The Pacific Alliance: integration and growth · 2018. 9. 14. · 1 A rising group of countries...
Transcript of The Pacific Alliance: integration and growth · 2018. 9. 14. · 1 A rising group of countries...
The Pacific Alliance: integration and growth
Juan Ruiz
BBVA Research │ Chief economist for South America
DE / BBVA Conferences – Pacific Alliance│ Lisbon, 1 October 2013
Pacific Alliance/ October 2013
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1 A rising group of countries among emerging economies
2 Committed to integration, without forgetting about the global economy
3 Stability and growth, but some challenges as well
Outline
Pacific Alliance/ October 2013
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Emerging markets: the most dynamic
GDP growth, adjusted by PPP (%)Source: BBVA Research
0000
1111
2222
3333
4444
5555
6666
7777
1980s1980s1980s1980s 1990s1990s1990s1990s 2000s2000s2000s2000s 2011201120112011----2021202120212021
45 EMEs ex China45 EMEs ex China45 EMEs ex China45 EMEs ex China 45 EMEs45 EMEs45 EMEs45 EMEs G7G7G7G7
Share of global GDP: emerging vs. developed (%)Source: BBVA Research
30
35
40
45
50
55
60
65
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
2019
2022
Advanced Economies
Emerging Economies
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BBVA EAGLEs: Emerging And Growth Leading Economies
45 candidate 45 candidate 45 candidate 45 candidate emerging emerging emerging emerging
economieseconomieseconomieseconomies
G6 countriesG6 countriesG6 countriesG6 countries
Current GDPCurrent GDPCurrent GDPCurrent GDPGDP in 10 GDP in 10 GDP in 10 GDP in 10
yearsyearsyearsyears
BBVA Research / IMF forecastsBBVA Research / IMF forecastsBBVA Research / IMF forecastsBBVA Research / IMF forecastsStep 1Step 1Step 1Step 1
Step 2Step 2Step 2Step 2Incremental Incremental Incremental Incremental
GDPGDPGDPGDPGDP in 10 GDP in 10 GDP in 10 GDP in 10
yearsyearsyearsyearsCurrent GDPCurrent GDPCurrent GDPCurrent GDP---- ====
BBVA EAGLEs: emerging economies that will be the biggest contributors to global growth
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BBVA EAGLEs: combining size and growth rates
Ranking and selection according to incremental GDP
Step 3Step 3Step 3Step 3
G6 average (446bn$)
Minimum from G6 (Italy, 194bn$)
NEST
EAGLEs
Rest of candidate emerging economies
Biggest
incremental GDP
Smallest
incremental GDP
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EAGLEs versus G7: A new G?• EAGLEs will contribute 60% of global GDP growth in the next 10 years. EAGLEs will contribute 60% of global GDP growth in the next 10 years. EAGLEs will contribute 60% of global GDP growth in the next 10 years. EAGLEs will contribute 60% of global GDP growth in the next 10 years.
• NEST countries will contribute an extra 10% (G7: 16%)NEST countries will contribute an extra 10% (G7: 16%)NEST countries will contribute an extra 10% (G7: 16%)NEST countries will contribute an extra 10% (G7: 16%)
GDP (PPP adjusted): current and in the next 10 years (2012-2022). Bn dollarsSource: BBVA Research
Contribution to global GDP growth 2012-2022 (%)Source: BBVA Research
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
EAGLEs
G7
Nest
Other
Advanced
Rest of World
Other EMEs
2012 2012-2022
EAGLEs57%
Nest10%
Other EMEs3%
G717%
Other Adv.5%
Rest of World8%
Pacific Alliance/ October 2013
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Indonesia1219
Brazil2363
Russia2520
Korea1618
Japan4623
Turkey1126
Germany3207
Mexico1768
UK2335 Taiwan
905
G6 avg.2620
300
400
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600
700
800
900
1000
1100
1200
1300
EAGLEs: global players• BBVA EAGLEs: China, India, Brazil, Indonesia, Korea, Russia, Mexico, Turkey and TaiwanBBVA EAGLEs: China, India, Brazil, Indonesia, Korea, Russia, Mexico, Turkey and TaiwanBBVA EAGLEs: China, India, Brazil, Indonesia, Korea, Russia, Mexico, Turkey and TaiwanBBVA EAGLEs: China, India, Brazil, Indonesia, Korea, Russia, Mexico, Turkey and Taiwan
EAGLEs (ex China and India) vs. G6:
Current GDP size (2012, size of circles) and contribution to global GDP growth 2012- 2022 (bn dollars)Source: BBVA Research and IMF
Billion USD
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G6 avg.2620
Egypt540
Nigeria453
Thail.655
Australia967
S.Arabia744
France2260
Canada1451
Colombia500
Vietnam322
Malaysia498
Poland806
Spain1415
Bang.307
S.Africa580
Philip.425
Iraq156
Peru328
Argentina745
Pakistan517
Iran1002
Chile322
G6 min.(Italy)1808
100
150
200
250
300
350
400
450
500
Waiting list of potential EAGLEs: The NESTNEST vs. G6:
Current GDP size (2012, size of circles) and contribution to global GDP growth 2012- 2022 (bn dollars)Source: BBVA Research and IMF
Billion USD
Pacific Alliance/ October 2013
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The Pacific Alliance in the global sceneBiggest economies in 2012(bn. USD, PPP adjusted)Source: BBVA Research and IMF
Biggest contributions to GDP growth in the next 10 years (m USD, PPP adjusted)Source: BBVA Research and IMF
0
200
400
600
800
1000
1200
1400
1600
1800
2000
China
India
US
PA
Indo
nesia
Brazil
Rus
sia
Korea
Japa
n
Turke
y
German
y
UK
PER
COL
CHI
MEX
13k 5k 4k
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
US
China
India
Japa
n
German
y
PA
Rus
sia
Brazil
UK
Franc
e
Italy
Korea
PER
COL
CHI
MEX
16k 12k
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1 A rising group of countries among emerging economies
2 Committed to integration, without forgetting about the global economy
3 Stability and growth, but some challenges as well
Outline
Pacific Alliance/ October 2013
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Committed to integration in the global economy
Number of trade agreements signedSource: BBVA Research and WTO
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... especially with the main economic regions
Trade agreements signedTrade agreements signedTrade agreements signedTrade agreements signed
with
US
with
EU
with
Japan
with
China
Total
number of
agreem’ts
Chile 21
Colombia 11
Mexico 18
Peru 16
Brazil 5
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Trade between PA countries is just4% of their total foreign trade
Trade between PA countries is just4% of their total foreign trade
Nevertheless, cooperation within PA can extend beyond trade flows:
know-how , investment and labor market
Nevertheless, cooperation within PA can extend beyond trade flows:
know-how , investment and labor market
There is scope to increase trade within PA but, potential is highest in the case of Mexico
There is scope to increase trade within PA but, potential is highest in the case of Mexico
Also committed to trade integration within the PA. But trade opportunities are asymmetric for nowExport potential (origin-destination)(index: 0= very high; 200 = very low)Source: BBVA Research and COMTRADE
0
20
40
60
80
100
120
140
160
180
COL MEX PER CHI MEX PER CHI COL PER CHI COL MEX
Origin: CHI Origin: COL Origin: MEX Origin: PER
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High
Primer cuartil Mozambique Uruguay
Chile,
Colombia,
Peru
Segundo cuartil Nicaragua Costa Rica Portugal
Mexico,
Spain, US
Tercer cuartil São Tome
Low
Cuarto cuartil
Paraguay, Angola Ecuador
Cuarto cuartil Tercer cuartil Segundo cuartil Primer cuartil
Low High
Belos expectations
FDI Attraction index (2009-2011)
FDI potential index (2011)
Above expectationsIn line with expectations
PA countries among those with highest potential to attract FDIPA countries among those with highest potential to attract FDI
FDI attraction: ranking of inward FDI
both in absolute terms and relative to country size
FDI attraction: ranking of inward FDI
both in absolute terms and relative to country size
FDI potential index:
(i) attractiveness of domestic market;
(ii) productivity of labor force; (iii) availability of natural resources;
(iv) infrastructures
FDI potential index:
(i) attractiveness of domestic market;
(ii) productivity of labor force; (iii) availability of natural resources;
(iv) infrastructures
Pacific Alliance attracts FDI in line with its high potential....FDI: attraction and potential to attractSource: BBVA Research and UNCTAD
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... especially from US and Europe, with growing interest from Asia
PA: Source of FDI (% del total 2002-2012)Source: BBVA Research, ECLAC and national sources
0
5
10
15
20
25
30
Chile Colombia Peru Mexico
2009 2012
FDI from Asia to PA (% of total FDI to PA)Source: BBVA Research, ECLAC and national sources.
0%
20%
40%
60%
80%
100%
CHI COL MEX PER
US Europe Latam Asia-PacificOrigin:
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There is scope and potential for bigger bilateral FDI flows within the PA
There is scope and potential for bigger bilateral FDI flows within the PA
Mexico and Colombia: focus on financial sector, telecoms and retail
Mexico and Colombia: focus on financial sector, telecoms and retail
Chile has led the process in Peru and Colombia: geographical proximity; search of economies of
scale; similar characteristics
Chile has led the process in Peru and Colombia: geographical proximity; search of economies of
scale; similar characteristics
... but there is still a sizable asymmetry in FDI flows within the Pacific AllianceCumulated FDI to PA countries 2009-2012 (home-host country, m USD)Source: BBVA Research and Banco Central de Chile
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
CO
L
PE
R
ME
X
CH
I
PE
R
ME
X
CH
I
PE
R
CO
L
CH
I
CO
L
ME
X
Home:
Chile
Home:
Colombia
Home:
México
Home:
Peru
Host
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Integration in portfolio investment is lagging behind in the Pacific Alliance
Stock market capitalization (m USD, Dec 2012)Source: BBVA Research and Bloomberg
Volume of transactions (2012, m USD)Source: BBVA Research and Bloomberg
1227
678
525
313262
103
0
200
400
600
800
1,000
1,200
1,400
Brazil MILA Mexico Chile Colombia Peru
3,487.0
502.0182.0 157.0 25.0 0.4
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Brazil Mexico Chile Colombia Peru MILA
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MILA: a great opportunity to develop the regional stock marketVolume and number of transactions in MILA(m USD, number)Source: BBVA Research and MILA
There are already mutual funds operating in MILA, hedging risk between markets
There are already mutual funds operating in MILA, hedging risk between markets
Need to keep working on having similar tax burdens in different countries, simultaneous
IPOs and more financial instruments
Need to keep working on having similar tax burdens in different countries, simultaneous
IPOs and more financial instruments
MILA will be further developed when Mexico joins in
MILA will be further developed when Mexico joins in
0
10
20
30
40
50
60
0
100
200
300
400
500
600
700
800
900
1000
May
-11
Aug
-11
Nov
-11
Feb
-12
May
-12
Aug
-12
Nov
-12
Feb
-13
May
-13
Volume (RHS) Number of transactions
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1 A rising group of countries among emerging economies
2 Committed to integration, without forgetting about the global economy
3 Stability and growth, but some challenges as well
Outline
Pacific Alliance/ October 2013
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Besides a high contribution to global growth,a high potential growth rate
Besides a high contribution to global growth,a high potential growth rate
Commitment to reform will contribute to increasing potential growth
Commitment to reform will contribute to increasing potential growth
Pacific Alliance: high potential growthPotential GDP growth next 10 years (%)Source: BBVA Research
0
1
2
3
4
5
6
7
8
BRA MEX CHI COL PER US EU China OtherEAGLEs
with reforms
Average PA
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Dynamism due in part to favorable demography and the rise of the middle class
Population growth rate(% annual, 2011-21)Source: BBVA Research
Increase in middle class(million people, 2011-21)Source: BBVA Research
Population growth, demographic dividend
Population growth, demographic dividend
Progress in decreasing inequality
Progress in decreasing inequality
Increase in per capita income
Increase in per capita income
Increase in
middle class
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
BRA MEX Andeans0
2
4
6
8
10
12
14
16
18
20
BRA Pacific Alliance
PER
COL
CHI
MEX
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... also (and more importantly) due to prudent policies, low interventionism and openness
Public debt (gross)%GDP, 2012
Source: BBVA Research and FMI
0
10
20
30
40
50
60
70
BRA MEX CHI COL PER
Inflation (%, 2012)Source: BBVA Research and FMI
0
1
2
3
4
5
6
BRA MEX CHI COL PER
Index (0-7) of competition in the domestic market(7 = maximum competition)Source: BBVA Research and World Economic Forum
0
1
2
3
4
5
6
7
BRA MEX CHI COL PER
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Human capital: quality of educationHuman capital: quality of education
Tax revenues highly dependent on a small number of exported commodities
Tax revenues highly dependent on a small number of exported commodities
Physical capital: quantity and quality of infrastructure (except Chile)
Physical capital: quantity and quality of infrastructure (except Chile)
But the PA also faces big challengesQuality of infrastructure(Index: 0-7, 7 = maximum quality)Source: BBVA Research and World Bank
0
1
2
3
4
5
6
BRA MEX CHI COL PEREAGLEs
NEST G7
High informal sector (labor market, underground economy)
High informal sector (labor market, underground economy)
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The Pacific Alliance (PA) is the sixth biggest economy in the world
and will be the fourth in term of contribution to global growth in the
next 10 years.
The PA is committed to trade and financial integration both within
the alliance as well as with the rest of the world. There is ample room
to develop further integration within the AP.
The PA’s potential growth is close to 4,5% during the next decade.
Growth will be based on continuing reforms and prudent economic
policies.
Growth could be even higher if there are further advances in
reducing the informal sector and increasing investment in
infrastructure and in human capital (education).
To summarize …1
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The Pacific Alliance: integration and growth
Juan Ruiz
BBVA Research │ Chief economist for South America
DE / BBVA Conferences – Pacific Alliance│ Lisbon, 1 October 2013