Another correction to the Washington Consensus: FDI

Among the different recommendations (~impositions) compiled in the Washington Consensus (WC, from now on), one called for the liberalization of inflows of Foreign Direct Investment. In a recent book (Harnessing Foreign Direct Investment: Policies for Developed and Developing Countries) edited by the Center for Global Development, Theodore H. Moran questions and analyses the impact that this "recommended policy" has had not only in developing countries but also in developed countries (both in terms of efficiency and competition). He divides his analysis into three different sectors: extractive industries, infrastructure and manufacturing and assembly.

He concludes that not every FDI is good for recipient countries (that is, it doesn't bring attached the desired transfer of capital and know-how). To avoid this, the author claims for more transparency, for the development of new business deals that diminishes the investment risks and proper labour regulation.

By the way, why don't developed countries liberalise the remittances sector?

NB: the implementation of the policy recommendations gathered around the WC (and its consequences) was not only because of the persuasiveness of developed countries, but also because of the myopic view of the governments in developing countries!

Elections around the globe 2007: Nigeria (more of the same)

Nigeria will held elections next April. The leading candidates (NB: as in Latam, we can't talk about political parties) come from the north, with the majority of the population Muslim. On the contrary, the oil fields are located in the south, mainly catholic, but owned by the elites from the north... all analysts ask themselves whether this new elections can help to diminish the frequent ethnic tensions and avoid the resource curse.

The actual situation in Nigeria is far from what one would expect given the abundant presence of oil in the Niger delta region. It has a dual economy. The most important one is the one related to oil (approximately 75% of the public revenues and 95% of exports). Then we have the primary sector, which represents around the 40% of the national GDP and where the the majority of Nigerians find work. Despite the efforts, and according to Transparency International Nigeria is still one of the most corrupted countries in the world. Certainly, most of the weaknesses the country presents have to do with the resource curse.

Here you can find an interesting solution to these problems...

To keep an eye on the missing continent: http://allafrica.com/

The difficulties of reform...

When dealing with economic, social an political reforms we often know where we would like to get... however, in the way we might confront different obstacles which critically undermine the efforts to reach that goal and also distort the objectives pursued. The most important ones are referred to the stakeholders contrary to this reforms. Confronting this resistance is a major issue in any reform. The OECD has recently published its third annual "Going for Growth" report analysing all these aspects based on the experience we have on the structural reforms being done in European countries.

Eventhough it seems pretty difficult to use all the recommendations offered in this report for developing countries, major donors and IFIs can certainly take good note of them!

Rodrik and Rodríguez (Resistance to reform – status quo bias in the Presence of Individual-Specific Uncertainty) modelled these same issues in the case of trade reform in the American Economic Review (81 (5):1166-55, 1991). Another very interesting insight from this great great economist.

Short cuts...

1. It seems that Peru is following Chinese-style reforms concerning the unpunctuality of their citizens... another attempt to change informal institutions!

2. De Rato's view on the necessary steps to be taken in Latin America given its actual economic performance. I like this excerpt:

"Where progress has not been made, the problem is often that reforms have not gone far enough, and that many reforms are incomplete."

After reading it, a lot of questions come to my mind: We all agree in the macro reforms... what about the micro ones? Why don't they start thinking about the sort of political problems those countries face to engage into these kind of reforms?

3. Xavier Sala-i-Martin is starting an interesting series of articles (in Spanish, though) about climate change... the debate is on the table!

Secrets, truths and lies about Venezuela (part I)

I'm increasingly interested in the events going on in Venezuela. I just came across this interesting article (Why Chavez wins) on Foreign Policy. I haven't checked the official numbers mentioned in the article, but it looks pretty serious. It seems that the fight against poverty in the country is not working as well as Chavez pretends.

This other interesting resource (La Macroeconomía del populismo: una vez más, in Spanish) disentangles the main characteristics of the macro and micro policies pursued by Chavez and how they resemble to old mistakes being done in the past in the region.

I promise to report more documents on this country.

How to improve aid effectiveness...

I just read this short piece (Aid Effectiveness - Opening the Black box) written by Bourguignon and Sundberg which synthesises the different mechanisms operating in the relationship between aid and development outcomes (what they call: the black box).

They mention almost every problem and obstacle related to aid that hinders its effectiveness, and there is one which really keeps my attention: coordination between different donors and agencies. This one is also another problem related to the " governance of aid" and how these agents follow their own agenda. A lot has been said about this principal-agent relationship established between donors and recipient countries... but I really miss more research and documentation on how donor organisations from developed countries coordinate their activities and operate in developing countries.

On the other hand, this short paper is another good example of how far it is the research being done by those working for the IFIs and the interventions finally deployed by this same IFI.

Wolfofitz's new era at the World Bank

Long time ago, I wrote about the "dark" process leading to the election of the new president of the World Bank (Como no predicar con el ejemplo: la elección del presidente del Banco Mundial). Certainly, this process laid very far from the ideas of good governance and transparency the World Bank tries to spread in the developing world. However this recent picture has changed ny mind.

Lots of critics to the World Bank were based on the idea that its consultants went to a developing country with a baggage full of options and advises while spending their days in a five-star hotel... Well, it seems that Mr. Wolfowitz got the point...

¿Realmente es tan difícil transformar la institucionalidad informal?

De nuevo, el gigante asiático da muestras de cómo hacer las cosas a su manera. Si pensábamos que transformar las costumbres y los hábitos (lo que comúnmente se ha denominado institucionalidad informal) era una tarea de siglos y muchas veces condenada al fracaso, China se está poniendo las pilas con la vista puesta en los juegos olímpicos de 2008.

Según una noticia aparecida hoy en El País (Campaña de buena educación), el gobierno se ha propuesto transformar la mala costumbre de no preservar el orden y el turno en las colas.. A partir del mes que viene, cada día 11 de mes se conoce como el día de "hacer cola".

¿Tendrán éxito?