Volume 45, Number 178, July-September 2014


EDITORIAL
Regionalism and Development Models: Asia and Latin America*

revista164 On an overcast morning, we cannot see the light at the end of the tunnel. The international economy simply has not grown stronger. Although the unemployment rate in the United States has fallen considerably, to nearly 6.7%, in Europe, austerity policies have been accompanied by economic fragility and volatility. The Great Recession has not yet come to an end. Deflation is still a threat, and the Great Crisis has left behind repercussions that will be difficult for developed countries to address and rebuild in the short and medium term.

Global forecasts are constantly adjusted in reaction to how the United States unemployment rate and GDP are behaving (1.9% in 2013 and 2.1% in 2014). Global GDP growth was 2.4% in 2013, and 2.8% in 2014, while this figure was 4.6% and 4.7% in emerging markets, for the same years. Despite the global economic crisis, emerging economies have continued to grow thanks to anti-cyclical policies implemented after the Lehman Brothers collapse, although growth rates have not yet returned to pre-2007 levels. Latin American and the Caribbean grew at a rate of 2.4% in 2013, and 1.9% in 2014. Asia (East and South) grew 5.6% in 2013 and 5.7% in 2014. The GDPs of these countries continue to grow at a faster rate than those of developed countries.

In this environment, we are witnessing a puzzling development among major emerging international economies. China, Russia and India are turning towards nationalist and inclusive policies to favor their majorities. These countries, part of the so-called BRIC group, are gaining ground on the global geo-economic and geopolitical stage. Add to that Japan, with its Abenomics.

These four Asian countries account for nearly 24.85% of GDP (2012) and corporate governance in this region has given Asian capitalism a certain peculiarity. Regardless of whether enterprises are private, public or partially state-owned, results must be quantifiable. Asia currently consumes 76% of steel, emits 44% of contamination and receives 17% of foreign direct investment.

These macroeconomic indicators cannot be understood without the role of the State and a strong financial system. Who are the big players in production, as defined by sales? In the energy sector: Sinopec, China National Petroleum Corporation, CNOOC, Sinochem Group and China Resources Enterprises Ltd. (China), Gazprom and Lukoil (Russian Federation) and Petronas (Malaysia). In the electronics industry: Samsung Electronics (Korea) and Hong Hai Precision Industries (Taiwan). In commerce: Noble Group Ltd. In telecommunications: China Mobile (Hong Kong) Ltd. (China). In construction: China Railway Construction Corporation Ltd. In the automobile industry: Hyundai Motor Company, Kia Motors (Korea) and Tata Motors Ltd. (India). In the metal and metal products sector: China Minmetals Corp. (China) and Tata Steel Ltd. (India).

On the other side of the Pacific, multinational Latin American companies are reaching sales of nearly a trillion dollars. There is significant investment in these companies, and they are expanding beyond the Latin American region and globalizing to North America, Europe, Africa and Asia. The Latin American leaders in the energy sector include: Petrobras (Brazil), Pemex (Mexico), PDVSA (Venezuela), Ecopetrol (Colombia), and ENAP (Chile). In telecommunications: América Móvil (Mexico). In mining: Vale (Brazil) and Grupo México (Mexico). In construction: Odebrecht (Brazil). In commerce: Cencosud and Falabella (Chile). In agro-industry: JBS Friboi and Marfrig (Brazil). In the iron and steel industry: Techint (Argentina) and Gerdau (Brazil). In the food sector: Femsa and Bimbo (Mexico) and BRF Food (Brazil). In cement: Cemex (Mexico) and Camargo Corrêa (Brazil).

In the midst of this puzzle, the following question is useful. Are the different growth models implemented over the past decades valid for both regions? Or will we have to wait for a new period to see how the Great Recession develops? It is important to properly analyze how foreign investments are channeled, because they are a source of employment. It will also be helpful to look at how the State repatriates earnings and allocates public spending.

When this edition went to press, three topics were up for debate, in the Economic Commission for Latin America, as well as in the magazine The Economist and in the newspaper The Financial Times. The ECLAC document highlighted major multinational companies in emerging countries, while The Economist presented the principal Asian corporations and The Financial Times emphasized the new nationalist wave in India, Russia, China and Japan.

In the article, “The Primary Sector and Economic Stagnation in Mexico,” the authors Moritz Cruz and Mayrén Polanco begin with various theoretical approaches and the hypothesis that the primary sector is the foundation upon which industry grows and is reinforced. Once industry matures, the primary sector begins to receive resources through subsidies or tax incentives to sustain economic growth. This work demonstrates how the primary sector deteriorated after agricultural policy was dismantled through official credit, eliminating subsidies and the entry into force of the Free Trade Agreement with the United States and Canada 20 years ago. The central strength of the work lies in its econometric evidence. To achieve growth, there must be agricultural policy that guarantees a productive surplus for the primary sector, along with productivity.

In the article, “Is Brazil Becoming Deindustrialized?” Fernando Mattos and Bruno Fevereiro discuss so-called deindustrialization, which results from reduced industry and manufacturing, fewer jobs and the position of aggregate value. The authors begin with the idea that income growth, which accompanies increased productivity, alters the demand structure. As such, their thesis that deindustrialization has come about due to a change in relative prices, owing to varying labor productivity growth rates among sectors, should go further in-depth. The signs of deindustrialization in Brazil appear upon examination of the country’s recent foreign trade profile. One important factor is the increase in imports of Chinese products as supplies for Brazilian industrial activities, leading to employment losses.

One of the greatest international concerns is the real-estate bubble in China, which could set off a future financial crisis. This is the subject of Mylène Gaulard’s work, “The Real-Estate Bubble in China.” She studies real-estate sector prices in two time periods. What is truly worrisome is how these prices went up after the central bank injected cash into the economy to prevent a downward economic spiral in 2009. The author also analyzes real-estate prices in major Chinese cities. The construction sector in China consumes around 60% of the cement produced around the world and 43% of construction equipment. In light of increasing real-estate prices, families are reducing the internal demand, and this could lead to a trap, as consumption falls.

“The Multidimensional Poverty Index and Poverty Traps in the Southern Cone,” by María Emma Santos, considers three dimensions: education, health and living standards. She discusses these topics, in the framework of the human development capabilities approach, for five Southern Cone countries: Argentina, Bolivia, Brazil, Paraguay and Uruguay. The article concludes that in three of the five countries analyzed, the majority of the poor, as defined by the MPI, have deprivations in at least two dimensions, where education and living standards is the most frequent combination, followed by health and living standards. This suggests that in the absence of exogenous aid, this population, which is the standard, will face severe difficulties in trying to overcome poverty. This indicator is a possible approximation to quantifying poverty traps in the countries analyzed.

With a multivariate probit model, the author Pedro Orraca, in “Child Labor and Its Causes in Mexico,” creates a database to study child labor in-depth. He also studies the effect of birth order and insufficient household economic resources on how time is allocated towards attending school and working paid and unpaid jobs among minors in Mexico. This is an interesting case, because the country has medium-high income levels, extreme inequality, significant poverty and child labor and various wide-ranging social programs whose direct and indirect objectives are to promote human development. The results of this model contradict the findings of developed countries, where birth order favors oldest children. In Mexico, the effect of birth order on how time is allocated to school and work tends to favor the youngest children.

In “Wind Energy in the Isthmus of Tehuantepec: Development, Actors and Social Opposition,” Sergio Juárez-Hernández and Gabriel León describe this region as having significant wind power potential. In recent years, national energy policy has favored private investment in the energy sector and, specifically, in the electricity industry, to such an extent that the Energy Regulating Commission has granted permits to private companies – mainly foreign – to build wind power plants. Spanish multinational companies predominate among this group, and are members of the Mexican Wind Power Association (AMDEE). They have been lobbying for legal and regulatory adjustments to ensure that their projects will be profitable. The article describes the relationship between private power generation companies and consumers, as well as the opposition groups who believe that the energy produced is not for the good of affected communities, where the percentage of households without electrical power exceeds the national average.

In “An Approach to Currency and Crisis,” Marcos Cueva analyzes the role of money beyond its traditional function as a means of exchange, producing an abstraction that represents a double-faceted social link. Starting with the importance of money in its own analysis, and the idea that money has been hegemonic since the crisis, he concludes that international currency has undergone a modification. The author’s objective is to create an abstraction, not only of money through modern history, but also how it is subjectively expressed in the social sciences.

The reviews section recommends five books: Neoliberalism in Crisis: Causes, Scenarios and Possible Developments, by Jaime Estay, Claudio Lara and Consuelo Silva (eds.), reviewed by Francisco González, After the Crisis, Public Policies to Promote Economic Growth, by Alma Chapoy and Patricia Rodríguez (coords.), from the Problemas del Desarrollo book collection, reviewed by Elizabeth Concha, Socialism or Death, by William Yohai, reviewed by Óscar Mañán, Science, Technology and Innovation in Mexican and Latin American Development. The Challenges of Science, Technology and Innovation. Development, Education and Labor, Volume I, by María del Carmen del Valle, Ana Mariño and Ismael Núñez (coords.), reviewed by Alejandro Barragán, and, finally, Science, Technology and Innovation in Mexican and Latin American Development. Innovation and Learning Dynamics in Territories and Productive Sectors, Volume II, coordinated by María del Carmen del Valle, Ana Mariño and Ismael Núñez and reviewed by Jessica Tolentino.

Alicia Girón
Journal Editor
unam, June 2014

*Data for this editorial was taken from the ECLAC document Foreign Direct Investment in Latin America and the Caribbean, 2014 and The Economist, published May 31 and June 6, 2014. Figures on GDP growth were taken from the document, “World Economic Situation and Prospects 2014 (Update as of Mid- 2014” by the UN. Available at: http://www.un.org/en/development/desa/policy/wesp/wesp_current/WESP2014_mid-year_update.pdf. Figures on global GDP growth for the United States and Latin America and the Caribbean were taken from, “Global Economic Prospects. Shifting Priorities, Building for the Future” (June 2014), by the World Bank. Available at: http://www.worldbank.org/content/dam/Worldbank/GEP/GEP2014b/GEP2014b.pdf.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 193, April-June 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Moritz Cruz. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: June 27th, 2018.
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