo in 1861 and reinstate serfdom. When it comes to backsliding on economic modernisation, Mr Lukashenko is clearly a world-beater.

Yet other emerging markets, while not actually going backwards, have shown little enthusiasm in recent years for bold policy moves to streamline regulation, tackle corruption, improve the legal environment and, most particularly, build the infrastructure needed for a modern economy. Continue reading »