Clearly
in the world are happening political, economic and social changes, so
from this blog we want to give the reader an idea of how this
metamorphosis affects international trade, but above all, we want to
provide information so as to form with realities implicit in the day
and usually we are not able to see. In this article we express our
personal opinion about what some developing countries should do to be
definitely developed based on commercial export potential from its
wealth of natural resources which must be increasingly transformed
into finished products.
The
Theories how things work dating from long ago and are not innovative.
Daniel Defoe in 1725 described how the Tudor monarch, Henry VII (
1485-1509 ), transformed England from an exporter of raw wool in a
woolen factory products around the world through policies
characterized by protectionist measures to the domestic industry and
high rates of tariffs on wool coming from abroad. Ulysses Grant also
described how England for two centuries had trusted and applied an
extreme protection measures with satisfactory results to which they
owed their strength, until the protection had nothing to offer them;
back then, Ulysses proposed that the United States once had obtained
everything possible form the protection, would adopt free trade and
we know that since 1872 overtake the UK as the world's first economic
power. In 1885 Friedrich List did a simple exemplification of what
the doctrine of Adam Smith professed, using the idea that a country
use a ladder to climb a peak of unattainable glory for encouter a
situation of advantage over the rest and once there, kicking away the
ladder by which it has uploaded thus depriving the rest of climb by
the same ladder. Objectively, these measures had consisted in raise
industrial power and capacity of the country's international trade
through protectionist tariffs and restrictions to such a degree
developmental which no other nation could sustain a fair competition
against them, and from that moment, wisely eliminated these measures
out and preached to other nations the benefits of free trade,
obviously assuming that the previous approach was wrong and was now
on the right track. Let us not forget what we explained in the
article "Unraveling the ins and outs of International Trade",
where we analyzed how the United States again in 1973 unilaterally
imposed its currency under the false premise that they were the
largest economy given their commercial ties extended worldwide, when
really were in bankrupt and could not maintain the Bretton Woods
agreement, already that they could not continue the convertibility of
dollar to gold, so they let fluctuate loosely the dollar against
other currencies and declared their non-convertible currency with
gold. This situation, in which most countries were also forced to
abandon the gold standard for the dollar standard, allowed the United
States continue its hegemony at the expense of widely unequal
distribution of growth with the rest of the world from which obtained
their riches by paying with its own money.
Now
and since the financial crisis, many experts predict the decline of
the U.S., such as the Algerian intellectual Sami Nair, who recently
said that the U.S. has already started to decline slowly and
eventually reorganizing the apogee in three possible actors: China,
Germany and Russia, by sharing the power among different nations. In
his analysis finds that in Europe has happened to lead Germany more
than France, being more evident from the euro crisis, because at the
start existed more strategic parity between them. There is no doubt
that Germany is a power of global leadership, leaving in Europe on
background both France and UK, and may even talk as an equals with
the United States 70 years after the end of World War II based on
explained in our article "The European market and German engine".
However, Ukraine put at risk important economic issues, such as
enlargement of the area of influence of the European market and
Germany's energy dependence on Russia (see "How the conflict of Ukraine affects international trade").
On the other hand, France still on the side of the rich, has run
aground, so no surprises in the streets complete unanimity against
Europe, having gained in the recent European elections an anti
European party. One thing that burn also the alarms is that of the
500 global companies created after 1975, less than 5 are European.
Europe is now divided, some like Germany who want stability and low
inflation, and others such as Spain and Italy, they need growth and
inflation to ease their debts. This implies that the discontent grow
up in several countries. The explanations of why it has come to
nostalgia and discontent lie in the relative decline of Europe from
China and other emerging powers in the inability to establish a
democratic system of participation and control that allows citizens
feel represented, and in the German strength. In its favor, Europe
has the most amazing culture and diversity of the world able to be
the seed of growth for technology companies, because the culture
allows communication between people. Also, it is an ancient continent
that has largely developed despite differences, stay united and which
has received U.S. support since World War II, therefore, Germany
would not achieve to be world power for us. Russia with its current
political leader, Vladimir Putin, has taken a leading role in the
international context showing a growing estrangement from the
European Union and the United States, so we hope that these new
developments do not accrue over time on military conflicts that are
definitely a detriment to the societies of the countries concerned,
so we don´t believe that they play a major role as a world economic
power leaving a greater role to China.
Analyzing
China, since 2009 has surpassed the U.S. as the largest energy
consumer in the world faster than was expected because was unaffected
by the global financial crisis. Its per capita energy consumption is
about one-third of the average of the OECD countries giving us an
idea that consumption will continue growing in so far the country
continues growing economically. Energy demand would have been much
higher if the Chinese government had not put the effort required to
slow the amount of energy required to produce a dollar of GDP (energy
intensity), investing in energy efficiency with the development and
implementation of renewable energy. As well, China also managed to
overtake U.S. in renewable energy investment according to a study by
the Pew Charitable Trust (invested 36 billion dollars compared with
almost 19 billion of the U.S.). It also outperforms Spain like third
worldwide wind power capacity with 20GW of installed wind power and
starting to concentrate more on nuclear power instead of coal power
plants. Also, buyers and Chinese companies aspiring to become in the
largest landowners in the U.S. and have begun to flood Detroit
(nicknamed the Motor City) and formerly known as the largest
industrialized city in the world to record the highest per capita
income of the country, but today is the largest bankruptcy in U.S.
history. In order to leave their private hell, the governor of
Michigan, Rick Snyder, seems to be convinced that China can play the
role of savior for this city so it would request 50.000 special
federal immigrant visas in the next five years to attract
professional foreigners willing to work and live in the city, being a
reality that many Chinese companies are already taking root in
Detroit investing in U.S. companies with new technology in vehicles,
selling everything from seat belts until the shock absorbers in
retail stores. At the same time, hire engineers and experienced
designers in an attempt to acquire the talent and experience of the
U.S. automakers. At the moment where China would be overtaking as
first power to the U.S., is acquiring in the last years massively
European technology and elsewhere, reason why some submits that if
bases its growth on a model to copy and buy technology, ever going to
have a society based on entrepreneurial knowledge, but clearly are
undertaking with their particular way of doing things and are
successful.
Very
recently, the World Bank made a report indicating that China will
overtake the U.S. as the world's first economic power later this year
to five ahead of schedule. According to the report based on data
collected through 2011, China's GDP, adjusted for purchasing power
parity, is much greater than what had been previously estimated ,
since the end of 2011 accounted for 87% of GDP U.S., while just six
years earlier was 72%. Moreover, the IMF estimated that in these four
years China will have accumulated with growth of 24%, compared to
7.6% in the U.S., and this information confirmed, would mean that
this year China overtakes U.S. as world's largest economy in these
terms. This recalculation break the IMF forecast estimated that this
would happen in 2019, again on the basis of eliminating the exchange
rate on GDP, since, if said calculation shall be done in current
dollars, neither the World Bank nor the IMF expected this to occur
throughout the decade, because the U.S. is still double that China.
For its part, the Chinese Statistical Institute disagrees with the
methodology applied to the calculation, rejecting the results mainly
from their authorities, as if wishing not be the world's largest
economy. These Way of measuring GDP, making it a national economic
indicator eliminates the impact of the exchange rate in their
calculation, since it becomes a common currency so that the parity of
purchasing power is a more direct measure that exchange to determine
the purchasing power of money. Thus are measured major economic
aggregates in terms of what a currency (dollar or euro) is able to
buy in each country, however, some experts (Arvind Subramanian and
Martin Kessler of the Peterson Institute) doubt that this indicator
serves to asseverate that China is the new world economy. Anyway,
these experts say this new calculation ensures that the Chinese
currency is trading in their rigth value allowing to be the basis for
development of the Chinese economy that so far was based on a
depreciated currency to boost exports, but nevertheless, if now
approved the internationalization of the yuan, would have a dramatic
impact on the world economy, while the U.S. It remains and will
remain the major player in the global financial system. Returning to
the comparison in current dollars asserts that China remains a much
poorer country than the U.S. because the Chinese per capita income
amounts to just a fifth of the U.S., even when adjusted for
purchasing power. The dominant countries like the UK and the U.S.
always been rich countries, so there is no precedent and in which
case if this happens, also would put in front of the economy a
country without a democratic political system.
Another
noteworthy event, took place at the annual meeting of the Bretton
Woods Committee this year, where the director of the International
Monetary Fund, Christine Lagarde, spoke about the importance of
reforms during her tenure noting that the IMF has had to adapt to new
circumstances delivering nearly $700 billion in loans with assistance
in 150 of the 188 member countries. She questioned by the lack of
foresight of the financial crisis, hid behind the problem did not see
it obsessively, citing a document published before the crisis where
the previus IMF managing director highlighted some of the risks that
were emerging, without them to be perceived with great importance
clearly showing the fund culture to avoid taking risks and blames. At
this same committee meeting of Bretton Woods, the World Bank
President Jim Yong Kim, referred to the book by Thomas Piketty who
points to two main forces that has brought the world to convergence:
the dissemination of knowledge and the investment in training. He
explained that the World Bank during the crisis was focused on
emergency assistance by putting at its disposal their resources to
those who needed. At this meeting he pointed out that they are
wondering why do something in one country can cost three times more
than in another, when in our view an institution like them, should be
clear at this point and if not should check with international trade
experts. However, we see of interest to explain the novelty of the
World Bank and the International Finance Corporation (IFC), are
working to create capital markets in emerging countries through the
sale of bonds abroad in local currencies for national investors and
international (they have already issued 8.5 billion dollars in 19
currencies since 2011). The emissions are either focused on the
financing of specific issues, stimulating economic activity and
developing emerging markets for the benefit of local governments and
businesses. These bonds are issued by IFC which is a supranational
institution with AAA rating, helping to create capital markets by
attracting investors such as pension funds that want to put their
money into low-risk investments, generally having excess subscribers.
This was born two years ago in the Dominican Republic for finance
businesses and homebuyers, collecting with the issue of a bond in
local currency, money of the Dominicans pension funds to develop the
private sector in the country and continued to expand this process in
many of the least developed countries.
There
is talk that Latin America, as current largest net exporter in the
world and composed by least developed countries, it could provide
food for nine billion people in 2050 and thus become the granary of
the world according to a study by Global Harverst Initiative (GHI),
which only would be possible to reach if apply the politics key in
pursuit of agricultural productivity. Both Latin America and the
Caribbean can count on the third of the freshwater resources in the
world and large tracts of land with great potential for cultivation,
however, have only achieved a fraction of its potential to increase
agricultural production weather for the regional consumption and for
the worldwide export. Latin America has great potential to help meet
in a sustainable and productive way, the increased food demand,
grasses, fibers and fuels of our planet, simply by starting an agenda
for agriculture friendly policies to attract investment and
innovation necessary to become in a global pantry of the XXI century.
Currently, Latin America and the Caribbean accounted for 11% of the
value of world food production and accounts for almost 24% of the
world's arable land. According to some experts, owns 28% of the
world's land is considered medium-high potential for sustainable
expansion of cultivated area and 36% of the earth is only about six
hours of local markets on average. Noteworthy that in one of our
articles we talk about "China: a great opportunity for Latin America",
where we explained that the Chinese trade has increased by 21 in the
last 12 years being this country one of the major players in Latin
America. However, this commercial growth does not benefit their trade
balances because the growth of the exchange is reciprocal, where
Latin America mainly sells raw materials and China sells its simple
manufacturing technology. We also explained the need for Latin
America to change the current trend, where 80% of its foreign trade
is with countries outside the region, being necessary to increase
intra-Latin trade in their manufactures because it would be in a
percentage of 20% taking still long way to go, while the intra-Asian
trade would be 53%. For their part, African countries with rich
mineral soils are also among the poorest countries in the world,
being underdeveloped or developing countries, where 80% of its
exports are commodities. China is the third most important partner in
this continent having interest in resource-rich countries like Angola
for their oil and a few other countries for their minerals. U.S. and
Europe also have investments in these countries through general
construction and exploitation of hydrocarbons as minerals, but China
win in influence. Currently, Nigeria comes hard on the continent
given its rapid growth in the oil, agriculture and minerals sectors
but not without problems of social stability.
In
the last months there have applied various sanctions against Russia
by Europe and the United States without being able to preventing
Russia from continue with its foreign policy to propose a change in
the monetary standard used, so there are now at least 40 central
banks of various countries that manage stocks of Chinese currency
(the yuan) and many others have reported that will continue with the
trend. The data emerges from the report submitted by South China
Morning Post where manifiested the existence of 40 central banks that
invested in the Chinese Yuan and that this figure is increasing,
which allows to conclude that China's currency is becoming in a
global reserve asset. Some of the 40 central banks belong to the
following countries by continent detail: In Europe, Austria, Norway,
France and Lithuania; Asia, Hong Kong, Indonesia, Japan, South Korea,
Macau, Malaysia, Nepal, Pakistan, Singapore and Thailand; Oceania,
Australia; South America, Chile, Bolivia and Venezuela; and Africa,
Kenya, Ghana, South Africa, Nigeria and Tanzania. In addition,
African countries can already get direct money from China given its
growing commercial ties. Already been opened in Frankfurt trading
zone where only partipate euros and yuan, which accentuate the clear
trend decline in the USD as reserve, since in 2013 accounted for 33%
of global currency reserves in dollars while in 2000 were 60% of
existing reserves. Although the IMF fails to disclose the percentage
of yuan treasured as reserves, someone comments that the figure per
hold reserves in other currencies grows by 400%. China and Russia
have already signed an agreement that Russian energy exports will be
canceled in yuan by China marking the tipping point to the hegemony
of the dollar as the universal currency. In the case of China, its
currency strengthens the reasons of being a world reserve by the real
commercial ties with Africa, Asia, Europe and Latin America being in
our consideration an economic power. We believe this trend should be
deepened with many Latin American and African countries should join
this process of change taking other reserve currencies and fixing the
price of their raw materials in other currencies. The countries of
Latin America and Africa are rich by the natural resources they
possess and their capacity as sources of food, especially Latin
Americans since the industries of processed products in developed
countries would not be anything without raw materials from developing
countries. We do not want to make communism apology, but with the
capitalism must be the existence of a better wealth distribution, and
this requires a change that couldn´t be possible with the currency
that suppressed the potential of the rich countries for their
resources and are now under development, but poor due to the actual
speculative and financial monetary system. If already exist
operations where American interests are absent, why not start the
change fixing these raw materials and products in strong currencies
of the countries involved in the operation allowing a greater
monetary stability regardless of speculation. Latin America should
seek a monetary union similar to Europe further tightening their
economic policies and trade ties between the countries of the region.
At the meeting held this year on the tenth anniversary of Fernando
Henrique Cardoso Institute (IFHC) in Sao Paulo, the meeting political
leaders, asked unanimously that Latin America would speak with one
voice on the international stage and we believe it would be time to
do it.
In
conclusion, of datas presented we understand how America became a
power with the protectionism and later with the imposition of its
currency. The financial crisis is the turning point in the decline of
USA and no posibility to Europe with Germany leading the way, as well
as, Russian that favors to China who take a leading role on the world
stage. Then is China, who will play a vital leadership as potency in
the world economy. We believe convenient by the data supporting of
the just price from Chinese currency, which mainly the developing
countries will change the dollar standard to yuan standard gradually
through commercial exchange with China. Latin America should lead
their union and establish a joint currency that would be backed by
natural resources and productive capacity of food. This currency
could boost it in the capital markets by selling bonds to domestic
and international investors to finance mainly technology industries
efficient and responsible to the environment, allowing greater
transformation of raw materials into manufactured products. All this
must be complemented by policies that favor greater equality between
countries and we don´t know the organism who could be able to direct
a feat of such magnitude when the two main ones are incapable of take
responsibility and would be under the influence of interests that
would disapprove a proposal as the one described.
For
more information or require services related to this article, please
contact through our website www.externalexpansion.net
or directly our email
info@externalexpansion.net.
No comments:
Post a Comment
Dear customer your inquiry has been logged and will be answered within 24 hours.
Estimado cliente su consulta ha sido registrada y será atendida en un plazo de 24hs.