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How Chinese Investment in Latin America Is Changing

Otaviano Canuto | Posted : March 14, 2019

China's push for Latin American consumers reflects changes back home.

Chinese financing in Latin America is changing. After becoming a major source of capital flows to Latin America and the Caribbean over the past 15 years, a more diverse range of investors has surfaced, interested in channeling resources towards infrastructure, governments and state companies.

Why Brazil Must Build a (Fiscal) Wall

Otaviano Canuto | Posted : January 31, 2019

Without reforms, financial markets’ optimism may crumble – and bring the house down.

Judging by the reaction of financial markets, the Brazilian economy started the year at high speed. The real is among the world’s best-performing currencies so far in 2019 and the main stock market index Ibovespa hit a string of record highs leading into last week, when it broke the 97,000-point mark. Future interest rates have fallen sharply. 

World Bank: A Hummingbird on the Firing Line

Otaviano Canuto | Posted : January 14, 2019

Last week Jim Yong Kim, president of the World Bank, unexpectedly announced his resignation, effective as soon as next month and three and a half years prior to the end of his second mandate. Given the current environment of challenged and weakened multilateralism, the aftermath of his succession has a relevance that transcends the limits of that institution.

The US-China trade truce: a time-out or a possible armistice?

Otaviano Canuto | Posted : December 06, 2018

The trade truce between the United States and China, announced after the dinner of the presidents of the two countries in Buenos Aires on Saturday after the G20 meeting, must be assessed in accordance to three different motivations that can be attributed to President Trump as reasons for starting the war. Although special attention has been given to immediate implications of the truce for the global macroeconomic environment and its impact on financial markets, it is important to keep in sight what it will take to become either a short time-out or a step to armistice.

Benefits and Costs of Islamic Finance

Otaviano Canuto | Posted : November 05, 2018

Islamic finance is a way of doing finance while respecting the Islamic ban on interest-based transactions and ensuring risk sharing between parties in all operations. Contracts are supposed to rule out features that would make them akin to gambling or “making money from money.” Furthermore, engagements in businesses considered immoral or ethically problematic are not allowed.

The Parrot and Commodity Prices

Otaviano Canuto | Posted : October 10, 2018

Teach a parrot the terms ‘supply and demand’ and you’ve got an economist.” That parrot can explain to us what is happening with commodity prices (Chart 1, left side). That is, while agricultural and industrial metal prices - particularly copper - plummeted on average by over 10% since June, energy prices - especially oil - have risen nearly 20% since the beginning of the year. Brent's barrel price is now triple what it was in early 2016. Check the latest World Bank Commodities Price Data (The Pink Sheet) here.

How to heal the Brazilian economy

Otaviano Canuto | Posted : September 18, 2018

If I were to synthesize the current situation of the Brazilian economy in one sentence, I would say: “it is suffering from a combination of ‘productivity anemia1 and ‘public sector obesity2’". On the one hand, the mediocre performance of productivity in Brazil in recent decades has limited its GDP growth potential. On the other, the gluttony for expanding public spending has become increasingly incompatible with such limits in the potential expansion of GDP, particularly since the former has not been achieving socioeconomic results that match such appetite.

No Women, No Growth – The Case for Increasing Women’s Leadership in Latin America

Otaviano Canuto | Posted : August 27, 2018

Latin America is up against a momentous year on multiple fronts. On one hand, game-changing national elections in six countries, including three of its largest – Brazil, Mexico and Colombia – are poised to reshape the political scenario in the region. In parallel, the economic agenda is front and center of countries’ efforts to overcome imbalances, implement reforms and accelerate growth. As a backdrop to all this, an important feminist movement is unfolding on the heels of a year marked by discussions on gender equality, with critical implications on both the political and economic spheres.

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