Archive for category: Economy

Information and stories about economy.

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More than Moved

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In the midst of international mourning for Nelson Mandela and in an attempt to drive home the message of International Human Rights Day, a Brazilian NGO posed a provocative question on Tuesday, December 10.

A billboard designed by Conectas Human Rights, featured an image of Nelson Mandela and the question, “Do you feel moved by his legacy?” The text then urged the Brazilian population to act upon their emotions and “Do more than be moved.”

This campaign is driven by recent public opinion polls that reveal a negative feeling toward human rights issues in Brazil and support for more stringent laws and regulations.

Respondents to surveys administered across 134 municipalities in June 2013, support the reduction of maximum crime penalties from 18 years of age to 16, based on a belief held by 60% of the sample population that criminality is the result of ‘bad character.’

Moreover, the Datafolha Research Institute released data that reveal 26% of self-identified conservative-leaning respondents believe that homosexuality must be discouraged by society as a whole, whilst 33% believe that poverty is the result of laziness.

These emerging public opinions are linked to a reduction in funding for human rights groups, namely through foreign aid.

Brazil is widely considered to be an emerging market, the country’s role as 2014 World Cup host is evidence of this image but it disguises the fact that a growing economy does not automatically address human rights issues as seen through the need of foreign aid in assisting structural development.

It is estimated that 60% of the country’s NGOs relied on foreign aid for 80% of their budgets in 2003. Between 2008 and 2009 this aid decreased by 30% and again by another 49% in 2010 alone.

Executive Director of the Brazil Human Rights Fund, Ana Araújo, reminds us that Brazil was marked by dictatorship as recently as 30 years ago, a type of legacy that differs greatly from the one being celebrated across the globe on International Human Rights Day 2013.

Araújo argues that domestic support for human rights groups is the next, though not imminent, step, suggesting that emerging powers require more support, not less, to ensure that their emergence is ‘just.’

– Zoë Dean

Sources: Global Voices Online, Universo Online: CNT, Universo Online: Rightist Leanings, Open Democracy

Mixed Policy for Banks in India

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Raghuram Rajan took office as the governor of India’s central bank in September. His liberal vision of India’s financial sector was meant to boost economic growth and help the poor. In 1969, India’s former prime minister, Indira Gandhi, nationalized most of the banks in India. Since India’s presidential election in 1969, there have been many reforms to the country’s banking system, but the system is a mix of new liberal policies and right-wing conservative policies, creating an ambiguous mixture that is India’s current banking system.

The Reserve Bank of India’s (RBI) hybrid system may promote social inequality and create an unstable economic atmosphere. Many problems plague India’s banking sector, including bad debts, low bank reserves and mediocre capital levels and the fact that only 35 percent of adults have bank accounts.

At least half of all rupee trading is abroad, and two large foreign banks in India have operations that are 1.9 times bigger than their local counterparts. RBI’s hybrid system may promote social inequality and create an unstable economic atmosphere. The difficulty and lack of opportunities to save money perpetuates poverty and makes it hard for the government to collect taxes.

The RBI’s growing independence has led to the Bank no longer setting the interest rates that banks must charge. However, the system controls the assignment of credit, requiring banks to invest 23 percent of their deposits in government bonds and save an additional four percent with the RBI.

The rules that govern the debt market mean 58 percent of banking system deposits are based on government preference. Rajan’s position at the RBI creates hope for extending finance to more Indians. New banking laws will make it easier for foreign banks to expand, provided that they set up local subsidiaries that the Indian government can regulate easily. One of Rajan’s goals is to methodically end the way that banks are forced to purchase government debt. In addition, Rajan has vowed to make new rules that will stop business magnates from exploiting the country’s fragile banking system and force banks to recognize debts that would otherwise sour.

– Daren Gottlieb

Sources: The Economist, Rediff News

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Global Unemployment

Global Unemployement
Many countries measure their unemployment rate differently. However, unemployed people are individuals who are actively seeking for job but could not obtain jobs. Reason for unemployment varies from economy downturn, and changes of particular industry to lack of required skills.

In third world countries, global unemployment is cause by overpopulation and lack of education. Unemployment rate is one of the biggest indicators of the economy, but it is also one of the biggest indicators of poverty. Countries with high unemployment rate normally have high level of poverty.

An example of the relationship between poverty and unemployment rate is Greece. In 2008, Greece unemployment rate was 7.7%, but after the economics crisis, the unemployment rate rose to 23.8% in 2012. The same situation is spotted in Spain. Spain’s unemployment rate in 2012 is 24.9%. Even though these numbers are high, but African countries are at alarming levels. Some high unemployment rates in Africa are: Kenya (40%), Congo (49.1%), and Djibouti (59.5%).

In the United States, the unemployment rate is only 7.7% in 2013, but it results in slow economic recovery and more people each day is living under poverty level. With only half of the population employed, these countries do not have enough income to distribute among all their citizens.

Half of the people are unable to support themselves with adequate shelters, food, and medical supply. In developed countries such as the United States, the government offers welfare for unemployed citizens to maintain the standard of living. However, in developing countries, welfare programs do not exist or are very limited. Unemployed individuals are struggling every for their basic needs.

When the world economy is recording due to the emerging market, many people are still suffering from the impact of the economic crisis.

– Phong Pham

Sources: Huffingtion Post, International Labour Organization, Trading Economics, Global Finance

10 Global Trends for 2014

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The World Economic Forum recently published a report answering the question, “What are the top trends facing the world in 2014?” Based on a poll of 1,592 leaders from academia, business, government, and non-profits, the report determined 10 global trends to expect in the coming year.

1. Increasing Tensions in the Middle East and North Africa

For the post-Arab Spring countries, promise and hope has given way to uncertainty. A debate continues about whether or not to keep religion and government separate while unemployment persists. The report recommends an entrepreneur-friendly climate to help promote economic growth for the masses, which in turn would build stability.

2.  Widening Income Disparities

The gap between rich and poor is a major challenge for most of the world. The problem is seen as the most pressing issue amongst North Americans.

3. Persistent Structural Unemployment

History has shown that chronic joblessness is tied to social unrest, especially among a young generation growing up in hopelessness. A solution: train and offer mentorship to young adults so that they could develop in roles that show promise for career growth. Governments should create incentives for companies to create jobs and invest in their workers.

4. Intensifying Cyber Threats

Emerging technologies are outpacing security. Technology allows us to operate remotely more than ever, but our vulnerabilities to hackers increase. Rather than attempting to prevent all possible forms of hacking, the report suggests that we ensure that it’s not catastrophic to get hacked.

5. Inaction on Climate Change

There is action and attention towards climate change, but not at the scale that is needed.  For example, there is $1 trillion of cumulative investment in renewable energy. However, $1 trillion per year is needed.

6. Diminishing Confidence in Economic Policies

The pop of the American housing bubble retrospectively revealed the deficiencies in US economic policies. The Pew conducted polls across the globe that showed people voicing similar widespread concerns about economic conditions in their countries. Europeans were particularly disillusioned.

7.  A Lack of Values in Leadership

People in Latin America and sub-Saharan Africa do not trust that their leadership, even when elected, will act in the interest of the common good. Free press is important for promoting accountability along with the sharing and understanding of various values.

8.   The Expanding Middle Class in Asia

More than any other region, Asians are hopeful about the economic prospects for the next generation. This is a result of free market reforms, investments in science, technology and education, a culture of pragmatism, meritocracy, and peace, and a strong the rule of law. Nonetheless, there is a need to make sure this generation of Asians does not negatively impact the global environment more than it needs to.

9.  The Growing Importance of Megacities

According to the United Nations Population Division, more than half of the world’s population lives in urban areas. By 2025, there will be 35 megacities in comparison to 22 in 2011.

10. The Rapid Spread of Misinformation Online

One-third (30%) of the world’s youth have been active online for at least five years, according to the International Telecommunication Union. Social networking has also spread around the world. Rumors fly easily when there are 1 billion tweets produced every two-and a-half days

– Maria Caluag

Sources: Pew, World Economic Forum
Photo: National Post

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China and Senegal Grow an Economy

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A growing number of Chinese migrants are working in Africa due to economic growth in recent times. While many world officials claim China’s relations with African nations are heavily linked to exploitation of resources, such as Africa’s gold, diamonds, timber and oil, China has since the 2000s began migrating to nations without these resources.

Notably, Chinese have migrated into Senegal. Senegal has good economic stability and attractive location in West Africa.

These factors are suitable for China’s workers to invest in Senegal. The motivations behind the Chinese workers as a whole are business-rooted. Senegal’s compliance to work with the Chinese is based on a desire to seek diverse investment opportunities and trade partners, as well as an improved position in international affairs.

With the large Chinese presence in African nations, Chinese traders have created competition among the migrants. This competition has forced many workers to expand into other business sectors, thus supporting the economic growth.

Historically, China and Senegal have had international relations with each other since 1971, (with a gap between 1996 and 2005, where Senegal acknowledged Taiwan) the growth of Chinese migrants traveling to the nation increased greatly in 2005. Today, most Chinese in Senegal are completing state work in infrastructure, communication, mining, and oil.

The business relationship still remains unbalanced, however. The Senegalese imports are very small compared to the Chinese exports to the West African nation. However, officials know this is common for Chinese relationships with African nations, and this is just another example of how China’s economy wields strength and influence.

To visualize, in 2010, China and Senegal reached $549 million, where China invested $45 million in Senegal, primarily within the infrastructure sector.

In late September of this year, the Chinese ambassador to Senegal, Xia Huang said China is looking for ways to share its developmental experience and knowledge with the Senegalese to boost further their emerging economy. The ambassador explained how the relations between Senegal and China are still growing in a positive way.

At the celebration of China’s National Day on October 1st, he said Sino-Senegal relations had, “remained fruitful, tangible and has continued to give concrete results to the Chinese and Senegalese people.”

In addition, Xia mentioned that even though China is the second largest economy in the world, 100 million Chinese people are living below the poverty line. Concluding, Xia said by the year 2021 Chinese officials will double the nation’s GDP.

– Laura Reinacher

Sources: All Africa, Migration Information
Photo: Forum on China-Africa Cooperation

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Tujijenge Tanzania Helps ‘Build Africa’ through Microfinance

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Tujijenge Tanzania is a microfinance company based in Dar es Salaam, Tanzania. Founded in 2006, the organization is both the largest and fastest growing microfinance institution (MFI) in Tanzania. Broadly speaking, MFIs are companies that provide financial services to low-income individuals, or that provide services in areas without access to “typical” banking. They operate off of the idea that poverty-stricken individuals can remedy their own situation if given access to financial services.

Today, Tujijenge Tanzania is part of the larger, not-for-profit company Tujijenge Afrika, a Swahili name that roughly translates to mean “let’s build ourselves, Africa.” The company was founded by six microfinance practitioners, who now serve on its board of directors. The founders sought to remedy a problem that they observed in African society by employing their own skills. That is, 90 percent of the country does not have access to financial services. They saw that few MFIs existed, forcing residents to rely on expensive banking alternatives that perpetuated a lifestyle of poverty.

Tujijenge Tanzania aims to provide financial help to individuals, both men and women, who are engaged in all manner of small businesses, ranging from stationery shops to restaurants. The company operates by sending Loan Officers into local communities to give presentations about their services. Interested individuals then form groups of up to 35 members and receive four weeks of training from the Loan Officers. This includes instruction on lending methodology and creating viable business plans. During this period, the group must satisfy several requirements, including electing leaders and opening an account with a commercial bank (the company partners with both Bank of America and Kenya Commercial Bank).

Furthermore, every member is required to save 20 percent of the expected amount of the loan during this training period. This serves the dual purpose of teaching the discipline of making weekly payments, as well as demonstrating that the individual is engaged in a serious, capital-generating business. Upon completion of the training period, if all requirements have been met, the group can make a formal application for a loan. After receiving the money, the group will continue to meet every week, both to make repayments and to discuss general business issues and practices.

Beyond making loans to small business owners, the company is also engaged in a wide variety of product development. Currently, Tujijenge Tanzania is in the process of developing a mobile banking solution for their clients to help serve those in less accessible areas.

In the past, they have developed both solar loan and agricultural loan models in collaboration with organizations such as Oxfam. They have also engaged in market research in the promotion of medical and life insurance all around Africa.

– Rebecca Beyer
Feature Writer

Sources: Tujijenge Afrika, KIVA

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Where Walmart Won’t Win

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Walmart has sales reaching over $135 billion in 26 countries outside the United States making it the world’s biggest retailer. It’s also the world’s largest public corporation when ranked by revenue.

It has shattered the expectations of many small businesses that have either opened in a Walmart’s vicinity or have had a Walmart take over the local community. It’s a seemingly unstoppable force in the retail business. But looking abroad to several of the world’s largest economically sound countries, not a single Walmart store can be found.

On October 9, 2013, Walmart announced that it was breaking up its corporate partnership with Bharti Enterprises, which hints to the dissolving of its vision of opening up hundreds of stores throughout India. Scott Price, head of Walmart Asia, referred to the breakup being fueled by “poor investment conditions.”

This is a deeper issue than pro-small business owners and supporters celebrating over this breakup. When an individual, group, or corporation ascends to the heights that Walmart has in its respective niche, competition has no choice but either to compete and take a tiny share of the market or to hope that the empire crumbles.

While this decision by no means points to Walmart losing its stranglehold on the retail market, it sends a sign to most investors looking to put money in Southeast Asia. If Walmart is backing out and cannot make a steep, yet potentially rewarding investment, how can others?

Russia is another market Walmart has not tapped. For six years, Walmart has been in talks with a Russian-based company to join a partnership that would ease Walmart’s entry into the bureaucratically strict nation. Germany and South Korea are without Walmart stores, as well. Walmart was present in both nations until 2006 when it shut down all operating stores.

For Germany, it was a rather strange issue that possibly stems from cultural and sexual repression. German men did not like when Walmart clerks handed their groceries to them and smiled as they were leaving the store. They believed the friendliness was a sign of flirting which made them uncomfortable. South Korea has also found it hard to house a Walmart chain, as it preferred to stock electronics and clothing as opposed to food and beverages, which can be bought at local markets.

This is not a loss for Walmart as much as it is a rattling in its marketing process. This shake up abroad almost seems like collusion between governments not wanting to take away domestic profits from local businesses, and can anyone blame them?

– Sagar Jay Patel

Sources: Business Week, New York Times
Photo: Chieforganizer.org

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Africa’s Rising Middle Class

Growing Middle Class in Africa
The middle class is essential for economic and democratic growth. The continent of Africa, consisting of 54 independent countries, contains the poorest countries in the world, according to the human development index created by the United Nations. However, over the last 15 years, the middle class in Africa has grown.

As the middle class expands, so does consumerism. The growth of the African middle class not only means more stability for Africa, but also more profit for American businesses. More of the African population is buying televisions, cell phones, and leisure and entertainment items, which Western companies provide.

But, how is the African middle class defined? In the U.S., there is a struggle to define the middle class. However, it is clear that those earning about $20,000 to $120,000 a year would categorize themselves as middle class. In Africa, the range is quite different. The middle class consists of those earning $2-$20 a day, or $730-$7,300 a year.

A strong and large African middle class is beneficial. The African middle class consumed approximately $680 billion in 2008, consisting of nearly a quarter of Africa’s GDP. At this rate, Africa will comprise approximately 3 percent of worldwide consumption by 2020, with about $2.2 trillion of consumer spending. The middle class will help grow the economy as they have more income to spend and can invest more of their finances in health and education. However, 60 percent of the African population continues to earn a meager $2-$4 daily.

Those in this floating class, earning $2-$4 a day, are at risk of leaving the middle class and descending into poverty. This represents 180 million people. The floating class could slip into poverty very easily; a job loss or the death of the head of household could cause the slip. Therefore, a balancing act is required to help grow the middle class while also preventing the floating class from slipping back into poverty.

Policies that focus on both human capital development and job generation will ensure the growth of the African middle class. Continued improvements in governance, better access to technology, the rapid spread of mobile telephones, and the better use of natural resources are necessary. Additionally, social changes and policies that focus on education and health will work to support those earning $2-$4 a day.

The U.S. should continue investing in Africa through aid. History demonstrates that the U.S. benefits greatly by assisting poorer countries. For instance, from 1960 to 1974 the U.S. provided South Korea with $5.6 billion in aid. In 2010, the annual U.S. export to South Korea was $38.8 billion. But this is just one example. Find more information about the benefits of reducing global poverty here.

Now is the time to increase the investment in Africa. As the middle class is beginning to grow, investment in Africa will result in a more stable economy, growth of democracy, and an increase in consumerism. Both the U.S. and Africa will benefit from building a strong middle class throughout Africa.

– Caressa Kruth

Sources: How We Made It In Africa, UN Development Program, The Borgen Project, National Geographic
Photo: Forbes India

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Pressure on Developed Nations to Contribute More Aid

Leaders have begun to discuss what will replace the Millennium Development Goals once they reach expiration in 2015. Mukhisa Kituyi, the new secretary general of UNCTAD, the UN Trade and Development body, stated that aid-flows from wealthy nations were drying up and that developing economies must contribute more in order to assist the poorer nations.

Kituyi, who took office last month, urged Brazil, China, and other emerging economies to take responsibility for the fight against extreme poverty. “From Brazil to China, while they have shown a willingness to invest in economic infrastructure – the construction of roads, railways, and ports – that capacity should also extend to the construction of social infrastructure,” he said.

There has been constant pressure on developed nations to contribute more aid in both reaching the Millennium Development Goals and ending extreme poverty; however, Kituyi’s call for action represents one of the rare voices asking the developing nations to pay tribute as well.

UNCTAD, which was formed in 1964, is seen as the intellectual counterweight to the World Bank and the IMF, urging even more liberalized trade and deregulated finance. However, in recent years, some of the organization’s staff members are increasingly concerned about Unctad’s future. Kituyi claims that he is determined to boost the organization’s reputation, and is especially concerned in taking part in the formation of what follows the Millennium Development Goals.

– Sonia Aviv

Sources: The Guardian, International Development News, News 168
Photo: The Habari Network

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Inflation and Food Shortages in Venezuela

For residents of Venezuela, food and grocery shortages have become a part of daily life. Outside of many government-subsidized grocery stores, people line up before dawn hoping to purchase what they can before supplies run out. Items such as milk, meat and toilet paper are bought up quickly. The shortages have lasted for more than a year, prompting calls for President Madura to reevaluate the economic policies of his predecessor, Hugo Chavez.

Though Venezuela is one of the most oil rich nations in the world, it is struggling to mitigate inflation and keep subsidized grocers stocked with products. Many experts say that strict price controls are to blame for the country’s economic problems, while President Maduro insists that it is all part of an effort by the opposition and CIA to destabilize the government and sabotage Venezuela’s oil industry.

Asdrubal Oliveros, an economist at one of Venezuela’s leading consulting firms, told the Guardian that the current crisis is the result of several factors, which include the country’s overreliance on imports and the government price controls. Another factor is the decrease in agricultural production due to the government’s recent land expropriations. “It’s cheaper to import than it is to produce,” Oliveros said. “That’s a perverse model that kills off any productivity.”

Many economists echo Oliveros analysis, saying that the Venezuelan government is not helping the problem by fixing prices so low. When prices are set low, companies and producers are not able to make a profit—this, in turn, leads to a cessation of farming, manufacturing, and production. Originally designed to help Venezuela’s poor and working classes afford food and staples, the price-fixing program has instead led to empty shelves and long queues.

After becoming President of Venezuela, Hugo Chavez and his ministers sought to reduce the growing wealth disparity in their country. To achieve this, they implemented price controls on certain goods so as to make them cheaper for individuals and families with lower incomes. This step and increased spending on social programs, however, may be contributing to the country’s current economic crisis.

Aggravating the problem is the fact that inflation is increasing at an alarming speed. In August, 12-month interest rates rose to 45.4 percent. This is the highest since Venezuela’s hyperinflation crisis in the mid-1990s. Officials in Maduro’s government have said that they will be considering changes in the country’s economic policies in an effort to combat the rising prices and food shortages in Venezuela.

– Daniel Bonasso

Sources: The Guardian, New York Times, Wall Street Journal