Archive for category: Economy

Information and stories about economy.

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Growing Investment in Africa Spurs Domestic and International Growth

Investment in AfricaRecently, international investors have turned their sights to Africa, whose expanding consumer class and abundant natural resources make it the next prime location for development and innovation. According to the Africa Attractiveness Survey, investment in Africa totaled $128 billion dollars in 2014, up 136 percent from the previous year. Investment reached $174 million per project, an increase from $67.8 million in 2013. This vast increase is largely spurred by several megadeals on the continent rather than many smaller ones. Although this “big money” form of investment may crowd out smaller investors, it paves the way for future funding from all types of businesses.

According to Charles Brewer, managing director for DHL Express Sub-Saharan Africa, an update in the way investors perceive the continent has been the source of increased funding. Economic growth, coupled with an improved business environment and strengthened infrastructure, has caused foreign investment to hit a historic high. Sufficient infrastructure is key to successful development because it lowers the expense of logistics. In the past, supply chain costs were nine times greater in Africa than in other continents. Deals, such as DHL Express’s, not only expands the frontier for international corporations but also lends to growth within Africa as well. Brewer predicts millions more in investment dollars from his company alone in 2015.

“With increased Foreign Development Investment and macroeconomic growth, I believe that Africa will become an economic powerhouse in the future. The region is abound with untapped opportunities and has much scope for growth,” says Brewer.

With more and more people benefiting from international aid and earning money, the consumer base in Africa has grown rapidly. This provides immense opportunities for companies to move into these countries and provide previously undeveloped services. Brewer lists 18 countries where his company has planned major projects. Such economic development will also provide more jobs to African workers and increase spending across the economy, leading to even more economic growth and future foreign investment. Companies such as DHL Express will help reinforce the business environment and create opportunities for African businesses all over the world. In this way, Africa is not a market to be cornered by the rest of the world; the world is a market soon to be cornered by Africa.

– Jenny Wheeler

Sources: IT News Africa

Photo: Flickr

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China’s Central Bank: RRRs and Rural Villages

china_bank
With official approval from the State Council, China’s central bank decided to cut reserve requirement ratios and benchmark interest rates for the third time in nearly five months in July. These cuts will specifically affect commercial banks that serve agricultural and rural areas, as well as provide loans to small businesses. The reserve requirement ratio (sometimes called the deposit-reserve ratio, or the RRR) is a regulation from the central bank which sets a minimum ratio (or fraction) of customer deposits that banks must hold in reserves (as currency, or note) within the bank. A decrease in RRR allows banks to more easily lend money to the institutions it supports, as a smaller amount of physical cash is required to finance loans.

Adjusting the RRR is common practice in China and is often used as a tool of domestic monetary policy. The deposit-reserve ratio has been altered several times in recent years and this is, in fact, the fourth round of interest cuts since 2014. While central banks in many nations refuse to make similar types of cuts in light of liquidity concerns, China has in the past shown leadership in this type of aggressive monetary policy. Such a policy is intended to allow for a positive credit flow towards rural and poverty-stricken areas.

Despite China’s rapid rise in recent years, growth has lately slowed—representing a transition from an economy characteristic of a rapidly-emerging nation, to a growth rate that is less fast-paced, but more sustainable. This new round of cuts reveals a strategy by China to restructure its borrowing mechanisms, as well as boost and stabilize its economy. Part of this strategy involves offering competitive advantages and lending options to small, independent businesses and agricultural enterprises.

This change, a lowering of the deposit-reserve ratio by 50 basis points (bps) for banks lending to rural, agricultural areas and to small businesses is intended to encourage financial institutions to invest in farmers, micro-businesses and rural development in many poverty-stricken areas of China. China explained its most recent round of cuts in the deposit-reserve ratios and benchmark interest rates by citing plans to “stabilize economic growth, upgrade structure and lower financing costs in society,” and describes the cuts as “conducive for financial institutions to support mass entrepreneurship and innovation.”

The new measure allows institutions to more easily lend money to small businesses in rural China and will provide more credit influx towards these small (but crucial) enterprises, which make up an important part of China’s economy. The cuts not only lower the costs of financing small enterprises but lower loan rates. This allows China’s financial institutions to encourage innovation and entrepreneurship amongst the least developed areas of society.

– Melissa Pavlik

Sources: CCTV, The New York Times, The People’s Republic of China
Photo: China.org.cn

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2016 Olympics: Brazil and Its Economy

Brazil
Brazil will be the first South American country to host the Olympics for the 2016 Summer Olympics. Although Brazil has an emerging economy, the 2016 Olympics may do more harm than good as it relates to the economy and those living in poverty.

The theory is that hosting the 2016 Summer Olympics will cause a growth spurt in the economic development of Brazil with an influx of tourism and employment. However, Brazil also spent more than $11 billion on hosting the FIFA 2014 World Cup. The data from the World Cup shows that the costs of hosting such a big event may outweigh the benefits. The World Cup did little to boost the economy and the jump in tourism the government was anticipating was not as significant as expected.

The economy in Brazil is looking rather weak considering the fact that the country has $900 billion in foreign debt and economic activity is decreasing yearly by almost five percent.

The state of the economy coupled with the costly and grueling task of Olympic preparation seems to be rather dangerous. The budget for the Olympics was originally $2.93 billion but has risen to $13.2 billion since January 2014.

Although Mayor Eduardo Paes of Rio de Janeiro claims that 57 percent of the funding will be from private enterprise, the brunt of the consequences of the infrastructure projects will fall upon the shoulders of the Brazilian taxpayers.

Amid the excitement of the coming of the Olympic Games is the very real crisis of eviction that families are facing. The scarcity of land in Rio means that things have to be shifted around to accommodate the new infrastructure.

Thousands of families have been moved out of poor neighborhoods (called favelas) so the neighborhoods can be destroyed and then rebuilt as different Olympic structures. Approximately 3,000 families in Rio have been forced to relocate as a result of the Olympic projects.

An estimated 67,000 people have been evicted from their favelas since 2009 when Rio was chosen to host the Olympics. Those who fight against the eviction and refuse monetary compensation and alternate housing are met regularly with aggressive eviction attempts.

The price of land is quickly rising in anticipation of the Games. After the Games, the complexes will be converted to luxury condos for sale for up to $700,000.

The 2016 Summer Olympics will change the economy of Brazil and leave a lasting impact. Those who will feel the weight the most will be the voiceless poor.

– Iona Brannon

Sources: Bloomberg Business, Business Insider, The Guardian, NPR, Reuters, Seven Pillars Institute, Washington Times
Photo: Brazil the Guide

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Forbes Calculates America’s Most Generous Companies

Forbes
A new survey released by The Chronicle of Philanthropy ranks 12 companies in order of who gave away the highest percentage of profits in 2013. Seventy U.S. companies participated in the survey. The top 12 most generous companies are listed below along with descriptions of their core values and donations.

12 Most Generous American Companies

  1. Alcoa: Alcoa, a metals, engineering and manufacturing company, values innovative solutions that better the world. They donated 12.1 percent of their profits to worthy causes.
  2. Safeway: Safeway, a grocery and food supply company, values quality food and integrity. They donated 7.2 percent of their profits to worthy causes.
  3. UPS: UPS, a commerce and messaging company, values excellent service and dedication. They donated 5.6 percent of their profits to worthy causes.
  4. Bank of America: Bank of America, a banking company, believes in the power of helping all people. They donated 5.4 percent of their products to worthy causes.
  5. State Farm Insurance: State Farm Insurance, an insurance company, values being a Good Neighbor and helping those in need. They donated 4.1 percent of their profits to worthy causes.
  6. Kroger: Kroger, a retail food company, believes in proving the best service, selection and value. They donated 3.3 percent of their profits to worthy causes.
  7. MetLife: MetLife, an insurance, benefits and retirement company, values individuals and seeks to help the future of others. They donated 3.2 percent of their profits to worthy causes.
  8. Target: Target, a retail company, values quality products to enable a successful life. They donated 3.2 percent of their profits to worthy causes.
  9. Nationwide: Nationwide, an insurance company, values helping others. They donated 3.2 percent of their profits to worthy causes.
  10. DOW Chemical: DOW Chemical, a chemical, biological and physical sciences company, is committed to innovations that help the world. They donated 2.4 percent of their profits to worthy causes.
  11. Goldman Sachs Group: Goldman Sachs Group, a bank, securities and investment management company, believes in making a difference in someone’s life. They donated 2.3 percent of their profits to worthy causes.
  12. Exelon: Exelon, an energy service company, values progress and knowledge that will help the world. They donated 2 percent of their profits to worthy causes.

– Kelsey Parrotte

Sources: Alcoa, Bank of America, DOW, Exelon, Forbes 1, Forbes 2, Goldman Sachs, Kroger, MetLife, Nationwide, Safeway, State Farm,, Target, UPS
Photo: Flickr

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New Development Bank Unveiled

new_development_bank
After three years of negotiations, officials from the world’s five major emerging national economies, Brazil, Russia, India, China and South Africa (BRICS), have officially unveiled their new collective multilateral development bank.

Considered a potential rival to the global influence of U.S.-led institutions like the World Bank and International Monetary Fund (IMF), the Shanghai-based New Development Bank (NDB) is the second multilateral bank poised to begin operations in the near future, along with the Asian Infrastructure Investment Bank (AIIB), which announced its launch earlier this year. Both banks will aim to provide increased funding for large-scale infrastructure development projects in poor and developing regions.

The leadership of the $100 billion NDB will come in the form of a rotating five-year presidency, with the inaugural term going to K.V. Kamath, an Indian banker who had previously worked at multilateral development institutions like the Asian Development Bank.

Experts anticipate that the emergence of the NDB and AIIB will mark a new era of development that will greatly complement Western-led development efforts. An increase in the level and diversity of multilateral investment will help to combat extreme poverty in more effective and creative ways.

“I’m optimistic that we are going to get a very different era when it comes to development cooperation. We’re at the beginning of the end of aid-led, Western-funded, post-colonial development,” said Civicus secretary-general Dhananjayan Sriskandarajah in an interview with Devex. “It’s not just about the rich giving charity to the poor through aid. It is about new forms of cooperation.”

In an open statement to the NDB, 44 civil society groups and social movements declared their hopes that the bank will deliver inclusive and participative development, prioritize poverty-focused goals and emphasize human rights and the environment. The signees claimed that these aims are critical if multilateral development institutions are to realize effective results in the coming years.

“Investment cannot bring development if it does not meet people’s needs. The NDB should support inclusive, accessible, participative development that is driven by communities, addresses poverty and inequality, removes barriers to access and opportunity, and respects human rights,” reads the statement. “If the BRICS can help create an institution that lives up to the above principles, they will have done the cause of international cooperation a great service, true to the name ‘New Development Bank’.”

Development experts note that many of the anti-poverty policies currently touted by leading institutions – austerity, privatization and liberalization, to name a few – have not yielded the results that poor and developing countries have hoped for. The emergence of alternative development institutions like the NDB and AIIB could challenge those long-prescribed economic policies.

According to the chief executive of ActionAid International Adriano Campolina, increased competition among multilateral development institutions will only increase the scale and effectiveness of anti-poverty projects in the regions that desperately need them. However, he noted that these institutions must strive to make poverty-reduction policies a focus on infrastructure development.

“Both industrialized and developing economies have been seeing a rapid increase in inequality,” he wrote in an article for Devex. “Development must also, therefore, prioritize policies like fair and equitable land tenure, creation of decent jobs, strong social protection and free access to quality education that have been proven to reduce inequality.”

Campolina and other experts note that in order for the New Development Bank to successfully differentiate itself from existing institutions, it must prioritize the aims of people in poor and developing countries, not those of itself and of its own donors. If it succeeds, it may well contribute to the absolute elimination of extreme poverty and help to develop the infrastructure required for poor countries hoping to make substantial steps in economic development.

– Zach VeShancey

Sources: Devex 1, All Africa, Devex 2
Photo: Merco Press

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Poverty in Mexico – 10 Facts You Should Know

Poverty in Mexico
Even though much of Latin America has been able to significantly reduce poverty, the country of Mexico still struggles. Below are the leading facts about poverty in Mexico. Education about the problem of poverty in Mexico is crucial and will help us remedy the situation.

Top Facts about Poverty in Mexico

  1. Around half of the population lives in poverty; about 10 percent of people live in extreme poverty.
  2. The number of people in poverty has mainly been increasing since 2006, when 42.9 percent of people were below the national poverty line.
  3. Chiapas, Guerrero and Puebla are the states with the highest levels of poverty.
  4. Mexico has a sizable GDP of about $1.283 trillion. Even so, Mexico’s GDP per capita or per person is $14,000. This means that there is a sizable wealth gap in the country between rich and poor.
  5. More than 20 million children live in poverty with more than five million living in extreme poverty, according to Fusion, the United Nations Children’s Fund.
  6. About 25 million Mexicans make less than $14 a day and a quarter of the workforce is underemployed.
  7. The average salary in rural areas is 3 to 4 times less than that of urban areas in Mexico.
  8. Economic growth is commonly believed to decrease poverty. Mexico’s annual growth rate is somewhat small, around two to three percent. Additionally, this economic growth has mainly benefitted the rich.
  9. Drug wars are thought to perpetuate poverty in Mexico.
  10. Despite all of this, Mexico has decreased extreme poverty in the country by 20 to 25 percent since 1995. This is mainly because of social welfare programs that were enacted during economic crises.

Even though poverty in Mexico is a sizable issue, there are certain steps the country can take to help those in poverty. Mexico can focus on decreasing the wealth gap and ensuring that economic growth benefits the poor. Additionally, Mexico can take steps to prosecute drug cartels. This may be easier said than done, but with these things in mind, Mexico can decrease poverty in the country.

– Ella Cady

Sources: World Bank, Huffington Post, IB Times, Poverties.org
Photo: PV

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Rotary International Continues Fight Against Poverty

rotary_international
For the past 110 years, Rotary International has brought together business leaders, philanthropists and other individuals to promote interdisciplinary discussion to find solutions to the world’s biggest problems.

Started in the United States, the group now operates on a global scale. Through monetary donation or helping on the ground, Rotary’s 1.2 million members have positively impacted the world’s poor in a variety of ways.

Promoting Peace, Fighting Disease, Providing Clean Water, Saving Mothers and Children, Support Education and Growing Local Economies are Rotary’s biggest campaigns—made up of thousands of initiatives that work in different, but important, ways. Rotary International recognizes poverty is an intricate problem, and combatting it requires employing a litany of methods that enable individuals and countries alike to attain economic security.

Their greatest achievement is highlighted by the role they’ve played in the worldwide fight against polio. Launched in 1979, Rotary International has contributed $1.3 billion and countless volunteer hours to the campaign to eradicate polio. Since then, the number of polio-ridden countries has plummeted from 179 to three.

In January of this year, Rotary contributed an additional $35 million for immunization efforts that many believe will fully eliminate the disease.

Rotary can be just as effective on the ground. Their Clean Water campaign has provided millions with access to toilets, sanitation facilities and other water infrastructure.

Clean water also has many residual health and economic benefits. Healthy children mean less premature deaths, which stabilizes population growth. It also prevents the spread of infectious diseases, such as dysentery, diarrhea and ulcers. Access to local and clean water allows children to attend school instead of walking miles to retrieve it.

Since Rotary has expanded its Clean Water campaign in Ghana, the country has experienced a stark drop in waterborne diseases. Not surprisingly, 85 percent of Ghana’s citizens have access to a reliable water supply due to the newly drilled wells.

Rotary’s part in ending polio and bringing water security to Ghana are just the surface of what the group’s achievements. Its unique structure creates solutions at the local level, but change on a global scale. Going forward, they will have a substantial role in reducing and eventually eliminating global poverty.

Based on the past century, that role will be in safe hands.

Here is the link to Rotary’s website. Check it out to learn more about their mission and campaigns.

– Kevin Meyers

Sources: End Polio Now, Forbes, Rotary International 1, Rotary International 2, Rotary International 3

Photo: Rotary International

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Changing Migration Patterns in Latin America

Migration Patterns in Latin America
Although immigration is a major concern for policymakers in the United States, immigration and emigration have a significant impact on the economy and communities throughout Latin America.

Over the last 25 years, in particular, migration patterns in Latin America show that immigrants have moved from unstable economies and governments into bordering states that have greater economic stability and prosperity. This continues to be the case in Chile, with migrants flowing in from neighboring countries.

The Southern Cone of Latin America is famous for its continued movement of people across country borders. This region includes Chile, Peru, Argentina and Uruguay. Chile has seen an influx of immigrants, particularly from Peru, since the 1990s. This was the turning point in the Chilean economy and government, transitioning over from a military regime to a more stable, democratic system.

This change in government led to more overall economic stability in Chile, creating more job opportunities and more money per household. Neighboring countries, such as Peru, have not seen such success.

This influx of immigrants has been accompanied by its own issues, particularly with regard to security concerns. Large groups of immigrants easily travel across state borders, because of geographic proximity, as well as insufficient border policies. For example, Peruvian immigrants that have migrated to Chile have created cultural enclaves within cities and populated areas of the country. These transnational communities as they are described have created a concern for not only governments of receiving nations, but also the citizens of said countries.

Social marginalization is one of the biggest obstacles many immigrants of said transnational communities report facing, forcing such cultural enclaves to emerge. This, in a way, defeats the purpose of many immigrants, in search of new opportunities, as they are almost forced to stay within the confines of communities that are primarily made up of other immigrants.

Though this is the case, many immigrants in Latin America continue to migrate to neighboring countries, because despite social and cultural obstacles, many do find more economic potential and opportunities for jobs that they have the qualifications and skillsets for.

Immigration is a concern that faces not only the United States and its borders but also persists as an issue throughout intraregional Latin America. Not only that, but the circumstances in which Latin Americans find themselves make immigration that much more appealing and feasible.

– Alexandrea Jacinto

Sources: Migration Policy Institute, Money Market, Bloomberg,
Photo: Flickr

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Economics and Refugees

Economics and Refugees-TBPWhen there is an influx of people to a new area, in an effort to escape the horrors of war, disaster and other hardships, local economies can be significantly strained. A humanitarian effort to help those in need is beneficial, but oftentimes the number of people in need can create circumstances where it is extremely difficult to provide everyone with their basic needs.

Normally, local economies are structured to provide for a relatively stable amount of people. The equilibrium of local supply and demand is stable, however, when an influx of people grows the demand for all types of goods at once, it creates a supply vacuum. This increase in demand and lack of supply creates a whole host of problems.

Turkey has absorbed about 200,000 Syrians. Many have become beggars, wandering in traffic, looking for spare change and unable to find employment. Others take up trades on the street, taking customers from existing Turkish vendors and businesses. These two cases are examples of the lack of supply and the increase in demand. The beggars along with the increased competition for some small Turkish businesses have created a hostile atmosphere against the Syrian refugees.

Lebanon is a more extreme example of the strain that refugees can put on an economy. One in 10 of Lebanon’s residents is now a Syrian refugee, escaping the war and famine that has eviscerated their homeland. This has created a range of problems similar to those seen in Turkey, however, the magnitude of the number of refugees seen in Lebanon is much worse.

Lebanon is a much smaller country than Turkey, and it is also taking in many more refugees than Turkey. Food prices in Lebanon have skyrocketed due to the increased demand from more than a half-million refugees entering the country in the span of a few years. Electricity was already faulty and has now been hit with a 27 percent increase in demand due to the housing of many of the new refugees. Again, similar patterns are immerging within Lebanon as they did in Turkey.

Just as Turkey experienced similar economic disruptions, the social aspect of the new population has put social tensions on the list of concerns for government officials in Lebanon. Some economists argue that the new populace has actually been beneficial to the local economies of rural areas in Lebanon because of an increase in spending in the local area.

In places like Canada, the effects of refugees are somewhat different. Typically, when developed nations accept refugees from other countries they are not accepting hundreds of thousands at a time. This difference is important because it means that local economies are not strained to the same extent.

A study by the Institute for the Study of Labor found that employed refugees in Canada were no worse off than average. However, the study also showed that the unemployed did end up needing significant government assistance.

The study concluded that refugees were not damaging to the economy and identified discrimination and lack of credential recognition as potential factors in unemployment rates amongst refugees. Better job training programs could help refugees adjust to a new economic landscape and help them integrate into the economic system.

The case of the Syrian refugees is one of the best modern-day examples of how massive amounts of refugees can disrupt local economies. In the case of Canada and other developed nations, it exemplifies how a smaller amount of refugees entering the country does not affect the economic and social situation in ways that are comparable to Turkey and Lebanon.

Context is important to see how refugees can affect local economics, but it is clear is that events that create massive migrations can be harmful to neighboring economies. Perhaps programs that help disperse refugees across more countries could be improved or expanded to reduce the impact that refugees have when overwhelming local areas. Nonetheless, it is important to recognize that it is in everyone’s interest to take in those in need and help them adjust to their own new realities.

– Martin Yim

Sources: New York Times, Reuters, Institute for the Study of Labor
Photo: Flickr

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Costa Rica Looks Beyond GDP in National Happiness Index

Costa Rica Looks Beyond GDP in Gross National Happiness Index

Earlier this summer, the National Teacher’s Cooperative of Costa Rica released its inaugural Gross National Happiness Index. Their results mirror what the Sustainable Solutions Development Network’s World Happiness Report and the Gallup Poll’s 2014 State of Global Well-Being Rankings find: Costa Rica’s citizens are generally happy. However, the fact that this index was compiled and published is of greater significance than the results it contains.

The acute and unwavering commitment to Gross Domestic Product (GDP) as the ultimate telltale for societal well-being has been distorting policies and steering resources away from sustainable and equitable growth since the Great Depression.

This skewed developmental path has resulted from GDP’s narrow focus on output. GDP, and more specifically its fundamental adherents, has its blinders on an array of other important benchmarks like health, quality of education, altruism and prosocial behavior, environmental health, gender equality, level of social connectivity and support networks, and, of course, financial status.

In other words, the GDP school of thought assumes increased output equals increased income which leads to societies being better off. In a broad, general and abstract sense this seems correct, but it does not hold up in the real world.

A more nuanced approach is required to get humanity back on the right tilt, to allow a better balancing of social, economic and environmental progress. Social scientists are working hard to discover just what makes people happy and societies well off, and how to do so. Their findings may inform a new era of enlightened public policy.

The good news is that when humankind sets a target, we get better at hitting it. We learn how to remove barriers to improvement and shift gears to meet the goals. A whole suite of tools—financial, economic and social—can be tweaked and set in motion to guide and support progress toward an objective.

Costa Rica’s effort to measure their citizens’ happiness marks a trend that has been incubating since 1972, when the King of Bhutan began measuring Gross National Happiness, GNH, instead of GDP. In 1990, the United Nations initiated their Human Development Index, measuring a variety of quality of life indicators. In 2010 Britain declared their intentions to study happiness as well as GDP, and global metrics of happiness and peace, including the World Happiness Report, Global Well-Being Rankings and the Global Peace Index, are on the rise and gaining prestige.

The growing importance of these indicators is a promising sign of a shift. Costa Rica’s high level of happiness and their new effort to measure it should be applauded and replicated by the international community.

– John Wachter

Sources: Foreign Policy, Tico Times 1, Tico Times 2, World Happiness Report
Photo: TicoTimes