By Hugo Swire of the UK Foreign and Commonwealth Office
A year ago I spoke at a summit in London hosted by the Financial Times and the Foreign and Commonwealth Office (FCO) about how the UK could work most effectively with the ‘Pacific Alliance’. The consensus then, as it remains today, was that this economic bloc, made up of Chile, Colombia, Mexico and Peru, offered new opportunities for the UK to forge closer ties with Latin America for our mutual benefit. Read more
By Kavaljit Singh of Madhyam
It’s official: India and the US will resume negotiations on a high-standard bilateral investment treaty (BIT). In a joint statement on Sunday by Prime Minister Narendra Modi and President Barack Obama, the leaders affirmed their “shared commitment to facilitating increased bilateral investment flows and fostering an open and predictable climate for investment.”
Since 2008, the two countries have been engaged in sporadic discussions to arrive at such a treaty. In the coming days, negotiations will begin on its wording, based on each country’s revised model treaty texts. Read more
By Tony Elumelu of Heirs Holdings
This week, world leaders from the public and private sectors, civil society and academia are gathered at Davos to discuss a “new global context” – the theme of the World Economic Forum’s 2015 annual meeting. In this new context, the WEF fears that profound transformations – social, economic, political and technological – are hastening the end of “economic integration and international partnership”. Read more
By Timothy Ash of Standard Bank
While we all enjoy the ECB-inspired feeding frenzy across all risk assets this week it might be well to remember why Mario Draghi opted for yet another extraordinary measure in line with the message that he will do “whatever it takes”. Indeed, it is perhaps a reflection of the immense challenges facing Europe that he is betting the bank and, especially, other peoples’ (Germans’) money. Europe is in the worst state it has been in at any point in the entire post WWII era. Read more
By Joy K Gallup of Paul Hastings
A year ago, the reforms of Mexico’s restructuring law for financially distressed companies were just taking effect. Most practitioners felt the changes addressed many of the flaws in the existing bankruptcy or concurso process. One year later, the new restructuring law is again in the spotlight, as the three largest bankruptcies currently before the courts are proving terrible test cases for the revised law and highlighting where further improvements are needed. Read more
By Kavaljit Singh of Madhyam
President Barack Obama’s upcoming visit to India is likely to kick-start stalled negotiations on a bilateral investment treaty (BIT) between the US and India that has been under sporadic discussion since 2008, aimed at facilitating greater cross-border investment flows.
Negotiations will resume based on model treaty texts prepared by each side. In April 2012, the US released a new version of its model BIT. New Delhi launched a review of its investment treaties in mid-2012 in the wake of public outcry over arbitration notices served by 17 foreign companies (including Vodafone and Sistema) challenging various policy measures and demanding billions of dollars in compensation for the alleged violation of India’s BITs. Read more
By TMS Ruge
Two events have the potential to radically affect how the world tackles extreme poverty and climate change in 2015. On September 25, United Nations Member States will gather to adopt the post-2015 Sustainable Development Goals (SDGs) at a summit in New York City. In December, the 21st Conference of the Parties (COP21) will attempt to sign long-overdue, universally binding agreements on the climate in Paris. We have been here before: this will be the 21st year of the COP meetings and the SDGs are set to take over after 15 years of development work driven by the Millennium Development Goals (MDGs). In the boardrooms in New York and Washington, the voices of those at the “last mile” – a term in development jargon that refers to poorest of the poor – remained largely silent. Read more
By Otaviano Canuto, Cornelius Fleischhaker and Philip Schellekens of the World Bank
Brazil’s is an unusually closed economy as measured by trade penetration, with exports plus imports equal to just 27.6 per cent of GDP in 2013. Brazil’s large size is often used to explain its relative lack of openness. But this argument does not stand up to scrutiny: among the six countries with larger economies than Brazil’s, the average trade-to-GDP ratio is 55 per cent. Given the size of its economy, we would expect Brazil’s trade to be equal to 85 per cent of GDP, three times its actual size. Read more
By Ilan Goldfajn of Itaú-Unibanco
China’s growth model has long been driven by exports and investment, favouring commodity exporters like Brazil. But as its future growth will be fueled by increases in household spending, this shift will have a negative impact on the prices of international commodities, including those exported by Brazil.
However, the outlook for a weaker Brazilian real and a stronger renminbi implies a reduction of wage differentials, which could be favourable for Brazilian manufacturers. This creates growth opportunities for other segments of the Brazilian economy, especially if Brazil resumes its productivity gains, narrowing the current cost differential between the two countries. Read more
By Emad Mostaque of Ecstrat
With oil trading at $50 a barrel, the immediate prognosis for Gulf nations looks grim. However, the future may not be as bad as it first appears. There are several changes that could be made to enable these nations to emerge in a stronger, more stable position than before. Read more
Russian asset prices have taken a severe battering this year and are now ranked as among the cheapest in the world. The obvious question many are now asking is, “is this a good time to buy” or “is there more pain to come” which might lead to even lower prices and valuations in 2015?
Apart from the cheap valuations, the reason why investors are asking that question now is because, during Russia’s previous two recent crises, in 1998/’99 and 2008/’09, we had similar situations where the reasons to continue avoiding the country were overwhelming but it was, nevertheless, exactly the right time to buy. Read more
By Taras Kuzio of the University of Alberta
In a Slovyansk café bar this month I received a rude wake-up call about the weakness of western support for Ukraine in the face of Russia’s annexation of Crimea and its aggression in the Donbas. A soldier on a neighbouring table listened in to my conversation in English with a humanitarian aid worker and, when he got up to leave, delivered the comment: “You useless fuckers”. Many more Ukrainians have been dismayed at the weak response from the US, Canada and Europe. Read more
By Arthur Bastings of Millicom
Africa watchers frequently comment on how technological innovation on the continent is leap-frogging more developed markets. But now the market is more competitive than ever and companies have to look ahead to anticipate consumer needs and stay relevant. What’s next for Africa’s digital and mobile revolution? Read more
By Tony Volpon of Nomura Securities
The Brazilian economy is in a perilous state as it enters 2015. Economic growth is flirting with an outright recession this year. Inflation is oscillating around the upper bound of the inflation target. Fiscal accounts are showing a primary deficit, and measures of indebtedness are rising. The current account deficit is also rising and the country may see a trade deficit in 2014.
External conditions are unlikely to improve in 2015. Brazil was one of the big winners from the Chinese-driven commodity boom, so it is not surprising that many of the problems we see today began with the fall in the country’s terms of trade that began in 2011. Whatever the inadequacies of the policy response, the government does have a point when it argues that external conditions have been a big part of the slower growth seen since 2011. Read more
By Saurabh Mukherjea of Ambit Capital
As I finish my two-week year-end trip to meet our western clients (around 40 of them), it is obvious that enthusiasm regarding investing in India is at record highs. Over the past fortnight, I have met at least 10 western-hemisphere-based funds that have either just started investing in India or have applied to the Indian securities regulator for Foreign Portfolio Investor (FPI) status (which allows them to access the Indian stockmarket directly). Even more interestingly, half a dozen of the clients I met have moved to larger, better-appointed offices in money centres like London, New York, Zurich and San Francisco. Read more
By Timothy Ash of Standard Bank
This time last year I was asked to contribute an article for beyondbrics on the outlook for 2014, and I chose Ukraine (see Hello 2014: Ukraine’s crisis may run and run, December 20, 2014). That post turned out to be prescient, although even I could never have imagined the remarkable turn of events in that country this year.
For 2015 I think Ukraine will remain in the headlines, but its future is likely at least partially to be determined by events in its eastern neighbour, Russia. The new reform administration in Kiev can succeed, if Moscow gives it some breathing space and scales back its own direct intervention in Ukraine. Read more
By Mohamed El-Erian
One of the main challenges facing emerging countries in 2015 will be dealing with increased economic and policy “divergence” within the advanced world. It is a challenge that will widen the gap between well- and poorly-managed economies. It is also one that will tax even the best-run economies. In turn, their response will influence the prospects for the advanced world. Read more
By Aleksandar Vucic, Prime Minister of the Republic of Serbia
Serbia recently began its accession talks with the EU and is firmly dedicated to its European path. This is a blessing to a country like Serbia, since its geographic position places us at a key strategic juncture between Europe and the Orient – and this role is becoming ever more prominent.
The first character in the Chinese words for Serbia and Serbian is pronounced sai. It translates as ‘place of strategic importance’. As Chinese characters so often do, it offers a remarkably concise and meaningful description of Serbia’s relationship with China and the world more broadly. Read more
By Jukka Pihlman of Standard Chartered Bank
The Chinese currency’s path to internationalisation has been stellar so far but something may happen next year that could propel the renminbi (RMB) into the currency stratosphere.
The IMF’s Special Drawing Rights (SDR) – the IMF’s ‘virtual currency’ based on a basket of other currencies reviewed every five years – rarely warrant much excitement. But if the RMB gets included in 2015, alongside the dollar, euro, pound and yen, it could boost the Chinese currency’s fortunes overnight. Read more
By Alejandro Poiré of Tecnológico de Monterrey
What makes Mexico’s current political turmoil unique is that it has put the problem of corruption front and centre of the social agenda. Streets, schools, homes, corporate offices, union meetings and workplaces are teeming with a mix of anger and concern. There is an underlying feeling that it is corruption that lies at the root of our inability to protect the innocent from murder and abuse; that it is corruption that could derail the future promised by the remarkable reforms of the past few years.
As Mexico’s leading public intellectuals have argued, its current crisis, a crisis of corruption and rule of law, calls into question its very viability as a democracy. Yet its political elites have yet to grasp the depth of the problem. The government’s leadership style has pushed social allies away. Opposition parties, mired in their own decomposition, have not served as a channel for social outrage, and players on all sides of the aisle seem way too eager to look past their lamentable wrongdoings. Read more