Archive for category: Economy

Information and stories about economy.

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9 Facts About the Informal Economy in Latin America

9 Facts About the Informal Economy in Latin America
The informal economy is a fluid area of work that people may drift in and out of. Certain companies may live in both the formal and informal job sector as well. The International Labor Organization (ILO) distinguishes between the informal sector and informal employment, stating that the former is an “enterprise-based concept and is defined by the characteristics of the enterprise in which workers are engaged” while the latter occurs on a case-by-case basis regarding the employee’s relationship to the enterprise. For example, some companies operate within the formal sector but hire certain employees “informally.”  In other words, one can define the informal economy as “firms and workers that stand outside a country’s tax and regulatory systems.”

It is important to note that the informal economy is not synonymous with the black market or the underground economy. Additionally, the informal market is not necessarily illegal. However, many countries do not mandate the social benefits and protections included in the formal economy. Informal work can include a variety of jobs including street vendors, subsistence farmers, seasonal workers, industrial workers and others. Given this characterization, below are nine facts about the informal economy in Latin America.

9 Facts About the Informal Economy in Latin America

  1. A total of 140 million people work in occupations involving social vulnerability, limited rights and precarious conditions. According to the ILO, this number translates to roughly 50 percent of total employment in the region. It is a little less than the global average but more than double for the developed region.
  2. The percent of informally employed workers varies greatly across the region. Costa Rica had the lowest rate of informally employed workers as of 2013 at 30.7 percent. In addition, Guatemala had the highest at 73.6 percent.
  3. An International Monetary Fund study found four main contributing factors to the expansive informal economy in Latin America. Some of these factors include the heavy tax burden on corporations and individuals as well as minimum wage constraints. Another factor is the importance of agriculture because informal employment is much higher in the agricultural sector.
  4. Although there are poor and non-poor alike across the informal and formal sectors, empirical research has displayed that those working in the informal economy may be at a higher risk of poverty than those employed in the formal economy. The exact relationship between the informal economy and poverty is difficult to determine. This is due to a variety of circumstances that can affect poor households. For instance, the income an individual brings home may not technically be below the poverty line, however, it may not be sufficient to support five people. Regardless, informal employment is often unstable due to inconsistent wage earnings and a lack of social protection.
  5. The informal economy affects youth in Latin America. According to the International Labor Organization, there are an estimated 56 million Latin Americans in the age range of 15 to 24 in the workforce. A little over 7 million are jobless and 27 million are working informal jobs. Many quit without much of a choice as six out of the 10 jobs available to them are in the informal economy.
  6. In 2013, 44.5 percent of the non-agricultural informal employment in Latin America was male while 49.7 percent was female. However, globally males make up a higher percentage because they make up a larger portion of the workforce. In contrast, when looking across developing countries, 92 percent of all women have informal employment compared to 87 percent of all men.
  7. The informal economy in Latin America represented 34 percent of its average gross domestic product (GDP) from 2010-2017, which is higher than any other region in the world. This is true despite Latin America being in possession of one of the lower percentages of informal work, 40 percent compared to the 85.8 percent of employment in Africa.
  8. The informal economy has been reducing in Latin America and the rest of the world for the past 30 years. This could partly be due to a reduction in the challenges to register a business.
  9. Improving transit infrastructure and access to education can reduce the size of a country’s informal economy. A case study of Mexico City found that high transit costs can lead to an increase in the percentage of workers on the outskirts of cities choosing informal work. Furthermore, by improving access to cheaper and more efficient transit services, informal employment can decrease. Meanwhile, a case study in Peru showed that it is easier to obtain formal employment if one has higher education. This was true even for indigenous groups in the country who often face discrimination when entering the formal sector.

Informal work remains an ambiguous topic requiring more research. Nonetheless, it is important to keep in mind that the informal economy is not inherently bad. While many struggle because of their informal work, they often cannot afford the costs of transitioning to the formal sector. For instance, one may deem small businesses that have under 10 workers as informal, and therefore, they would not have to pay social benefits, thus saving them money. In other words, in some circumstances, informal workers may require additional support, but would not necessarily benefit from transitioning into the formal sector.

– Scott Boyce
Photo: Wikimedia Commons

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The Progress of Laos’ Growing Economy

Laos' Growing Economy
Laos is growing rapidly thanks to high economic growth since the early 2000s. Its GDP growth rate has hovered around 7 percent since 2000, which makes Laos one of the fastest-growing countries in Asia. The infrastructure and tourism sectors have developed at a fast rate since 2017, which makes poverty reduction a possible side effect. As an economy grows, poverty tends to decline. Poverty in Laos was 46 percent in 1996 and around 23 percent in 2015. This cut in the poverty rate is partially due to Laos’ growing economy. Key sectors such as agriculture, tourism and infrastructure continue to be strong focus areas in Laos’ development.

A Commercialized Agriculture Industry

Agriculture remains important to Laos’ growing economy. About 70 percent of all workers have employment in the agriculture sector. Although the service sector is growing while agriculture is declining, the agriculture industry remains an important contributor to its GDP and the main source of employment for many Laotians. Most of the cultivated land consists of rice, and, as is common in developing countries, the main type of work is subsistence farming. There is a shift toward commercializing the agriculture industry, though, and this emphasis remains important in increasing wages and pulling more Laotians out of poverty. The Ministry of Agriculture and Forestry’s Agricultural Development Strategy 2011-2020 outlines the goals in increasing productivity and transitioning the industry toward commercialization.

Rural Infrastructure Growth

Infrastructure, which includes bridges, roads, schools and hospitals, remains an important foundation to a country’s livelihood. Without the necessities, a country may have difficulty helping its people and increasing its development and trade. Laos’ infrastructure is developing at a fast rate. Infrastructure growth remained around 8 percent for 2017, 2018 and 2019. While infrastructure is growing, there are still issues in rural areas that people tend to overlook. Electrification is about 80 percent in rural areas, though the country could resolve this in the future. The challenge to electrifying rural areas relies on navigating the rough and mountainous terrain of Laos. While Laos is growing rapidly, a higher emphasis on rural infrastructure development could help pull more Laotians out of poverty.

The Rising Tourism Industry

The tourism industry in Laos has grown fast since the 1990s. In 1995, about 350,000 international tourists visited Laos, yet that number grew to more than 4 million in 2018. Tourism contributes almost $2 billion to its GDP, so Laos has big stakes in the industry for its current and future economic well-being. China and neighboring countries, such as Thailand and Vietnam, comprise most of the tourists visiting Laos.

The tourism industry is yet another reason why Laos is growing rapidly. More than 100,000 jobs are related to tourism, and many expect that number to grow to 121,000 by 2028. The tourism industry grew by 9 percent in 2019, and Laos’ goal for 2020 is to reach 5 million international visitors. Job growth and GDP growth are two major effects of the rise of tourism in Laos, but there is also the effect tourism has on infrastructure. Hotels, resorts, entertainment venues and parks receive revenue and expand thanks to tourism growth.

Future for Laos’ Growing Economy

Laos’ high economic development could simultaneously transform its economy and continue to reduce its poverty. Poverty in Lao reduced by half while it was developing its economy since the 1990s. Thanks to its key sector developments, Laos is growing rapidly and poverty is continuing to decline. Rapid economic growth since 2000 shows that it may become a developed country in the near future, even though it is one of the least developed countries in the world currently. According to the U.N.’s Economic and Social Council and due to meeting two of the three criteria for development, Laos will leave the Least Developed Countries list by 2024.

– Lucas Schmidt
Photo: Flickr

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Socio-economic Equity in Brazil and Chile

Socio-economic Equity in Brazil and Chile
Latin America has the worst socio-economic equity gap in the world. The average Gini Index (percentile measurement of income distribution) is 41, which is a 10 point difference in comparison to the Organization for Economic Cooperation and Development (OECD) average. The Gini Index is like golf in a sense—the lower the score, the better the distribution. Although this region has a high Gini rate, Brazil and Chile have shown real promise in leading the rest of the region in socio-economic equity.

Chile: Counter-cyclical Spending and Education Investments

The Bachelet Administration effectively implemented a counter-cyclical spending policy that helped safeguard against a total economic collapse during the 2008 global crisis. Essentially, social spending reduced and taxes increased during a boom period, allowing Chile to save approximately $18.1 billion with the Economic and Social Stability Fund. During the global recession, Chile increased its social spending and lowered taxes creating demands for goods. When properly executed, counter-cyclical spending more evenly distributes resources without causing stagnation or inflation.

Education is essential to decreasing inequality between low-skilled workers and high-skilled workers; it provides an endowment of marketable skills. Generally speaking, better skills receive better pay. Chile spends 1.2 percent of its total GDP on Early Childhood Education and Care programs.

 In 2017, nearly 33 percent of 19 to 20-year-old Chileans enrolled in tertiary education and 25 percent finished with a four-year degree. Systemic education reform made tertiary education 100 percent free for low-income households. As a result, students receiving government loans and scholarships increased from 17 percent in 2007 to 58 percent just 10 years later.

Chileans have benefited from a reformed education system in a tangible way. Individuals with vocational degrees earn 40 percent more than secondary educated workers. Those with a bachelor’s degree earn upwards of 100 percent, and doctoral graduates earn 4.7 times the average of upper secondary educated workers.

Universal education invests in resource mobility; however, this is only possible if leaders prioritize the fundamental needs of those living in extreme poverty. Brazil, through conditional cash transfer programs, directly addresses the imbalance of socio-economic equity by providing those needs.

Brazil: Conditional Cash Transfers

Non-contributory social protection or social assistance works specifically for those in vulnerable living situations. These programs, funded through a general budget and taxation of public companies, provide monetary assistance to low-income households with children.

Of more than 30 active conditional cash transfer (CCT) programs in Latin America, Bolsa Familia (PBF) is the most prevalent. PBF reduced poverty in Brazil by 28 percent during its first 13 years and assisted over 11 million families a year.

The goal of PBF (and CCTs) is to end cyclical systemic poverty by investing in human development. Families receive assistance after they agree to social responsibilities like taking their children to health care providers and attending school.

Since its inception in 2003, Bolsa Familia integrated four other CCT programs. Today it reaches 46 million people, 54 percent of whom are women. The Economic Commission for Latin America and the Caribbean estimates that out of 133.5 million people living, 30.2 million households receive a conditional cash transfer.

There is no denying the obvious progression in addressing the imbalance in socio-economic equity in Brazil and Chile; however, much of Latin America still lives in poverty. The long term solution for socio-economic equity is to integrate non-discriminatory policies into law.

Universal Social Protection

The idea of a basic level of income is not new; the concept received debate during the early 19th century in the U.K. Meanwhile, some proposed it in the U.S. in the 70s and then again in 2019 with Andrew Yang’s promise to give $1,000 to every U.S. citizen every month.

Creating a “care pillar” would not only meet the urgent needs of those who need it most but would also promote human development for all. A stronger care system by function distributes necessary provisions of public goods and services, creating socio-economic equity. Unconditional, universal payment to the state inhabitants allows them to meet their basic needs.

The Universal Social Protection in Latin America and the Caribbean states that “by freeing people of the more serious consequences of material dependency, a basic income could lead to a rearrangement of social hierarchies, increase bargaining power of women…and [others facing] discrimination…and open up spaces for greater autonomy…for all people.”

In other words, bettering the linkage between the components of social protection and coverage, while eliminating discriminatory mechanisms, guarantees access to a decent life.

Brazil and Chile have made exemplary progress in the battle for socio-economic equity, but like the rest of Latin America, they have a long way to go before income distribution is fair and balanced. Breaking the cycle of poverty begins with policy. It is up to the countries that have disposable funds to implement policy change and reform. Once those countries reach socio-economic equity, they will have the resources to help neighboring countries reach the same goal.

– Marissa Taylor
Photo: Flickr

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The Rise of Venezuela’s Rum Revolution

Venezuela’s Rum
Extended hyperinflation continues to cripple Venezuela’s economy with prices of basic groceries skyrocketing to five times the monthly minimum wage from 2015 to 2017. Estimates determined that extreme poverty in Venezuela in 2016 was 82 percent. Yet, there is a shimmer of light with potential economic growth through Venezuela’s rum industry.

Fall in Whiskey Sales

For a long time, people have seen Scotch as a status symbol in Venezuela and often only for the upper-class to enjoy at home or for middle-class friends to have on a night out. In 2007, Venezuelans consumed over three million boxes of whiskey, fifth in consumption worldwide and priced at nearly $151 million in imports. In 2009, imported Scotch whiskey outsold Venezuela’s rum sales nearly two to one.

However, with hyperinflation setting in, reaching over 60,000 percent in 2018 and almost 350,000 percent in 2019, imports experienced restriction and the tightening of currency controls, putting whiskey out of reach for many. At the black market rate, a bottle of Chivas Regal 18-Year-Old Whiskey costs $31, more than the country’s monthly minimum wage.

Rise in Rum Sales

The popularity of whiskey began declining in 2013, with a 29 percent drop in sales. At this point, the country had only recently crossed the hyperinflation threshold of 50 percent, while Venezuela’s rum sales increased by 22.6 percent. During that same time period, domestic rum production increased from 15.8 million to 21.8 million liters.

In addition to the rising cost of imports, the government’s recent introduction of relaxed regulations and loosening price controls has bolstered domestic rum production. This has led to Santa Teresa, one of Venezuela’s rum distilleries, to become the first in the country to release a public offering in 11 years, selling one million shares on January 24, 2020. With banks hesitant to lend, public offerings provide alternative forms of capital that can allow businesses to grow and become more competitive in the global market.

Project Alcatraz

Project Alcatraz, a recreational rugby initiative, launched as a means of rehabilitation and to serve as a deterrent for gang violence after gang members broke into the grounds of the Santa Teresa rum distillery. Now, Project Alcatraz includes vocational training, psychological counseling and formal education, reaching roughly 2,000 adolescents and a few hundred inmates.

Additionally, experts believe that the project has led to a drop in the murder rate of the local municipality. In 2003, the year the project originated, there were 114 murders per 100,000 people; as of 2016, that number had dropped to 13 per 100,000 people.

Cocuy

Venezuelan rum has not been the only liquor that has seen recent success in the country. Cocuy is a liquor similar to that of Mexican tequila because it comprises of fermented agave plants. Cocuy has a long history in the country, with indigenous groups originally making it 500 years ago. The country reportedly outlawed the drink prior to 2006 to boost Venezuela’s rum and beer production and sales. Cocuy production companies regained licensure, resulting in the drink gaining popularity throughout the years. This once stigmatized drink meant for the poor and less refined is now one of choice primarily because of its low price point.

While the rise in domestic liquor sales may be seemingly insignificant, the growth of any domestic industry can play a critical role in the reversal of the economic climate of an impoverished nation. Venezuela’s rum revolution in the past decade could turn the country’s economy around.

– Scott Boyce
Photo: Pixabay

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The Impact of Coronavirus On the Global Economy

Impact of Coronavirus
Over the past several months, the outbreak of the fast-spreading pandemic of coronavirus or COVID-19 has taken the world by storm. In efforts to stop the pandemic from spreading and provide aid to the sick, many countries are closing borders and imparting quarantine policies on citizens. Not only is the coronavirus taking lives, but it is also heavily impacting the global economy in terms of billions of dollars. 

Efforts to Curb COVID-19

Currently, the WHO has reported 234,073 confirmed global cases and 9,840 deaths from the coronavirus. This pandemic is extremely contagious and spreads through respiratory fluids, which is why it is important to cover the mouth when coughing and washing hands frequently. The CDC recommends washing hands every hour for at least 20 seconds.

International governments are also closing borders and canceling flights to slow the impact of coronavirus. Further, people from CEOs to politicians and regular citizens are promoting social distancing. All over the world, authorities are telling people to only leave home when necessary like to buy groceries, travel to work, exercise or receive medical care. In Jordan, curfews exist that are punishable with jail time if people do not abide by them. Meanwhile, the United Kingdom is asking retired doctors and medical professionals to help fight the outbreak.

Organization Action

Organizations are also taking action to fight the outbreak. Organizations like the Gates Foundation, Wellcome and the Mastercard Impact Fund are contributing large sums to support economically impacted communities. The Gates Foundation and Wellcome have donated up to $50 million, and the Mastercard Impact Fund has committed up to $25 million. The CEO of Apple, Tim Cook, has announced the company will donate to “groups on the ground” that are in specific contact with those ill. Specific to the Gates Foundation, its initial donation is a part of the $100 million it has committed to help fight the outbreak and provide aid relief.

Additionally, the co-founder of Alibaba, Jack Ma, has donated $14.4 million to help develop a vaccine to reduce the impact of coronavirus. Ma has provided $5.8 million to support two Chinese government research organizations in tackling vaccine production. The rest of the funds are going towards prevention protocols. According to the latest CDC situation report, the first vaccine trials are in progression. Furthermore, the WHO has set up an international study in many countries to compare different treatments.

Impact on the Global Economy

From a financial standpoint, the pandemic is slowly weakening the global economy and will continue to do so until the situation is under control. So far, the impact of COVID-19 is billions of dollars of government money to go towards aid needs, prevention technology and protection measures. Estimates determine that the impact of coronavirus will have cost nearly $2 trillion by the end of 2020. However, some countries like the U.S. are already receiving billions of dollars in bailouts.

With an abundant amount of action per nation, generous donations and hard-work from medical professionals, it is the hope of many that the pandemic will soon take a more positive turn. It is important to take adequate measures to stay safe during the pandemic. Safety precautions allow a slower spread and provide medical professionals and the health care system time to reduce the impact of the virus. Additionally, these measures will aid in providing therapeutic resources and developing vaccines. 

– Sarah Mobarak
Photo: Flickr

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UN Report on Global Unemployment

UN Report on Global Unemployment
Global unemployment plays a key role in global poverty. After all, the logic goes that employment leads to prosperity, even if little by little. Development economists proclaim the efficacy of providing jobs, however low paying, as the means to the end of escaping poverty, regardless of location. There is some evidence for this. According to the Brookings Institute, increasing work rates impacted poverty most, with education being second. With that said, a recent U.N. report on global unemployment clouds the future of international job growth since, for the first time in nearly a decade, the global unemployment rate has risen.

Previous Global Unemployment Rise

In 2008 and 2009, the Great Recession hamstrung the United States economy in the worst way since the Great Depression nearly 70 years prior. Unemployment soared, reaching 13.2 percent nationally and 5.6 percent globally. Between 2008 and 2009, the last time the U.N. reported on global unemployment rate increases, it increased by nearly a full percentage point, according to the World Bank. The stock market crash in the United States and Europe clearly caused this, but thankfully the rate recovered and surpassed the 2009 point in 2019, returning to about 4.9 percent.

Reasons for the Present Situation

A U.N. report on global unemployment in January 2020 indicated that this rise in the global unemployment rate was due largely to trade tensions. The United Nations said that these conflicts could seriously inhibit international efforts to address concerns of poverty in developing countries and shift focus away from efforts to decarbonize the global economy. Due to these strains, the report claims that 473 million people lack adequate job opportunities to accommodate their needs. Of those, some 190 million people are out of work, a rise of more than 2.5 million from last year. In addition, approximately 165 million people found employment, but in an insufficient amount of hours to garner wages to support themselves. These numbers pale in comparison to the 5.7 billion working-age people across the world but they concern economists nonetheless.

To compound the issue, the International Labor Organization said that vulnerable employment is on the rise as well, as people that do have jobs may find themselves out of one in the near future. A 2018 report estimated that nearly 1.4 billion workers lived in the world in 2017, and expected that 35 million more would join them by 2019.

The Implications

A rise in global unemployment, like that which the U.N. report on global unemployment forecasts, assuredly has an impact on global poverty. More people out of work necessarily means more people struggling to make ends meet. The World Economic and Social Outlook places this trend in a bigger context. Labor underutilization, meaning people working fewer hours than they would like or finding it difficult to access paid work, combined with deficits in work and persisting inequalities in labor markets means an overall stagnating global economy, according to the report.

Hope for the Future

First of all, stagnation is not a decline, and a trend of one year to the next does not necessarily indicate a predestined change for the years ahead. In fact, the World Bank points toward statistics that it issued at the end of the year to support the claim that every year, poverty reduces. In 2019, nearly 800 million people overcame extreme poverty from a sample of only 15 countries: Tanzania, Tajikistan, Chad, Republic of Congo, Kyrgyz Republic, China, India, Moldova, Burkina Faso, the Democratic Republic of the Congo, Indonesia, Vietnam, Ethiopia, Pakistan and Namibia. Over a 15-year period, roughly from 2000 to 2015, these 15 countries showed the greatest improvements in global poverty, contributing greatly to the reduction of the global rate of people living on $1.90 a day or less to below 10 percent. Additionally, efforts by organizations such as the International Development Association have funded the needs of the 76 poorest countries to the tune of $82 billion, promoting continued economic growth and assisting in making them more resilient to climate shocks and natural disasters.

While the U.N. report on global unemployment forecasts a hindrance to these improvements, hope is far from lost. The fight against global poverty continues with plenty of evidence of success and optimism for the future.

– Alex Myers
Photo: Flickr

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RIMAC and The Economy in Croatia

Economy in Croatia
While beautiful, Croatia is not the most affluent in terms of economic standards. As of 2015, 19.5 percent of the Croatian population was below the poverty line. The financial crash of 2008 stunted the development of gross domestic product the country experienced since 1998. The convergence gap widened by 3 percent, launching the country into a recession. Luckily, RIMAC and its car, the Concept Two, is impacting the economy in Croatia in a positive way by offering Croatian’s jobs and allowing Croatia to compete in the international market.

Croatian Economic Slump

Various key issues lead to a poor economy in Croatia including labor shortages, minimal pay, lack of adequate education and subsequent lack of skill. Such domestic problems are integral to why many Croats are unable to find opportunities that match up to wealthier Western European countries such as the United Kingdom, Germany, Sweden and/or Switzerland. According to the Croatian Employers Association (HUP), firms in Croatia are unable to fill some 30,000 jobs. Most of these openings exist in the tourism industry, making up at least 20 percent of Croatia’s gross domestic product.

Potential for a Great Economy

Despite the current state of the economy in Croatia, an emerging market may turn it around. Croatia, along with many other European Union member states, has benefited from the integration and trade of modern goods and services, specifically in technology.

Concept Two’s Impact

In 2018, a zoomer of a car sped onto the world’s tech radar at the Geneva Motor Show called the Concept Two. This car may support the development of a thriving economy in Croatia. Some have deemed the vehicle as “alive with technology,” elevating the bar as the fastest electric car around the globe.

The CEO of RIMAC, Mate Rimac, developed the lightning-fast vehicle. Mate Rimac began the development roughly 10 years ago when he turned his gas-powered vehicle into an electric car. The CEO has also discussed his desire to create opportunities in Croatia, “a country where people usually emigrate from,” to keep citizens from leaving. Further, Mate Rimac has already hired individuals of 22 different nationalities to work at his company.

The company manufactures all components of the Concept Two in-house. With the pricey, technologically loaded unit selling for more than $2 million, the average Croat would not be able to afford such a speedster. although, this hefty price tag could bring in a large influx of stimulation for the economy in Croatia.

RIMAC’s Impact

According to recent reports, the manufacture and production of the Concept Two are now employing many. The company has listed 429 full-time employees as of October 2018. Prior to this report in 2017, a venture capital funding organization noted the availability of 100 new jobs at RIMAC. These efforts have resulted in a growth of nearly double.

Further, the European Investment Bank (EIB) notes RIMAC as a good investment. In 2018, the EIB provided a direct loan to expand the research and development department, in part due to RIMAC introducing jobs and growth of the economy in Croatia.

Investment in Innovation

Often, the best way a country can improve the national economy is to grow business that can compete on an international level. Countries in the Baltic have been able to improve the internal business climate by increasing competition at the global playing field. One can promote allowing businesses to start and grow through investment in innovation, much like the Concept Two with RIMAC. One of the most productive methods to increase economic growth is through research and development in modern technology.

Companies like RIMAC should improve the business climate and economy in Croatia. With enough investment and support, companies with bravery and innovative force have the potential to be a major player in promoting Croatia into the international economy.

– Robert Forsyth
Photo: Wikimedia

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The Transform Africa Summit

The Transform Africa SummitThe Transform Africa Summit is a global forum that SMART Africa created in 2013 in Kigali, Rwanda. The summit is an annual event that brings together global and regional government officials and international organizations and businesses that meet to discuss how to shape and sustain Africa’s digital future. Here is more information about the Transform Africa Summit.

Purpose

The purpose of the summit is to further push Africa into a knowledge economy where member states are able to become more competitive on a global scale by increasing innovation and boosting job opportunities and improvements in sectors such as health care, education and agriculture. Overall, it strives to transform African cities into smart societies. The summit has had five editions since 2013, the last of which Kigali, Rwanda hosted in May 2019.

What is SMART Africa?

SMART Africa is both a solution and a commitment from African Heads of State and Government to grow the continent’s socio-economic developments and create affordable access to broadband. The overall goal is to increase Africa’s lagging economy through systems such as information and communications technologies (ICT).

Within SMART Africa is the Alliance, a group of 24 countries representing over 600 million people, that works to implement and maintain the pillars of the SMART Africa Manifesto and make sure its vision moves into action. These pillars include Policy, Access, e-Government, Private Sector/Entrepreneurship and Sustainable Development. These pillars further break down into four enablers that ensure the effective establishment of economic growth and job creation.

Previous Summits

More than 1,200 delegates attended the first summit in 2013, including top executives from groups such as Facebook and Google. The 2013 summit resulted in the creation of the SMART Africa Manifesto, which was the first time Africa planned to put the private sector first and create a more open economy through ICT and advanced telecommunication. The 2018 summit hosted in May showcased the continent’s first Transform Africa Economic Forum which proposed ways to boost Africa’s economy by connecting cabinet secretaries with business leaders for collaboration.

The 2019 summit focused on the theme of “Boosting Africa’s Digital Economy.” This summit culminated in efforts to engage business leaders and high net worth investors in areas where collaboration and investment opportunities were possible, mainly in public-private partnerships. The newest summit is scheduled for April 2020 in Conakry, Republic of Guinea and projections determine that it should host over 4,000 participants from around the world.

Key Ideas

One of the unique features of the Transform Africa Summit is the member state’s drive to put the private sector first, which could further increase investments and productivity. Prior to the summit, Africa previously underdeveloped this notion. Through digitalization and creating a “One Africa Network,” leaders of the summit hope to rid Africa of the vast fragmentation that exists between countries.

Also central to the summit’s mission is to bring Africa from merely being a consumer of ICTs to its own producer. By operating on the premise of shared prosperity, creating supportive policies and doing away with monopolies, Africa can take great strides toward developing a successful knowledge-based economy.

Transformations

All four summits have been incredibly successful in ushering in connectivity in African cities and villages. All 53 governments of the African Union have accepted the SMART Africa Manifesto. This is a huge leap from the seven original members. Also successful was the push for the “One Africa Network” which paved the way for the adoption of the African Continental Free Trade Area Agreement and proposed the establishment of a single market for all goods and services in 54 countries, a feat that would not have happened without SMART Africa’s digital push.

The 2018 summit noted that Africa’s mobile usage had increased to 80.8 percent, falling just behind 99.7 percent usage at the world level. Summit leaders also noted how new technology prices were able to go down due to the rise of technology that was popping up.

Overall, the Transform Africa Summit has created a more connected, open and successful economy for Africa. Africa has experienced job increases, industry expansion and economic growth since the original creation of the SMART Africa Manifesto in 2013 and its implementation by members of the African Alliance. The World Economic Forum speakers projected that numbers for 2020 will show that Africa’s consumer spending will be over $1.4 trillion.

– Laurel Sonneby
Photo: Flickr

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Reducing Poverty in Honduras

Reducing Poverty in Honduras
Honduras is a Central American country with a poverty rate of about 49%. Although it is among the poorest countries in Central America, Honduras has the second-highest growth rate in Central America and is beginning to transform its economy, reduce poverty and mitigate corruption. The International Monetary Fund (IMF), USAID and the Government of Honduras (GOH) are working together to improve livelihoods in Honduras.

Country Development Cooperation Strategy

Honduras is aware of its current problems with crime, food insecurity, poverty, political instability and corruption. This is why the GOH asked USAID for help, forming the USAID/Honduras Country Development Cooperation Strategy (CDCS). The three main goals of the CDCS involve increasing security to vulnerable populations in high-crime areas, reducing poverty in Honduras and improving transparency and accountability in the government.

Widespread violence and income inequality are two major reasons Hondurans flee to other countries. The most at risk of both violence and income inequality are those in poor areas, such as the slums that are prevalent in Western Honduras. The CDCS project began in 2015 and ends on December 22, 2020. So far, homicides per 100,000 people decreased from 87 in 2011 to 44 in 2017 and poverty lessened slightly.

To combat mass migrations out of their countries, Honduras and its neighbors El Salvador and Guatemala presented a strategy called Alliance for Prosperity. The Alliance for Prosperity states that economic growth is a possible solution to crime and poverty, both of which lead to people fleeing to safer countries, including the U.S.

IMF and Honduras

In 2019, Honduras received $311 million from the International Monetary Fund. Honduras stated the money is precautionary and will support the government’s goal of economic stability and institutional reform. The economic program also involves stabilizing the public electricity company, which has been struggling with debt. The economy has been stable since 2018. GDP growth has remained around three to five percent from 2017 to 2019, which is higher than the GDP growth average of Central America.

Part of the $311 million will also go toward easing the national debt and improving infrastructure. Infrastructure job growth could have a positive outcome in reducing poverty in Honduras, as the agriculture industry occupies most of the country where income is low. Political corruption, a weak economy and violence have made it difficult for Honduras to develop out of its agriculture-based economy.

The IMF also provided financial assistance to Honduras in 2014, which helped to improve the country’s spending habits and reduce its debt. Honduras’ debt makes up approximately 40% of its GDP, which the nation is focused on eliminating through economic growth.

A Stable Economy for the Future

Progress is occurring in reducing poverty in Honduras. The country’s goals of reducing poverty, increasing economic growth and improving government transparency have the potential to transform the economy. Poverty reduced from 82.1% in 1990 to 50.3% in 2017 through economic growth, yet poverty remains very high. Assistance by the IMF, USAID and other parties have helped further Honduras’ goals of transforming the economy and reducing the poverty rate in both rural and urban regions.

– Lucas Schmidt
Photo: Flickr

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China’s Investment in Rwanda

Investment in RwandaThe commonly held belief on Chinese investment in African countries is that China is only interested in exploiting the continent for its mineral resources and establishing a sycophantic relationship with some of the world’s most vulnerable developing nations. However, the investment in Rwanda makes little sense if short term profit and influence are the country’s only motives. Rwanda lacks the natural resources that its neighbors have. Furthermore, its population will only yield a small number of consumers of Chinese goods in the future. Motivations aside, China’s investment is helping to develop the country in ways that will positively impact the lives of the country’s poor.

Rwanda’s Rapidly Improving Infrastructure

The investment in Rwanda has had no bigger impact than in the area of infrastructure with projects that include the construction of hotels, schools, hospitals and multi-thousand capacity stadiums in the underdeveloped eastern province. China also constructed 80 percent of the country’s roads, beginning with a loan of 250 million yuan in 2009. This equals about $36,040,200 million.

In the short term, the Chinese have reduced the cost of construction and have created jobs for local people according to Qinghai Liu, A Chinese expert in the research on China’s investment in Africa. Evidence exists to support her claim as well. One example is the construction of the Administrative Office Complex located in the capital city of Kigali. The Chinese builders employ some 260 Rwandan employees and provide them training in construction skills.

China is also funding an agriculture technology center to help improve Rwanda’s farming. Construction has also extended into real estate. Chinese enterprises are building 4,500 villas and apartments in Vision City for an emerging middle class. Recently, the Chinese embassy donated building materials for housing for the most vulnerable families.

The Tradeoff

The Rwandan government has found a willing investment partner in China whose aid is not preconditioned on democratization, liberalization and privatization. Rwanda has even modeled its development on China, lacking an emphasis on personal and social freedoms. Should Rwanda be unable to pay its debts, it is unclear what China might do to make good on its investment. Sri Lanka is the only country to have defaulted on its loans with China in the past. China seized the economically vital port of Hambantota in a response that remains controversial to this day.

Though there are obvious political and social concerns that come with the investment in Rwanda, the poor are benefiting. There is evidence that China is playing a concrete role in helping to lift Rwandans out of poverty. In big and small ways, China is helping Rwanda in its development, and not just the rich are benefiting.

– Caleb Carr
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