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Turkey's finance minister Simsek praises the independence of the central bank, as prime minister Erdogan and the Economy minister Zeybecki put political pressure on the central bank to cut interest rates. Erdogan says the half percentage cut in rates to 9.5% is "a mockery of this nation." Governor Basci of the central bank has said in the past that such calls are part of Turkish political culture and the bank remains independent. Inflation is high at 9.38% and expected to reach 10% in May 2014. The central bank forecast is for interest rates at 8.33% by the end of 2014. India, Turkey, Indonesia, Brazil and Russia, face high inflation and depend on capital inflows for growth. Analysts say investors are likely to reduce Turkish assets if Governor Basci is forced out. For emerging markets political protests in Turkey, Russia (with the added volatility created by the Ukraine crisis), India, and Brazil, have led to capital outflows and increased uncertainty. The situation is reversing itself in India with the election of a business friendly government and in Indonesia following the recent election....

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New estimates of the coronavirus cases and deaths show Peru having twice as many than estimated before. Peru has the world's highest mortality rate per capita in the world. Most of the jobs were pushed into the informal sector in the last 2 decades. This is also true of Columbia and other Latin American countries. During the first and second wave of the coronavirus these people in informal jobs were the hardest hit having little access to health care. In Colombia the result of the stress from the pandemic and the other problems have led to street demonstrations and violence. The president Ivan Duque lacking public support faces violent street protests. Duque who is from former president Uribe's party won the electon in a runoff with a former leftist guerilla leader Gustav Petro who was Mayor of Bogota. Uribe and Duque had not supported the peace agreement with the rebel left movement in Colombia negotiated by presiddent Santos.  In Peru the election is between Mrs. Fujimori from the Fujimori family and a Marxist politician Castillo. The problems in the informal economy during the pandemic have led to the election of Castillo as the next president. Many of Latin America's problems from Brazil to neighboring countries remain unresolved even as Asian countries have moved forward, with lack of basic access to sanitation, tap water, health care and education, and lacking basic infrastructure. The pandemic has shown the weakness in decades of development in Latin America.   ...

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Ruchir Sharma, chief global strategist at Morgan Stanley, says Poland has achieved a remarkable transformation over 25 years with steady growth of 4% year after year. The bright spot is manufacturing. For emerging nations the average percentage of GDP from manufacturing exports is 22%. Poland is at 33 percent of GDP for manufacturing exports. Countries dependent on commodity exports such as Argentina, Brazil, Russia, lack this steady growth from a manufacturing base and are less likely to cross the line of $15,000 of GDP per person that qualifies for it to be called an "advanced economy" for the IMF. South Korea, the Czech Republic and Poland are some of the countries that have benefited from manufacturing exports. Poland's wages are one third of that in Germany and its currency is cheap, giving it an advantage as an export hub for German companies. Germany is the main destination for exports and the German automobile industry uses the Czech Republic and Poland as export hubs. Poland's and Czech Republic's geographical location near Germany with a highly educated population makes it attractive for German companies. Poland has gone from $2300 per capita GDP to about $13,000 in 25 years according to the IMF, and is likely to be the next country to make it to advanced economy status by 2020, says Sharma. It is important not to run up debt, to manage finances carefully, and to maintain steady growth not growth in spurts interrupted by declines, and have a manufacturing base, says Sharma.  ...

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Strong criticism from Attorney General Luisa Ortega, and dissension inside the government, led to the Supreme Court retracting parts of its decision to nullify the powers of the legislature. Ortega called the move "a rupture of the constitutional order." Most of the judges are appointed on the court by the Maduro government. Strong criticism by the OAS calling it a "self inflicted coup", by other governments in Latin America, also led to retracting parts of the decision by the Supreme Court. Nicholas Maduro succeeded Mr. Chavez who was the democratically elected president of Venezuela from 1999 to 2013. Maduro narrowly won the election in 2013 by a margin of about 1.5% over Henrique Capriles. In 2015 in National Assembly elections the opposition parties won a majority in the National Assembly. Protests against the Maduro government were followed by a recall attempt in 2016 which was suppressed. Inflation and economic conditions in Venezuela worsened under Maduro with the collapse of oil prices. The devaluation of the currency, high inflation and shortages of basic goods have led to widespread protests. As the situation worsened the Supreme Court in support of the government gradually chipped away at the powers of the National Assembly since 2016, leading to the situation in April 2016 with  the effort to strip the Assembly of all powers and remove the immunity from prosecution of legislators. Maduro is a former bus driver for the city of Caracas bus system, and a trade unionist. He was part of the movement supporting Chavez release after a coup attempt, foreign minister 2006-2013, and appointed Chavez successor in 2012.  Max Fisher and Amanda Taub of the NYT go on to discuss the writings of political scientists, including Dutch expert Cas Mudde, who pointed out that populism often starts its climb because established institutions and elites have become unresponsive to pubic needs. Yet the replacement is with what starts out as an effort to bring fairness- yet ends up creating another elite, suppressing opposition, and creating a new set of problems, even threatening the institutional framework of democracy such as elected assembly as happened last week in Venezuela.  In Venezuela the Chavez populist movement was initially intended to reduce corruption in the court system, the established parties control over media, and ensure oil revenues were used to provide services to poor regions and neighborhoods.  In the process over two decades it introduced a system that set up a Bolivarist class of its own based on socialist goals, failed to integrate the economy into the global economy for modernization, and created an overdependence on oil revenues that hurt the country when prices dropped sharply. High inflation, corruption, shortages of basic goods, and an economy slipping behind neighboring countries in Latin America, are the result by 2017. Seeing the situation in Venezuela in the context of current populist trends in the U.S. and Europe may be a stretch because the situation in Venezuela is unique to Latin America in some ways and is from an earlier period. High inflation, collapsing economy, debt problems and mismanagement of the economy, devaluation of currency, are problems faced by Brazil, Argentina, and other countries in Latin America, happening under conservative as well as populist governments since the 1960's. It is different in two respects, the disconnect with the global economy that prevents modernization, and the trend towards authoritarianism, as seen in Venezuela.     ...

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The South China Morning Post provides this view of China on the day of the 70th anniversary of the Communist Party of China, on the long road from the founding of the government in 1949 under Mao, the Cultural Revolution, and the shift to a state sponsored market economy under premier Deng in the 1980's.  From being at early stages of industrialization to a fully developed modern and industrialized country over three decades.  The challenges China faces are whether its growth will slow with a high debt situation, trade war with the U.S., aging population and the housing bubble that has created problems in Hong Kong. This could lead to a situation where its per capita income stays in the middle range at around $12,000 per capita, referred to as a middle income economy by the World Bank. Some experts believe that the factors that propelled China since 1990- a youthful labor force, globalization reducing tariffs and benefitting from entry into WTO, easy access to western technology, land sales for local governments to finance industrial development, rapid urbanization, and infrastructure investment in electricity rail and highways, are now reaching their limits with smaller incremental steps and growth in the future. The big gains made in the last three decades could be limited by other factors also such as the high debt economy, build up of industrial overcapacity, limited domestic consumption to take the place of exports facing high tariffs. Countries normally face some slowdown in such situation after a period of rapid growth, Japan and South Korea being recent examples. During the transition period to a new kind of economy from the manufacturing export push Asian model many unseen social and other problems emerge. The situation in Hong Kong shows how the housing bubble can also lead to problems that require resources and attention.  There are other social problems that continue to remain hidden. It does not take long for hidden problems to emerge as the situation in Brazil for lack of sanitation and epidemic prevention shows. In China the cost of too rapid development has led to pollution of rivers and land that will need to be cleaned up. The effect of contamination of food supply is an ever present risk with the contamination of land and water. Little attention is paid to prevalence of smoking and its damaging effects on health. The one child policy also brings with it cultural issues of how a whole new generation of children without siblings. Many other social problems that affect the quality of life become evident as growth slows and addressing these problems can actually benefit the country and its people. ...

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Food inflation is affecting a wide range of countries not just poor countries. Even in the US where on average only 7% of the income of households goes to food, for poor and lower income households this can go up to over 30%. In Turkey with a high inflation rate of 80% in June over prior year, the problems of food inflation are severe. Turkey, Egypt, Tunisia and other Arab countries get most of their wheat from Ukraine and Russia through Black Sea ports. Across Asia the situation varies with less food inflation in countries that are self sufficient in food production such as China, India and Vietnam, to countries such as Sri Lanka where inflation is severe and takes up most of the budget for ordinary families. Lebanon is an extreme example with the collapse of its economy and 332% inflation with food inflation severe. Ethiopians spend about 45% of income on food. Somalia faces drought conditions and severe food shortages. This part of Africa is the most fragile and most prone to breakdown. Being self sufficient in food was an important goal for countries that faced famine in the past such as China and India- this has produced good results. Even in Europe small countries that make their own food with agriculture getting importance such as France and Switzerland the benefits are immense. Switzerland food inflation is as low as 1.5% lowest in the world. Where as in Africa this importance of agriculture has been neglected the consequences are seen today. In Latin America Argentina and Brazil are exporters of soyabeans and other food. This helps insulate them from the worst effects of the food crisis.     ...

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This report in the WSJ provides details on the groundwork that was laid by the Trump administration as it worked to find a solution to the problems facing Venezuela with refugees and economic crisis, and months of protests. The plans were set in the days before Nicholas Maduro took office for the second term as president. The night before Juan Guaido, head of the National Assembly, declared himself president, U.S. vice president Mike Pence stated that the U.S. would support him if he took the reins of government from Maduro by invoking a clause in the Venezuelan Constitution that makes the head of the National Assembly take the office of president if the existing president is declared illegitimate taking office unlawfully. About 60 nations did not recognize the elections that gave Maduro a second term. On Jan 2 Mr Trump who feels deeply about the collapse of the Venezuelan economy and rising poverty, the suffering of the Venezuelan people, met with presidents of Brazil and Colombia. Colombian president Ivan Duque and Trump hinted at a plan to cooperate to help people fleeing Venezuela and respecting its democratic heritage. Mr Pompeo spoke to allies of the U.S. The National Assembly laid out its plans on Jan 15, for using a constitutional mechanism that allows the head of the Assembly to lead an interim government till new elections are held if the existing president is declared illegitimate. A leading Republican senator of Cuban origin Mr. Rubio supported the move. On the eve of protests in Venezuela Rubio and two other senators from Florida met Mr. Trump and Pence at the White House. Also present were Bolton, Pompeo, Ross and Treasury Secretary Mnuchin. Mr. Trump then decided to do it. He placed a call to Mr. Guiado  to tell him that if the National Assembly invoked Article 233 the U.S. president would back him.  The U.S. believes the rank and file in the military are with the opposition even though its leaders back Maduro. After the U.S. action, the governments of Brazil, Argentina, Chile, Peru, Colombia, backed the move for an interim government. The European Union called for free and credible elections. Russia and Mexico supported Maduro.  The State Department instructed the U.S. Federal Reserve about Guiado government as the sole representative for Venezuelan assets in banks. Sanctions could be placed on Venezuelan oil exports as backup efforts proceed to support the interim government. ...

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President Yudhoyono picks the former finance minister and central bank governor Boediono, a respected economist, as his running mate for elections in July. Indonesia is still growing at a rate of 4.4% from a year earlier, down from 5.2% in the 4th quarter. As economy minister till earlier this year Boediono was instrumental in getting a popular program to give $20 a month to Indonesia's 19 million poorest families, reaching about a third of the country's 240 million people. This is similiar to programs in place in Brazil and India, though the Brazilian program works with incentives for parents to send their children to school.

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The young people in Venezuela increasingly question continued support for president Chavez. About 7.5 million Venezuelans ages 18-30 make up 40% of the electorate. Chavez has won elections since 1998, and has setup a network of youth support. Yet there is now voter fatigue after Chavez's 14 years in power, and this election is being vigorously contested by opposition leader, Henrique Capriles. Voters are increasingly looking for an alternative, and an economy that creates jobs and new opportunities beyond the social welfare state supported by oil earnings offered by Chavez, especially the 42% of the working population in the informal sector. One voter puts it succintly saying what Chavez has to give has already been given, and Venezuela's future lies in a different direction. A new direction would better integrate Venezuela with the global economy bringing in new technology and foreign investment. In addition it would include efforts to enlarge the middle class and improve conditions for the working class, as Brazil has done....

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Use of oil for transportation has increased from 30% ten years ago to nearly 50% in 2013, according to Sanford Bernstein, as more cars are added to China's roads. This makes it less likely that a slowdown in China's growth will affect demand for oil. Sales of passenger cars increased by 11% in January and February 2014. A study at France's central bank by Gauvin and Rebillard shows only a much smaller effect on oil prices from a hard landing of the Chinese economy, compared to the effect on metal prices. Passenger cars now make up two out of three vehicles on Chinese roads, according to LMC Automotive. The growth in cars is likely to continue, not just in China, but in other emerging markets such as India, Brazil, Mexico and Russia. Metal consumption is different, as it comes mostly from housing, infrastructure and factories which are the most affected parts of the economy in China.

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This article in the Economist magazine says Brazil's new president Michel Temer, once impeachment proceedings lead to the resignation of Dilma Rousseff, is only slightly less popular than her. Polls show 58% of Brazilians say Temer should be impeached close to the 61% for Rousseff, and his party is also affected by the Petrobras corruption scandal. Brazil's large trade unions supporting the Worker's Party of Rousseff see it as a "coup" or "golpe" and promise strikes, combined with large street protests, this comes as the country faces a second year of falling GDP at 3.8% according to the IMF. Brazil has a budget deficit of 10.8% and needs changes in public spending, including pension reforms, which are unlikely under Temer or his party the PMDB, or under the PMDB's Mr. Cunha. Some experts see the change in Brazil as part of a broader shift in Latin America, that happened in Argentina recently with the election of Mauricio Macri as president, towards governments that move to the centre in politics and reduce state intervention in the economy to stimulate growth. This is unlikely to happen in the short run, with society deeply divided and the area in front of the Brazilian Congress cordoned off to separate the opposing factions and rallies of political supporters....

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A less known political leader, Albert Hernandez, who teaches university law classes, is now set to become the next president of Argentina. He has worked with Peronist party under the Kirchner administrations and quit Christina Kirchner's administration after some disagreements on policies.  He is so far ahead of president Macri- sixteen points in the primary, that it is seen as too much of a gap for Macri to reverse. Hernandez is seen as a pragmatic leader and has as his running mate Christina Kirchner. Ms. Kirchner says she supports Hernandez as he can bring together all the Peronist factions. Mr. Hernandez is 60 years old and has worked with Peronist leaders in government from the 1990's who supported free market changes and with the Kirchner administrations when Argentina was recovering from economic collapse. Hernandez says he is learning from the mistakes made by Christina Kirchner. During the administration of Nestor Kirchner, Christina's husband, Hernandez, who was chief of staff, acted as a key problem solver. Argentina faced a crisis in debt accumulation and defaulted on the debt during that period around 2003. Argentina recovered from that crisis with the help of a commodities boom and demand from China. Mr. Hernandez was also chief of staff under Christina Kirchener who followed her husband as president, but resigned early because of differences on economic policy. Today debt accumulation is again a problem, with debt built up under the Macri administration and errors in policy of Mr. Macri. Christina Kirchner asked Hernandez to lead the ticket after it was clear that Peronist factions who did not support her could only come together if Mr Hernandez was the candidate. As a moderate without ideological tendency Mr. Hernandez was able to lead a broader coalition after errors in economic policy made by Mr. Macri leading to high inflation and a declining economy. Mr. Hernandez says he would renegotiate a deal with the IMF for a $57 bailout, which was signed by Mr. Macri to tackle a currency crisis. He also plans to take a new look at the trade deal with the European Union. Today both Brazil and Argentina are mired in economic crisis. Brazil through extravagant spending including on pensions, that left basic sanitation services, transport services, health care  poorly funded. Argentina has gone from prosperity to crisis, before 2003 during the first Kirchner administration, and now under Mr. Macri in 2019. Recurrent economic crises are a regular pattern in the region since 1950, with the region dependent on commodities exports and failing to build manufacturing industries.   ...

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The Bureau of National Labor Statistics in China says China's GDP growth for 4th quarter 2008 was 6.8%. Private economists expect growth to slow to something like 5% in 2009 as the full brunt of the housing downturn and the drop in exports manufacturing is felt this year. Housing and exports were the two engines that helped China to reach 12-13% growth rates for 2007 and 2008. 2008 was also the year of the Olympics, and it now appears that by excessive growth and production capacity in many industries and increasing exports China may have created severe imbalances in the world economy. One way this happened is through the huge and ever increasing trade deficits with the US. By reinvesting the money in US Treasurys, China made a huge wave of liquidity and cheap credit possible in the US creating a bubble economy. The other is through the inflated demand in commodities like oil from the Middle East and countries like Russia, and demand for iron ore and other metal commodities from places like Brazil and Australia. This put upward pressure on the prices of commodities, creating a bubble in the price of oil. With the bursting of these bubbles the economies of Russia, Brazil and Australia and other countries are in a deep nosedive. The effects have operated in myriad ways, including a circular effect of the bursting of the credit bubble in the US leading to a collapse of demand in the US market for Chinese goods. In turn the collapse in demand for German and Japanese goods in China with declining demand, as the effects moved through the channels of the international trading system. The decline in Chinese demand also affects the US ability to make a export driven recovery....

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Rumelt argues that efforts to induce aconsumption led recovery won't work in 2011-2012 because of the high debt to income ratio of American households, reminiscent of the situtation in the 1930's as America went into World War II. It took a long period of over a decade to bring debt to income ratios down during the 1940's to 20% for America to once again stage a consumption based recovery. Since the solution of war time engagment and lower consumer spending due to wartime rationing is not a feasible solution today, a lot depends on stimulating investment. Rumelt does not say how this would happen in practice as corporations invest to increase production in a consumer based economy. Corporations can invest on increasing production for growing emerging markets such as India, China and Brazil, and this is happening today. But this does not increase growth in the U.S. economy, except in the limited sense that some of the high end development work takes place in the U.S. Policies that stimulate investment would set the stage for a future recovery. ...

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John Taylor on the dangers of a loose U.S. monetary policy and the effects this had in fueling a housing bubble in Spain, Ireland and other EU countries. Taylor points to the bubble ocurring in emerging market economies from low interest rates. Taylor says the ECB's interest rate moves in 2003-2005 were affected by the Fed's low interest rates. He estimates the ECB set rates about two percentage points too low leading to housing bubbles in EU countries. A similiar process is taking place today with the Fed's near zero interest rate policy. Taylor points to interest rates in a group of 18 emerging market economies- including Brazil, China, India, Mexico and Turkey, which have held interest rates on average about 5 percentage points below widely used benchmarks fueling a doubling of global commodity prices between 2009-2011. The U.S. Fed's policies make it harder for central banks in emerging market economies to take aggresssive action against bubbles developing in these countries. Taylor says his does not mean that the Fed should not pay attention to the U.S. unemployment rate and long term unemployed, but should keep in mind the negative effects of slowing demand in emerging market economies and in the EU as a result of its monetary policy of keeping rates at near zero for long periods of time. This feeds back to the U.S. economy at a critical time....

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The $17 discount for Russian oil to Brent crude is a result of the president's efforts with sanctions plus tariffs on China and India to cut oil purchases from Russia. This puts a strain on Russia in financing the war with Ukraine. Bothe China and India have cut purchases of Russian oil in recent weeks and the Indian refinery at Jamnagar no longer gets Russian oil, according to recent reports. DJT was criticized for his stance on Indian tariffs as inconsistent with the agreement with China on rare earths. It now appears that China and India have both agreed to stop financing the Russian war effort with big oil purchases and are shifting it to other places such as Brazil, Guyana and Canada. India plans large oil purchases and arms purchases from the US and this is part of the trade agreement being negotiated with India. About one third of the additional 240 million barrels of oil on the seas in tankers is Russian oil being stored for lack of buyers with total oil on waters at 1.4 billion barrels. This has led to a 48% increase in tanker costs to $125,000 a day. All this makes it harder for the Russian economy to sustain the war effort as the US pushes both sides to settle the Ukraine conflict in the 28 Points Peace Plan negotiated with important Russian negotiators in Washington DC over 3 days last week. ...

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This opinion by Andres Oppenheimer in Miami Herald Jan 30, 2025, welcomes Rubio's visit to Latin America starting with central American countries in the coming weeks, but says it should have a message to help these countries cope with economic crises. This would be also a way to discourage migration by reducing both the mismanagement of the economy, and gang crime with economic assistance and help in managing the economy.  The Miami Herald says the last time the US paid attention to the southern part of the American continent was in 1912. Yet it was in 1960 during the debates with Nixon that JFK asserted the importance of Latin American relations. In 1961 JFK launched the Allianza de Progreso.  Sixty four years later the page on the, Alliance for Progress in the JFK Library site says it was a failure. LBJ, Nixon, Reagan, Clinton, Obama Biden lost interest in Latin America. It blames the elites in Latin America and American business that showed little interest. Yet compared to 1960 a lot of progress has been made. Brazil the largest is now a more stable and growing economy, Mexico has grown and struggles with the drug trade, Argentina is still struggling with inflation. Only in Central America and Venezuela is the situation dire. Much of it from gangs and drug trade that has destabilized small countries. Venezuela was torn up because of a lack of national consciousness to bring all parties together for the common good using tested approaches to development- instead embarking on a novel socialist experiment with disastrous results for both Venezuela and the entire American continent.  ...

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The World Trade Organization is about to choose a new director-general to succeed Mr. Azevedo, a career diplomat from Brazil. The two candidates are a former finance minister from Nigeria,  Ms. Okonjo-Iweala supported by the European Union and the trade minister of South Korea, Ms. Yoo Myung-hee, supported by the U.S. Japan supports the Nigerian candidate because of its trade disputes with South Korea. The role of head of WTO is important today because of trade issues between countries particularly the trade issues between China and the U.S., U.S. and other countries. And the sense that the WTO arrangement is not working for many countries in recent years without a level playing field in many industries from improper subsidies. Before the U.S. withdrawal from the World Health Organization not much attention was given by the U.S. to how it had changed after new elections. As a result non profit foundations like the Gates Foundation from the U.S. played a leading part in representation of American interests and China played a leading role leading to the crisis facing WHO today. During the coronavirus pandemic the WHO lacking adequate influence of U.S. or European Union countries was not able to act in a way that met the needs and concerns of these countries with advanced health systems. In the past pandemics were better addressed worldwide when the U.S. and EU played a major role from the beginning because of long experience and technological resources,  a role that was missing in the current pandemic. Ebola and other virus were tackled in Africa only when the U.S. or European countries played a leading and critical role. This role was sorely missed in the current crisis. This is why changes at the World Trade Organization matter. World trade is important for the world economy and can best operate when the concerns of U.S. and European Union about a level playing field and fair competition are met. This level playing field and fair competition also meet the interests of developing countries such as India which are industrializing rapidly and need to protect their own markets from unfair dumping, as well as Indonesia and other parts of Asia, Latin America and Africa that are part of the supply chain for the world economy. ...

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Prospects for the global economy in 2016- debt to GDP ratios high in Turkey, Brazil and China lead to problems and slowing growth. India an exception in emerging markets with growth rate above 7%, benefitting from increasing foreign investment and halving of oil prices. U.S. recovers slowly, and the eurozone emerges from the debt crisis with need for further quantitative easing by the European Central Bank. Russia recovers gradually after a steep devaluation of the ruble. Ironically just when a slow recovery is taking place in 2015-2016, the private sector governance improvements, and serious tackling of debt problems, lead one to conclude that prospects for the long term are better today than in 2005 when the optimism was not well grounded because of weak governance and debt buildup.

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The crisis of late 2008 and early 2009 in the global economy saw huge stimulus programs, resposible economic management, and rapid recovery by the end of 2009 in developing countries. China put in place a large stimulus program, and in most developing countries, India, Vietnam, Brazil and other countries efforts were made to strengthen the safety net for the poor and to introduce stimulus for creating jobs. India and Indonesis saw the return of ruling party governments and in Brazil Lula da Silva had favorability ratings above 60%. So contrary to earlier fears in late 2008 their was both asense of political stability and asense of confidence in the developing countries. Capital is flowing into these countries and the IIF says that net private capital inflows to developing countries will double in 2010 to $672 billion. Russia which saw capital outflows of $50 billion in the first 9 months saw $20 billon of capital inflows in the fourth quarter of 2009. Half of the 140 million laborers working in Chinese cities returned home in early 2009, a fifth stayed there and another fifth counld not find work when they returned to the cities. But as the stimulus in China kicked in, and infrastructure development surged, (see link to the rail infrastructure spending) by the middle of 2009 jobless ness among rural migrant workers went down to less than 3%. This shows in the Pew Global Attitudes Project wth more than 40% of respondents in India, China and Indonesia saying that they were satisfied with their lives, in China this was 87%. In France, Japan and Britain the share is below 30%. In America 49% of those in the Pew pollingfelt that America should mind its own business internationally, 30 points higher than in 1964. When asked "Are you better off in free markets?" the respondents share fell in 2009 in Germany by 4 points, in Spain by 10 points. Shares rose in India and China, and stayed flat in Brazil and Turkey, so there is no backlash against free markets in developing countries....

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Greg Ip points out that the stronger dollar in 2018 is creating serious problems for Argentina, and will have an effect on Turkey, Indonesia and other developing countries. Dollarization hurts because it increases debt as debt servicing becomes costlier with dollar denominated debt and imports denominated in dollars become costlier. The dollar has increased in importance in the global economy. This is why the economic growth has suffered in developing countries in 2018. It is also why president Trump believes he can cut off Iran from the U.S. banking system to increase chance of new negotiations to fix flaws in the Iran nuclear deal, says Ip.   Argentina has seen internal problems compounded by the rising dollar causing the peso to drop by 17% so far in 2018. 88% of Argentina's imports are denominated in dollars. A rising dollar means it costs more in pesos for imports. Argentina's different levels of government have $98 billion in dollar denominated debt, and private sector has an additional $68 billion, the total being a third of its GDP. A decline in the peso means this is harder to pay off. About 40% of world trade, according to Harvard economist Gita Gopinath, is invoiced in U.S. dollars, four times U.S. share of world trade, and developing countries together owe $2 trillion in dollar denominated debt according to BIS. This makes it harder for developing countries such as Indonesia, Turkey, India, Argentina, Brazil, as they now face rising oil prices in combination with a rising dollar. In Argentina a poor crop for soyabeans and other agricultural exports in 2018 creates additional woes.   ...

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Venezuela faces an uncertain future after U.S. efforts to support Mr. Guaido and call for new free and fair elections have failed. With help from Russia the Venezuelan economy is showing signs of recovery from the steep decline and high inflation in 2019. Oil production is expected to reach 1 million barrels a day in 2020 after falling to 650,000- 700,000 barrels a day in 2019. Russia's oil company Rosneft provides critical help for Venezuelan oil sales and maintenance in oil fields.  National Security Adviser John Bolton is faulted for his advice to president Trump on Venezuela, that merely voicing support for 36 year old Guaido, would lead to regime change without action from the U.S. With the recovery in Venezuela with help from Russia and Cuba, Mr. Guaido's popularity has dropped by 20 points to 38%, according to a Venezuelan pollster Datanalisis. Most Cubans and Venezuelans in the U.S. are in Florida where there is support for new elections, and Mr. Trump continues to support Mr. Guaido. The lack of support for change from other countries including Europe, India, Turkey, and Mexico have led to a stalled situation in Venezuela. There is concern for the steep inflation, the migration of about 4.5 million Venezuelans, the shortages of critical supplies as a result of the economic collapse in 2019. The situation is stabilizing for the government yet the future of Venezuela with U.S. sanctions and weak economy leaves Venezuela in a precarious situation. Venezuela continues to be an example of how well meaning changes for social justice can lead to political changes that bring about economic collapse. This happens  when business and the economy flounder under mismanagement and corruption under crony socialism, a variant of crony capitalism. The old capitalist class and the privileged families who ran the country under its old two party system are gone. Replaced with a new class. The trying out of untested economic ideas in the quest for social balance leads to economic mismanagement, loss of critical human resources which leave the country, and a higher degree of poverty with shortages than before.  Today in Latin America Brazil shows how allowing generous pension benefits at the expense of basic needs and public services in the budget can hurt the economy. Argentina's overborrowing once again shows how this leads to IMF loans and harsh economic austerity. Chile shows how not financing pensions and public services can lead to collapse of public confidence and riots. Venezuela shows how the quest for social justice and reducing privilege can itself get flawed, leading to mass migration of as many as 4.5 million citizens. This happens under models that vary from free enterprise models to socialist or nationalist models showing that models can be less relevant than good sense and good management. In the beginning and for some time each of these models worked well, commodity price supported booms concealed real problems. Avoiding extremes, prudent spending, good investment and hard work, investment in education and infrastructure, building consensus, and good management, is critical for the future to avoid the bad outcomes facing much of Latin America. A lesson also for Asian and African countries that basic virtue is more important than socialism or free enterprise or nationalism when it comes to development.   ...

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In the most recent Global Financial Stability Report out in Sept. 2011, the increase in the ratio of a country's outstanding credit to GDP is highlighted as a key warning light indicator for country economies. An increase in this ratio of over 5% signals a warning light according to the IMF. It tells us that borrowing is expanding at significantly faster rate than the growth of the economy. Using this indicator would have set a warning light up for the U.S. before the 2008 mortgage crisis, and a warning light well before the financial crises in Greece, Portugal and Ireland. The outstanding credit to GDP ratio went up for China by 24 percentage points in 2009, with 4% percentage point increase in 2010. The ratio was up 30 percentage points in Hong Kong for 2010. The warning light is also up for Turkey and Vietnam. Capital inflows into countries that can be suddenly reversed, and overvalued currencies are a danger for emerging market countries and act as supplemental indicator warning lights. Brazil and South Africa have overvalued currencies. Turkey has high capital inflows. Only a small portion of this is foreign direct investment, the rest helps support a high amount of lending and credit provided by the banks. That a significant portion of this is in short term borrowing poses additional risks, as evident in the 1997 Asian financal crisis for S. Korea, Thailand and Malaysia....

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Russia's exports to the USA only 3% of total exports, 21% to China, 19% to India, and 16% to Brazil. But does this suggest the Russian economy is insulated It exports natural gas to Germany, its largest trading partner. Are oil exports from Russia to the US so insignificant that they constute only 3% of total exports? This needs to be verified. Russia built the $478 billion reserves based on oil exports. If prices drop this will affect future increases in these reserves and affect foreign investment in the Russian economy, investment it badly needs to modernize. Russia is less affected relative o other countries, but its stock markets dropped 20% after the global markets reacted in cascading effect in January 2008. There is some insulation but not really that much and the case is overstated. Russia is starting out with a smaller manufacturing economy. It badly needs to build this up and the effects of a global slowdown will mean reduced investment than would otherwise occur.

LyrArc Article Gist
Chile's new constitution was drafted after a vote on a constitutional convention in which many people not involved before and on the fringes of society including indigenous groups were elected. More than half are independents and from different groups of society not well represented before. As a result of this the lack of experience has led to enshrining every single right that one could think of instead of focusing on what the protests were about about - the pension system, unfairness in access to health housing and education in the way funds are allocated from the budget, and promoting fairness in government.  At this time there is no certainty that it will be passed. A 36 year old student protest leader Gabriel Boric is the president elected after two years of protests about the unfairness of the system that took shape under a constitution written by a military dictator Pinochet who ran the country from 1973 to 1990. Pinochet came to power in a coup that is common in the history of South American Republics such as Brazil, Argentina, Chile and other countries. During the period of the government of Marxist president Salvador Allende the country was polarized resulting in the military taking over.  If the constitution is rejected a new convention will be formed to write a new constitution. In following the Structure of the US, Canadian, or British constitution, or the Indian it is important to look at the document so that it will stand the test of time rather than simply enumerating the rights of man. It is also important to focus on how to make the basic rights such as food, housing and education be well funded and society to be run along lines of basic fairness in incomes, while protecting enterprise and industry that can create new wealth for the country. The large South American economies are mainly dependent on commodities for export and there is a need to fund new business sectors which are not in commodity products- copper in the case of Chile- so that the economy can develop in a way that funds progress in incomes. ...