SOURCE: Reuters—“Kenya parliament to speed peace deal through”
Kenya’s economy saw a dramatic downturn from late December 2007 until very recently due to continued controversy over the results of the national election. The ethnic and political violence that followed the contested election resulted in 1,000 deaths and the displacement of more than 300,000 people.
However, peace has been restored and the economy has bounced back to a great extent on the heels of a compromise recently forged between the Orange Democratic Movement (ODM) led by Raila Odinga and the Party for National Unity (PNU) led by Mwai Kibaki. Legislation to ratify the power sharing agreement between the two parties and change the nation’s constitution to permit the same are expected to become law in the next week.
While public opinion supports the return of stability in Kenya, there are growing concerns over the potential effects of the power-sharing agreement that has made that stability possible. For instance, there will no longer be an opposition party, and the agreement has resulted in the creation of new government positions as both parties struggle to ensure that their representatives hold important positions. There is also concern that the focus on the division of power and top government jobs is distracting Kenya’s leaders from problems related to ethnic strife, land distribution, rampant poverty and corruption.
FOR DISCUSSION:
Will the current Kenyan peace will last, or is the power-sharing agreement doomed to failure?
Tuesday, March 11, 2008
Sunday, March 09, 2008
Peru's economy booms, but is it overheating?
Sources:
Economic Times—“Peru cuts taxes on fuel, food to curb inflation”
Bloomberg—“Peru’s economy expanded 9.1 percent in fourth quarter”
Reuters—“Peru to grow 6-7 percent for 20 years: finance minister"
Peru’s economy has been booming, expanding almost 9% over the whole of 2007. However, the nation’s rapid growth has fueled fears that the economy is overheating.
The government responded last week to concerns over growing inflation by further cutting tariffs on food and fuel. In October of 2007, tariffs on essential foodstuffs such as vegetables, meat and milk products, were cut by 70%. Last week's cuts reduced the taxes on many of these necessary products to zero.
Peru, which has long been considered an “economic laggard” in Latin America, has become popular with investors as a result of a number of reforms, including tariff reductions on foreign imports and a focus on public investment.
The nation’s finance minister claims that with $30 billion in the federal reserve, Peru is financially bulletproof, but it is not clear that the nation would be able to completely insulate itself from ill affects of a change in investor sentiment.
FOR DISCUSSION:
In a globalized world where much depends on attracting foreign investment, how can a nation best insulate itself from the problem of investor flight?
Economic Times—“Peru cuts taxes on fuel, food to curb inflation”
Bloomberg—“Peru’s economy expanded 9.1 percent in fourth quarter”
Reuters—“Peru to grow 6-7 percent for 20 years: finance minister"
Peru’s economy has been booming, expanding almost 9% over the whole of 2007. However, the nation’s rapid growth has fueled fears that the economy is overheating.
The government responded last week to concerns over growing inflation by further cutting tariffs on food and fuel. In October of 2007, tariffs on essential foodstuffs such as vegetables, meat and milk products, were cut by 70%. Last week's cuts reduced the taxes on many of these necessary products to zero.
Peru, which has long been considered an “economic laggard” in Latin America, has become popular with investors as a result of a number of reforms, including tariff reductions on foreign imports and a focus on public investment.
The nation’s finance minister claims that with $30 billion in the federal reserve, Peru is financially bulletproof, but it is not clear that the nation would be able to completely insulate itself from ill affects of a change in investor sentiment.
FOR DISCUSSION:
In a globalized world where much depends on attracting foreign investment, how can a nation best insulate itself from the problem of investor flight?
The developed world's cotton subsidies are crushing west African cotton.
Source: Globe and Mail—“U.S. cotton subsidies rip apart the fabric of Malian life”
Richer nations that do not rely on aid from multilateral institutions like the World Bank subsidize agricultural commodities such as cotton. The United States, for example, dominates the global cotton market as the world’s largest producer. This is made possible by the massive subsidy doled out each year by the US government, which provides domestic cotton producers with between $2- and $3-billion in subsidies each year. China and the European Union also provide sizable subsidies for their cotton producers.
On the other hand, nations like Mali, where the entire GNP (gross national product) amounts to only a fraction of the US cotton subsidy alone, large incentives for agricultural producers are simply not possible. Additionally, Mali and other developing nations that rely on financial assistance from the World Bank are prohibited from providing any subsidy for their agricultural producers.
The seriousness with which the Bank enforces this condition against borrower countries was evidenced in 2004 when the Malian government attempted to protect its farmers from plummeting cotton prices. The Bank cut off all budgetary support to the impoverished nation until the paltry subsidies extended to cotton farmers were withdrawn.
However, the negative effects of over-subsidized cotton from the developed world—in particular the US—is felt by the entire cotton-producing region of western African, not just Mali. With the support of a coalition of west African countries, Brazil challenged the legality of US cotton subsidies before the World Trade Organization (WTO) in 2003. In 2004, the WTO found that the US cotton subsidies were illegal, but the US has done almost nothing to change its policies, instead opting to engage in protracted appeals so as to continue its anti-competitive practices for as long as possible.
FOR DISCUSSION:
Do you agree with the World Bank’s condition on assistance prohibiting borrower countries from providing any subsidies to local producers?
Do you think such a policy is fair given that the Bank’s leading donors provide such heavy subsidies to their own producers?
As long as subsidies are permitted—and used—by the developed world, is it fair to prohibit the developing world from use of this tactic (given that almost all the developing world relies on assistance from the World Bank and IMF)?
Does this policy approach serve to advance the goal of poverty elimination or does it only exacerbate the problem?
Richer nations that do not rely on aid from multilateral institutions like the World Bank subsidize agricultural commodities such as cotton. The United States, for example, dominates the global cotton market as the world’s largest producer. This is made possible by the massive subsidy doled out each year by the US government, which provides domestic cotton producers with between $2- and $3-billion in subsidies each year. China and the European Union also provide sizable subsidies for their cotton producers.
On the other hand, nations like Mali, where the entire GNP (gross national product) amounts to only a fraction of the US cotton subsidy alone, large incentives for agricultural producers are simply not possible. Additionally, Mali and other developing nations that rely on financial assistance from the World Bank are prohibited from providing any subsidy for their agricultural producers.
The seriousness with which the Bank enforces this condition against borrower countries was evidenced in 2004 when the Malian government attempted to protect its farmers from plummeting cotton prices. The Bank cut off all budgetary support to the impoverished nation until the paltry subsidies extended to cotton farmers were withdrawn.
However, the negative effects of over-subsidized cotton from the developed world—in particular the US—is felt by the entire cotton-producing region of western African, not just Mali. With the support of a coalition of west African countries, Brazil challenged the legality of US cotton subsidies before the World Trade Organization (WTO) in 2003. In 2004, the WTO found that the US cotton subsidies were illegal, but the US has done almost nothing to change its policies, instead opting to engage in protracted appeals so as to continue its anti-competitive practices for as long as possible.
FOR DISCUSSION:
Do you agree with the World Bank’s condition on assistance prohibiting borrower countries from providing any subsidies to local producers?
Do you think such a policy is fair given that the Bank’s leading donors provide such heavy subsidies to their own producers?
As long as subsidies are permitted—and used—by the developed world, is it fair to prohibit the developing world from use of this tactic (given that almost all the developing world relies on assistance from the World Bank and IMF)?
Does this policy approach serve to advance the goal of poverty elimination or does it only exacerbate the problem?
Chile introduces a new pension safety net for the elderly poor.
SOURCE: Sign On San Diego—“Chile’s pioneer private pension system add public payouts for poor”
Chile’s privatized social security program will see a big change this coming Tuesday (March 11). The plan as it currently exists only has payouts for those who pay in—a situation that has left those who spend their working years either un- or underemployed with insufficient fund to draw on in old age. As one retired maid whose pension fund is about to run dry put it: “[s]ometimes old age lasts a long time.”
But the program that is to be become law on Tuesday revamps this system, setting up a universal safety net that guarantees the elderly poor a monthly income above the national urban poverty level.
Chile, which has enjoyed a prosperous economy in part due to foreign investment in its privatized pension funds and the high price of copper last year, currently has sufficient funds to support the program, but some economists have raised concerns that it is too generous and could hurt the national economy in the long run.
Others assert that the extra expense in pension payouts will be offset in part—though not full—by decreases in healthcare spending. It is suggested that if Chile’s elderly poor have enough money, they will take better care of themselves and require fewer drastic and expensive healthcare interventions.
Still other observers note that Chile has succeeded with privatization in the pension area thus far and that the expansion of the program to assist the elderly poor is an extension of this success—Chile’s program, they say, is adapting to the needs of the people.
FOR DISCUSSION:
Some critics assert that Chile’s program is too generous to the elderly poor. What is the purpose of a nation if not to serve (all of) its citizens?
Chile’s privatized social security program will see a big change this coming Tuesday (March 11). The plan as it currently exists only has payouts for those who pay in—a situation that has left those who spend their working years either un- or underemployed with insufficient fund to draw on in old age. As one retired maid whose pension fund is about to run dry put it: “[s]ometimes old age lasts a long time.”
But the program that is to be become law on Tuesday revamps this system, setting up a universal safety net that guarantees the elderly poor a monthly income above the national urban poverty level.
Chile, which has enjoyed a prosperous economy in part due to foreign investment in its privatized pension funds and the high price of copper last year, currently has sufficient funds to support the program, but some economists have raised concerns that it is too generous and could hurt the national economy in the long run.
Others assert that the extra expense in pension payouts will be offset in part—though not full—by decreases in healthcare spending. It is suggested that if Chile’s elderly poor have enough money, they will take better care of themselves and require fewer drastic and expensive healthcare interventions.
Still other observers note that Chile has succeeded with privatization in the pension area thus far and that the expansion of the program to assist the elderly poor is an extension of this success—Chile’s program, they say, is adapting to the needs of the people.
FOR DISCUSSION:
Some critics assert that Chile’s program is too generous to the elderly poor. What is the purpose of a nation if not to serve (all of) its citizens?
“Indigenisation” for Zimabawe
SOURCE: The Guardian—“Mugabe approves Zimbabwe nationalization law”
Zimbabwe’s President Robert Mugabe this weekend approved the controversial Indigenisation and Economic Empowerment Bill, which seeks to allow members of the nation’s impoverished majority to take control of foreign-owned corporate interests, including mines and banks.
The government claims it will work with businesses to set up a timetable for the establishment of local control in an attempt to allay fears of blanket seizure. Many critics compare the indigenisation policy to a much-criticized 2000 land reform program that sought to transfer fertile farmland from British colonists to Zimbabwean natives. The plan was heavily criticized because the removals were often violent and the new landowners inexperienced at farming, resulting in poor yields.
Critics contend that this is yet another disastrous move in a long line of efforts by Mugabe, who has led Zimbabwe since the British withdrew from colonial rule in 1980. While critics point to the 100,000% inflation rate and investor flight to support their claims, they provide little to no commentary on the proper manner to remodel the Zimbabwean economy towards a structure that is inclusive of the majority indigenous population, which was oppressed an excluded from the economy during the nations colonial period, which lasted from 1890 to 1980.
Mugabe faces a re-election fight later this year and some critics claim that this move is directed at gaining popular support from the impoverished majority.
FOR DISCUSSION:
Some observers accede that the indigenisation program is an attempt to restructure Zimababwe’s economy, which still suffers from inequities that were reified during nearly a century of colonial rule.
President Mugabe is widely excoriated as a ruthless dictator, and as a result may not be the best spokesperson for the effort to heal Zimbabwe’s economic and cultural wounds in this post-colonial era. However, other countries, such as Mexico and Venezuela, have nationalized valuable natural resources in efforts to reclaim economic power that their leaders felt had wrongly been turned over to foreign interests.
How are developing nations recovering from colonial rule to establish a government that truly works for the interests of its own citizens if the economic structures and benefits established under colonialism are permitted to remain?
Zimbabwe’s President Robert Mugabe this weekend approved the controversial Indigenisation and Economic Empowerment Bill, which seeks to allow members of the nation’s impoverished majority to take control of foreign-owned corporate interests, including mines and banks.
The government claims it will work with businesses to set up a timetable for the establishment of local control in an attempt to allay fears of blanket seizure. Many critics compare the indigenisation policy to a much-criticized 2000 land reform program that sought to transfer fertile farmland from British colonists to Zimbabwean natives. The plan was heavily criticized because the removals were often violent and the new landowners inexperienced at farming, resulting in poor yields.
Critics contend that this is yet another disastrous move in a long line of efforts by Mugabe, who has led Zimbabwe since the British withdrew from colonial rule in 1980. While critics point to the 100,000% inflation rate and investor flight to support their claims, they provide little to no commentary on the proper manner to remodel the Zimbabwean economy towards a structure that is inclusive of the majority indigenous population, which was oppressed an excluded from the economy during the nations colonial period, which lasted from 1890 to 1980.
Mugabe faces a re-election fight later this year and some critics claim that this move is directed at gaining popular support from the impoverished majority.
FOR DISCUSSION:
Some observers accede that the indigenisation program is an attempt to restructure Zimababwe’s economy, which still suffers from inequities that were reified during nearly a century of colonial rule.
President Mugabe is widely excoriated as a ruthless dictator, and as a result may not be the best spokesperson for the effort to heal Zimbabwe’s economic and cultural wounds in this post-colonial era. However, other countries, such as Mexico and Venezuela, have nationalized valuable natural resources in efforts to reclaim economic power that their leaders felt had wrongly been turned over to foreign interests.
How are developing nations recovering from colonial rule to establish a government that truly works for the interests of its own citizens if the economic structures and benefits established under colonialism are permitted to remain?
Saturday, March 08, 2008
US Job Report Keep Fanning Fears of Recession
Sources: Toronto Star, Financial Times
February’s US job report delivered another strike to the already frail US economy. Employers slashed 63,000 jobs in February. That is the most job cuts in five years. The national unemployment rate fell to 4.8 percent from January’s 4.9 percent. This was a product of job seekers leaving the employment force. Additionally, January’s job report was revised from 17,000 lost jobs to 22,000 lost jobs.
This job report, which was worse than predicted, is expected to force the Federal Reserve’s hand in lowering interest rates again. Experts had predicted a net gain in jobs—not a net loss. Commerce secretary Carlos Gutierrez noted, “We are disappointed any time you see a number showing lost jobs...This is consistent with a slowdown.” Those comments were consistent with Bush Administration concerns that the economy is shrinking.
There were gains in several sectors, such as education, tourism, health care, and public services. Those modest gains, however, were overshadowed by massive losses in the manufacturing, construction, and retail sectors. The loss of jobs is clear indication that the US economy is slowing down, and possibly on the way to a US recession.
The US government is attempting to tackle the recession early on. The Federal Reserve has promised $100 billion to alleviate some debt problems. This is in addition to the $160 billion already provided. Furthermore, it may be hoped that the recession may be staved off by the tax rebate checks due in May as promised by the government’s economic stimulus package.
Question: If the economy continues to falter for March and April—will May’s stimulus checks be able to stem the tide of recession?
February’s US job report delivered another strike to the already frail US economy. Employers slashed 63,000 jobs in February. That is the most job cuts in five years. The national unemployment rate fell to 4.8 percent from January’s 4.9 percent. This was a product of job seekers leaving the employment force. Additionally, January’s job report was revised from 17,000 lost jobs to 22,000 lost jobs.
This job report, which was worse than predicted, is expected to force the Federal Reserve’s hand in lowering interest rates again. Experts had predicted a net gain in jobs—not a net loss. Commerce secretary Carlos Gutierrez noted, “We are disappointed any time you see a number showing lost jobs...This is consistent with a slowdown.” Those comments were consistent with Bush Administration concerns that the economy is shrinking.
There were gains in several sectors, such as education, tourism, health care, and public services. Those modest gains, however, were overshadowed by massive losses in the manufacturing, construction, and retail sectors. The loss of jobs is clear indication that the US economy is slowing down, and possibly on the way to a US recession.
The US government is attempting to tackle the recession early on. The Federal Reserve has promised $100 billion to alleviate some debt problems. This is in addition to the $160 billion already provided. Furthermore, it may be hoped that the recession may be staved off by the tax rebate checks due in May as promised by the government’s economic stimulus package.
Question: If the economy continues to falter for March and April—will May’s stimulus checks be able to stem the tide of recession?
Can China Curb Inflation
Sources: BusinessWeek, Financial Times
China has committed herself to reigning in inflation, but experts believe this will be daunting task. Controlling inflation, which stood at 7.1 percent in January, is important to prevent the economy from growing too fast and “overheating.” Wen Jiabao, the Chinese prime minister, delivered his annual report to the legislature on Wednesday, which laid out policies to control prices. The report also promoted a more conservative fiscal policy. Nevertheless, education and health spending is expected to increase dramatically. Prime Minister Wen aims to bring inflation to a more manageable 4.8%.
January’s extremely high inflation rate has been blamed on the rise in agricultural prices. The bitter winter led to expensive food products. Nevertheless, there are fears that the expensive food products will “create an inflationary spiral that would be hard to contain.” Government plans include policies that would increase agricultural commodity production, ration grain use, and more closely monitor demand needs. Inflation has hit the poor the hardest, and the government has committed to ensuring basic food supplies would not be interrupted, and subsidy increases are forthcoming.
Question: The world economy is expected to slow dramatically over the next few months—yet China’s economy is speeding along, with the government aiming for a GDP growth of 8 percent in 2008. Can China maintain the rapid growth, and—can China stem inflation in the face of the faltering world economy?
China has committed herself to reigning in inflation, but experts believe this will be daunting task. Controlling inflation, which stood at 7.1 percent in January, is important to prevent the economy from growing too fast and “overheating.” Wen Jiabao, the Chinese prime minister, delivered his annual report to the legislature on Wednesday, which laid out policies to control prices. The report also promoted a more conservative fiscal policy. Nevertheless, education and health spending is expected to increase dramatically. Prime Minister Wen aims to bring inflation to a more manageable 4.8%.
January’s extremely high inflation rate has been blamed on the rise in agricultural prices. The bitter winter led to expensive food products. Nevertheless, there are fears that the expensive food products will “create an inflationary spiral that would be hard to contain.” Government plans include policies that would increase agricultural commodity production, ration grain use, and more closely monitor demand needs. Inflation has hit the poor the hardest, and the government has committed to ensuring basic food supplies would not be interrupted, and subsidy increases are forthcoming.
Question: The world economy is expected to slow dramatically over the next few months—yet China’s economy is speeding along, with the government aiming for a GDP growth of 8 percent in 2008. Can China maintain the rapid growth, and—can China stem inflation in the face of the faltering world economy?
Wednesday, March 05, 2008
US Calls for IMF Reform
SOURCES: Financial Times
On February 27, 2008, the US added additional pressure on the IMF to reform for better governance. The US is requesting some changes on the executive board and additional requests including a deal to increase the weight of surfacing markets. The need for governance reform in the IMF is not new. The issue for renewed governance in the IMF began to weaken when former managing editor left the IMF. The new managing editor agrees that there needs to be more governance reform in the IMF, but has remained focused on the credit crises and budget cuts, especially a 15 percent reduction in the number of IMF employees.
There has been some additional concern that if the IMF does not reform that it will no longer be relevant to the international financial market. The undersecretary for the international affairs in the US Treasury, David McCormick, believed that the IMF needed to update its mission, governance, and financial model to be more successful. McCormick believes that exchange rates issues should be at the top of the agenda. If the IMF fails to fulfill such duties, all work done by the IMF may be questioned.
Another main responsibility of the IMF is to uphold financial stability. In order to uphold financial stability, the IMF needs to be able to predict a financial crisis. Some are skeptical on this matter. The IMF has attempted to set up structures that can face financial crisis independently. In order for this to take place, the financial market has to be able to overcome risks and losses during such a crisis. The “Group of Seven” strongest economies are now recognizing the importance of the IMF’s role, which has an international membership beyond the strongest and most stable economies.
FOR DISCUSSION:
Do the Group of Seven need to collectively put pressure on the IMF to see any change take place? What specific changes need to be met to reach the expectations of the IMF’s members?
On February 27, 2008, the US added additional pressure on the IMF to reform for better governance. The US is requesting some changes on the executive board and additional requests including a deal to increase the weight of surfacing markets. The need for governance reform in the IMF is not new. The issue for renewed governance in the IMF began to weaken when former managing editor left the IMF. The new managing editor agrees that there needs to be more governance reform in the IMF, but has remained focused on the credit crises and budget cuts, especially a 15 percent reduction in the number of IMF employees.
There has been some additional concern that if the IMF does not reform that it will no longer be relevant to the international financial market. The undersecretary for the international affairs in the US Treasury, David McCormick, believed that the IMF needed to update its mission, governance, and financial model to be more successful. McCormick believes that exchange rates issues should be at the top of the agenda. If the IMF fails to fulfill such duties, all work done by the IMF may be questioned.
Another main responsibility of the IMF is to uphold financial stability. In order to uphold financial stability, the IMF needs to be able to predict a financial crisis. Some are skeptical on this matter. The IMF has attempted to set up structures that can face financial crisis independently. In order for this to take place, the financial market has to be able to overcome risks and losses during such a crisis. The “Group of Seven” strongest economies are now recognizing the importance of the IMF’s role, which has an international membership beyond the strongest and most stable economies.
FOR DISCUSSION:
Do the Group of Seven need to collectively put pressure on the IMF to see any change take place? What specific changes need to be met to reach the expectations of the IMF’s members?
Tuesday, March 04, 2008
US Recession
US Recession Fears Grow
Sources: Financial Times, British Telegraph
Newly released economic data increased fears of a US recession. Some individuals, such as Warren Buffett, already claim that the US is already in a recession with the worst yet to come. Last months manufacturing report reported some contraction in the US sector, but the sector did not contract as much as originally predicted. Economists based their bleaker projection on earlier regional surveys that showed a weak manufacturing sector.
The less than expected contraction was fueled by manufacturer cutbacks due to recession fears. This is the third straight month of contraction, but nevertheless, was still better news than expected. Stocks, bonds, and the US dollar rebounded slightly. There was some additional good news. The weak dollar has led to growing exports. US exports have grown for 63 consecutive months.
Nevertheless, not all news was good. While the manufacturing sector did not contract as predicted, construction spending fell drastically—at a pace not seen in 14 years. “Activity is plunging faster than ever in the residential sector and the long-feared collapse in commercial real estate activity now appears to be materializing,” said Paul Ashworth at Capital Economics.
Despite the economic slowdown, few economists predict the bleak scenario that engulfed the US during the stagflation era of the 1970s, although some—including Buffett—believe that inflation may be on the way. Buffett warned that the Federal Reserve Chair, Ben Bernanke may have a “very tough balancing act” to right the economic ship.
Question: What actions can Mr. Bernanke take, along with the US government, to prevent the continual decline of the US economy? Can the economic stimulus package along with the housing assistance ignite the US economy?
Sources: Financial Times, British Telegraph
Newly released economic data increased fears of a US recession. Some individuals, such as Warren Buffett, already claim that the US is already in a recession with the worst yet to come. Last months manufacturing report reported some contraction in the US sector, but the sector did not contract as much as originally predicted. Economists based their bleaker projection on earlier regional surveys that showed a weak manufacturing sector.
The less than expected contraction was fueled by manufacturer cutbacks due to recession fears. This is the third straight month of contraction, but nevertheless, was still better news than expected. Stocks, bonds, and the US dollar rebounded slightly. There was some additional good news. The weak dollar has led to growing exports. US exports have grown for 63 consecutive months.
Nevertheless, not all news was good. While the manufacturing sector did not contract as predicted, construction spending fell drastically—at a pace not seen in 14 years. “Activity is plunging faster than ever in the residential sector and the long-feared collapse in commercial real estate activity now appears to be materializing,” said Paul Ashworth at Capital Economics.
Despite the economic slowdown, few economists predict the bleak scenario that engulfed the US during the stagflation era of the 1970s, although some—including Buffett—believe that inflation may be on the way. Buffett warned that the Federal Reserve Chair, Ben Bernanke may have a “very tough balancing act” to right the economic ship.
Question: What actions can Mr. Bernanke take, along with the US government, to prevent the continual decline of the US economy? Can the economic stimulus package along with the housing assistance ignite the US economy?
Chinese Arms Buidup
Sources: Financial Times, Associated Press
Are the United States and China embarking upon a new arms race? Officially, China upped defense spending by 17.6%, to $58 billion. The US Department of Defense, however, claims that China’s defense spending is between 97 and 139 billion dollars. Nevertheless, according to China it is the Americans who are rolling back the world timeline to a new “Cold War.”
The Pentagon recently released a report documenting Chinese military growth, and criticized the “lack of transparency” in Chinese military growth, especially referencing China’s efforts to potentially operate beyond the Taiwan Straits. The report also noted concerns regarding nuclear weapons growth, as well as the development and acquisition of the new “Jin” class submarines. Nevertheless, China has blasted the report, claiming that this “is a serious distortion of facts and attempts to interfere in China's internal affairs and break the norms of international relations.” China further claimed that this was merely Washington attempting to isolate China by perpetuating the “China Threat Theory.” Foreign Ministry spokesman Qin Gang urged the U.S. to drop its Cold War mentality and have a correct understanding of China and China's development, correct its wrongdoing and contribute to our mutual trust and constant cooperation.”
China, in her defense, has claimed that the growth in the defense spending has nothing to do with an arms race. China contends that defense spending is not excessive, and is only used to modernize an aging military, pay salaries, and meet the basic funding needs of the People’s Liberation Army.
Question: At what point will the US lose its “lone superpower” status? And, if China acquires the ability to conduct operations beyond Taiwan, what ramifications may this have internationally?
Are the United States and China embarking upon a new arms race? Officially, China upped defense spending by 17.6%, to $58 billion. The US Department of Defense, however, claims that China’s defense spending is between 97 and 139 billion dollars. Nevertheless, according to China it is the Americans who are rolling back the world timeline to a new “Cold War.”
The Pentagon recently released a report documenting Chinese military growth, and criticized the “lack of transparency” in Chinese military growth, especially referencing China’s efforts to potentially operate beyond the Taiwan Straits. The report also noted concerns regarding nuclear weapons growth, as well as the development and acquisition of the new “Jin” class submarines. Nevertheless, China has blasted the report, claiming that this “is a serious distortion of facts and attempts to interfere in China's internal affairs and break the norms of international relations.” China further claimed that this was merely Washington attempting to isolate China by perpetuating the “China Threat Theory.” Foreign Ministry spokesman Qin Gang urged the U.S. to drop its Cold War mentality and have a correct understanding of China and China's development, correct its wrongdoing and contribute to our mutual trust and constant cooperation.”
China, in her defense, has claimed that the growth in the defense spending has nothing to do with an arms race. China contends that defense spending is not excessive, and is only used to modernize an aging military, pay salaries, and meet the basic funding needs of the People’s Liberation Army.
Question: At what point will the US lose its “lone superpower” status? And, if China acquires the ability to conduct operations beyond Taiwan, what ramifications may this have internationally?
UN Sanctions Iran Again
SOURCES: Financial Times
On March 3, 2008, the United Nations Security Council enforced sanctions against Iran for the third time. The sanctions were aimed at individuals that had a close connection with the nuclear weapons agenda. In addition, the sanctions also penalized banks that may have funded the agenda. The permanent members of the council agreed on the sanction in January. However, some non-permanent members, including South Africa, Indonesia, Libya, and Vietnam, inquired on the need for further sanctions after previous penalties were unsuccessful.
The UN’s five powers and Germany are encouraging proposals for a negotiation. They suggest that such negotiation may give Iran the opportunity for political and economic benefits. However, the same proposals were offered approximately 2 years ago. The sanctions include travel restrictions on Iranian citizens suspected of being involved in the nuclear weapons agenda and the sanctions also require increased caution on the Iranian banks’ activities, specifically Bank Melli and Bank Saderat.
The Iranian envoy to the United Nations called the sanctions “unjust and irrational.” Some Western diplomats claim that the sanctions were actually weakened to get more support with the other members of the council. European sponsors revised the text to include a welcomed agreement with Iran on determining a resolution on Iran’s nuclear intentions. However, after the IAEA presented evidence that Iran maintained nuclear weapons research up to 2004, the western point of view was definitely reinforced.
FOR DISCUSSION:
Will a third set of sanctions accomplish the UN’s goals? Did the IAEA evidence influence the UN members’ decisions on what types of sanctions to enforce?
On March 3, 2008, the United Nations Security Council enforced sanctions against Iran for the third time. The sanctions were aimed at individuals that had a close connection with the nuclear weapons agenda. In addition, the sanctions also penalized banks that may have funded the agenda. The permanent members of the council agreed on the sanction in January. However, some non-permanent members, including South Africa, Indonesia, Libya, and Vietnam, inquired on the need for further sanctions after previous penalties were unsuccessful.
The UN’s five powers and Germany are encouraging proposals for a negotiation. They suggest that such negotiation may give Iran the opportunity for political and economic benefits. However, the same proposals were offered approximately 2 years ago. The sanctions include travel restrictions on Iranian citizens suspected of being involved in the nuclear weapons agenda and the sanctions also require increased caution on the Iranian banks’ activities, specifically Bank Melli and Bank Saderat.
The Iranian envoy to the United Nations called the sanctions “unjust and irrational.” Some Western diplomats claim that the sanctions were actually weakened to get more support with the other members of the council. European sponsors revised the text to include a welcomed agreement with Iran on determining a resolution on Iran’s nuclear intentions. However, after the IAEA presented evidence that Iran maintained nuclear weapons research up to 2004, the western point of view was definitely reinforced.
FOR DISCUSSION:
Will a third set of sanctions accomplish the UN’s goals? Did the IAEA evidence influence the UN members’ decisions on what types of sanctions to enforce?
Sunday, March 02, 2008
Bahrain as the Financial Capital
Sources: Economic Development of Bahrain (EDB)
Bahrain is solidifying its reputation as the financial capital of the Middle East by the unyielding formation of the Central Bank of Bahrain (CBB). In Bahrain alone, there are 340 financial institutions. These institutions include commercial banks, investment banks, leasing banks, insurance companies, fund managers, legal services, financial consultants, international regulatory agencies, and real estate investment trusts.
The CBB, which was formerly the Bahrain Monetary Agency, has played a major role in maintaining the reputation as the paramount banking and financial services center. It is widely recognized that the services provided by CBB surpass any other central bank in the Arab world. The CBB’s success in regulation, innovation, non-discriminatory treatment, license management, and operational excellence cannot be compared to any other financial institution in the Arab nation.
More recently, specialized agencies have been created in Bahrain. These specialized agencies make certain that the appropriate international regulations are being used and that these regulations also continue to help expand and develop the international financial industry. Some of these industries include Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the General Council for Islamic Banks and Financial Institutions, the International Islamic Financial Market, the Liquidity Management Centre, and the International Islamic Rating Agency.
In addition, Bahrain is the first country in the Gulf market to launch and establish the captive insurance market. It is also a major regional insurance and reinsurance center. Two major Islamic insurance companies are based in the center of Bahrain. Bahrain has continued to expand its solid reputation by constructing the Bahrain Financial Harbour. The construction for the project has reached $1.3 billion, but is well worth it for Bahrain to keep the position as the financial capital of the Middle East. This new development will create a unification of all financial services, including the Bahrain Stock Exchange and a new Bahrain International Insurance Centre.
Question: Are Bahrain’s financial institutions influenced by political pressure? If not—what influences affect the financial institutions?
Bahrain is solidifying its reputation as the financial capital of the Middle East by the unyielding formation of the Central Bank of Bahrain (CBB). In Bahrain alone, there are 340 financial institutions. These institutions include commercial banks, investment banks, leasing banks, insurance companies, fund managers, legal services, financial consultants, international regulatory agencies, and real estate investment trusts.
The CBB, which was formerly the Bahrain Monetary Agency, has played a major role in maintaining the reputation as the paramount banking and financial services center. It is widely recognized that the services provided by CBB surpass any other central bank in the Arab world. The CBB’s success in regulation, innovation, non-discriminatory treatment, license management, and operational excellence cannot be compared to any other financial institution in the Arab nation.
More recently, specialized agencies have been created in Bahrain. These specialized agencies make certain that the appropriate international regulations are being used and that these regulations also continue to help expand and develop the international financial industry. Some of these industries include Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the General Council for Islamic Banks and Financial Institutions, the International Islamic Financial Market, the Liquidity Management Centre, and the International Islamic Rating Agency.
In addition, Bahrain is the first country in the Gulf market to launch and establish the captive insurance market. It is also a major regional insurance and reinsurance center. Two major Islamic insurance companies are based in the center of Bahrain. Bahrain has continued to expand its solid reputation by constructing the Bahrain Financial Harbour. The construction for the project has reached $1.3 billion, but is well worth it for Bahrain to keep the position as the financial capital of the Middle East. This new development will create a unification of all financial services, including the Bahrain Stock Exchange and a new Bahrain International Insurance Centre.
Question: Are Bahrain’s financial institutions influenced by political pressure? If not—what influences affect the financial institutions?
The World Bank in the Middle East
Sources: FINANCE
Due to the World Bank’s private sector, the Middle East has became the fastest growing region for investments. The Middle East traditionally draws attention for its political instability. However, the region is now developing a different reputation with 1.2 billion dollars in investments last year. This investment amount is almost double its investment in 2005. The World Bank and the International Finance Corporation’s (IFC) investments reflect a change in the global financing trend.
The trend may have begun with the flood of petrodollars into the Middle East and North African regions. The increase in investments has sparked additional need for local banks to recycle the liquidity in the region. This is an opportunity for the Middle East to provide more financial market services, insurance, and traditional sectors (oil and gas). The IFC's investments may have more significance than it appears. Investments tend to signify a greater international private flow.
Egypt received most of the loans over the past five years. Other countries following Egypt include Oman, Algeria and Iraq. Egypt happens to be the most populous Arab country. It is rumored that the IFC is making new investment opportunity tied to the World Bank and International Monetary Fund. Some of these new investments projects include banking, electricity and telecommunication sectors.
The Middle East region has always only received a small proportion of the international finance investments worldwide. However, it has grown considerably in recent years. The World Bank, for example, has increased its lending three times more in the last five years.
Question: Will Egypt’s greater share of investments add to the political tension in the Middle East? How will the increase in investments affect poverty, inequality, and unemployment in the region?
Due to the World Bank’s private sector, the Middle East has became the fastest growing region for investments. The Middle East traditionally draws attention for its political instability. However, the region is now developing a different reputation with 1.2 billion dollars in investments last year. This investment amount is almost double its investment in 2005. The World Bank and the International Finance Corporation’s (IFC) investments reflect a change in the global financing trend.
The trend may have begun with the flood of petrodollars into the Middle East and North African regions. The increase in investments has sparked additional need for local banks to recycle the liquidity in the region. This is an opportunity for the Middle East to provide more financial market services, insurance, and traditional sectors (oil and gas). The IFC's investments may have more significance than it appears. Investments tend to signify a greater international private flow.
Egypt received most of the loans over the past five years. Other countries following Egypt include Oman, Algeria and Iraq. Egypt happens to be the most populous Arab country. It is rumored that the IFC is making new investment opportunity tied to the World Bank and International Monetary Fund. Some of these new investments projects include banking, electricity and telecommunication sectors.
The Middle East region has always only received a small proportion of the international finance investments worldwide. However, it has grown considerably in recent years. The World Bank, for example, has increased its lending three times more in the last five years.
Question: Will Egypt’s greater share of investments add to the political tension in the Middle East? How will the increase in investments affect poverty, inequality, and unemployment in the region?
Saturday, March 01, 2008
France, Africa reestablish defense relationship
Source: Sarkozy seeks new Africa defence ties
France intends to renegotiate all defense agreements with its former colonies in Africa, signaling that President Sarkozy intends to make good on his promise to transform his country’s attitude towards the African continent. France has maintained military bases in several countries in west and central Africa since the early 1960s, frequently intervening in African politics in support of autocratic leaders with which France had close ties. However, in an address to South Africa’s parliament in Cape Town, Sarkozy indicated that such agreements are “obsolete,” and that new agreements must reflect “Africa as it is today, and not as it was yesterday.”
Currently, the details of the replacement agreements are unknown. French officials indicate that the two countries will negotiate the new agreements in the next few months. It is expected that one of the new emphases for the French military in Africa will be on training missions. France has an estimated 26 military accords with its former African colonies. These accords allow for varying levels of involvement, ranging from complete military intervention to cooperation on training and arms sales. Currently, France has 9,000 troops deployed in five countries, with three permanent bases in Senegal, Gabon, and Djibouti. It is expected that the biggest changes will be in the Ivory Coast, where approximately 2,400 peacekeeping soldiers are stationed.
Questions for Discussion
1. Critics of Sarkozy suggest that whereas this action seems consistent with his promise to break the tradition of post-colonial policies towards Africa that real change is slow to materialize. Is this a fair critique?
France intends to renegotiate all defense agreements with its former colonies in Africa, signaling that President Sarkozy intends to make good on his promise to transform his country’s attitude towards the African continent. France has maintained military bases in several countries in west and central Africa since the early 1960s, frequently intervening in African politics in support of autocratic leaders with which France had close ties. However, in an address to South Africa’s parliament in Cape Town, Sarkozy indicated that such agreements are “obsolete,” and that new agreements must reflect “Africa as it is today, and not as it was yesterday.”
Currently, the details of the replacement agreements are unknown. French officials indicate that the two countries will negotiate the new agreements in the next few months. It is expected that one of the new emphases for the French military in Africa will be on training missions. France has an estimated 26 military accords with its former African colonies. These accords allow for varying levels of involvement, ranging from complete military intervention to cooperation on training and arms sales. Currently, France has 9,000 troops deployed in five countries, with three permanent bases in Senegal, Gabon, and Djibouti. It is expected that the biggest changes will be in the Ivory Coast, where approximately 2,400 peacekeeping soldiers are stationed.
Questions for Discussion
1. Critics of Sarkozy suggest that whereas this action seems consistent with his promise to break the tradition of post-colonial policies towards Africa that real change is slow to materialize. Is this a fair critique?
Sunday, February 24, 2008
Pakistan: Will Musharraf Remain President?
Sources: Washington Post, Financial Times
Pakistani president Perfez Musharraf is facing calls to resign after last week’s election saw his party lose all but 40 of the 268 contested seats in the National Assembly. Musharraf’s party, the Pakistan Muslim League-Q, was soundly beaten by the two largest opposition parties: the Pakistan People’s Party (PPP) and the Pakistan Muslim League-N. The two parties 154 seats. The PPP was headed by recently assassinated Benazir Bhutto, and the Muslim League-N was headed by Nawaz Sharif.
The opposition parties have called for Musharraf’s resignation as president—but it seems unlikely that he will resign. He has made no showing that he wants to resign, and the Musharraf camp has refuted any rumors to the otherwise. Opposition forces do not have enough votes in the parliament to force an impeachment, but have cautioned that Musharraf may face civil disobedience by the population to force him to resign.
The two major opposition parties, faced with the prospect of working with Musharraf, have formed a coalition and nominated Amin Fahim to be prime minister. Fahim is a member of the PPP, and is believed to have been offered the post by Musharraf in 2002. This may likely result in additional stability when the opposition parties work with the ruling Musharraf.
Question: Will Musharraf bow to political pressure and resign? If not—how will Musharraf be able to work with opposition forces that he had previously tried to stamp out?
Pakistani president Perfez Musharraf is facing calls to resign after last week’s election saw his party lose all but 40 of the 268 contested seats in the National Assembly. Musharraf’s party, the Pakistan Muslim League-Q, was soundly beaten by the two largest opposition parties: the Pakistan People’s Party (PPP) and the Pakistan Muslim League-N. The two parties 154 seats. The PPP was headed by recently assassinated Benazir Bhutto, and the Muslim League-N was headed by Nawaz Sharif.
The opposition parties have called for Musharraf’s resignation as president—but it seems unlikely that he will resign. He has made no showing that he wants to resign, and the Musharraf camp has refuted any rumors to the otherwise. Opposition forces do not have enough votes in the parliament to force an impeachment, but have cautioned that Musharraf may face civil disobedience by the population to force him to resign.
The two major opposition parties, faced with the prospect of working with Musharraf, have formed a coalition and nominated Amin Fahim to be prime minister. Fahim is a member of the PPP, and is believed to have been offered the post by Musharraf in 2002. This may likely result in additional stability when the opposition parties work with the ruling Musharraf.
Question: Will Musharraf bow to political pressure and resign? If not—how will Musharraf be able to work with opposition forces that he had previously tried to stamp out?
New Cuba Leader
Sources: CNN, AFP, Financial Times
Raul Castro, 76, has been approved by the Cuban National Assembly to become its next president. He succeeds his older brother Fidel Castro, who has ruled Cuba with an iron fist for nearly fifty years. During the elder Castro’s rule, Raul was the head of the army. He also assisted in planning the revolution that saw the overthrow of the government in the 1950s.
Raul Castro has served as acting president since Fidel Castro handed power to him in 2006. The Fidel Castro era officially ended on Tuesday, after he announced that he would resign as the Cuban leader. Fidel Castro called it “a betrayal to [his] conscience to accept a responsibility requiring more mobility and dedication than [he is] physically able to offer.”
Fidel Castro’s resignation was greeted with skepticism in the US. American leaders have pointed that this could be a catalyst for a change to democracy. Secretary of State Condoleeza Rice stated: “We urge the Cuban government to begin a process of peaceful, democratic change by releasing all political prisoners, respecting human rights, and creating a clear pathway towards free and fair elections.” Nevertheless, skeptics remain. Alina Fernandez, the elder Castro’s Florida-based daughter, says “I think that the government will remain mostly the same, but I think they are going to bring a different faces that they need.”
The new Castro regime has promised “a better form of socialism” and possibly a “more democratic society.” Fidel Castro, however, accused President George W. Bush stating that the American vision for Cuba amounts to an annexation of Cuba.
Question: Will Cuba, under Raul Castro, make some move towards democracy—and if so, how can this happen?
Raul Castro, 76, has been approved by the Cuban National Assembly to become its next president. He succeeds his older brother Fidel Castro, who has ruled Cuba with an iron fist for nearly fifty years. During the elder Castro’s rule, Raul was the head of the army. He also assisted in planning the revolution that saw the overthrow of the government in the 1950s.
Raul Castro has served as acting president since Fidel Castro handed power to him in 2006. The Fidel Castro era officially ended on Tuesday, after he announced that he would resign as the Cuban leader. Fidel Castro called it “a betrayal to [his] conscience to accept a responsibility requiring more mobility and dedication than [he is] physically able to offer.”
Fidel Castro’s resignation was greeted with skepticism in the US. American leaders have pointed that this could be a catalyst for a change to democracy. Secretary of State Condoleeza Rice stated: “We urge the Cuban government to begin a process of peaceful, democratic change by releasing all political prisoners, respecting human rights, and creating a clear pathway towards free and fair elections.” Nevertheless, skeptics remain. Alina Fernandez, the elder Castro’s Florida-based daughter, says “I think that the government will remain mostly the same, but I think they are going to bring a different faces that they need.”
The new Castro regime has promised “a better form of socialism” and possibly a “more democratic society.” Fidel Castro, however, accused President George W. Bush stating that the American vision for Cuba amounts to an annexation of Cuba.
Question: Will Cuba, under Raul Castro, make some move towards democracy—and if so, how can this happen?
Wednesday, February 20, 2008
Central Banks show caution
Source: Central Banks take fewer risks
In light of the global credit squeeze, surveys indicate that managers of foreign exchange reserves within central banks are considerably more risk-averse, placing safe assets back in favor. Investment managers report that pressure is on them to search for greater yields, but that the risk required to achiever higher returns is not favored. Additionally, managers report feeling a much greater pressure to increase the transparency of their investment strategies.
In comparison to last year, more than 80% of reserve managers said that junk bonds, asset-backed securities and mortgage-backed securities are less attractive. In contrast, highly rated government securities are much more attractive. Reports one reserve manager from Asia, “Demand for mortgage-related and other structured products will slow down for some time until financial institutions hit by exposures from subprime investments have recapitalized their balance sheets, ensured their viability and restored confidence of investors in the financial markets.”
However, in spite of shying away from higher-risk assets, at least half of reserve managers report they think there will be a continued emphasis on increasing yields of funds under management. Additionally, euro-dominated assets continue to gain favor, with as many as two-thirds of responding reserve managers reporting that they had increased the proportion of their respective central bank’s euro-backed assets.
In light of the global credit squeeze, surveys indicate that managers of foreign exchange reserves within central banks are considerably more risk-averse, placing safe assets back in favor. Investment managers report that pressure is on them to search for greater yields, but that the risk required to achiever higher returns is not favored. Additionally, managers report feeling a much greater pressure to increase the transparency of their investment strategies.
In comparison to last year, more than 80% of reserve managers said that junk bonds, asset-backed securities and mortgage-backed securities are less attractive. In contrast, highly rated government securities are much more attractive. Reports one reserve manager from Asia, “Demand for mortgage-related and other structured products will slow down for some time until financial institutions hit by exposures from subprime investments have recapitalized their balance sheets, ensured their viability and restored confidence of investors in the financial markets.”
However, in spite of shying away from higher-risk assets, at least half of reserve managers report they think there will be a continued emphasis on increasing yields of funds under management. Additionally, euro-dominated assets continue to gain favor, with as many as two-thirds of responding reserve managers reporting that they had increased the proportion of their respective central bank’s euro-backed assets.
Monday, February 18, 2008
Kosovo gains supports of its independence
source: Kosovo is recognized by U.S., France and Britain
This Monday, following Kosovo’s declaration of independence on Sunday, the United States joined France and Britain in their support of the world’s youngest country. U.S. Secretary of State Condoleezza Rice said that the U.S. “has today formally recognized Kosovo as a sovereign and independent state. We congratulate the people of Kosovo on this historic occasion.” France’s foreign minister, Bernard Kouchner, said that a letter recognizing Kosovo’s independence would be sent from President Nicolas Sarkozy to Pristina on Monday, stating that the independence was “a victory for common sense.” Germany is reported to support Kosovo’s independence as well.
However, support for Kosovo’s independence is far from unanimous. The Associated Press reports that Serbia promptly removed its ambassador from the United States in protest of their support of Kosovo, despite reassurances from the U.S. government concerning the welfare of Kosovo’s Serbian minority. Miguel Angel Moratinos, foreign minister of Spain, informed reporters that Spain would not recognize Kosovo because the country’s declaration of independence did not respect international law. In a statement yesterday, he said that “the government of Spain will not recognize the unilateral act proclaimed yesterday by the assembly of Kosovo.” Cyprus, Romania, Bulgaria, Slovakia and Greece are also reluctant to recognize Kosovo. Additionally, Russia demanded an emergency meeting of the United Nations Security Council to proclaim the declaration “null and void,” but the meeting was without resolution. Russia has continuously opposed Kosovo’s independence. Vojislaw Kostunica, prime minister of Serbia, vowed that Serbia will never recognize the “false state.” Serbia has considered Kosovo its heartland since medieval times. Although the Serbian government ruled out the use of military force to respond to the declaration, it will downgrade diplomatic ties with any government that recognizes Kosovo. Demonstrations are planned for Monday in Serbian pockets of Kosovo.
Kosovo is an incredibly poor, predominantly Muslim country with an estimated population of two million. Its unemployment rate is a staggering 60% and the average monthly wage is a mere $250.
Questions for Discussion
1. France's foreign minister Bernard Kouchner stated that Kosovo and Serbia will one day be in the European Union together. Is this a likely outcome?
This Monday, following Kosovo’s declaration of independence on Sunday, the United States joined France and Britain in their support of the world’s youngest country. U.S. Secretary of State Condoleezza Rice said that the U.S. “has today formally recognized Kosovo as a sovereign and independent state. We congratulate the people of Kosovo on this historic occasion.” France’s foreign minister, Bernard Kouchner, said that a letter recognizing Kosovo’s independence would be sent from President Nicolas Sarkozy to Pristina on Monday, stating that the independence was “a victory for common sense.” Germany is reported to support Kosovo’s independence as well.
However, support for Kosovo’s independence is far from unanimous. The Associated Press reports that Serbia promptly removed its ambassador from the United States in protest of their support of Kosovo, despite reassurances from the U.S. government concerning the welfare of Kosovo’s Serbian minority. Miguel Angel Moratinos, foreign minister of Spain, informed reporters that Spain would not recognize Kosovo because the country’s declaration of independence did not respect international law. In a statement yesterday, he said that “the government of Spain will not recognize the unilateral act proclaimed yesterday by the assembly of Kosovo.” Cyprus, Romania, Bulgaria, Slovakia and Greece are also reluctant to recognize Kosovo. Additionally, Russia demanded an emergency meeting of the United Nations Security Council to proclaim the declaration “null and void,” but the meeting was without resolution. Russia has continuously opposed Kosovo’s independence. Vojislaw Kostunica, prime minister of Serbia, vowed that Serbia will never recognize the “false state.” Serbia has considered Kosovo its heartland since medieval times. Although the Serbian government ruled out the use of military force to respond to the declaration, it will downgrade diplomatic ties with any government that recognizes Kosovo. Demonstrations are planned for Monday in Serbian pockets of Kosovo.
Kosovo is an incredibly poor, predominantly Muslim country with an estimated population of two million. Its unemployment rate is a staggering 60% and the average monthly wage is a mere $250.
Questions for Discussion
1. France's foreign minister Bernard Kouchner stated that Kosovo and Serbia will one day be in the European Union together. Is this a likely outcome?
Sunday, February 17, 2008
Argentina takes proactive steps to protect against economic instability.
SOURCE: chinaview.cn—“Argentina announces new measures to stabilize economy"
Concerned about the possibility of a financial crisis similar to that experienced in 2001-2002, Argentina announced protective measure to ensure a stable economy in January of the year.
Among the steps being taken are maintaining a stable exchange rate between the Argentine peso and the United States dollar, ensuring a trade surplus, engaging in necessary market interventions, and increasing its foreign exchange reserve to protect against the possibility of capital flight by investors.
Argentine President Christina Fernandez asserts that the nation is well-placed to weather the current global economic turbulence, despite reports that a recession in the United States could have an adverse affect on economies in South and Central America.
FOR DISCUSSION:
Do you think that the steps Argentina is taking will be enough to protect it from the global economic downturn?
Concerned about the possibility of a financial crisis similar to that experienced in 2001-2002, Argentina announced protective measure to ensure a stable economy in January of the year.
Among the steps being taken are maintaining a stable exchange rate between the Argentine peso and the United States dollar, ensuring a trade surplus, engaging in necessary market interventions, and increasing its foreign exchange reserve to protect against the possibility of capital flight by investors.
Argentine President Christina Fernandez asserts that the nation is well-placed to weather the current global economic turbulence, despite reports that a recession in the United States could have an adverse affect on economies in South and Central America.
FOR DISCUSSION:
Do you think that the steps Argentina is taking will be enough to protect it from the global economic downturn?
South Africa faces power crisis, economic slowdown
SOURCE: allAfrica.com—“South Africa: Country’s Economy Holds Up in Power Crisis—Analyst”
In his recent State of the Nation speech, South African President Mbeki recognized and responded to growing economic problems in the nation that have been further aggravated by the ongoing power crisis. Other factors that signal rough economic times ahead in South Africa are high inflation, the ever-increasing cost of food and fuel, the depreciating rand, and the threat of a recession in the United States.
To respond to the power crisis, which has hit the electricity-dependent mining sector particularly hard, the South African government plans to fund the building of generation facilities. While economic indicators are not promising, observers are not concerned that South Africa faces a recession. Rather they see economic slowdown falling short of recession as a more likely outcome for the continent’s largest economy.
FOR DISCUSSION:
Do you believe building additional generation facilities is the best use of government funds given high food and fuel prices?
In his recent State of the Nation speech, South African President Mbeki recognized and responded to growing economic problems in the nation that have been further aggravated by the ongoing power crisis. Other factors that signal rough economic times ahead in South Africa are high inflation, the ever-increasing cost of food and fuel, the depreciating rand, and the threat of a recession in the United States.
To respond to the power crisis, which has hit the electricity-dependent mining sector particularly hard, the South African government plans to fund the building of generation facilities. While economic indicators are not promising, observers are not concerned that South Africa faces a recession. Rather they see economic slowdown falling short of recession as a more likely outcome for the continent’s largest economy.
FOR DISCUSSION:
Do you believe building additional generation facilities is the best use of government funds given high food and fuel prices?
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