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Sunday, August 30, 2015

BRIC? not really; MINT

BRICs remember that?
Ten years ago Wall street pundits argued that Brazil had everything going for itself. Talks of becoming a developed country were published daily. It was its industry, manufacturing, tourism, internal demand, raw materials, food production... what could wrong?

Mexico...  well it was doomed... China made Mexico irrelevant.

look at this table

Greenfield FDI investments by country in $M
YEAR Brazil Mexico
2005 24,092 3,431
2006 4,357 9,743
2007 10,926 6,472
2008 27,958 21,463
2009 13,309 15,536
2010 25,355 10,412
2011 24,823 13,272
2012 13,809 9,253
2013 9,330 13,728
2014 5,917 16,025
2015 2,025 8,113
Total 161,901 127,548

Now nobody talks about BRICs in fact we talk MINT


Cool... for how long?

Thursday, August 20, 2015

A brand new FX world

I used to teach (even this morning, 8/20/2015) that a devaluation was a good way for countries to increase their exports and get out of debt...

I guess it is still true, however... (a big one)...

Our supply chains are now so interconnected that depend on a group of currencies. Only a portion of any good is made in one country. Much of many products is simply transportation.

In this line, a new study from the World Bank concludes:

"Intuitively, as countries are
more integrated in global production processes, a currency
depreciation only improves the competitiveness of a fraction
of the value of final goods exports. "

The authors claim that depreciations are only 1/2 as effective as they were 20 years ago.