reform

By Taras Kuzio of the University of Alberta

Ukraine’s pre-term parliamentary election on October 26 will elect a new parliament that will be undoubtedly pro-European but the jury is still out if it will lead to long overdue reforms and a strong fight against corruption. Three factors will influence the election results. 

By Dmytro Shymkiv of the Ukrainian Presidential Administration

In cooperation with the European Union, Ukraine is pushing ahead with a reform package designed to modernise the economy and prepare our country for eventual EU membership. The reforms require tough choices and will encounter obstacles along the way but commitment to change by the Ukrainian government and civil society alike instil the hope that we can transform our country’s economy and political system. 

Brazil’s presidential election on October 5, previously seen as a shoo-in for the incumbent Dilma Rousseff of the leftwing PT, was thrown wide open last month by the death in an air crash of Eduardo Campos of the centre-left PSB, lying third in opinion polls. His running-mate, the much better known Marina Silva, a former environment minister with a compelling story of personal struggle from jungle poverty to national prominence, has surged ahead to take the lead in the polls.

Investors have gone almost dizzy with excitement. Their thinking is that an opposition victory would mean less of the statist, interventionist, ad hoc policy-making seen under Rousseff and more of the market-friendly, across the board, pro-growth reform so many economists and investors in Brazil have been crying out for for years.

But how much should they realistically expect of a Marina government? 

By Jonathan Fenby, Trusted Sources

There’s nothing like an acronym or a catchy label when it comes to emerging markets. The master alchemist, Jim O’Neill, set the pace with the formulation 13 years ago of the four-nation BRICs (with or without a final capital S for South Africa). Fidelity followed that with the MINT collection of Mexico, Indonesia Nigeria and Turkey constituting MINT.

Then Morgan Stanley chipped in with Fragile Five, which – such are the vagaries of nomenclature – includes five members of the previous two aggregations.

Now, a new and potentially more durable grouping is emerging – even if it does not lead itself to an acronym that trips off the tongue. The best I can come up with is CIMI – or, if you twist it to give Mexico rather than China first place, the marginally more memorable MICI, though that would invite too many columnists to compare them to Disney’s mouse. 

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.

 

When Tanzanian President Jakaya Kikwete steps down next year he hopes to have completed the first of three phases in a plan to turn Tanzania into a middle-income country. The purpose of the first phase is to tackle “constraints to growth” in agriculture, transport, energy, water, education and resources. 

That was then

Back in 2008, President Luis Inácio Lula da Silva boasted that the tsunami of the global financial crisis would register barely a ripple, uma marolinha, in Brazil. Bar Mexico, this was true for the rest of the region too. Today, though, Latin America is more vulnerable to a devastating “sudden stop” in international capital flows.

As Agustin Carstens, the head of the Mexican central bank, warned last week, such an event could be triggered by higher US interest rates. Or, more worryingly, it could follow a sudden collapse of commodity prices should China’s economy slow abruptly. But how much more vulnerable is Latin America today? About 20 per cent more, according to the Inter-American Development Bank. 

By Simon J Evenett of the University of St Gallen, Switzerland

“The best way to ensure that foreign investors remain interested – and invested – in those countries is to implement reforms needed to maintain economic dynamism.” That’s how the FT’s editorial on Saturday concluded its assessment of recent emerging market turmoil. But is the best enough? If not, will policy makers act? What should investors expect? 

How much of a worry is the lack of structural reform in emerging markets? Jonathan Wheatley, deputy emerging markets editor, talks to the FT’s Daniel Garrahan about whether more aggressive changes should have been made when times were good.

By Roman Khodykin of Berwin Leighton Paisner

Last week, following the announcement of president Vladimir Putin’s decision to liquidate the Supreme Arbitration Court and subordinate all commercial courts to another branch of the judiciary, about one in eight Supreme Arbitration Court judges and a number from other commercial courts immediately tendered their resignations in protest. Are they right to be so concerned about the impact of the reforms? 

Did Enrique Peña Nieto’s proposed fiscal reform, unveiled on Sunday, deliver what Mexico needs to boost its woefully low tax take? One way of assessing that is to gauge what the reform aims to provide against the bills that Mexico has to pay. On that basis, the answer is “Partly” – even though the economic slowdown prompted Peña Nieto to hold back from a widely expected sales tax increase on medicines and food. 

China is often accused of only picking the low-hanging fruit when it comes to policy making. In its decision to liberalise lending rates over the weekend, it didn’t even manage that. This apple had already dropped off the branch.

But, in this case at least, the symbolism matters. 

Vladimir Putin was in typically punchy form at the St Petersburg International Economic Forum on Friday promising to invest billions in infrastructure projects, massively expand Russia’s energy trade with China, and instruct every state official from the lowest police officer to the highest minister to devote themselves to improving Russia’s business climate. 

China’s Securities Regulatory Commission has begun consultation on a new round of IPO reform, raising hopes that it is preparing to lift its most recent ban on initial public offerings, imposed last year to speed up reform and stabilise a weak domestic market. But many are urging Xiao Gang, the CSRC’s new chairman (pictured), to take the proposed reform further. 

Enrique Peña Nieto, Mexico’s new president, is promising structural reforms and generating great excitement about his economic model. Mexico’s markets are rallying, but can the reforms stimulate real wages, which have stagnated for more than a decade? John Paul Rathbone, Latin America editor, and Long View columnist John Authers discuss.