From Windfall to Windmill: Harnessing Asia’s Dynamism for Latin America


By Andre Meier and Fabiano Rodrigues Bastos

(Versions in Español and Português)

Latin America’s recent economic fortunes highlight the region’s closer economic ties with Asia. China, in particular, has grown into a crucial source of demand for Latin American commodities over the past two decades, providing significant gains to the region. The flip side is that the ongoing structural slowdown of Chinese investment is weighing considerably on the prices of those commodities, and the countries that export them.

But Asia can be much more than just a source of episodic windfall gains (and losses) for Latin America. Like a windmill, Asia could help to power a stronger Latin American economy—by providing an example of successful regional trade integration and through greater direct links across the Pacific that benefit both sides. However, securing these benefits will require clear and realistic objectives, a long-term strategy, and attention to the political and social implications of greater economic integration. 

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Fixing International Corporate Taxation—Not Just a Problem for Advanced Economies


Mick KeenBy Michael Keen

It’s hard to pick up a newspaper these days (or, more likely for readers of blogs, to skim one online) without finding another story about some multinational corporation managing, as if by magic, to pay little corporate tax. What lets them do this, of course, are the tax rules that countries themselves set. A new paper takes a closer look at this issue, which is at the heart of the IMF’s mandate: the way tax rules spill over national boundaries, and what this means for macroeconomic performance and economic development. These effects, the paper argues, are pretty powerful and need to be discussed on a global level.

Follow the money

Take, for instance, international capital movements. Though tax is not the only explanation, the foreign direct investment (FDI) positions shown in Table 1 are hard to understand without also knowing that  tax arrangements in several of these countries make them attractive conduits through which to route investments. In its share of the world’s FDI, for example, the Netherlands leads the world; and tiny Mauritius is home to FDI 25 times the size of its economy.

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Capital Flows to the Final Frontier


By Antoinette M. Sayeh

(Version in Français)

Sub-Saharan Africa’s “frontier markets”—the likes of Ghana, Kenya, Mauritius, and Zambia—were seemingly the destination of choice for an increasing amount of capital flows before the global financial crisis. Improving economic prospects in these countries was a big factor, but frankly, so too was a global economy awash with liquidity.

Then the crisis hit. And capital—particularly in the form of portfolio flows—was quick to flee these countries as was the case for so many other economies.

Fast forward to 2011. Capital flows are coming back to the frontier, but in dribs and drabs. Continue reading

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