Beijing Consensus?

November 13, 2009

Less than five years ago, few analysts could have predicted China’s role in the global economy would be as significant as it is today. But the economic recession has helped to catapult China into becoming an engine for global economic growth.

China’s growing influence in the world—and particularly in Latin America and the Caribbean—is currently the source of much debate in Washington. (In fact, a Fall 2009 AQ book review on this very topic has already generated two Letters to the Editor.)  Some worry that Beijing is trying to undermine U.S. influence in the region, while others see China’s interest in our hemisphere as merely a reflection of its drive for a bigger piece of the world’s economic pie.

China has quickly become one of the region’s most important trading partners. In 2009, it overtook the United States to become the top trading partner of both Brazil and Chile.  Beijing also has free-trade agreements in force with Peru and Chile and is currently in negotiations with Costa Rica. A bilateral investment treaty was signed with Colombia on the sidelines of the 2008 Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting. Later this month, Bogota will host the third China-Latin America Business Summit, a meeting with more than 1,000 investors expected to attend. 

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Latin America's Middle Class Isn't What You Think (cont'd): The Unbanked

August 19, 2009

Two weeks ago I started a serialized essay on Latin America’s middle class that will appear every other week on the AQ blog. As I wrote at the time, Latin America’s middle class has received a lot of attention of late, including worry about its size, praise and high expectations for its growth and debate about its future. It’s also sparked a fair amount of speculation by businesses about its market potential.

But as I wrote two weeks ago, Latin America’s middle class is much more heterogeneous and, quite frankly, poorer and marginalized than many of us in developed countries would believe.  In the last post, I talked about the definition of the middle class.  In this one I talk about access to banking.  And not to give away the punch line: it’s lower than you think.  In later ones I’ll talk about wage security, education, access to health care, access to insurance, quality of housing, levels of satisfaction, and support for democracy.  But more about this in subsequent posts. 

Now it’s about the integration of Latin America’s middle class into the formal banking/financial system.

Consider this: according to an article that appeared in The New York Times on August 18, 2009, in New York City (notice how as a resident now I capitalize City as if to give it special meaning.  Why I don’t know.) “in the world’s banking capital, 12 percent of households do not have a bank account” compared with 8 percent nationally. 

That’s in New York and is a statistic that transcends socioeconomic groups—upper class, middle class and the poor. 

Consider this: in Latin America, in Mexico, for example, the middle class’s access to formal credit averaged just over 20 percent (in other words, just under 80 percent of the Mexican middle class did not have access to formal credit sources—banks, credit agencies, credit cards, etc.).  And in Peru under 18 percent had access to savings accounts. 

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A Green Opportunity in Mexico

June 30, 2009

Passage of climate change legislation in the U.S. House of Representatives last Friday was the United States’ first step in a more robust, forward-looking policy to cut greenhouse-gas emissions. But look to the other side of the Rio Grande and you’ll find a country that is showing new leadership in going green.

Yes, the outlook for Mexico may be somewhat grey these days if you're looking at the economic situation or the loss in tourism revenue. But Mexico is fast becoming one of Latin America’s best examples of how a government can address climate change and open the door for greater use of alternative energy.

Mexico’s role is quite welcome in a region that lags behind the world in terms of its investments in alternative renewable energy and in fighting climate change.  In 2007, Latin America produced just 1.7 percent of global renewable energy, including wind, solar, geothermal, and small hydro energy. This correlated with the region’s ability to attract a meager 3 percent of the $87 billion globally invested in renewable projects. And while Latin America may not be a big contributor of carbon dioxide (CO2) emissions, climate change is intensifying tropical rains, tornados, hurricanes, and dry seasons across the world. Mexico and the rest of the region stand to lose out by not taking action now.

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