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Multinationals and Development in Emerging Markets Crédit Agricole Asset Management Paris, 3 rd October 2007 Javier Santiso Acting Director & Chief Economist.

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Presentation on theme: "Multinationals and Development in Emerging Markets Crédit Agricole Asset Management Paris, 3 rd October 2007 Javier Santiso Acting Director & Chief Economist."— Presentation transcript:

1 Multinationals and Development in Emerging Markets Crédit Agricole Asset Management Paris, 3 rd October 2007 Javier Santiso Acting Director & Chief Economist OECD Development Centre

2 2 Spain and Latin America: Mutual Benefits1Banks and Development2Telecommunications and Development 3 Conclusions: Partnerships4

3 3 Latin America is crucial for Spanish firms 30% Source: OECD Development Centre, 2007; based on Annual Reports.

4 4 Spanish firms contribute to Latin American growth by investing… Sources: UNCTAD, World Investment Report 2006 and Datainvex, Ministry of Industry, Tourism and Trade. 0 20 000 40 000 60 000 80 000 100 000 19951996199719981999200020012002200320042005 Millions of USD. FDI to LatamSpain

5 5 …by being a major employment creator Source: OECD Development Centre, 2007; based on Annual Reports. Employees in Latin America, Spanish firms 2,894 12,317 15,562 62,746 61,543 131,968 0 50 000 100 000 150 000 200 000 250 000 IberdrolaEndesaRepsol YPFBBVASantanderTelefónica Employees. Employees in Latin America (2005) Total of employees (2005)

6 6 Spain and Latin America: Mutual Benefits1Banks and Development2Telecommunications and Development 3 Conclusions: Partnerships4

7 7 Private banks: Actors in economic development in Latin America Source: OECD Development Centre, 2007. Based on: Betancour, De Gregorio, Jara, Improving the Banking System: The Chilean Experience. BIS Papers. No. 28, 2006. Financial development by region Financial solidity Index: Based on the Moodys Financial solidity index, calculated with the weighted average of bank ratings per country. LAC

8 8 Banks have arrived along with the rise of democracy in the region Brazil 50000 70000 90000 110000 130000 150000 1984 1986 1988199019921994 1996 1998 2000 1 3 5 7 9 11 International Credit 50000 70000 90000 110000 130000 150000 1984 1986 1988199019921994 1996 1998 2000 1 3 5 7 9 11 Consolidation of Democracy Chile 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 1984 19861988 1990 1992 1994 1996 1998 2000 0 2 4 6 8 10 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 1984 19861988 1990 1992 1994 1996 1998 2000 0 2 4 6 8 10 Source: Santiso & Rodriguez. ¨Banking on Democracy: The Political Economy of Private Bank Lending in Emerging Markets¨. Working Paper WP 259 OECD Development Centre, 2007. Mexico 50000 70000 90000 110000 130000 150000 1984 1986 1988 19901992 1994 1996 1998 2000 2 3 4 5 6 7 8 9 10 11 50000 70000 90000 110000 130000 150000 1984 1986 1988 19901992 1994 1996 1998 2000 2 3 4 5 6 7 8 9 10 11 Argentina 20000 30000 40000 50000 60000 70000 80000 90000 100000 19841986 1988 1990 19921994 1996 1998 2000 7 7,5 8 8,5 9 9,5 10 10,5 11 20000 30000 40000 50000 60000 70000 80000 90000 100000 19841986 1988 1990 19921994 1996 1998 2000 7 7,5 8 8,5 9 9,5 10 10,5 11 International Credit Consolidation of Democracy International Credit Consolidation of Democracy International Credit Consolidation of Democracy

9 9 Peru 2000 7000 12000 17000 22000 198419861988199019921994 1996 19982000 3.8 4.3 4.8 5.3 5.8 6.3 Guatemala 0 500 1000 1500 2000 2500 198419861988199019921994199619982000 0 2 4 6 8 10 Bolivia 0 1000 2000 3000 1984198619881990199219941996 19982000 2 4 6 8 10 Uruguay 1000 3000 5000 7000 9000 1984198619881990 1992 1994 199619982000 7 8 9 10 11 12 Source: Santiso & Rodriguez. ¨Banking on Democracy: The Political Economy of Private Bank Lending in Emerging Markets¨. Working Paper WP 259 OECD Development Centre, 2007. Banks have arrived along with the rise of democracy in the region International CreditConsolidation of DemocracyInternational CreditConsolidation of Democracy International CreditConsolidation of DemocracyInternational CreditConsolidation of Democracy

10 10 …and the strengthening of economic freedom Source: Santiso & Rodriguez. Banking on Democracy: The Political Economy of Private Bank Lending in Emerging Markets. Working Paper WP 259 OECD Development Centre, 2007. Note: EFW corresponds to the Economic Freedom of the World Index (EFW Index, Source: Freedom House Index) Chile 0 10000 20000 30000 40000 50000 60000 1985199019952000 20012002 20032004 5.0 5.5 6.0 6.5 7.0 7.5 8.0 International Credit EFW Index 0 10000 20000 30000 40000 50000 60000 1985199019952000 20012002 20032004 5.0 5.5 6.0 6.5 7.0 7.5 8.0

11 11 0 10 20 30 40 50 60 70 1234567891011121314151617181920212223 Periods ARGENTINABOLIVIACOLOMBIACOSTA RICACHILE EL SALVADORMEXICOPERUURUGUAY Return to Democracy Evolution of Latin American Pension Funds (% of GDP) Democracy and economic stability: the case of pension reforms in Chile % Source: Javier Santiso, Latin Americas Political Economy of the Possible. Cambridge, Mass., MIT Press. 2006.

12 12 The Spanish banks market share continues to be the most important in Latin America Source: Bank of International Settlements, 2007. External Bank Assets (abroad). Index 1983=100.

13 13 An example of Public-Private Partnerships: Remittances Source: International Financial Statistics (IMF), Datastream and OECD. 2007. Remittances, Aid and Foreign Investment, selected countries Ecuador 0 200 400 600 800 1000 1200 1400 1600 1800 19871988198919901991199219931994199519961997 199819992000200120022003200420052006 Millions of U$ Workers remittances Foreign Direct Investment Aid for Development Dominican Republic 0 500 1000 1500 2000 2500 3000 19871988198919901991199219931994199519961997199819992000200120022003200420052006 Millions of U$ Workers remittances Foreign Direct Investment Aid for Development El Salvador 0 500 1000 1500 2000 2500 3000 19871988198919901991199219931994199519961997199819992000200120022003200420052006 Millions of U$ Workers remittances Foreign Direct Investment Aid for Development Mexico 0 5000 10000 15000 20000 25000 30000 198719881989199019911992199319941995 1996 1997199819992000200120022003200420052006 Millions of U$ Workers remittances Foreign Direct Investment Aid for development

14 14 Remittances have a significant impact on the financial structure of receiving countries Source: OECD Development Centre, 2007. Based on: IMF Balance of Payments, 2007. Bank deposits and Remittances Flows Correl. : 0.62 Correl. : 0.69Correl. : 0.98 Correl. : -0.1

15 15 Spain and Latin America: Mutual Benefits1Banks and Development2Telecommunications and Development3Conclusions: Partnerships4

16 16 Telecommunications in Latin America Source: OECD Latin American Economic Outlook 2008; Based on ITU, World Telecommunications Database

17 17 Latin America is the emerging region with the highest investment in telecommunications Source: OECD Latin American Economic Outlook 2008, OECD Development Centre; based on PPI Database from the World Bank. Source: Information and Communications for Development 2006, World Bank.

18 18 Allowing the take-off of private investment and successful privatization Source: OECD Latin American Economic Outlook 2008, OECD Development Centre, based on PPI Database, World Bank. Note: Includes only countries with available data, for Latin America (Argentina, Belize, Bolivia, Brazil, Chile, El Salvador, Guatemala, Guyana, Mexico, Panama, Peru, Trinidad and Tobago, and Venezuela).

19 19 Telephone access has dramatically increased… Source: OECD Latin American Economic Outlook 2008, OECD Development Centre; ITU, World Telecommunication Indicators Database, 2006.

20 20 In particular because of mobile coverage Mobile coverage Venezuela 94% Chile 93% Brazil 90% Argentina 86% Mexico 81% Uruguay 80% El Salvador 77% Guatemala 71% Colombia 69% Peru 68% Nicaragua 64% Panama 56% Source: OECD Latin American Economic Outlook 2008, OECD Development Centre.

21 21 Competition in Latin America within this sector has favoured the access Telefónica Both operate, no leader Telmex/América Móvil Other s Source: OECD Latin American Economic Outlook 2008, OECD Development Centre. Leaders in fixed telephone Operators mobile phone

22 22 Quality has also improved substantially… Source: OECD Latin American Economic Outlook 2008, OECD Development Centre.

23 23 The use of TICs has increased firms profitability

24 24 Spain and Latin America: Mutual Benefits1Banks and Development2Telecommunications and Development 3 Conclusions: Partnerships4

25 25 Conclusions: Examples of Partnerships for Development Partnerships with Banks and Asset Managers: ¿Why not picture a partnership between the National Co-operation agency and banks to create an investment fund (Public Private Equity) in Latin America following the model of the Emerging Africa Infrastructure Fund? http://www.emergingafricafund.com/ http://www.emergingafricafund.com/ This fund, with 370 million USD, was created by the British Co-operation agency (DFID) and private banks such as Barclays and Standard Bank. Other governments (Switzerland, Netherlands, Sweden) are also investing in this fund today. Why not envisage a French Investment Fund for Emerging Markets driven by the French Co-Operation agency? In 2006, the Swiss government created the Swiss Investment Fund for Emerging Markets (Sifem), with an initial investment of 200 million USD, to manage and promote investments of the State Secretariat for Economic Affairs (SECO) in long term projects for the private sector in developing countries.

26 26 Partnerships with Banks and Telecoms: Micro-finance and remittances offer opportunities for private-public partnerships for France. Financial actors in Latin America are carrying out ambitious projects (see for instance BBVA Foundation for Micro-finance or the development of remittances markets). Mobile banking had a spectacular peak in South Africa with a significant impact on local individual and corporate development: with banking actors and telecoms in Latin America, France could promote bancarization through the mobile in Latin America. It could be a remittances channel. Regarding remittances, why not favour bank accounts in euros in Latin America and avoid the currency risk for the money senders, at the same time encouraging bancarization in the receiving country? Conclusions: Examples of Partnerships for Development

27 27 Thank you! Contact: javier.santiso@oecd.org http://www.OECD.org/dev/ http://www.OECD.org/dev/


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