terça-feira, 17 de maio de 2016

Africa has to go through its own industrial revolution

Capitalism is failing Africa. A relatively small number of entrepreneurs have prospered on the continent in the past decade, becoming the face of the “Africa Rising” narrative. But hundreds of millions more have remained poor and unemployed, and lacking electricity, good schools and access to adequate healthcare.

The collective gross domestic product of the continent’s 54 nations is roughly $1.5tn — less than that of Brazil alone, at more than $2tn. Africa, with 70 per cent of the world’s strategic minerals, has about 2 per cent of world trade and 1 per cent of global manufacturing.

Capitalism has been the greatest creator of national wealth in world history, lifting billions out of poverty from Singapore to China, and from South Korea to Brazil. But Africa stands on the cusp of a lost opportunity because its leaders — and those who assess its progress in London, Paris and Washington — are wrongly fixated on the rise and fall of GDP and foreign investment flows, mostly into resource extraction industries and modern shopping malls.

They are in thrall to orthodoxies better suited for more mature economies. African countries need to focus on creating broad-based growth across sectors and social classes in order to promote jobs and labour productivity. This is what improves GDP per capita, which has remained stagnant at less than $3,000 in most African countries. Africa must stop counting malls and measure jobs and their productivity instead.

There is no shortcut to that outcome that can ignore building industrial economies based on manufacturing. African nations must reject the misleading notion that they can join the west by becoming post-industrial societies without having first been industrial ones.

Africa should be striving for self-sufficiency and to become part of the globalised production value chain. This requires the consistent development of skilled labour, linking innovation to industrial production, as well as investment — both domestic and foreign — in infrastructure and manufacturing.

Fossil power has turned out to be a mirage in countries such as Nigeria. They need to switch to a strategy based on renewable energy that is often quicker to install and is increasingly cost-effective.

If countries across Africa are to achieve inclusive economic growth on this basis, another shibboleth must be confronted: the one which decrees that for economies to prosper and grow, governments must get out of the way of business. On the contrary, governments must lead the way, with a firm hand on the wheel and by setting policy that creates an enabling environment for market-based growth that creates jobs.

They must also keep a careful eye on market actors with regulation and oversight that has wider social objectives in view. Markets must work for society and not the other way round. That, surely, is one of the lessons of the global financial crisis.

This is not an argument for a heavy-handed statist approach that would choke productivity and stifle competition. Nevertheless, a strategic role for governments remains essential. The question is whether African governments are capable of making the right policy choices. Ethiopia and Rwanda offer hopeful examples.

African countries need to remove incentives for systemic corruption if the proceeds of growth are to be widely shared. The Nigerian government under President Muhammadu Buhari has rightly withdrawn subsidies and deregulated the importation of refined petroleum products. Next, it should review its policy of maintaining an artificially fixed exchange rate, in the face of depressed income from crude oil. This has bred corrupt arbitrage in currency markets and hurt productivity.

Another key to manufacturing-based, inclusive growth is “smart protectionism” — temporary tariffs that would protect nascent industries from the cheap imports that have rendered African economies uncompetitive on the global stage. For developing countries, such as many of those in Africa, this can be achieved within the rules of the World Trade Organisation.

For capitalism to work for Africa, just as it has for China and much of east Asia, public policymakers must shake off the shackles of orthodoxy.

Kingsley Moghalu is a former deputy governor of the Central Bank of Nigeria

Fonte: FT

Brazilian real perks up as most emerging market currencies sour

Brazil’s real defied the downbeat mood in emerging market currencies, strengthening against the dollar as the market clung on to hope that the appointment of interim president Michel Temer would herald a change in the country’s economic fortunes.

Last week’s Senate vote to impeach Dilma Rousseff from the presidency was seen by many forex strategists as the culmination of the real’s political risk-driven rally which has made it the biggest gainer this year on the currency market.

The final two days of last week saw the real fall 2.7 per cent as the reality of the task facing the new Temer administration sank in. Monday’s trading, however, suggested investors were not yet ready to call the end of the real rally, pushing the currency 0.9 per cent higher.

Poland’s zloty strengthened 1 per cent, as the country surprisingly avoided a downgrade from rating agency Moody’s, and the Russian rouble rose strongly on the back of oil nudging $50 a barrel.

Much of the rest of emerging markets looked decidedly pale, not helped by soft data out of China over the weekend.

Flows data suggested sentiment in EM has deteriorated, said Luis Costa at Citigroup, probably because momentum in commodity prices had been fading and confidence in equities was weaker.

The currency market was also on alert for US inflation data on Tuesday to maintain dollar strength following its Friday rally following better than expected retail sales data.

If the dollar continued to climb and China data softened, a further rise in the currency against the renminbi would “take its pound of flesh out of the broader markets and in particular emerging markets”, said Brad Bechtel of Jefferies International.

South Africa’s rand dropped 2 per cent to a two-month low and government bonds deteriorated after the government denied a report that finance minister Pravin Gordhan would soon be arrested over controversy surrounding the tax authority, which he previously ran.

In a year marked by strong gains across EM currencies, the rand has underperformed and a combination of weak fundamentals and rising political risk meant that was likely to continue, said Win Thin, an analyst at Brown Brothers Harriman.

Slow growth has driven unemployment towards 27 per cent, and although support for the ruling ANC was likely to drop, Mr Win said the party should hold on to power at municipal elections this summer.

“President [Jacob] Zuma’s second and final term doesn’t end until 2019, and he has so far proven impervious to various scandals,” he added

Roger Blitz

Fonte: FT

segunda-feira, 2 de maio de 2016

Draghi returns fire over Berlin’s ECB attacks

Mario Draghi has hit back at German criticism of the European Central Bank’s interest rate policy, saying low borrowing costs were symptomatic of a glut in global savings for which Germany was partly to blame.

The ECB president’s argument on Monday is a new line of defence against strong objections from German politicians, bankers and the media over the ECB’s decision to lower its benchmark main refinancing rate to zero.

The ECB also has a deposit rate of minus 0.4 per cent, which works as a tax on lenders’ reserves held at the central bank.

The ECB has faced a barrage of criticism in Germany, where it has been accused of fuelling the rise of the Eurosceptic right and even by one newspaper of creating a “social disaster”.

Mr Draghi conceded that official interest rates were “not innocuous”, saying they put pressure on financial companies’ business models and pensioners’ income.

However, ultra loose policy was “not the problem, but a symptom of an underlying problem” caused by a “global excess of savings” and a lack of appetite for investment.

This excess — dubbed as the “global savings glut” by Ben Bernanke, former US Federal Reserve chairman — lay behind a historical decline in interest rates in recent decades, the ECB president said.

“The right way is not to address the symptoms, but address the underlying cause,” Mr Draghi said, adding that ageing populations had led to increased competition for savings while declining productivity meant entrepreneurs were only willing to borrow at lower rates.

The only solution was for an increase in demand for capital.

While Mr Bernanke has focused on the role of Asian economies in exacerbating this trend, Mr Draghi highlighted the contribution of the eurozone — and notably, of Germany.

The single currency area was “also a protagonist”, the ECB president said, pointing to its 3 per cent current account surplus. He then singled out Germany for maintaining a surplus above 5 per cent over the past decade.

Low interest rates globally meant such surpluses could no longer be maintained. “In a world where real returns are low everywhere, there is simply not enough demand for capital elsewhere in the world to absorb that excess saving without declining returns,” Mr Draghi said.

In such an environment, low central bank interest rates were not the enemy, but exactly what was needed to boost demand for investment.

“If central banks did not do this, investing would be unattractive,” Mr Draghi said. “So the economy would stay in recession.”

He added that the interest rate on savings was ultimately the same as that of the growth of the economy as a whole. Without the ECB’s aggressive response, the permanent damage to the eurozone’s economy would have been much graver.

In an implicit criticism of Berlin’s reluctance to spend to boost growth, Mr Draghi said those who have called for higher rates — such as German finance minister Wolfgang Schäuble — “necessarily imply a larger role for fiscal policy to raise demand”.

In a swipe at the rightwing and Eurosceptic Alternative for Germany party, Mr Draghi said there was “little doubt” that question marks over the future of the eurozone and the EU were holding back investment and spending.

Institutional reform was an “essential part of the solution” to the economic conditions that lay behind low interest rates. The ECB president has been a vocal advocate of more eurozone integration.

Claire Jones

Fonte: FT