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Multinationals and Development in Emerging Markets. Javier Santiso Acting Director & Chief Economist OECD Development Centre. Crédit Agricole Asset Management Paris, 3 rd October 2007 . 1. 4. Spain and Latin America: Mutual Benefits. Conclusions: Partnerships. 2. - PowerPoint PPT Presentation
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Multinationals and Development in Emerging
Markets
Crédit Agricole Asset Management
Paris, 3rd October 2007
Javier Santiso
Acting Director & Chief Economist
OECD Development Centre
2
Spain and Latin America: Mutual Benefits1
Banks and Development2
Telecommunications and Development3
Conclusions: Partnerships4
3
Latin America is crucial for Spanish firms
Share of sales in Latin America
0%
10%
20%
30%
40%
50%
60%
RepsolYPF
GasNatural
Iberdrola Endesa Santander Telefónica BBVA
20042005
30%
Source: OECD Development Centre, 2007; based on Annual Reports.
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
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Mill
ions
of
US
D .
FDI to Latam Spain
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
62,74661,543
131,968
0
50 000
100 000
150 000
200 000
250 000
Iberdrola Endesa Repsol YPF BBVA Santander Telefónica
Em
plo
yees
.
Employees in Latin America (2005)
Total of employees (2005)
6
Spain and Latin America: Mutual Benefits1
Banks and Development2
Telecommunications and Development3
Conclusions: Partnerships4
7
0
20
40
60
80
100
120
140
160
180
200
Chile
Phillipin
es
Bra
zil
Colo
mbia
Mex
ico
Mal
aysi
a
Kore
a
USA
Spai
n
Ger
man
y
Fran
ce
%
Private Credit/ GDP
Stock Market capitalization/ GDP
Private banks: Actors in economic development
in Latin America
0
20
40
60
80
100
120
Chile
Colo
mbia
Core
a
USA
Esp
aña
Filip
inas
%
Financial Solidity Index
Private Bonds/ GDP
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 Moody’s Financial solidity index, calculated with the weighted average of bank ratings per country.
LAC LAC
8
Banks have arrived along with the rise of democracy in the region
Brazil
50000
70000
90000
110000
130000
150000
1984
1986
1988
1990
1992
1994
1996
1998
2000
1
3
5
7
9
11
International Credit
50000
70000
90000
110000
130000
150000
1984
1986
1988
1990
1992
1994
1996
1998
2000
1
3
5
7
9
11
Consolidation of Democracy
Chile
10000150002000025000300003500040000450005000055000
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
0
2
4
6
8
10
10000150002000025000300003500040000450005000055000
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
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
1990
1992
1994
1996
1998
2000
2
3
45
6
7
89
10
11
50000
70000
90000
110000
130000
150000
1984
1986
1988
1990
1992
1994
1996
1998
2000
2
3
45
6
7
89
10
11
Argentina
20000
30000
40000
50000
60000
70000
80000
90000
100000
1984
1986
1988
1990
1992
1994
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
1984
1986
1988
1990
1992
1994
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
Peru
2000
7000
12000
17000
22000
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
3.8
4.3
4.8
5.3
5.8
6.3
Guatemala
0
500
1000
1500
2000
2500
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
0
2
4
6
8
10
Bolivia
0
1000
2000
3000
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
2
4
6
8
10
Uruguay
1000
3000
5000
7000
9000
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
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 Credit Consolidation of Democracy International Credit Consolidation of Democracy
International Credit Consolidation of Democracy International Credit Consolidation of Democracy
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)
Brazil
25000
45000
65000
85000
105000
125000
145000
165000
1985
1990
1995
2000
2001
2002
2003
2004
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
25000
45000
65000
85000
105000
125000
145000
165000
1985
1990
1995
2000
2001
2002
2003
2004
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
International credit EFW Index
Chile
0
10000
20000
30000
40000
50000
60000
1985
1990
1995
2000
2001
2002
2003
2004
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
1985
1990
1995
2000
2001
2002
2003
2004
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Argentina
2500035000
45000
5500065000
7500085000
95000105000
1985
1990
1995
2000
2001
2002
2003
2004
3.03.54.04.55.05.56.06.57.07.5
International credit
2500035000
45000
5500065000
7500085000
95000105000
1985
1990
1995
2000
2001
2002
2003
2004
3.03.54.04.55.05.56.06.57.07.5
EFW Index
Venezuela
10000
15000
20000
25000
30000
1985
1990
1995
2000
2001
2002
2003
2004
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
International credit EFW Index
10000
15000
20000
25000
30000
1985
1990
1995
2000
2001
2002
2003
2004
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
11
0
10
20
30
40
50
60
70
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23Periods
ARGENTINA BOLIVIA COLOMBIA COSTA RICA CHILEEL SALVADOR MEXICO PERU URUGUAY
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 America’s Political Economy of the Possible. Cambridge, Mass., MIT Press. 2006.
12
The Spanish banks’ market share continues to be the most important in Latin America
Consolidated claims in Latin America (% of total)
35
20
1210 9
64 2 2
0
5
10
15
20
25
30
35
40
Sp
ain
Un
ited
Sta
tes
Oth
ers
Un
ited
Kin
gd
om
Net
her
lan
ds
Can
ada
Ger
man
y
Fra
nce
Jap
an
%
Source: Bank of International Settlements, 2007. Source: Bank of International Settlements, 2007.
External Bank Assets (abroad) .
Index 1983=100 .
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
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Million
s o
f U
$
Workers’ remittancesForeign Direct Investment
Aid for Development
Dominican Republic
0
500
1000
1500
2000
2500
3000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Million
s o
f U
$
Workers’ remittancesForeign Direct InvestmentAid for Development
El Salvador
0
500
1000
1500
2000
2500
3000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Million
s o
f U
$
Workers’ remittancesForeign Direct Investment
Aid for Development
Mexico
0
5000
10000
15000
20000
25000
30000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Million
s o
f U
$
Workers’ remittancesForeign Direct Investment
Aid for development
14
Remittances have a significant impact on the financial structure of receiving countries
C0LOMBIA
0
100
200
300
400
500
600
700
800
900
1000
1998
1999
2000
2001
2002
2003
2004
2005
Millions
of dollars
0
500
1000
1500
2000
2500
3000
3500
4000
Millions
of dollars
Bank deposits (assets) Remittances (entry)
BRAZIL
0
5000
10000
15000
20000
25000
1998
1999
2000
2001
2002
2003
2004
2005
Millions
of dollars
0
500
1000
1500
2000
2500
3000
3500
4000
Millions
of dollars
Bank deposits (assets) Remittances (entry)
MEXICO
0
20000
40000
60000
80000
100000
120000
140000
1998
1999
2000
2001
2002
2003
2004
2005
Mill
ions
of do
llars
0
5000
10000
15000
20000
25000
Mill
ions
of do
llars
Bank deposits (assets) Remittances (entry)
ECUADOR
0
500
1000
1500
2000
2500
3000
3500
1998
1999
2000
2001
2002
2003
2004
2005
Millions
of dollars
0
200
400
600
800
1000
1200
1400
1600
1800
Millions
of dollars
Bank deposits (assets) Remittances (entry)
Source: OECD Development Centre, 2007. Based on: IMF Balance of Payments, 2007.
Bank deposits and Remittances Flows
Correl. : 0.62
Correl. : 0.69
Correl. : 0.98
Correl. : -0.1
15
Spain and Latin America: Mutual Benefits1
Banks and Development2
Telecommunications and Development3
Conclusions: Partnerships4
16
Telecommunications in Latin America
Suscribers and users per 100 inhabitans
0
10
20
30
40
50
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Mobile Fixed Internet users Broadband
Source: OECD Latin American Economic Outlook 2008; Based on ITU, World Telecommunications Database
17
Latin America is the emerging region with the highest investment in
telecommunications
FDI on telecoms towards Latin America
Millions of dollars
0
5 000
10 000
15 000
20 000
25 000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
FDI in telecommunications, per region
56%
24%
7%
6%4% 3%
Latin America Central and Eastern Europe
South East Asia South Asia
Middle East and North Africa Sub-Saharian Africa
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
Allowing the take-off of private investment and successful privatization
Telephone density and privatization
0
100
200
300
400
-7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7
Years (0=privatization)
Te
lep
ho
ne
de
nsi
ty (
añ
o 0
=1
00
)
Latin America OECD
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
Telephone access has dramatically increased…
Telephone lines per 100 inhabitants
0 20 40 60 80 100
HaitiCuba
NicaraguaHonduras
PeruBolivia
ParaguayGuatemalaEl SalvadorDominican
PanamaCosta Rica
EcuadorVenezuela
MexicoColombiaUruguay
BrazilArgentina
Chile
1990
1995
2000
2005
Source: OECD Latin American Economic Outlook 2008, OECD Development Centre; ITU, World Telecommunication Indicators Database, 2006.
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
Competition in Latin America within this sector has favoured the access
Operaciones de telefonía móvil
Millicom América Móvil
Telefónica
Líderes en telefonía fija (4) (1) (5)
Telefónica
Both operate, no leaderTelmex/América
MóvilOthe
rs
Source: OECD Latin American Economic Outlook 2008, OECD Development Centre.
Leaders in fixed telephone
Operators mobile phone
22
Quality has also improved substantially…
Installation of telephone lineMonths, by company
72
0.4
49
0.4
40
0.1518
0.13
1994 2005 1990 2005 1998 2005 1990 2005
Peru (TdP) Argentina (TASA) Brazil (TeleSP) Chile (CTC)
Source: OECD Latin American Economic Outlook 2008, OECD Development Centre.
23
The use of TICs has increased firms’ profitability
IndicatorUsing TIC Difference
Sales Growth (%) 0.4 3.8 3.4
Employment growth (%) 4.5 5.6 1.2
Profitability (%) 4.2 9.3 5.1
Investment Rate (%)a -- -- 2.5
Re-investment rate (%)a -- -- 6.0
Labour productivity (US$) 5 288 8 712 3 423
Total Factor Productivity (%) 78.2 79.2 1.0a Being truncated variables, median rates are not provided.
Source: Information and Communications for Development 2006, The World Bank
Not using TIC
Company
24
Spain and Latin America: Mutual Benefits1
Banks and Development2
Telecommunications and Development3
Conclusions: Partnerships4
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/
• 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
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