The Americas

Uruguay growth linked to government investment 3-31-18

Source: "The magic of Montevideo"  

From the article: "On March 22nd the central bank reported that GDP grew by 2.7% in 2017, bringing the country’s growth streak to 15 years, the longest expansion in its history. Its success shows the value of openness, strong institutions and investment in know-how. Uruguay was too economically dependent upon large neighbors Brazil and Argentina. The Broad Front (FA), a leftist coalition that has governed since 2005, began an effort to “decouple” Uruguay from its neighbours. Under two FA presidents—Tabaré Vázquez, an oncologist who governed from 2005 to 2010 and again since 2015, and José Mujica, a former guerrilla who held office between Mr Vázquez’s two terms—the government created special tax regimes and set up economic zones to attract investment. Uruguay entered new industries, such as software and audiovisual services, which exported to new markets. Between 2001 and 2016 the share of exports going to Brazil and Argentina fell from 37% to 21%.

Recently the government has invested in raising productivity. Public spending on science and technology increased by 73% in real terms between 2007 and 2015. Even cattle farmers adopted new technology. While Argentina slapped export tariffs on beef to hold down domestic prices, Uruguay became the first Latin American country to make all its beef exports electronically traceable, a way of reassuring buyers that problems like foot-and-mouth disease will be caught early. Between 2005 and 2012 Argentina’s beef exports fell by three-quarters; Uruguay now sells more than its larger neighbour. At the same time, FA governments stuck with the orthodox economic policies they inherited and with practices that make the country attractive to investors, such as keeping taxes low and the judiciary independent of political influence.

The formula has worked. Uruguay kept growing after Brazil and Argentina entered recession in 2014. The middle class, as defined by the World Bank, grew from 39% of the population in 2003 to 71 % in 2015. Uruguay’s income per person is the highest in Latin America."



A possible future for Haiti 6-10-17

Source: "A time to sow"  

Haiti ROIQuick recap on Haitian history. Current president is Jovenal Moise, who succeeded "Sweet Micky" Martelly in February of 2017 after a contested November 2016 election. Haiti has undergone 18 regime changes since Duvalier left in 1986.

From the article: "A small business elite has supported fragile governments in exchange for low taxes and oligopolistic control of key industries, keeping the economy uncompetitive and obliging the government to finance itself through regressive taxes on imports. Perennially short both of cash and professional civil servants, the state has failed to provide infrastructure, the rule of law and services such as health and education. The earthquake made the weak state even weaker, killing many civil servants and destroying their records. Most Haitians who have escaped poverty have done so by emigrating. Many of those who stay resort to crime. Violent protests are common, sometimes toppling presidents and starting the vicious cycle anew."

More Haiti facts: their GDP per person has declined 40% since 1981. The 2012 earthquake killed 200,000 people. Infrastructure is falling apart. Example: the Artibonite Valley, capable of growing enough rice to feed all Haitians, has lain fallow since 2015 when marsh grasses clogged the irrigation and drainage canals in the valley.

Moise is using a utilitarian approach to prioritize reforms. The Copenhagen Consensus Center (CCC) with a $2 million grant from the Canadian government, scored and ranked proposed reforms by their return-on-investment. Example: cholera epidemic kills 10,000 in 2010. By looking at ROI, it is determined that vaccinating just schoolchildren will have a better result than trying to vaccinate the entire population. It will be cheaper, easier to manage and once vaccinated, the schoolchildren will be sufficient in number to achieve herd immunity. This schoolchildren-only approach has a benefit-to-cost ratio of 6.

More from CCC: fortifying the flour in Haiti would save 150 infants a year and prevent 250,000 cases of anaemia at very little cost. It has an ROI of almost $25, meaning that for every $1 in cost, Haiti gets $25 in benefits. Also high up, training more first responders and improving access to contraception.

Mexico's Special Economic Zones 6/25/16

Article: "How the bottom half lives  

The Mexican government hopes to improve the lot of the south by creating special Economic Zones, which will have lower taxes or less regulation than the rest of a country.

Northern Mexico is where the manufacturing happens, thanks in part to maquila laws that allow duty-free importation of materials as long as the finished product is exported. Between 1980 and 2000 these laws boosted the share of international trade in Mexico’s GDP from 11% to 32%. Southern Mexico is poorer and rural, with an economy based on agriculture. The Mexican government hopes to improve the lot of the south by creating special Economic Zones, which will have lower taxes or less regulation than the rest of a country. The intention is to promote investment in deprived areas with incentives that might be unaffordable, unpopular or unnecessary if applied nationally. First used in Ireland in 1959, they now number over 4,300 globally. (Commenters think the real problem in Mexico is widespread corruption - the nation is referred to as a “Mafiacracy").