Top 10 blog-Substack posts of 2022 / 10 posts de blog y Substack más leídos

On November 23, 2022, I started a Substack account:

https://luisfierro.substack.com

Until then, I posted my articles on this blog.

Here are the top 10 posts in 2022 (combined from both sites):

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El 23 de Noviembre de 2022, inicié una cuenta de Substack.

Hasta entonces, publicaba mis artículos en este blog.

Aquí los 10 artículos más leídos de 2022:

 

# 10 Financing the energy transition in #Ecuador  

https://luisfierro.substack.com/p/financing-energy-transition-in-ecuador

# 9 Presentation on Climate Change, the Paris Agreement and Climate Finance 

https://luisfierro.substack.com/p/presentation-on-climate-change-the

#8 The End of the World 

https://luisfierro.substack.com/p/the-end-of-world

#7 China, Taiwan and the USA 

https://luisfierro.substack.com/p/china-taiwan-and-usa

#6  Economic Relations between the European Union, Latin America and the Caribbean

https://luisfierro.substack.com/p/economic-relations-between-european

#5 The "Wired" magazine 1997 predictions (and my predictions for 2064) 

https://luisfierro.substack.com/p/the-wired-magazine-1997-predictions-and

#4. Limits of democracy in the US  

https://luisfierro.substack.com/p/limits-of-democracy-in-us

#3. Comunismo indoamericano es barbarie

https://luisfierro.substack.com/p/comunismo-indoamericano-es-barbarie

#2.  Putin's Defeat  

https://luisfierro.substack.com/p/putins-defeat

And my top post of 2022 / y mi artículo más leído en 2022:

#1.  War and Economy 

https://luisfierro.substack.com/p/war-and-economy 

 

Happy New Year!  Feliz Año Nuevo!

War and Economy

By Luis Fierro Carrion (*)

Twitter: https://twitter.com/Luis_Fierro_C

The Russian invasion of Ukraine has exacted a heavy human toll, with tens of thousands of Ukrainian civilians killed, apart from some 20,000 Russian troops (as of April 13, according to Ukrainian sources). In the besieged city of Mariupol alone, the Mayor indicated that more than 20,000 civilians could have been killed. The number of injured could reach more than 100,000, and there are more than 11 million displaced people (of which about 5 million have left Ukraine).

Apart from this, the war has brought considerable economic losses, with the destruction of homes, infrastructure, roads, etc. It is estimated that more than USD 100 billion worth of infrastructure has been destroyed in Ukraine. The World Bank estimates that Ukraine's Gross Domestic Product (GDP) could fall by 45% as a result of the war, due to the collapse of production and exports in much of its territory. The poverty rate could rise from 1.8% of the population to about a third.

The Russian economy, subject to severe sanctions by NATO countries and other allies (Japan, South Korea, Australia, etc.), could fall by 11.2% in 2022, according to the World Bank.

If the war is prolonged and escalated, the drop in GDP could reach 75% in the case of Ukraine and 20% in the case of Russia.

Other countries severely affected will be the neighbors of Ukraine and Russia, including Belarus (-6 %) and Moldova (countries in which Russian troops also operate, in the former at the invitation of its dictator, in the latter due to the occupation of the Transnistria area). 

The growth projection for Central Europe (Bulgaria, Croatia, Hungary, Poland and Romania) will be reduced from 4.7% to 3.5%, due to the influx of refugees, the increase in commodity prices and the deterioration of business confidence. Refugee influx fluctuates between 4% of the pre-war population (Hungary) to 15% in the case of Moldova; Almost two and a half million people have entered Poland, equivalent to 6% of the pre-war population.

At the global level, it is estimated that the GDP growth rate will fall from 4% to 3%, mainly as a result of the effects on world trade, and the rise in the prices of fuel and food.

Price increases have been especially pronounced for commodities in which Russia and Ukraine are key exporters, including: natural gas, coal, oil, fertilizers, wheat, aluminum, iron ore and palladium.

In Latin America and the Caribbean, the Inter-American Development Bank (IDB) estimates that the growth rate will fall by one point in 2022, from 2.1% to 1.2%, and there could be a contraction of 0.4 % in 2023.

The growth scenarios for each country depend on various factors, from their commercial links with Russia and Ukraine, to their level of indebtedness; but in general, the IDB expects it to decrease compared to the pre-war scenario.

The high price of hydrocarbons and cereals will benefit the countries that export these products, while the importers, particularly those in Central America and the Caribbean, will suffer higher inflation.

Russia and Ukraine are important markets for several of the products that Latin America and the Caribbean exports, such as dairy products and meat (Southern Cone), fruits (for example, bananas, in the case of Ecuador) and flowers.

Around 20% of the region's total fertilizer imports come from Russia, as do more than 5% of iron and steel imports.

Another collateral effect will be the rise in international interest rates, as a result of the higher inflation faced by countries such as the United States and Europe.

In the case of Ecuador, the impacts will be contradictory: a positive effect due to the rise in the price of oil, a negative effect due to the increase in the price of fertilizers and the closure of the markets for bananas and flowers. The World Bank increased its 2022 growth forecast to 4.3%  (the second fastest growing country in Latin America, after Colombia).

But uncertainty will be the global and regional tone, subject to how the Russian invasion and the aftermath of the COVID-19 pandemic evolve.

(*) Translation of my column published in Diario "El Universo" on April 15, 2022'

https://www.eluniverso.com/opinion/columnistas/la-guerra-y-la-economia-nota/

Russia's flagship warship the Moskva has sunk

The Lasso Administration's Economic and Trade Agenda (focus on sustainable recovery and climate finance)

My intervention on the Lasso Administration's Economic and Trade Agenda

Part of the Conference on US-#Ecuador Bilateral Relations Post COVID: Build Back Better Together

Focus on the efforts to achieve a #SustainableRecovery and #ClimateFinance

Institute of the Americas

https://www.youtube.com/watch?v=Tm2nGpf2CsY

Coronavirus, oil prices and Ecuador's risk premium

By Luis Fierro Carrion (*)

The World Health Organization has warned that the COVID-19 coronavirus could lead to a worldwide pandemic.

The number of cases of coronavirus has increased exponentially, and according to Harvard University epidemiologist Marc Lipsitch, it could spread to between 40% and 70% of humanity by the end of the year. The incubation period lasts up to 14 days, and many asymptomatic people spread their disease before it is detected.

Despite the quarantine of millions of citizens in China, the epidemic has spread to South Korea, Japan, Iran, Italy, the United States and dozens of other countries (the first cases in South America have already been detected, including 6 in Ecuador by March 2).

If the mortality rate remains as high as in the first cases (1% - 3%), and a pandemic is unleashed, it could reach a death toll not seen since the 1918 "Spanish flu" pandemic (by comparison, annual seasonal influenza has a mortality rate of 0.1%, mainly affecting infants and the elderly with other health problems).

The Chinese economy, which has grown at rates above 6% annually since 1990, is collapsing, and forecasts of the global GDP growth rate have already been lowered; a recession could break out. Foreign trade, international travel and tourism are particularly affected sectors. Stock exchanges fell by 14% at the end of February.

A direct impact of the slowdown in the Chinese economy has been the fall in the price of oil and other commodities (palm oil, corn, soybeans, copper, etc.). The price of WTI crude oil has fallen 23% since the beginning of January, and has fallen below $ 50 per barrel (and below the estimated price for the 2020 Ecuadorian budget, of $ 51.30 per barrel).

The fall in oil has, in turn, influenced the steep increase of the so-called “country risk premium” (the investors' perception of Ecuador's ability to pay the external debt). This is the differential in the yield of Ecuadorian bonds in the secondary market with respect to the rate of the 10 year U.S. Treasury bonds. This index, which reached a level of 5069 basis points (50.69%) in December 2008 (when Correa declared a unilateral moratorium unilaterally not due to an inability to pay), had dropped to 446 in February 2018. After the indigenous strike, it increased to 1418, in January it went back to around 800, and at the end of February it shot up again to 1450.

It did not help that the Moody's rating agency has lowered its credit rating of Ecuador’s external debt to Caa1, considered “a poor position with a very high risk”. In its analysis of the fiscal and economic situation of the country, one of the negative factors mentioned was the inability to generate a social and parliamentary consensus on the economic measures required to deal with the fiscal downturn. Several political sectors are privileging their electoral expectations over the urgent need to recover the fiscal balance.

It should be remembered that the Correa Government did not make an economic adjustment when the price of oil began to fall in 2014, opting for aggressive indebtedness, which left a legacy of public debt of $ 60 billion (including external and internal debt, as well as other obligations). The public debt reached USD 58,560 million in January 2020, equivalent to 53.4% ​​of GDP. Apart from that, according to the Ministry of Economy, there are “Other Obligations of the State”, which total USD 5,941 million.

The Government has cut public investment, aggravating the country's economic stagnation. But it has failed to significantly reduce current spending, which portends a fiscal deficit of 3.1% of GDP. At least USD 6665 million in financing will be required in 2020, including USD 2000 million expected from concessions and sale of public assets.

With the expected disbursements of the IMF and multilateral banks, and other non-orthodox measures (issuance of Treasury Certificates, arrears of payments) the 2020 financing gap is expected to be closed; but Moody’s and other economic agents are concerned that external debt amortizations will increase significantly from 2022, and the economic reforms necessary to achieve an economic recovery are not being adopted; The possible return of economic populism is also worrying.

(*) Translated and updated (to March 2, 2020) version of my column in Diario "El Universo" of Ecuador

https://www.eluniverso.com/opinion/2020/03/02/nota/7762857/coronavirus-petroleo-riesgo-pais

Estudios de caso sobre Economía Circular e integración de los ODS en las estrategias empresariales

Por Luis Alberto Fierro (*)

La Fundación EU-LAC ha publicado un compendio de 16 “Estudios de caso sobre modelos de Economía Circular e integración de los Objetivos de Desarrollo Sostenible en estrategias empresariales en la UE y ALC”.

https://eulacfoundation.org/en/documents/case-studies-circular-economy-models-and-integration-sustainable-development-goals

La publicación, escrita por Yanina Kowszyk y Rajiv Maher de InnovacionAL, presenta los mejores estudios de caso en estos temas:  7 sobre Economía Circular y 9 sobre la integración de los ODS en las estrategias empresariales.  Se incluyen 8 casos de América Latina y el Caribe (ALC) y 8 de la Unión Europea.

Estos estudios de caso fueron seleccionados de una convocatoria efectuada por la Fundación, con el apoyo de InnovacionAL, en la cual se propusieron 45 casos.

Los 16 seleccionados como mejores prácticas son:

Economía circular

Ananas Anam (Reino Unido)

Better Future Factory (Países Bajos)

Closing the Loop (Países Bajos)

Donar (Eslovenia)

Laboratorio Tecnológico del Uruguay (LATU)

Neptuno Pumps (Chile)

Pulpo SA (Argentina)

Objetivos de Desarrollo Sostenible

Bagó (Chile)

Fundación FEMSA (México / Multinacional)

Iskraemeco (Eslovenia)

Las Tacuaras (Paraguay)

LIPOR (Portugal)

Chocolates Pacari (Ecuador)

Produbanco (Ecuador)

Telefónica (España / Multinacional)

Unilever (Argentina / Multinacional)

De estos, seis casos fueron presentados en paneles en el World Forum for a Responsible Economy que tuvo lugar en Lille, Francia, en octubre: https://www.responsible-economy.org/en/

Un ejemplo de mucho interés es el de Ananas Anam Ltd., del Reino Unido, que ha desarrollado un sistema para convertir a las hojas de la piña (que, de otra manera, se desecharían) en textiles y materiales que pueden usarse, por ejemplo, como un sustituto del cuero (para calzado, carteras, o incluso asientos de vehículo).  Actualmente está operando en las Filipinas, pero podría utilizar los desechos de países de ALC.

En el caso de Produbanco, de Ecuador, ha desarrollado una línea de financiamiento verde, para canalizar recursos de bancos multilaterales y bilaterales de desarrollo hacia Pymes, en sus esfuerzos por aumentar la eficiencia energética, la energía renovable y medidas de protección ambiental.

La empresa de diseño holandesa Better Future Factory ha logrado reciclar y reutilizar el plástico en varios productos, incluyendo el desarrollo de baldosas que se asemejan al mármol, y “tinta” para el uso en impresoras 3D (a partir de lo cual se puedan elaborar innumerables productos).  De manera similar, la empresa eslovena Donar convierte a plástico reciclado en muebles de alto diseño.

La empresa Chocolates Pacari de Ecuador, en cambio, se ha centrado en comprar directamente el cacao orgánico a los productores, y también proveerles de capacitación y financiamiento para mejorar la calidad de sus productos.

En fin, son 16 casos fascinantes e inspiradores, por lo cual les invito a leer la publicación (actualmente disponible en inglés, próximamente en castellano).

(*) Asesor en Financiamiento Climático y Desarrollo Sostenible.  Participé en la edición de esta publicación.

The slowdown of the Chinese economy

A version of this article was published in Spanish in "Revista Gestión" (http://www.revistagestion.ec/).

The slowdown of the Chinese economy

By Luis Fierro Carrión

In recent months, alarm bells have been going off about the likely slowdown of the Chinese economy, which could have negative effects for the world economy, and in particular for commodity exporters such as Ecuador and other Latin American countries.

During 33 years (1979-2012), the average annual growth rate of China was close to 10 %, and it became the second largest economy in the world.  The GDP per capita increased from $250 in 1980 (measured in purchasing power parity) to $9,185 in 2012 - that is, it had a 36-fold increase!

This extraordinary growth reflected diverse trends:  the reincorporation of China into the world market; the capitalist development (within a Communist political regime); urbanization; industrialization; opening towards foreign direct investment and joint ventures, etc.  There were some particular characteristics of the hybrid Chinese model, such as the expansion of state-owned enterprises (SOE), financed by the equally state-owned development banks.

But in part this accelerated growth simply reflected starting off at such a low base, after many decades of economic stagnation, "cultural revolution", state ownership of the means of production, and military conflicts.

The official growth rate target for 2013 is 7.5 %, but it is likely that this figure will not be met.  The longer term prospects for the future are even less auspicious, as economists believe that China is entering into what is know as the "middle income growth trap".

The rapid urbanization process seems to have reached excessive levels, with high urban rates of pollution:  16 of the 20 most contaminated cities of the world are located in China, and the life expectancy in Northeastern China has started to decrease as a consequence of respiratory and other illnesses associated with pollution.

Workers are starting to demand higher salaries and better working conditions, which will make a model based on cheap labor untenable.  Investment - that is as high as 50 % of GDP - is facing decreasing returns, as the labor surplus is falling.  The Chinese stock market index (SSEA) has fallen by 8 % since December 2012.  The state-owned financial system is facing increasing disequilibrium   And the population is ageing, and growing at a slower rate (with the added problem of having more males than females).

The slowdown in China has already had a negative effect on the prices of commodities.  The price of metal products, for example, has fallen by 6.5 % thus far in 2013, and the price of gold by 26.2 %.  This has affected commodity producing countries, such as Australia, Brazil, Peru and Chile; and it could also affect oil exporters, if the same trend starts to be felt in the oil market (the price of the West Texas Intermediate benchmark has fallen by 7.9 % in the month to November 12, although it is still up for the year).

What can countries such as Ecuador do to confront the Chinese slowdown?  Diversify its productive matrix and its commercial partners; depend less on commodities, and more on the increase of productivity of manufacture and services; depend less, as well, on Chinese financing, which will probably become less available and more expensive as China experiences growing economic and financial difficulties.