Business Journal

contents December 2013

Editor:Linda Hutchinson-Jafar

Consulting Editor:Donna Ramsammy

Design and layout:Karibgraphics Ltd.

Business Journal is published by:Caribbean PR Agency#268 Harold Fraser Circular, Valsayn, Trinidad and Tobago, W.I.T/F: (868) [email protected] www.bizjournalonline.com

© 2013. No part of this publication may be reproduced without the written permission of the Publisher.

We need to be creative if we want to make progress. We need smart governance if we want solutions that work for today’s global economy.

26

4

5

7

10

16

18

22

24

26

33

From the Editor

Unlocking the economic potential of the Caribbean diaspora

ECLAC predistc regional growth

The Caribbean in the ACP: Facing the Challenges?

Latin America: Entrepreneurs’ lack of innovation curbs creation of quality jobs

Citizen insecurity thwarts Latin America’s development - UNDP

Global partnership to tackle food security

Food price Watch, November 2013

Smart governance: solutions for today’s global economy

Light tight oil does not diminish the importance of Middle East supply - World Energy Outlook 2013

4 DECEMBER 2013 | BUSINESS JOURNAL

From the Editor’s Desk

It was another rough year for many Caribbean

economies which remain battered and bruised

in 2013 and seemingly unable to emerge from

the devastating 2008 global financial crisis.

Jamaica and many of the eastern Caribbean

countries, facing massive external debt,

huge employment and a stagnant tourism

sector have had to approach international

financial institutions for bail out, some which

were accompanied by austerity adjustment

measures.

The devastating Christmas floods which led to

a loss of lives and millions of dollars in damage

in St. Lucia and St. Vincent and the Grenadines

will no doubt impede their economic recovery.

Leaders of these two countries have painted

a very grim outlook for the islands which will

need outside assistance to get back on their

feet.

Barbados whose tourism sector continues to

take a major beating is the latest country in the

Caribbean seeking help from the International

Monetary Fund.

The island which always prided itself as a

solid economy with a stable exchange rate

is now facing employment cuts in the public

service and cuts in major areas of financing.

Notably, the countries in our region making

strides are Trinidad and Tobago although

revising down their growth projections for

2013, Guyana, Suriname and Belize.

Maybe 2014 will see some positive strides for

the Caribbean.

ECLAC is predicting recovery for the

Caribbean in the new year after a 1.3 percent

growth for 2013.

In it new report titled ‘Preliminary Overview

of the Economies of Latin America and the

Caribbean 2013,’ ECLAC said that less buoyant

external demand, greater international

financial volatility and falling consumption

were the factors determining the more modest

economic performance of countries in 2013.

The UN body said the world economic

situation in 2014 provides opportunities and

threats for Latin America and the Caribbean

while increasing investment in the region

remains a challenge.

You can read more about ECLAC’s forecast

in this issue of Business Journal.

The US economy which is inextricably tied to

the performance of economies in the Caribbean

could experience its fastest growth in a decade,

according to Moody’s Analytics chief economist

Mark Zandi.

The IMF is also forecasting a strong 2014 for

the United States.

China’s growth is expected to remain on track

particularly with the new reforms announced

by the regime.

Europe, another major region for the

Caribbean is also projected to return to growth

in 2014 after two years of decline.

Let’s hope 2014 will usher in long overdue

good news for the Caribbean particularly those

in the Eastern Caribbean.

Linda Hutchinson-JafarEditor

DECEMBER 2013 | BUSINESS JOURNAL 5

• Ninety percent of Caribbean diaspora

wants to engage deeper with the region,

representingasignificantuntappedpotential

foreconomicdevelopment.

• Key barriers to increased engagement

includelowvisibilityandawarenessofdeal

flow for local and diaspora angels, and a

complexregulatoryenvironment.

• Interventionstoovercomethesechallenges

shouldbedesignedfortheCaribbeanasa

whole.

The Caribbean diaspora is a sizeable, well-

educated, and affluent demographic whose

large majority is interested in investing in its

countries of origin. Due to the common heritage

and strong connections across the region, they

overwhelmingly take a regional approach to

the Caribbean, rather than a nationalistic one

Supported by the right incentives and policies,

diaspora members could play an even larger

role in contributing to the region’s development.

These are some of the findings of a new

study, “Diaspora Investing: The Business

and Investment Interests of the Caribbean

abroad”, by infoDev, a global innovation

program in the World Bank. The assessment

brings together knowledge and data gathered

from over 850 self-identified members of the

Caribbean diaspora, and sheds light on their

characteristics and investment interests.

The Caribbean diaspora is already

significantly engaged in the region, with some

70 percent being formal or informally affiliated

Unlocking the economic potential of the Caribbean diaspora

to organizations in their home countries. Half

of those surveyed send remittances and a full

85 percent give back to the Caribbean either

through financial help, or other support in

kind. Moreover, nine out of ten would like to be

even more engaged in the future, potentially

as investors. With nearly one diaspora member

living in North America or Europe for every

resident still in the region, this ability to engage

represents a significant untapped potential.

There is also a growing community of

angel investors among the diaspora that are

already actively involved both where they

live and back home. About 23 percent of

respondents has already invested in a start-up

company of some sort in the Caribbean region.

Looking forward, investors have expressed

strong interest in financing sectors with high

development potential for the region, such as

green energy, mobile applications, education,

and agribusiness.

There is nearly one person living abroad in the Diaspora to every person still resident within the Caribbean, making the Diaspora an untapped potential

resource for economic development. World Bank.


But challenges remain. The gap between real

engagement and expressed interest remains

significant. For instance, while 85% of diaspora

members would be interested in investing in a

business back home, only 13% of respondents

do so today.

“The biggest barrier we found was visibility,”

explains Qahir Dahanani, author of the report.

“The money is out there, but there is a lack

of awareness of investment opportunities,

including what deals are there, what deals

are high quality, and which entrepreneurs are

receptive to angel investing.”

Bureaucracy associated with making such

investments, and weak legal enforcement were

also highlighted as key barriers. The patchwork

of regulations among different countries makes

it difficult to unlock the latent demand for

regionally-focused investments among the

diaspora.

“There should be a serious effort by

policymakers and multinationals to create

a uniform regulatory environment,” says

Dahanani.

The report provides other recommendations

for interventions that are designed for the

Caribbean as a whole. Chief among these is the

creation of an online marketplace that connects

diaspora investors with opportunities back

home. Such an approach would capitalize on

the geographically dispersed nature of diaspora

populations, the increasing use of the Internet

for social networking and investing, and the

nascent but growing crowdfunding sector.

This low-cost and scalable platform would

provide equal access to everybody, regardless of

their country of origin. Other recommendations

include targeted capacity building for both

entrepreneurs and angel investors, and the

strengthening of existing angel investing

networks.

“This report underscores the important role

that the diaspora can play in the Caribbean’s

economic development,” said Sophie Sirtaine,

Country Director for the Caribbean in the World

Bank Group.

“Increased engagement and

investment by the diaspora will be a

boost for entrepreneurs in the region,

eventually leading to new, high-

skilled jobs.”

The report, which was funded by the

government of Canada, was developed as part

of the Entrepreneurship Program for Innovation

in the Caribbean (EPIC). The seven-year

program aims to contribute to increased

competitiveness, growth and job creation in

the Caribbean region through the development

of a robust and vibrant innovation and

entrepreneurship ecosystem, with particular

emphasis on supporting high-potential growth-

oriented early-stage companies.


ECLAC Predicts that the Region’s Countries Will Grow by an Average of 3.2% in 2014

In the Preliminary Overview of the Economies

of Latin America and the Caribbean, the

Commission forecasts a more favourable external

environment - albeit one characterized by

ongoing financial volatility and macroeconomic

policy challenges.

The economies of Latin America and the

Caribbean will expand by 3.2% in 2014, which

is higher than the 2.6% from the end of 2013,

according to a new ECLAC report launched

today at a press conference in Santiago, Chile.

In its annual report Preliminary Overview of

the Economies of Latin America and the

Caribbean 2013, ECLAC points out that less

buoyant external demand, greater international

financial volatility and falling consumption

were the factors determining the more modest

economic performance of countries in 2013,

which brought down the 3.0% estimate put

forward by the Commission in July.

The next year is expected to see a moderately

more favourable external environment help

boost external demand, and in turn the region’s

exports. Private consumption will also continue

to grow, although more slowly than in previous

periods. In the meantime, increasing investment

in the region remains a challenge.

As she presented the report, Alicia Bárcena,

Executive Secretary of ECLAC, stated “The

world economic situation in 2014 provides

opportunities and threats for Latin America and

the Caribbean”.

According to Ms. Bárcena “Opportunities

include increased international trade and the

possibility of harnessing currency depreciations

to ensure sustained changes in relative prices.

This - along with industrial policies to support

growth, boost regional integration and help

small and medium-sized enterprises - could

help to increase investment in diversifying

production in tradable goods and to reduce the

region’s structural heterogeneity”.

The threats facing the region include ongoing

volatility in the global economy and higher

external financing costs, as well as a smaller

contribution by consumption to GDP growth

and a worsening regional current account.

According to the Preliminary Overview by

the Economic Commission for Latin America and

the Caribbean (ECLAC), regional growth in 2014

will be led by Panama (with 7%), followed by

Bolivia (5.5%), Peru (5.5%), Nicaragua (5%),

Dominican Republic (5%), and Colombia, Haiti,

Ecuador and Paraguay (all four with 4.5%).

Growth is predicted to be 2.6% in Argentina

and Brazil, 4% in Chile and Costa Rica, 3.5%

in Guatemala, Mexico and Uruguay, and 1% in

Venezuela.

ExecutiveSecretaryofECLAC,AliciaBárcena,duringthelaunchofthePreliminaryOverviewoftheEconomiesofLatinAmericaandtheCaribbean2013.

Photo:CarlosVera/ECLAC

http://www.cepal.org/id.asp?id=51821




Next year, the Caribbean will experience a

recovery and post a figure of 2.1% (following

just 1.3% growth in 2013).

The report states that the main challenge

facing Latin American and Caribbean

governments is to drive through social covenants

for investment to boost productivity and growth

with equality. These social covenants must

have an institutional framework that provides

certainty and clear rules, short-term policies

to provide nominal and real stability and long-

term policies that encourage more diverse

investment in tradable goods sectors.

Overview of 2013

According to ECLAC, in 2013 consumption

made a smaller contribution to regional growth

owing to a slowdown in the wage bill and credit.

The slightly higher contribution by investment

and the smaller negative impact of net exports

failed to offset reduced consumer buoyancy.

This year, regional growth was led by Paraguay

(13%), followed by Panama (7.5%), Bolivia

(6.4%), Peru (5.2%), Nicaragua (4.6%),

Uruguay (4.5%), Argentina (4.5%) and Chile

(4.2%).

In terms of the labour market, the unemployment

rate remained more or less stable, going from

6.4% in 2012 to 6.3% in 2013. This dip was

caused by a lower overall labour participation

rate. Inflation remained below 5% in most of

the region’s countries.

A widespread worsening of the terms of

trade - on the back of continued commodity

price reductions - contributed to the balance-

of-payments current account deficit widening

from 1.8% of GDP in 2012 to 2.5% in 2013

(mainly as the result of a higher increase in

merchandise imports relative to exports).

Given this context of lower inflation, slower

economic growth and financial instability,

many countries implemented moderately

countercyclical policies aimed at shoring up

internal demand and tackling international

financial volatility. Some countries reduced

their benchmark interest rates (except Brazil),

while others encouraged the stable growth of

monetary aggregates (or total money circulating

in an economy).

Furthermore, the financial instability led to a

smaller accumulation of international reserves,

and some countries introduced macroprudential

measures to avoid greater exchange-rate

fluctuations.

Lefttoright,ECLAC’sDeputyExecutiveSecretary,AntonioPrado;ChiefoftheECLACPublicInformationUnit,MaríaAmparoLasso;ExecutiveSecretaryofECLAC,AliciaBárcena;DirectoroftheEconomicDevelopmentDivision,JuanAlbertoFuentes,andEconomicAffairsOfficersJurgenWellerandSandraManuelito,duringthelaunchofthePreliminaryOverviewoftheEconomiesofLatinAmericaandtheCaribbean2013.Photo:CarlosVera/ECLAC


Public Information Unit - E-mail: [email protected] - Tel.: (56-2) 2210-2040

Latin America and the Caribbean Total GDP, 2011-2014 (rates of variation)

(based in USD in constant 2005 prices)

Country 2011 2012 2013 a 2014 b

Argentina 8.9 1.9 4.5 2.6 Bolivia (Plurinational State of) 5.2 5.2 6.4 5.5 Brazil 2.7 1.0 2.4 2.6 Chile 5.9 5.6 4.2 4.0 Colombia 6.6 4.2 4.0 4.5 Costa Rica 4.4 5.1 3.2 4.0 Cuba 2.8 3.0 3.0 3.0 Ecuador 7.8 5.1 3.8 4.5 El Salvador 2.2 1.9 1.7 2.6 Guatemala 4.2 3.0 3.4 3.5 Haiti 5.6 2.8 4.0 4.5 Honduras 3.8 3.9 2.6 3.0 Mexico 3.8 3.9 1.3 3.5 Nicaragua 5.4 5.2 4.6 5.0 Panama 10.9 10.8 7.5 7.0 Paraguay 4.3 -1.2 13.0 4.5 Peru 6.9 6.3 5.2 5.5 Dominican Republic 4.5 3.9 3.0 5.0 Uruguay 6.5 3.9 4.5 3.5 Venezuela (Bolivarian Republic of) 4.2 5.6 1.2 1.0 Subtotal Central America, Haiti and Dominican Republic 5.1 4.7 3.7 4.5 Subtotal Latin America 4.4 3.1 2.6 3.2 Antigua and Barbuda -2.0 3.3 1.5 1.5 Bahamas 1.7 1.8 1.6 2.5 Barbados 0.8 0.0 -0.7 1.0 Belize 2.1 4.0 1.6 2.8 Dominica 0.2 -1.1 -0.5 1.2 Grenada 0.8 -1.8 1.5 1.3 Guyana 5.4 4.8 4.8 4.6 Jamaica 1.4 -0.5 0.1 1.2 Saint Kitts and Nevis 1.7 -1.2 1.6 2.9 Saint Vincent and the Grenadines -0.4 1.6 2.1 1.4 Saint Lucia 1.4 1.3 1.1 2.3 Suriname 4.7 4.4 3.9 4.7 Trinidad and Tobago -1.6 1.5 1.6 2.1 Subtotal Caribbean 0.5 1.2 1.3 2.1 Latin America and the Caribbean 4.3 3.1 2.6 3.2 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Estimates. b Projections.

Source: ECLAC


The Caribbean in the African,

Caribbean & Pacific (ACP)

Group: Facing the Challenges?

Now in its fourth decade since the

1975 Georgetown Agreement,

establishing the ACP Group of

States, there are mixed signals at

the highest political levels of the

Caribbean Community (CARICOM)

on what role, if any, they wish to

play in that unique organisation of 80 developing

countries.

This lack of strong engagement by most

CARICOM Heads of Government was evident a

year ago, at the 7th Summit of Heads of State

and Government of the ACP Group in Malabo,

Equatorial Guinea. The exceptional presence

and fitting tribute paid by the then- CARICOM

Chairperson, Prime Minister Dr. Kenny Anthony

of Saint Lucia, was a redeeming feature.

Contributions of Ministers and officials gave

added-value of high quality but far less than

one would expect from the Caribbean, the

“founding home” of the ACP Group.

Most encouraging has been the interest

demonstrated at a recent ACP Caribbean

Stakeholders’ Consultation on November 1-2,

2013, hosted by Grenada, the current Chair of

the Council of Ministers of the Caribbean Forum

(CARIFORUM) of the ACP Group. The event is

part of a current critical appraisal process being

pursued at a time vastly different

from the era of the Cold War and

the vibrant Non-aligned Movement

(NAM) that gave birth to the “ACP”

of 46 countries spanning a tri-

continental space.

Today, the ACP is shaping a future

beyond its decades of “privileged

partnership” with the European

Union in “trade, aid and political

dialogue” from Lome Agreement in 1975 to

Cotonou, Benin, expected to end in 2020. The

current conjuncture of global political, economic

and social forces presents a multi-polar world

in which small Caribbean economies face

an onslaught of trade liberalisation, growing

indebtedness and environmental degradation

at unprecedented levels.

These structural realities warrant serious

rethinking of policies and it is precisely those

situations that are being confronted in the

context of the wider grouping of the ACP’s near

one billion population and growing economies,

endowed with natural resources, mining and

mineral industries, forests and marine resources.

The Grenada Consultation was an occasion for

sober analysis to face the challenges the ACP

Group wishes to overcome.

Only a few highlights and implications of the

Consultation are offered on this occasion.

The Caribbean in the African, Caribbean & Pacific (ACP) Group: Facing the Challenges?

Column

By Ambassador P.I Gomes


Key Themes

The Grenada event was the second of the six

(6) regions of the ACP Group, the first being in

Apia, Samoa for the Pacific in which members

of an Eminent Persons Group (EPG) exchange

views with stakeholders to arrive at priorities

for a re-inventing of the ACP Group to become

a more relevant and effective voice for poverty

eradication and equitable development. The

EPG is chaired by former

President of Nigeria, Chief

Olesegun Obasanjo, and includes

three distinguished Caribbean

personalities – two former

Presidents of the Dominican

Republic and Guyana, Leonel

Fernandez and Bharrat Jagdeo,

respectively and Ms Patricia

Francis of Jamaica, former

Executive Director of the UN’s

International Trade Centre (ITC), Geneva.

In six sessions with panels of lead speakers

and open debate, the discussions ranged from

the historical roots by which Foreign Ministers

of Commonwealth Countries and former

francophone colonies, mainly West Africa, forged

a powerful negotiating alliance to confront the

then European Economic Community (EEC) and

gained preferential, non-reciprocal trade for

their mainly agricultural products. Of course

sugar, bananas, cocoa, coffee and rum featured

prominently. At the heart of the early formation

of the ACP Group were our two exceptional and

highly acclaimed visionary leaders, the then-

Trade Minister of Jamaica, P.J. Patterson and

Guyana’s Foreign Minister, Shridath Ramphal.

The Consultation was able to benefit from

the rich personal engagement that Sir Shridath

had provided in the founding period of the ACP

Group. He stressed the steadfast principles of

unity and solidarity that characterized what

was nothing less than another stage in the

movement of colonial liberation.

Quite significant was the strength of a common

vision among the core of eight Commonwealth

Caribbean foreign ministers that forged a

larger unity with the 46 African countries,

both English and French-speaking and Pacific

counterparts and resulted in

the first comprehensive North-

South “aid-trade and political

agreement”. It was legally

binding with mutual obligations

based on respect for human

rights and the rule of law.

At a deeper level than the legal

transactions and the commercial

relations of individual ACP

member states was the

ambitious motivating force to be politically

engaged in the multilateralism of the 1970s.

This was unmistakable in the Preamble to the

Georgetown Agreement and expressed as a

commitment on behalf of all developing countries

to “contribute towards the realization of a

new, fairer and equitable world order.” As

much then as it is today, Sir Shridath challenged

the Consultation to embrace and translate that

global commitment into the concrete demands

of today –no doubt an exceptionally complex

era of many more “regional groupings” and

battered by a dominant market-driven ideology

of competitiveness, at the expense of others

with competing offensive interests.

Throughout the Consultation this thread to

translate the foundation principles of unity and

solidarity in a larger global task preoccupied

the discourse.


The challenge was to realize those principles

by confronting the multi-polarity of the 21st

century, with a new multilateralism and

overcome growing inequality, explosive youth

unemployment, intolerable gender inequalities,

citizen insecurity and fragmentary forces

undermining faltering regional integration

efforts.

Other sessions and commentators addressed

these issues-sharing lessons learned on trade,

development assistance, political dialogues and

non-state actors in ACP-EU relations from 1975

to the present Economic Partnership Agreement

(EPA). Questions were raised on where does

the ACP Group fit, if at all, in the Foreign Policy

of CARIFORUM (CF) Member States and how

does the CF’s Post-2015 Development Agenda

address issues pertinent to a Group of 79

developing countries so heterogeneous with

SIDS, Land Locked, LDCs and Middle Income

Countries (MICs), now increasingly “graduated”

from Official Development Assistance (ODA).

The Consultation endorsed the need to craft

“new” partnerships by the ACP and to explore

options that address geo-strategic issues that

can enable structural transformation of member

states’ economies based on priority goals of the

constituent regional groupings.

An outline of CF’s priorities for development

through trade and innovative investments was

the major theme of a concluding session that

benefitted from a thought-provoking paper by

Professor Vaughan Lewis on an overarching

framework by which the Caribbean’s ACP-EU

and wider engagement could be pursued.

The paper, sub-titled: “ Small States Exploring

the Multi[polar World of the 21st Century”

contrasted the earlier years in which Caricom’s

diplomatic objectives could be realised by

the smaller entities of the grouping, Africa-

Caribbean-Pacific (ACP), drawing on the

strength and greater diplomatic weight of larger

member states. However, today’s «diversity

and economic weight of developing countries

generally » has become « increasingly complex,

and therefore challenging ».

Lewis pointed to « a degree of regionalization

… a growing realignment and diversity among

the developing countries’ economies », as in

the formation of a Brazil, Russia, India, China,

South Africa (BRICS) entity.

Given such « reformulations of regional

groupings between the EU and former colonial

entities », Lewis suggested that « the bases

of negotiations will be more particular to the

specific regions and sub-regions, and an holistic

– that is, multi-regional or multi-continental

diplomacy more difficult to organize ». It was

obvious in the EPA negotiations with a « break-

away » CARIFORUM strategy.

For Lewis, CARICOM/CF needs to sustain

the interest of the increasingly substantial

developing states in the specific problems of

our negotiations with Europe, and pursue ways

for them to sustain the “collective diplomacy »

of old through the ACP relationship.

Acknowledging a likely « objective diversion

of interests within the ACP grouping » there is

need for « a further (new?) effort on our part

to identify issues in wider global relations with

the desired positive outcomes common to both

parties” through a diplomacy with « a global

perspective ».

Along with this orientation, the persistent

forming of, and participation in, coalitions with

like-minded states within the larger international

organizations can facilitate beneficial objectives

for small states like ours.


Moreover, the relations of Caricom/Cariforum

with « emerging states » and those of the Latin

American region are seen as benefitting from

« strengthening of the diplomatic cohesion

between the countries of the African continent

and those of the Cariforum».

In this dynamic context of regional realignments,

Lewis spoke of « inter-regional cooperation »

as “federal” in its operation, with identified

objectives of the separate regions, or in relation

to similarity of objectives, thereby arriving at

jointly agreed platforms of policy objectives

and strategies ».

Basically, the Consultation was in agreement

with the need for “a sustained multipolar

diplomacy – Cariforum-Africa-Latin America

-that can provide periodic diplomatic support

for us towards a European Union engaging and

creating trading and investment regimes that

can sustain their own global presence over

time. »

For this “multi-polar diplomacy”, « locations,

or regionally-organised presences, in specific

international institutions” and specific countries

in the African-Latin American spheres are

essential. This will enable Caricom/Cariforum

to leverage impact on our relationship with the

European Union and wider world. To translating

this “new” diplomatic thrust into action the

Consultation offered priorities among which

were the following.

Priorities for the ACP’s Agenda

1. A vibrant future for the ACP Group was

unanimously desired but urgent reforms and

re-energising the Group are essential. In this

process, political commitment and ownership is

a sine qua non as it has to be led and energized

at the political level. If the political will is not

provided unambiguously then the ACP will not

move forward. Caribbean leadership was at the

forefront of the ACP’s formation, buttressed by

the energy and growing momentum behind the

regional integration movement in the Caribbean

(CARIFTA/ CARICOM 1973). Strong Caribbean

unity at the time enabled the region to facilitate

and support ACP unity and solidarity.

2. ACP future perspectives should go beyond

relations with the EU. The ACP of the future will

have to be both a stronger and renewed inter-

governmental group based on deeper Intra-ACP

cooperation - which it may not have pursued

systematically or was unwilling to accomplish

since it’s establishment. The current situation

necessitates a focus in its relations within the

global community and with realigning regional

groupings.

3. The future ACP must be grounded

in clearly defined strategic areas including

trade, regional integration and development

cooperation. In terms of trade, the ACP, given its

historical ties and political relations, represents

the best opportunity for forging South-South

Cooperation through trade relations. The

ACP should explore incrementally on an inter-

regional basis (or on the basis of Intra-EPA

Groupings) steps towards an ACP-wide free

trade area built on deeper trans-regional

linkages.

4. The Caribbean needs both the ACP

and CELAC as regional groupings by which

CARIFORUM can play a positive role to link

Africa and the Pacific with Latin American

concerns especially on issues of « graduation

and differentiation » but CF should also review

its role and future in order to be impactful.

5. CARIFORUM could promote the following

areas and provide the necessary leadership

by deriving lessons from experiments such

as ALBA and PETROCARIBE, also in TRADE

by which Rules of Origin in the EPA alllow

cumulation for a manufacturing base to be

established for specific commodities. Similarly

FUNCTIONAL COOPERATION in health, research

and innovation and cultural cooperation would


be tangible areas for CF to contribute through

South-South Cooperation. Attention to YOUTH

ENTREPRENEURSHIP, NON-STATE ACTORS and

GENDER EQUALITY should be distinct priorities

for a future ACP.

6. CARICOM/ CF should consider (joint)

diplomatic presence in Africa. If possible, one in

a Francophone area and another located where

it could serve the Pacific Region.

In identifying such possibilities for a « re-

invented » ACP the meeting was mindful that

the Eminent Persons Group (EPG) in its Final

Report should distinguish between what is

« desirable » and what is « attainable »,

giving special attention to defining measures

for the financial sustainability of the ACP

Group.

The above remarks could not treat adequately

the extremely stimulating proposals from

the Consultation but unambiguously all

present wanted to see a dynamic Caribbean

engagement in the transformation of the

ACP Group.

Dr. P.I Gomes is

Guyana’s Ambassador to Brussels.

n n n n n n


2006 proved to be an important year for start-

ups. The launch of Twitter, Facebook open to

anyone over 13 and the realization of a lifelong

dream for two young Argentinians.

Tomás Pando and Francisco Murray may

not be household names like Zuckerberg or

Dorsey, but they are the face of the region’s

undeniable entrepreneurial spirit. Seven

years on, their modern-day reinvention of the

gauchos’ traditional footwear - alpargatas -

sold a quarter of a million pairs in 2012 and has

stores in 23 countries worldwide, from Angola

to Venezuela.

Yet, tales of innovation like that of Paez are

rare, according to a new World Bank flagship

report published today.

A massive 60% of Latin America employees

work for businesses with five or fewer

employees. Often considered to be a driver of

development, entrepreneurship creates jobs

and promotes economic growth. But while

Latin America: Entrepreneurs’ lack of innovation curbs creation of quality jobs

business creation is high in the region, the

resulting companies grow at a much slower

rate than similar enterprises in other middle-

income regions and companies.

“The landscape of the economy in Latin

America is such that firms tend to start small

and stay small,” explained De la Torre at the

report’s launch event. “There’s nothing bad

about being small, per se, but staying small

forever is a problem.”

And the reason behind this stunted growth:

a chronic shortage of innovation within the

region.

This should ring warning bells. Over the past ten

years, Latin America has benefited significantly

from favorable economic tailwinds, enabling

the region to reduce extreme poverty, increase

equality and boost 50 million people into the

middle class. However, as these tailwinds die,

growth has to come from within, and innovation

and dynamism are the key if the region is to

build upon the social gains of recent years.

Lack of innovation

Latin American firms develop new products

less frequently than their counterparts in

other developing regions. In fact, in Ecuador,

Jamaica, Mexico and Venezuela this rate of

product development is less than half than

that of Thailand or Macedonia. Consequently,

this lack of innovation harms competitivity

and slows growth and rebounds on quality job

creation - a significant development challenge,

especially in Central America.

http://www.worldbank.org/content/dam/Worldbank/document/LAC/LatinAmericanEntrepreneurs.pdf

http://www.worldbank.org/content/dam/Worldbank/document/LAC/LatinAmericanEntrepreneurs.pdf


Possible reasons are four-fold:

· Human capital: Science and

technology graduates and engineers

are at a premium in Latin America and

it’s a scarcity that has a direct effect

on innovation. In fact, Scup co-founder

Daniel Heise admitted he has been

trying to fill ten positions for around

a year, but with little success. Closely

related to the quality of education, the

report recognizes this will be a major

challenge for the region.

· Intellectual property: With separate

laws governing copyright in every

country, ensuring intellectual property

rights can be a significant bureaucratic

undertaking for the region’s

entrepreneurs. The complicated

panorama lends less protection to

the product creators, deterring much

needed investment for new product

research and development.

· Risk taking: No-one likes to fail, but

in Latin America a deep cultural shame

of failure is hindering innovation by

dissuading entrepreneurs from taking

risks. This is evident as much in

individual reticence at a business level

as in the low levels of investment in

research and development, especially

from the private sector.

· Logistics: Modernizing ports, transport,

and customs can add a competitive edge

to products from the region. Currently,

poor public services, communication

links and transport infrastructure are

adding to the obstacles to boosting

production capacity in the region.

Quality job creation

Launching the report in Miami, De la Torre

proposed that size isn’t always the best marker

for growth potential and quality job creation.

In fact, ‘multinational’ firms based in Latin

America far less dynamic than their offices

outside of Latin America and the region’s

‘multilatina’ companies are also suffering from

an innovation deficit.

Instead, it is more helpful to consider

businesses, whether they be small, medium

or large, in terms of their age. In all cases,

younger firms far outshone more established

ones in terms of job creation. The key,

therefore, is to identify early on which startups

have the most potential and the support their

growth through start up programs, subsidies,

business expansion support programs or policy

as necessary.

Entrepreneurs are key actors in turning

low productivity around to create quality

jobs and lasting economic benefit for the

region. Consequently the report recommends

establishing an economic environment which

enables them to innovate and compete, thereby

reducing the grip of monopolies, increasing

productivity and diversifying the business

environment.

The report concludes.

“It is about building an innovative entrepreneurial class in which top-notch firms—firms that export goods, services, and even capital—no longer look tepid in contrast to entrepreneurial superstars elsewhere.”

http://blogs.worldbank.org/latinamerica/do-central-american-universities-pass-muster

http://blogs.worldbank.org/latinamerica/do-central-american-universities-pass-muster


New York - Insecurity is a shared

challenge that obstructs social and

economic development in every country in

Latin America, says a new UN Development

Programme (UNDP) report launched here

today. But crime control measures alone

are insufficient; the most effective way to

reduce citizen insecurity is by improving

people’s lives, boosting inclusive economic

growth and enhancing security and justice

institutions, according to the Regional

Human Development Report (HDR) 2013-

2014.

The HDR “Citizen Security with a

Human Face: evidence and proposals for

Latin America” reveals a paradox: in the

past decade, the region experienced both

economic growth and increased crime

rates. Despite social improvements, Latin

America remains the most unequal and

most insecure region in the world. While

homicide rates reduced in other regions,

they increased in Latin America, which

recorded over 100,000 murders per year,

totaling more than a million from 2000-

2010. While homicide rates stabilized and

even declined in some parts of Latin America, it

is still high: in 11 of the 18 assessed countries

the rate is higher than 10 murders per 100,000

inhabitants, reaching epidemic levels. Moreover,

the perception of security has worsened, with

robberies hiking threefold in the last 25 years,

says the regional HDR.

“Citizen security is a sensitive issue which

preoccupies many political decision-makers

and reverberates in the heat of electoral

campaigns,” said UNDP Administrator Helen

Clark. “It is a crucial issue for several regions,

including Latin America and the Caribbean,

because without peace there can be no

development, and without development there

can be no lasting peace.”

“There is no magic solution to insecurity,

but this serious problem can be remediated—

with vision and long-term political will,” said

UN Assistant Secretary-General and UNDP

Director for Latin America and the Caribbean

Heraldo Muñoz. “Each country needs to secure

a National Citizen Security Agreement between

the government, political parties and civil

society so it truly becomes a state policy.”

Citizen insecurity thwarts Latin America’s development, says UNDPRegional Human Development Report recommends prevention, institutional reforms and long-term national agreement to tackle violence


The HDR focuses on six main overlapping

threats that negatively impact the region:

street crime; violence and crime committed by

and against the youth; gender-based violence;

corruption (the misappropriation of public

property, whose provision is the responsibility

of the state); violence committed by state

actors and organized crime.

“While some threats—such as organized

crime, especially drug trafficking—are often

used to explain insecurity, the regional, national

and local dynamics are much more diverse,”

explains the HDR coordinator Rafael Fernandez

de Castro.

One of the main lessons drawn from Latin

America is that the “iron fist” policies do not

work: strong police and criminal repression

in the region have often coincided with high

crime rates, the report says. The assessed

experiences confirm that protecting the rights

to life, to dignity and to physical integrity is

essential to citizen security, which, as a public

good, is a responsibility of the state, highlights

the regional HDR.

MAPPING INSECURITY - While poverty and

inequality decreased in most of Latin America

from 2004-2010, in more than half of the

assessed countries homicide rates rose, even

in countries with lower levels of poverty. In

addition, one in every three Latin Americans

reported being a victim of a violent crime in

2012, says report.

The region’s rising consumer expectations

and relative lack of social mobility drive

“aspirational crimes,” says the HDR. The

transformations sparked by rapid and

disorganized urban growth, as well as changes in

family structure and school system deficiencies

have also influenced crime in the region.

Moreover, firearms, substance abuse and drug

trafficking also drive violence, even though they

are not direct causes of crime, according to the

HDR which states that “the capacity of Latin

American states has not risen the challenge of

insecurity: corruption and impunity and lack of

proportionality in sanctions have undermined

its effectiveness and legitimacy.”

UNDP-conducted surveys in prisons in

Argentina, Brazil, Chile, El Salvador, Mexico and

Peru highlight persistent social challenges. One

in every three inmates left home before age

15 (in Chile, one in every two), and between

13 percent (Argentina) and 27 percent (El

Salvador) never met their father or mother. The

survey also revealed that 40 percent of inmates

in Chile did not finish primary education. In all

assessed countries, more than 80 percent of

inmates did not complete 12 years of schooling.

The report also reveals a direct correlation

between urban growth and crime: most

countries with an urban population growth

above 2 percent per year (the natural

population growth) also reported increases in

homicide rates, with the exception of Colombia

and Paraguay. “The problem is not the size

of the city, but the institutional capacity to

include groups in marginal conditions,” says

the regional HDR.

Young Latin-Americans, especially males, are

the most affected by crime and violence and yet

are the most common perpetrators, according

to the report. El Salvador (92.3) , Colombia

(73.4) , Venezuela (64.2) , Guatemala (55.4)

and Brazil (51.6) have the five highest youth

homicide rates in the world (per 100,000

inhabitants), according to 2011 World Health

Organization data .

The HDR highlights gender violence as a

persistent threat and an obstacle to human

development, public health and human rights in

the region. Records of domestic violence, rape

and female murders (femicide) have increased

in almost all assessed countries. Among the

UNDP-surveyed inmates who had committed

sexual offenses, between 75 percent and 90

percent reported knowing their victims before

the crime and between 20 percent and 40

percent were family members.

PERCEPTION OF INSECURITY - In all

assessed countries the perception of insecurity

is greater than the direct victimization, says the

report. Five out of 10 Latin Americans perceive

that security in their country has deteriorated.

But in Honduras, for example, which has

the highest murder rate in the world (86.5 per

100,000), eight out of 10 citizens feel safe in

their neighborhoods—in line with the regional

average. In contrast, in Chile—which has

the lowest murder rates in the region (2 per

100,000) and low levels of victimization for

theft—the perception of safety is worse than in

Honduras: seven out of 10 citizens feel secure

in their neighborhood.

COSTS OF INSECURITY - Insecurity impacts

individuals, societies and democratic institutions.

It also affects the region’s economic potential:

without the excess mortality due to homicides

the region’s Gross Domestic Product (GDP)

would have been 0.5 percent higher, equivalent

to a potential gain of more than US$24 billion in

2009. In addition, Latin America lost 331 million

years of life in 2009, considering the loss in life

expectancy and the region’s population, based

on the homicide rates for 15 countries.

Honduras incurs the highest costs of crime

and violence as a percentage of their 2010

GDP (10.54 percent, equivalent to $1,7

billion), followed by Paraguay (8.7 percent,

or $1,7 billion), Chile (3.32 percent, or $7.2

billion) Uruguay (3 percent, around $1.2

billion) and Costa Rica (2.52 percent, or

$915 million), according to a UNDP-Inter-

American Development Bank (IDB) study for

the report, which analyzed the costs of crime

and victimization levels in those five countries.

Public expenditure as a result of crime (police

officers, judges, prison system, among others)

is higher in all countries except Uruguay, where

the costs incurred before crimes are committed

(such as security, insurance, prevention) is

higher.

STATE RESPONSE - Reforming basic justice

and security institutions—police, judges,

public prosecutors and prisons—is essential

to respond to citizen insecurity, says the HDR,

which emphasizes the need to restructure the

hiring, management and professionalization

of staff. The report analyzed the proportion

of police and judges in different countries and

conducted surveys that revealed very low levels



of public confidence in the criminal justice

systems. Except Nicaragua and Panama, more

than half of Latin Americans expressed little or

no confidence in their courts’ response in case

they were victims of theft or assault.

The UNDP report states that the prison system

is in crisis in almost all countries in the region.

Some factors such as institutional weakness of

the police and courts, overpopulation and abuse

of preventive detention are key challenges. In

addition, the rehabilitative function of prison

systems has not been prioritized in the region,

according to the report, turning them into

“spaces that promote violence, human rights

abuse, criminal networks and recidivism.”

Also, the perception of Latin American citizens

of incarceration as a solution to the security

problems has hindered the attempts to reduce

the prison population, boost alternative

measures and encourage social reintegration,

stresses the HDR.

BEYOND THE STATE - The report highlights

the importance of “non-state actors’“

response, including civil society organizations

and international cooperation. However, it

emphasizes that due to the growing sense of

insecurity, the expansion of the middle classes

and the “thinning” of the state, private security

guards are increasingly being hired in Latin

America at an average annual growth rate of 10

percent. The region now has almost 50 percent

more private security guards (3,811,302) than

police officers (2,616,753) and Latin American

private security agents are the most armed

in the world, with rates of gun possession per

employee ten times larger than Europe. This

phenomenon further increases inequality, as

social groups have different capacities to deal

with crime, says the HDR.

RECOMMENDATIONS – The report emphasizes

that efforts to improve citizen security must take

into account the specific needs and demands of

women and young Latin Americans, highlighting

10 political recommendations based on lessons

learned from the region: 1. Align national

efforts to reduce crime and violence, including

through a Citizen Security National Agreement

as a state policy; 2. Generate public policies

to protect those most affected by violence and

crime; 3. Prevent crime and violence through

inclusive growth; 4. Decrease impunity by

strengthening security and justice institutions

while respecting human rights, 5. Promote

the active participation of society, especially

local communities in the construction of citizen

security 6. Increase human development

opportunities for young people 7. Tackle and

prevent gender-based violence in the domestic/

private and in public spheres; 8, Safeguard

victims’ rights; 9. Regulate and reduce “crime

triggers”, such as alcohol, drugs, arms and

weapons through a comprehensive public

health perspective 10. Strengthen international

cooperation coordination and evaluation

mechanisms.

The regional HDR assesses citizen insecurity in

18 countries: Argentina, Bolivia, Brazil, Chile,

Colombia, Costa Rica, Ecuador, El Salvador,

Guatemala, Honduras, Mexico, Nicaragua,

Panama, Paraguay, Peru, Dominican Republic,

Uruguay and Venezuela.


More than 70 countries, private companies,

international organizations, trade associations,

academic institutions, and non-governmental

groups are meeting in Singapore at the Global

Food Safety Partnership (GFSP) 2nd Annual

Conference to evaluate its first-

year achievements and discuss

future plans to scale up and shape

the world’s response to food safety

challenges.

There is an ongoing world food

safety problem that threatens

every economy and food company,

challenging governmental

regulatory authorities, sickening

millions of people each year,

introducing barriers to trade, and hurting

corporate bottom lines. As a result, the

international community faces the critical

task of strengthening food safety capacity in

developing and middle income countries in order

to safeguard public health, while promoting

food security and economic development.

“Safe food should not be a luxury for so

many at our global table,” said Juergen Voegele,

World Bank Director for Agriculture and

Environmental Services. “Everyone involved

in the global food chain has an obligation to

ensure food safety. At the same time, meeting

international or industry standards creates both

challenges and opportunities for poor farmers

and agri-businesses competing in these growing

markets. Our partners recognize that no single

organization acting alone can have the impact

we all want. By building the understanding,

knowledge, and motivation to fully address food

safety risks, this unique partnership can help to

decrease food-borne hazards, reduce poverty,

and improve food security.”

Uniquely, the GFSP actions are

supported by a World Bank multi-

donor trust fund that can accept

funding from both public and

private contributors. The GFSP’s

mission is to create a new paradigm

of public-private collaboration for

food safety capacity building. It

aims to reduce risks to consumers

and businesses and increase the

benefits to both public health and the economy

by strengthening food safety protections and

supporting effective and efficient global supply

chains.

The GFSP builds on APEC’s Food Safety

Cooperation Forum, which was established to

address the twin challenges of facilitating trade

of food and food products and improving public

health within the region, and that has already

improved the availability, accessibility, and use

of food safety best practices and protocols.

“We live in a world where confidence is a

key pillar of the global food system -- and

consumer expectations for food safety are

high,” said Mary Lou Valdez the U.S. Food and

Drug Administration’s associate commissioner

for international programs.

Global Partnership to Tackle Food Safety



“The FDA is pleased to participate in the

Partnership, which we firmly believe can create

an effective space where all parties in the global

supply chain can work together to help ensure

that food products are safe for consumption.”

Since its launch in December 2012, the

GFSP has attracted significant contributions

from the governments of Canada, Denmark,

the Netherlands and the United States, private

companies such as Mars Incorporated and

Waters Corporation; and the World Bank.

“We are off to a great start, and the time is

right to pool our resources toward this essential

global public good,” said Frederik Vossenaar of

the Netherlands. “As a founding donor, we can

be part of a unique public-private partnership

between important government and private

sector leaders. Through this, we have been

able to demonstrate our commitment to the

world’s response to food safety challenges

including addressing trade issues, protecting

public health and enhancing food security” said

Mr. Vossenaar.

Financial contributions to the GFSP have

funded a range of innovative capacity building

activities, including training modules addressing

Hazard Analysis and Critical Control Points

(HACCP) at food processing industries in China,

Vietnam and Malaysia, and Good Aquaculture

Practices (GAqP) in Indonesia. Other activities

underway include development of training

modules for chemical risk assessment,

laboratory capacity, and regulatory systems,

and a capacity building needs assessment

toolkit that is being piloted in Zambia. All

training materials will be made widely available

through an open source knowledge and learning

platform that will allow for the scaling up of

food safety capacity around the world.

The GFSP has also built an active network

of some 30 contributing and implementing

partners, including governments, private

companies, international organizations, trade

associations, academic institutions, and non-

governmental groups.

“This truly is a new way of working,” said

Dr. Leon Bruner, Chief Scientist and Vice

President at the Grocery Manufacturers

Association.“Safety is the number one priority

for our industry. When it comes to developing

and manufacturing safe products, our industry

knows what works. To truly have a prevention

based food safety system, we need a paradigm

of collaboration whereby suppliers wishing to be

a part of global supply chains have the capacity

to provide food that meets the expectations of

global customers.” said Dr. Bruner.

“Food safety and food security are major

priorities for governments and food companies

in Asia - for both the protection of consumers

and to advance trade in our region,” said

Dr. Bev Postma, Executive Director of Food

Industry Asia (FIA).“The vast majority of food

in Asia is produced by small and medium sized

family businesses, and the Global Food Safety

Partnership is the ideal platform to support

training and capacity building for manufacturers,

suppliers and farmers, and for supporting the

public sector that supervises and regulates the

global and domestic food industry. We are very

honored to be part of this unique public-private

partnership.”



always on top of issues

Communications . Public Relations . Publications Development

International prices of food continued to decline between June and October 2013, but remain high. The World Bank’s Food Price Index decreased by 6% between June and October 2013. Despite steady declines in the past few quarters, prices remain high: the Bank’s Food Price Index was only 12% lower than a year ago and 16% below the all-time peak in August 2012.

The overall decline is mainly driven by the prices of grains, which were 19% lower in October than in June. However, within the prices of grains, there is some variation. The price of internationally traded maize fell by 32%, with sustained drops in each of the last three months. Prices of rice (Thai 5%) also fell markedly—but less—between June and October, by 16%.

In contrast, the international price of wheat increased during this period. The increase

Food Price Watch, November 2013: Prices Decline but Remain High as Weather Concerns Increase

On December 6th, 2013, Steve Maximay joined a very select group of international Consultants who can claim they developed a National Intellectual Property Strategy that meets the World Intellectual Property Organisation standards. Maximay was also member of a Cabinet-appointed team that wrote the IP Policy in Trinidad and Tobago a decade earlier.

Steve Maximay is the Managing Director at Science-Based Initiatives. As a Consultant, he has worked in all 15 CARICOM States primarily in the areas of Food, Agriculture, Tourism, Environment, and Intellectual Property. He was a member of the Technical Committee that wrote the region’s first “Risk Management Manual for Climate Change in the Caribbean” and was the agriculture representative on the “Caribbean Planning for Adaptation to Climate Change” project.

MOVING UP!Over the last decade he has been actively involved in the transitioning of businesses to carbon footprint reduction mode.

between June and October was 4%, with a sharp increase of 6% in October alone. Despite an increase of 6% in the Bank’s average price of crude oil during this period, fertilizer prices have not increased.

Weather has played a role, alongside improved production prospects, in sustained price declines. Favorable outlooks for the supply of cereals predict record harvests for wheat, maize, and rice.

However, deteriorating weather conditions and other uncertainties might further affect price trends. Bad weather in South America, Black Sea countries, China and India particularly warrants concern.

This issue of the Food Price Watch also explores the role that extra-large scale farming, popularly known as “super farms” may play in boosting agricultural productivity and poverty reduction.

Steve Maximay (left) shakes hands with Minister of Legal Affairs, Mr. Prakash Ramadhar. Also in the photo are Controller of the IP Office, Ms. Mazina Kadir (left) and Permanent Secretary in the Ministry of

Legal Affairs, Mr. Bernard Sylvester.

#268 Harold Fraser Circular, Valsayn, Trinidad and TobagoTel: (868) 645-0368 . Email: [email protected]; [email protected]

always on top of issues

Communications . Public Relations . Publications Development


Good afternoon! I am so pleased to be here

with you today, where I spent very happy years

earning my DPhil in economics. This is a magical

place, full of beauty and clever people. My only

regret is that I left too soon.

Fortunately, my good friends Ngaire Woods

and Max Watson have invited me to return to

give the Annual Global Economic Governance

Lecture. Let me outline the main points I plan

to make today.

Making the case for smart governance

Global economic crises tend to reignite

discussions of global governance and

international cooperation. The recent crisis has

been no different. This is because crises lay

bare the shortcomings of existing international

rules and institutions.

We have seen how weaknesses and failures

in banks and capital markets can spread

through the international financial system.

The same is true for other challenges faced by

the world today, whether we are talking about

climate change, nuclear weapons proliferation,

or health pandemics. What happens anywhere

affects everybody—and increasingly so.

So it is pretty clear that the world needs

more, not less, international coordination and

Smart Governance: Solutions for Today’s Global Economy

By Nemat Shafik Deputy Managing Director, International Monetary Fund Oxford, United Kingdom, December 5, 2013

Aspreparedfordelivery

cooperation. But how to achieve this goal? In

a recent article, the FT’s Martin Wolf discussed

the importance of global public goods and how

to provide them. “The states on which humanity

depends to provide these goods, from security

to management of climate, are unpopular,

overstretched and at odds. We need to think

about how to manage such a world. It is going

to take extraordinary creativity.”

Martin is right. We need to be creative if

we want to make progress. We need smart

governance if we want solutions that work for

today’s global economy.

I would like to focus today on three related

topics. First, I will briefly touch upon the

historical relationship between crises on the

one hand, and governance reforms and policy

coordination on the other hand. Second, I will

discuss the response in terms of governance

reforms and policy coordination that we have

seen in the aftermath of the financial crisis of

2008. Finally, I will close my talk by sharing with

you some reflections on how global economic

governance might evolve going forward—how

“smart governance” may provide the right

balance between flexibility and effectiveness

that the world needs to manage globalization.



A world in transition

The global economy is in transition. Global

economic power is shifting from west, to east

and south. Emerging and developing economies

already make up more than 50 percent of global

GDP (on a PPP basis)—ten years from now this

number is expected to increase to 64 percent.

At the same time, trade and financial linkages

have risen spectacularly. Cross-border bank

claims grew from $6 to over $30 trillion between

1990 and 2008, and global merchandise exports

of goods and services increased from $4 trillion

to $20 trillion. While these numbers contracted

somewhat in subsequent years due to the

global crisis, the growth rates for the past 20 or

30 years are still impressive.

On the production side, global supply

chains have become the norm rather than the

exception. A typical manufacturing company

today relies on inputs from more than 35

different contractors from around the world—

for some companies, such as car and airplane

manufacturers, this number can range in the

tens of thousands.

With the sharp increase in interconnectedness

and the growing diffusion of economic power,

it would have been reasonable to expect a

simultaneous transformation and expansion of

global governance. In theory, demand for global

governance should have increased with rising

levels of global integration in order to manage

the rules of the game and reduce negative

spillover effects.

But as we all know, global governance issues

were on the backburner in the run-up to the

financial crisis. Indeed, against the background

of high growth and low output volatility—what

has been called “the Great Moderation”—

observers even wondered whether global

governance was a concept of the past, and

institutions such as the IMF, World Bank and

WTO superfluous.

Only in 2008, when a disruption in a relatively

small segment of the U.S. financial system

spilled into distant markets and countries, and

morphed into a full-fledged global financial

crisis, it became clear that there had been an

undersupply of global governance in the years

leading up to the crisis.

Crises as opportunity

Five years after the onslaught of the global

financial crisis, economic governance remains

at the center of the policy debate. I would argue

that this is no surprise, given that, historically,

there has been a symbiotic relationship between

crises and the evolution of governance.

Granted, governance is often seen as evolving

slowly and in an incremental manner and at

a stately pace, while crises are intrinsically

disruptive and revolutionary. However, as

history has repeatedly shown, crisis often bring

out the shortcomings of existing governance

arrangements, while the fear of recurrence can

galvanize support for reform.

For instance, in the wake of World War

I, the League of Nations was created to

promote international cooperation and

achieve international peace and security, while

experiences of hyperinflation in the 1920s

motivated efforts to restore the gold standard.

Similarly, the Great Depression and World War

II triggered much of our current architecture

of global governance, with the creation of

the United Nations, IMF, World Bank, and the

General Agreement on Tariffs and Trade, now

the World Trade Organization.



The traumatic experience of World War II also

provided impetus for political and economic

integration in Europe.

In the United States, the financial crisis of

1907 paved the way for the creation of the

Federal Reserve, while the bitter experience of

the Great Depression led to a major overhaul

of financial regulation, with the passage of the

Glass-Steagall Act in 1933, which separated

commercial and investment banking, and

remained in place for more than sixty years.

More recently, the regional currency swap

arrangements among ASEAN members known

as Chiang Mai Initiative were created in the

aftermath of the Asian crisis.

As with similar situations in the past, the

global financial crisis of 2008 imposed large

costs and hardship on affected countries.

However, from a perspective of economic

governance, it has also provided a window of

opportunity to advance reforms and strengthen

policy coordination. Did we manage to not let

a good crisis go to waste? (a quote associated

with Rahm Emanuel, President Obama’s former

Chief of Staff, but like all great quotes was

said by Churchill first). Let me provide a brief

overview of what we have achieved in the

past five years before looking at the gaps that

remain.

A mixed score card

The efforts in governance reform since the crisis

can be broadly split into three categories—

coordinating macroeconomic policies, fixing

global financial regulation, and strengthening

regional and global safety nets.

First, macroeconomic policy

coordination. Although not perfect, such

coordination was particularly strong at the

initial stage of the crisis. For instance, six major

central banks announced, in an unprecedented

move, a coordinated cut in policy rates in October

2008 to ease global economic conditions. The

U.S Federal Reserve and 14 different monetary

authorities established temporary U.S. currency

swap arrangements to mitigate dollar shortages

in short-term funding markets. And the first

ever G20 Leaders’ Summit was convened in

November 2008 and led to a commitment to

coordinated fiscal stimulus and a pledge to

refrain from protectionism.


These massive efforts meant that, instead of

another Great Depression, we got the Great

Recession, which actually is a significant

achievement, given the possible counterfactuals.

However, more recently, the momentum for

policy coordination has slowed, as the focus has

shifted from preventing a calamity to avoiding

future crises and supporting the nascent

recovery. Some have argued that while the G20

was good in war, it might not be able to deliver

as much in peace time.

And the task is far from over.

One challenge faced by the international

community going forward will be to continue

the dialogue on unwinding unconventional

monetary policies and managing potential

spillover effects as well as managing our way

out of the debt burdens accumulated during the

crisis.


Second,globalfinancialregulation. To address

the origins of the crisis, G20 members committed

to a fundamental overhaul of global financial

regulation, with the intention of promoting a

more transparent, safe, and resilient global

financial system.

Most notably, the Financial Stability Board

(FSB) was created in 2009 with a mandate

to develop and promote effective financial

regulation. Significant progress has been

made in terms of strengthening system-wide

oversight, increasing capital and liquidity

buffers, promoting the exchange of financial

information, and implementing macroprudential

policy frameworks. Efforts are also underway to

facilitate cross-border resolution.

Yet major challenges remain, such as ending

the too-big-to-fail problem, reforming shadow

banking, and making derivatives markets safer.

In the euro area, recent policy actions have

helped ease market stress, but more still needs

to be done to reverse financial fragmentation

and move towards a full banking union.

Mechanism (ESM) and the ECB’s Outright

Monetary Transactions (OMT) framework.

In other parts of the world, commitments to

regional financing arrangements, such as the

Chang Mai Initiative and the Eurasian Economic

Community Anti-crisis Fund, were reinforced.

However, progress has been uneven in other

areas. For example, in the case of the IMF,

the agreement reached in 2010 on important

quota and governance reforms that would

further increase the voice and representation of

emerging market and developing economies has

not yet been implemented. While two of three

required conditions have been fulfilled, further

support is needed to meet the final condition

that will allow the reform to take effect.

If we put all this together, the report card

on global governance reform since the crisis

is somewhat mixed. Policymakers across the

globe need to keep the momentum alive and

seize the opportunity to advance governance

reform while memories of the crisis and the

sense of urgency remain fresh. Indeed, there

is a real danger that the window of opportunity

for addressing some of the most challenging

global issues might soon be closing. How can

this trend be reversed and important reforms

finalized? To answer this question, it is helpful

to look at the different types of solutions that

have evolved as means to deliver global public

goods.

Soft versus hard policy coordination

In what direction is the global system of

economic governance and policy coordination

evolving? To answer this question, I find it

instructive to differentiate between “hard” and

“soft” governance and policy coordination.


Third,strengtheningregionalandglobalsafety

nets. To mitigate the impact of the crisis,

countries came together to strengthen the

global financial safety net, including by trebling

the size of the IMF’s resources and increasing

the allocation of SDRs. In Europe, the financial

architecture of the euro area was enhanced

through the creation of the European Stability

30 DECEMBER 2013 | BUSINESS JOURNAL30 DECEMBER 2013 | BUSINESS JOURNAL

“Hard” policy coordination is typified by quid

pro quos in policies with a focus on specific and

tangible outcomes. Examples include the two

initial G20 Leaders’ Summits that took place

in the immediate aftermath of the crisis, and

resulted in the coordinated fiscal policy response

I mentioned earlier and the creation of the FSB.

In contrast, “softer” forms of coordination are

more process-based without apriori expectation

of substantial outcomes or agreements. They

are designed to facilitate the exchange of

views and information sharing on an ongoing

basis, such as the regular discussions among

central bankers at the Bank for International

Settlements (BIS).

Soft and hard policy coordination can

complement each other. For instance, soft

arrangements can keep the policy dialogue alive

during quiet times, and provide a framework

for harder cooperation, and even full-fledged

policy coordination, during crises.

Soft versus hard governance

A parallel argument can be made for

governance. “Hard” governance arrangements

require the establishment of legal obligations

and independent institutions through treaties.

The UN, IMF, World Bank and the WTO typify

such arrangements.

On the positive side, this kind of hard, treaty-

based architecture strengthens the credibility

of member countries’ commitments and grants

legal enforcement powers to institutions.

However, their establishment and adaptation to

changing circumstances tends to be a relatively

slow-moving process, which can be a problem

when the global environment or the needs of

members change.

“Soft” governance arrangements, such as the

G20 and BRIC country groupings, the FSB, or

the Financial Action Task Force (FATF) have no

international legal personality or obligations. As

a result, they tend to be more flexible and can

often be put in place more quickly. They do not,

however, have treaty-based mandates or legal

enforcement powers. As a result, they have a

more limited ability to enforce commitments,

which can pose challenges for their relevance

and effectiveness over time.

Finally, there are, of course, also private

sector solutions to governance challenges. One

example are Collective Action Clauses (CACs)

which allow a supermajority of bondholders

to agree to changes in bond payments terms,

with the intention of facilitating smoother debt

restructuring. Another example is IFRS, an

independent nonprofit foundation that promotes

the harmonization of global accounting

standards.

A mosaic of solutions

In sum, the global economic governance

structure of the future may well be a mosaic—or

ecosystem—of “hard” and “soft” elements that

operate in a complementary fashion. In such

a system, governance arrangements would

essentially be issues- and context-driven, with

choices between hard and soft governance

arrangements depending on what is the most

efficient and practical solution to regulate and

oversee a specific matter at hand. Making such

a system “smart” depends crucially on using

hard or soft governance at the right time and for

the right issues.Let’s consider three examples

of how hard and soft governance have been

combined:

DECEMBER 2013 | BUSINESS JOURNAL 31DECEMBER 2013 | BUSINESS JOURNAL 31

· First, take trade. We all prefer multilateral

trade agreements over regional ones. Since the

gains from trade are well recognized, the WTO

dispute resolution process has real “teeth” with

an ability to impose sanctions on those who

violate global trade rules. Increasingly mega-

regional agreements (like US-EU or TPP) are

less about tariffs but about standards and non-

tariff barriers. To the extent that they help set

global norms that facilitate trade, they bring us

closer to more global solutions and potentially

reinforce (and in the future possibly become

integrated with) the WTO framework.

· Second, consider the balance between

hard and soft governance in the euro area

crisis. Arguably the hard governance came from

the IMF and the ECB and soft governance from

the Eurogroup. Europe’s complex governance

arrangements worked well in peace time, but

decision making processes were not well suited

to managing crisis.

· Finally consider the areas of financial

regulation. As part of its mandatory Financial

Sector Assessment Program (FSAP), the IMF

conducts financial stability assessments every

5 years of jurisdictions that have systemically

important financial sectors. Mandatory FSAPs

are a good example of hard surveillance where

countries are assessed against compliance with

clear global standards and stress tested against

national and international spillovers. Every two

years after an FSAP, the FSB does a peer review

(a sort of soft governance) of follow up on FSAP

recommendations as a complementary way to

advance key reforms for financial stability.

However, a flexible and efficient global

governance structure may not emerge

automatically. For example, when “hard” global

institutions, such as the IMF, the World Bank,

and the WTO adapt too slowly to changes

in their environment, governance gaps will

open up. “Softer” institutions may step in to

fill these gaps, but as substitutes rather than

playing a complementary role. This would not

be efficient and could leave us with a weaker

global governance system.

The case for IMF governance reform

This brings me to a final point. In the evolving

ecosystem of global governance and policy

coordination that I described, it is essential

for the elements of “hard” governance to stay

relevant by adapting to changes in the world

economy.

Over the years, the IMF has demonstrated

a remarkable ability to adjust its work and

operations in response to major changes in the

global economy, including the fall of the fixed

exchange rate system in the early 1970s, the

debt crisis of the 1980s, and the collapse of the

Soviet Union in 1991.

The key reason why the IMF has remained

relevant has been a political governance

structure that, albeit slowly, does adapt to

changes in the world economy. It also has an

independent staff, and a constitution (in the

form of our Articles of Agreement) that allows

the Fund to adopt a longer-term perspective.


Moreover, the IMF has, in some aspects, also

managed to internally integrate hard elements

of governance such as mandatory surveillance,

with softer elements, such as voluntary

Reports on the Observance of Standards and

Codes or facilitation of standards for sovereign

wealth funds. On the “softer” side, the Fund’s

consensus-based decision-making has been

effective at ensuring that member countries’

points of view are being heard.

Going forward, it will be crucial for the IMF’s

effectiveness and legitimacy to ensure that

its governance structure reflects the relative

position of its member countries in the global

economy. Approval of the 2010 reforms would

be an important step in this direction, although

further shifts in quota and voting shares to

dynamic economies will also be needed.

To achieve this, some countries will have to

accept relative declines in their quota and voting

shares. Understandably, for them this will not

be an easy decision, but in return they will help

ensure that the Fund can continue to remain

strong and legitimate for the benefit of the

entire membership—and the global economy.

Conclusion

While significant efforts to improve global

economic governance were made in the initial

phase of the crisis, the momentum of reform

and policy coordination has slowed recently.

Indeed, while the current system is able

to deliver governance and policy coordination

when there is a lot to lose—such as in a crisis,

it is much less effective in galvanizing action

when there is potential for mutual gain—such

as global economic rebalancing.

One possible explanation is that the global

community tends to rally in a time of crisis

when the time horizon is short and immediate

costs are high. However, in normal times,

gathering momentum for action today may be

hard because the cost of inaction lies far in the

future.

Some observers point toward plurilateralism

and the rise of soft global governance as a

threat to the traditional pillars of hard global

governance, including the IMF. I am much

less pessimistic. I see these two forms of

governance as potential complements rather

than imperfect substitutes. Soft governance

works when innovation is needed but there is

time to act, when getting a subset of countries

to act is sufficient and ad hoc implementation

can work. Hard governance is needed in a crisis

or when global approaches are needed and

when consistent enforcement is key.

So, coming back full circle to Martin Wolf’s call

for extraordinary creativity in seeking solutions

to the multitude of challenges faced by the

world today, I believe we can tackle the issues

by being smart about the governance we need,

and by making the most of political opportunity

when it presents itself. By integrating “soft” and

“hard” governance more intelligently, better

outcomes can be achieved for everyone, small

and large countries alike.



Technology and high prices are opening up new oil resources, but this does not mean the world is on the verge of an era of oil abundance, according to the International Energy Agency’s (IEA) 2013 edition of the World Energy Outlook (WEO-2013). Although rising oil output from North America and Brazil reduces the role of OPEC countries in quenching the world’s thirst for oil over the next decade, the Middle East – the only large source of low-cost oil – takes back its role as a key source of oil supply growth from the mid-2020s.

The annual report, released today in London, presents a central scenario in which global energy demand rises by one-third in the period to 2035. The shift in global energy demand to Asia gathers speed, but China moves towards a back seat in the 2020s as India and countries in Southeast Asia take the lead in driving consumption higher. The Middle East also moves to centre stage as an energy consumer, becoming the world’s second-largest gas consumer by 2020 and third-largest oil consumer by 2030, redefining its role in global energy markets. Brazil, a special focus in WEO-2013, maintains one of the least carbon-intensive energy sectors in the world, despite experiencing an 80% increase in energy use to 2035 and moving into the top ranks of global oil producers. Energy demand in OECD countries barely rises and by 2035 is

less than half that of non-OECD countries. Low-carbon energy sources meet around 40% of the growth in global energy demand. In some regions, rapid expansion of wind and solar PV raises fundamental questions about the design of power markets and their ability to ensure adequate investment and long-term reliability.

“Major changes are emerging in the energy world in response to shifts in economic growth, efforts at decarbonisation and technological breakthroughs,” said IEA Executive Director Maria van der Hoeven. “We have the tools to deal with such profound market change. Those that anticipate global energy developments successfully can derive an advantage, while those that do not risk taking poor policy and investment decisions.”

The availability and affordability of energy is a critical element of economic well-being and, in many countries, also of industrial competitiveness.

Light tight oil does not diminish the importance of Middle East supply, IEA says in latest World Energy Outlook

Report sees large disparities in regional energy prices affecting industrial competitiveness

http://www.iea.org/

http://www.worldenergyoutlook.org/

http://www.worldenergyoutlook.org/

Natural gas in the United States currently trades at one-third of import prices to Europe and one-fifth of those to Japan. Average Japanese or European industrial consumers pay more than twice as much for electricity as their counterparts in the United States, and even China’s industry pays almost double the US level. InWEO-2013, large variations in energy prices persist through to 2035, affecting company strategies and investment decisions in energy-intensive industries. The United States sees its share of global exports of energy-intensive goods slightly increase to 2035, providing the clearest indication of the link between relatively low energy prices and the industrial outlook. By contrast, the European Union and Japan see their share of global exports decline – a combined loss of around one-third of their current share.

“Lower energy prices in the United States mean that it is well-placed to reap an economic advantage, while higher costs for energy-intensive industries in Europe and Japan are set to be a heavy burden,” said Fatih Birol, IEA Chief Economist.

Among the options open to policy makers to mitigate the impact of high energy prices, WEO2013highlights the importance of energy efficiency: two-thirds of the economic potential for energy efficiency is set to remain untapped in 2035 unless market barriers can be overcome. One such barrier is the pervasive nature of fossil-fuel subsidies, which incentivise wasteful consumption at a cost of $544 billion in 2012. Accelerated movement towards a global gas market could also reduce price differentials between regions. Gas market and

pricing reforms in the Asia-Pacific region and LNG exports from North America can spur a loosening of the current contractual rigidity of internationally traded gas and its indexation to high oil prices.

Action to reduce the impact of high energy prices does not mean diminishing efforts to address climate change. Energy-related carbon-dioxide emissions are projected to rise by 20% to 2035, leaving the world on track for a long-term average temperature increase of 3.6 °C, far above the internationally-agreed 2 °C climate target. The report emphasises the importance of carefully designed subsidies to renewables, which totalled $101 billion in 2012 and expand to $220 billion in 2035 to support the anticipated level of deployment.

An in-depth focus on oil in WEO-2013 looks at how technology is opening up new types of resources, such as light tight oil and ultra-deepwater fields, that were until recently considered too difficult or expensive to access. Despite new resources being unlocked, national oil companies and their host governments still control 80% of the world’s proven-plus-probable oil reserves. The pace of oil demand growth slows steadily, from an average of 1 mb/d per year to 2020 to just 400 kb/d thereafter, as high prices encourage efficiency and fuel switching, and the decline in OECD oil use accelerates. T

he shift in the balance of oil consumption towards Asia and the Middle East is accompanied by a continued build-up of refining capacity in these regions. However, in many OECD countries, declining demand intensifies pressure on the refining industry: in the period to 2035, nearly 10 mb/d of global refinery capacity is at risk of low utilisation rates or closure, with Europe particularly vulnerable.

Merry Christmas from

Business Journal


Merry Christmas from

Business Journal

Hyperlinked PDF sent to your inbox

Read Interact ShareKnow

NewsArticles

AnalysisPerspectives

Business Journal RISK Model:

Become part of our BJ network today!

Contact: [email protected]

bizjournalonline.com

twitter.com/bizjournalmag

Business Journal

Documents

caribbean economies

eastern caribbean countries

caribbean seeking help

caribbean pr agency

economies of latin america

economic recovery

economic potential

performance of economies