World Economic News
WTO Very Grim About World Economy
When the World Trade Organization starts to worry, the situation must be very bad, said one economics commentator about the press release summarizing the "World Trade Figures 2002" report issued by the WTO on April 23. The report points to "considerable uncertainty" clouding trade growth prospects for 2003. Growth rates for international trade volume have plunged to less than half of the average rates achieved in the 1990s (6.7%) and will further shrink this year to less than 3%, states the WTO. (It has to be noted that the growth rates in the 1990s were not generated by a growth in output, but rather by increased cross-border transport due to the outsourcing of production facilities.)
According to the WTO, "The downside risks on predictions for 2003 are large, bearing in mind continued sluggishness in the world economy," characterized by "the weakness of the global economy, greatly reduced investment flows, major movements in exchange rates, dented business confidence, increased restrictions on international trade transactions to reduce risks from terrorism and rising geopolitical tensions.... The weakness of fixed investment expenditure contributed significantly to the sluggish overall growth in the industrial countries. Worldwide expenditures on electronic equipment, IT hardware, and semiconductor plants continued to shrink."
The WTO then points to certain extraordinary developments during the last year:
*"Unemployment and underemployment worsened in most regions. Recorded unemployment rates rose in North America, Western Europe, and Japan. In the latter country, the unemployment rate reached an historic record of 5.5%, more than twice the level reported in the early 1990s. In Latin America, the steep decline in output has led to a sharply worsened employment situation: the average urban unemployment rate in the region increased to 9.1%, the highest rate observed in the 1990s."
*International capital flows "have experienced a drastic contraction," which can be illustrated by the "pronounced" fall of foreign direct investment (FDI). From $1.2 trillion in 2000, FDI flows in 2001 "collapsed by about 50%, and in 2002, by another 25%, falling back to about $500 billion." This global meltdown in FDI flows took place in spite of continued strong FDI flows to China and Central/Eastern Europe.
*"For the Latin American region, 2002 turned out to be one of the most difficult years since the debt crisis of the 1980s." Private net capital inflows to the region, exceeding $60 billion in 1999 and 2000, have suddenly disappeared. Currencies in the region were hit by "devaluations ranging between 50% and 70% in the most affected countries." Particularly dramatic was the economic deterioration in Argentina, which experienced "a massive cut in imports (-55%), which exceeded even the worst import contractions during the Asian financial crisis." Also other Latin American countries, including Brazil and Venezuela, saw one of their "worst years" in 2002.
*Finally, the WTO is very worried about the future of globalized markets as a consequence of unilateral actions by the Bush Administration: "The impact of a military conflict in the Middle East could also pose a challenge to international relations which go far beyond the questions of oil supplies and regional stability. Military intervention could have the effect of testing the whole system of international institutions and agreements, which have until now provided the basis for global governance, ushering in a new and more uncertain era in international relations. The erosion of confidence in global institutions could encourage the creation of the like-minded blocs and inward-looking policies."
Polio Cases Rose Sharply in 2002
Polio cases rose sharply in India in 2002, according to a report by the U.S. Centers for Disease Control and Prevention, based in Atlanta. The battle against polio hit its biggest roadblock last year in the northern Indian states of Uttar Pradesh and Bihar, which reported the worst outbreaks since 1988, when the World Health Organization (WHO) embarked on a major eradication program.
According to the CDC, polio cases rose worldwide from 483 in 2001 to 1,920 in 2002, with India suffering almost 70% of all cases, and with a reduction in the number and quality of mass vaccination programs accounted for the increase. "In certain parts of country, the vaccinators just did not reach all the kids they should have," said Steven Stewart, a spokesman for the CDC. Mass vaccination programs have been the linchpin of global efforts to stamp out the original form of the polio virus, as well as preventing the incidence of its vaccine-related form.
European Commission Lacks Means to Finance Trans-European Infrastructure
In a special memo titled "Building the trans-European transport networkInnovative funding solutions," the European Commission on April 23 noted that "without high-performance transport networks, economies cannot be competitive. The creation and smooth operation of the Trans-European transport network, which became official Community policy 10 years ago, is a key condition for the success of the internal market and to ensure sustainable mobility in an enlarged Union." However, while "traffic on the network is continuing to grow," the "transport infrastructure is still under-financed."
The issue is even more important in the context of European Union enlargement, which requires additional infrastructure financing. Anyone would agree, stated the memo, "that one of the keys to a successful enlargement will be the creation of a proper transport infrastructure network, which supplies the links still missing between the Fifteen [current members] and the new member countries." This will involve "infrastructure being modernized or newly built, not just in the future member countries, but also in the existing EU Member States, given that some projects have not yet been carried out, that new traffic flows will develop, and that connections between the two zones are few and far between."
Apart from technical and planning problems, "the main difficulty facing TEN (Trans-European Network) is funding. The estimated cost of the trans-European transport network alone is around 400 billion euros for all the projects to be completed by 2010, plus over 100 billion euros more for projects involving the future Member States." But the Commission is only putting a combined 15-20 billion euros into the various TEN projects per year; "this funding is clearly inadequate to complete all the planned projects by 2010."
The European Commission doesn't offer any new thoughts about how to overcome the failure of TEN funding. It just points to the "paradox" that the European Community was made responsible for improving and enlarging Trans-European infrastructure "without granting it the financial resources to execute that task." Public infrastructure spending by national governments is constrained by the Maastricht Stability Pact, and private-public partnerships would only work in a few cases. So what should be done? More taxation, such as a European-wide electronic toll systems, says the Commission.
Philippines Considers Fascist Labor Laws to Meet U.S. Hiring Demands in Iraq
The Philippines is now considering fascist labor laws, to facilitate the export of its labor to serve the empire policies of the United States in Iraq. Since the onset of the Iraq war, the Philippines government has created a super-Cabinet position to run the mass export of labor (perhaps 100,000) to serve the occupation forces in Iraq. Ironically, however, with continuing chaos in Iraq, and the refusal of the UN Security Council to lift the 12-year sanctions on Iraq without the UN certifying that there are no weapons of mass destruction, the "bonanza" of reconstruction contracts and jobs may be a chimera.
The man assigned to the super-Cabinet position, Bobby Romulo, is off consult with representatives of the U.S. occupation government. In Manila, Trade and Industry Secretary Manuel Roxas is considering the proposals of the Federation of the Filipino-Chinese Chamber of Commerce and Industry to promise the creation of 3 million jobs in the next two years in exchange for a 10-year ban, imposed by the government, on all labor strikes!
Thrown in for good measure is a reduction of minimum wage for "new recruits, until they gain experience." These overtly Nazi policies coincide with the deployment of U.S. combat troops into the most volatile Islamic regions in the country's south. Opposition to these measures appears to be muted thus far.
Argentina Hit with Lawsuits by Private Lenders To Recover Loans
Holders of private debt on which Argentina defaulted are suing to get their money back. Although Argentina has begun the process of restructuring the $52 billion in private debt on which it defaulted in December 2001, some creditors aren't waiting to go through the negotiating process. La Nacion of April 23 reported that last week, U.S. Federal Judge Thomas P. Griesa ruled that the Argentine government had to repay $8.1 million to three New York-based investment funds whose lawyers had sued in the Southern District of New York. Now, the Cayman Island-based EM Limited has sued in the same court for repayment of $595.4 million plus unpaid interest. EM Limited, an obscure off-shore company, claims that lawyers representing Argentina didn't contact it to discuss debt restructuring. The Argentines are said to be seeking at least a 50% writedown of the debt.
These lawsuits considerably complicate Argentina's debt negotiation plan. Francis Rodilosso of the Argentine Bondholders Association says his group is interested in continuing dialogue, but warns more legal action may lie ahead, if the Argentine government doesn't come up with a more "credible option" soon. In an interview with Clarin published April 21, former IMF official Claudio Loser threatened that unless Argentina makes solid progress by year's end, the IMF and G-7 will conclude that it doesn't merit future "assistance."
IMF Vultures Circling Argentina
For this story, see IBERO-AMERICA DIGEST, this issue.
Drop in Venezuela's GDP Will Be Largest in History
Due to the Venezuelan government's manipulation of exchange controls, as well as the oil industry strike that began last Dec. 2, the International Monetary Fund's "World Economic Outlook" report predicts a 17% decline this year for Venezuela's GDPthe largest in the country's history. The IMF report then ludicrously states that Venezuela will be the "only" Ibero-American country to undergo an economic contraction this year!
The inability of Venezuelan companies to obtain dollars to pay for imports, has not only affected the Venezuelan economy; it has also hit trade between Venezuela and South Florida, home to many Venezuelan export companies that trade with their home country. Inside Venezuela, Fedecamaras president Carlos Fernandez estimates that some 5,000 small and medium-sized companies, and 12,000 businesses, had closed by the end of 2002, and that another 25% of all Venezuelan companies closed during the first quarter of 2003.
Trade between South Florida and Venezuela dropped by 23% between 2001 and 2002, and is expected to drop another 50% this year. It is also estimated that Venezuela's crisis will cause the loss, directly and indirectly, of at least 50,000 jobs in South Florida.
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