Latin Asia Business Forum 2008

Leveraging the Latin Asia

Partnership in the Face of
Global Challenges

L. Enrique García

President and CEO

Corporación Andina de Fomento
Singapore, September 22-2008
 The region registered the largest economic expansion
over the last 15 years, within a stable environment
GDP Growth in Latin America Average inflation rate in Latin America
AVERAGE 2004-2007
5.4% 600
7

6 500
5
400
4

%
%

3
300

2 200
1
100
0

-1
0

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2007p
1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006
Unemployment and employment rates in Latin Poverty and extreme poverty in Latin America
America
Employment rate Unemployment rate Indigency Poverty
55 12 50
45
11
54 40
10 35
53 30
%

9
%

25
52
8 20

51 15
7
10
50 6 5
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007p

0
1980 1990 1997 1999 2002 2005 2006 2007p

Source: CAF, IMF WEO Sept-07

The main factors behind the good economic
performance were

• Favorable external conditions

• Solid macroeconomic fundamentals

• Domestic demand recovery

 Favorable external conditions (up to jul-07)
Latin America: Exports growth Latin America: Net capital inflows
120
12 250
Exports growth
Private flows, net
100
10 Commodities Index
Official flows, net
200 80

USD billions
8 60
150
%

6 40
100 20
4
0
50
2
-20
0 0 -40
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008
Embi + and Embi Latin Dynamics Latin America: International Reserves

400 450.000
Embi Latin 400.000 Short term debt / Reserves
350 Embi+
350.000 1991-1994: 110%
300.000 2004-2007: 31%
300
Pb

250.000
250 200.000

150.000
200
100.000

150 50.000
Mar-06
Abr-06
May-06

Jul-06
Ago-06

Dic-06

Mar-07
Abr-07
May-07

Jul-07
Ago-07

Dic-07

Mar-08
Abr-08
May-08

Jul-08
Ago-08
Ene-06
Feb-06

Jun-06

Sep-06
Oct-06
Nov-06

Ene-07
Feb-07

Jun-07

Sep-07
Oct-07
Nov-07

Ene-08
Feb-08

Jun-08

0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: IMF, WEO Sept-08, Bloomberg, CEPAL
Nonetheless, the region still faces
significant challenges
 Latin America is outperformed by other regions
in terms of income per capita growth
Per capita GDP, PPP 1960=100

1.400

1.200 East Asia OECD

1.000
Latin America China

800

600

400

200

0
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: World Bank (2007)
 ...and the region’s share in global trade and
investment flows is declining

Share in global exports Capital flows to Emerging Economies (%)

1953-2005 1991-2004
14

Latin America
América Latina y Caribe
12 China
China

Capital flows to Emerging Economies (%)

Southeast
Sureste Asia
Asiático
10

Emerging Asia
8
%

Latin America
6

Emerging
4 Europe

0
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005

Source: World Bank (2007), Talvi (2007)

 Low savings

Latin America: Saving Saving (% GDP)

1990-2007 1990-2007

25
35

30
20

25

15
20

% GDP
% GDP

15
10

10

5 5

0
0
Latin OECD East Asia
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

America

Source: IMF WEO Sept-07, CAF

 Low investment

Latin America: Investment Investment (% GDP)

1990-2007 1990-2007

22 35

30
21

25
20

20

% GDP
% GDP

19
15

18
10

17 5

0
16
Latin OECD East Asia
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

America

Source: IMF WEO Sept-07, CAF

 Low productivity hinders the expansion of
potential output
Labor productivity relative to USA
(1960-2003)*

Latin America East Asia whitout China

Finland Ireland
2,80
Labor Productivity / USA

2,50

2,20

1,90

1,60

1,30

1,00

0,70
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
*Labor productivity Index 1960=1

Source: Own calculations, Bosworth and Collins (2003)

 A sudden deterioration of the
international environment could
negatively affect the economic
performance of the region
 Nonetheless, Latin America has
medium and long term positive
prospects that open a window of
opportunity for Asia – Latin America
relations
 LAC-Asia Trade
Exports to Asia (% of each country’s total Imports from Asia (% of each country’s total
exports) imports)

Source: ECLAC (2008)

 Foreign Direct Investment in the Latin-American
countries and Asia

Latin America FDI in Asia by country (2002) Asia FDI in Latin America by country (2002)
Taiwan
(Province of
China) Singapore
Japan Malaysia Philippines
2,0% 1,0%
0,3% 7,5% 4,6% South Korea
Rest
Thailand 2,0%
Hong Kong 1,0%
26,3%
10,0%

Taiwan
(Province of
Japan
China)
84,0%
61,3%

Source: UNCTAD Source: UNCTAD

FDI Stock : USD 43,3 billions by 2002 FDI Stock : USD 1.100 billions by 2002
 Towards a comprehensive development
agenda for the future

Sustainable Quality Growth

Efficiency Stability
Stability Equity

Investment in all
Macroeconomic Productivity Social inclusion Environmental
forms of capital
balance sustainability
 Main Challenges

• Productive Transformation
• Domestic Agenda: support competitiveness
• Productive diversification and productivity growth
• Physical Infrastructure
• Education
• New activities and innovation
• Clusters’ Development
• High quality Foreign Direct Investment
• Institutional and regulatory strengthening

• Articulation of different international insertion

strategies
 CAF Input for strengthened ties with Asian
countries

• Trade and investment promotion

• Infrastructure and logistic
• Joint ventures
• Capital flows
Initiative for the Integration of Regional
Infrastructure in South America (IIRSA)

During the last decade, CAF has

approved 56 operations of USD
4.553 million for the execution of
47 South American physical
integration projects with a total
investment exceeding USD
12.950 million.
http://www.caf.com