The deadlock in dealing with developing country debt : a review.

Auslandsverschuldung; Entwicklungsländer;

The changing pattern of foreign direct investment in Latin America

Latin America has regained attractiveness for foreign direct investment. However, it is still uncertain whether the recent boom of capital inflows is sustainable, and which countries are well prepared to benefit from the current trend towards globalized production. Economic policies pursued by Latin American governments are shown to be of overriding importance for explaining why the region as a whole lost ground vis-a-vis Asian competitors for foreign direct investment, and why some Latin American economies were more successful than others in restoring their locational attractiveness.

Latin America after the currency crash in Brazil : why the optimists may be wrong

The currency crisis in Brazil and its adverse effects on neighboring countries are widely perceived to be short-lived phenomena. However, optimists—stressing favorable growth and investment prospects in Latin America—tend to ignore home-made causes of Brazil's crisis and -underrate the risks ensuing for the region as a whole. • Financial turmoil in Asia and Russia induced several speculative attacks on the Brazilian real. However, domestic policy failure caused the currency collapse: The Real Plan of 1994 was undermined by delaying fiscal consolidation. Thus, crisis was looming since 1997, mainly because soaring public sector deficits eroded the sustainability of the exchange-rate peg to the US dollar. • After the decision for floating the real, Brazil still faces serious policy dilemmas. Devaluation has not prevented a further rise in interest rates. Mounting debt-service obligations represent a fiscal time bomb. Restructuring short-term debt involves the risk of prolonged financial volatility. It cannot be ruled out that Brazil will impose capital outflow controls, the drawbacks of such a move notwithstanding. Brazil's crisis affects neighboring countries in several ways. Contagion transmitted through financial markets has remained limited so far. If financial turbulence continues in Brazil, however, the pressure on exchange rates, interest rates and stock markets is likely to increase in other Latin American countries. Contagion through trade hits Brazil's Mercosur partners in the first place. Mexico, too, may be affected as the devaluation of the real impairs the international price competitiveness of Mexican exporters on third markets. In addition, the crisis may disrupt intra-Latin American investment relations. Short-term economic prospects of Latin America would deteriorate if the United States were no longer prepared to absorb rising exports of crisis-ridden emerging markets. Protectionist sentiments may also spread in Latin America, especially if world-market prices of the region's major commodity exports remain depressed. In the light of Latin America's strong reliance on foreign capital, the greatest risk appears to be that external financing of current account deficits will be curtailed. The current crisis may have as a result that structural reforms, required for Latin America's successful participation in globalized production, will take second place for the time being. This applies especially to Brazil where fiscal discipline required for short-term stabilization clashes with public investment needs, notably in education. Deregulation of labor markets may be postponed in other Latin American countries, too, in order to contain unemployment in the short run. Yet, Latin American governments should signal their determination to stick to reforms even under conditions of financial turmoil. Privatization and public sector reforms supporting better governance are of critical importance in this respect. --

Relocation, offshoring and labour market repercussions : the case of the German automobile industry in Central Europe.

The paper raises the proposition that Central Europe?s integration into the international division of labour has added significantly to competitive pressure in the German automobile industry. Based on production and trade data, we trace two dimensions of competitive pressure: relocation of assembly operations and offshoring of automotive parts production. The knowledge-capital model of multinational enterprises provides the analytical basis for the discussion of labour market repercussions. Vertical foreign direct investment in Central Europe may have helped the relatively favourable employment and earnings record of the German automobile industry, compared to other manufacturing industries. Yet recent industrial disputes can be attributed, though not exclusively, to the emergence of Central Europe as an attractive location for assembly operations and autoparts production. Employment and wages diverged considerably within the German automobile industry. Relative to skilled workers, the labour market situation of less skilled workers deteriorated significantly.Direktinvestition; Kraftfahrzeugindustrie; Auslandsproduktion; Deutsch; Kraftfahrzeugzulieferer; Offshoring; Lieferanten-Kunden-Beziehung; Lohnstruktur; Qualifikation; Deutschland; Osteuropa;vertical FDI , trade in intermediates , relative wages , employment;

[Book Review of] How to improve the development impact of foreign direct investment: a review.

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German direct investment in Latin America: striking peculiarities, unfounded fears, and neglected issues

Foreign direct investment (FDI) of Germany in Latin America reveals various peculiarities that may shape future investment relations. However, two major concerns are largely unfounded: - In contrast to widespread fears in Germany, FDI outflows are highly unlikely to have added to labor market problems. - Host country concerns that the Eastern enlargement of the EU may divert German FDI away from Latin America seem to be unjustified. German investors have responded relatively weakly to new investment opportunities in Latin America. Some of the traditional features of German FDI in this region, notably the predominant orientation towards large local markets, may work against closer investment relations in the era of globalization. Much depends on whether Latin American host countries succeed in improving international competitiveness in industries in which German FDI is concentrated.

Corporate social responsibility and socially responsible investment : new paradigm, latest fad, or ingenious plot?.

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Winners and losers in the global economy : recent trends in the international division of labour and policy challenges

Globalised markets and production patterns offer favourable opportunities to raise world income. Yet globalisation also fuels conflicts about the distribution of welfare gains within and across countries. Various developing economies are poorly prepared to meet the challenge of fiercer competition on world goods and factor markets. In industrialised countries, low-skilled workers face mounting adjustment pressures. Multilateral trade liberalisation represents a "win-win strategy", with only a few possible exceptions in the short run. The neomercantilist notion that the removal of trade barriers is a concession to foreign trading partners is grossly fallacious. Income gains are mainly due to the countries' own liberalisation measures. Developing countries could have raised their share in world welfare gains if they had committed themselves more strongly to binding trade liberalisation during the Uruguay Round negotiations. Foreign trade and direct investment patterns reveal that the international division of labour is progressing not only in a regional context but also on a truly global scale. The opportunities for new competitors for foreign capital and technology transfers depend on domestic economic policies in the first place. Exogenous factors such as the recent revival of regional integration, autonomous locational decisions taken by multilateral corporations, and technological developments cannot be blamed for failures in benefiting from globalisation. The strikingly different economic performance of developing countries in globalised markets and production is clearly related to the progress made with respect to macroeconomic stabilisation, physical and human capital formation, and openness towards world goods and capital markets. Asian-type success stories could be repeated elsewhere, once governments have become aware that they can no longer pursue economic policies of their own liking. The Triad of the EU, Japan and the United States will come under fiercer adjustment pressure if more developing countries become involved in globalisation. Industrialised countries have little choice but to promote human capital formation in order to strengthen their comparative advantages in skill-intensive lines of production. Adjustment needs have been handled most effectively in Japan so far. By contrast, high unemployment in the EU, especially of low-skilled workers, appears to be the price that has to be paid for insufficient wage flexibility and structural change. --