Brazilian Growth Prospects: the Politics of Inflation, Taxes, and Infrastructure

Journal of Political Risk, Vol. 1, No. 1, May 2013.

by James R. Hunter

IPCA Rate of Inflation. Data source: Banco Central do Brasil.

IPCA Rate of Inflation. Data source: Banco Central do Brasil.

Brazil has been the hot investment ticket internationally for six to eight years. The common wisdom is that it has outgrown its “country of the future” label and has become a country of the post-2008 financial crisis. Investors now expect Brazil to grow into a first-world economy. Not so fast. While annual growth between 2005 and 2010 was consistently above 5%, it has stagnated since mid-2011. In 2012, its GDP grew a paltry 0.9% — the weakest of the five BRICS countries. It is time to take a cold look at whether the political factors promoting growth in Brazil between 2005 and 2010 are still operational. Continue reading

Protectionist clauses in the Philippine Constitution restrict foreign direct investment

Journal of Political Risk, Vol. 1, No. 1, May 2013.

Asia Foreign Direct Investment, 2003-2012.

Asia Foreign Direct Investment, 2003-2012.

Author: Priscilla Tacujan, Ph.D.

With the investment-grade credit rating granted by Fitch Ratings in March, an improved international business reputation, and sound fiscal management, the Philippines is poised to become the next foreign direct investment (FDI) destination of Asia.  Other conditions for a robust investment climate are in place: a large market, skilled human capital, youthful population, and strategic location that connects population centers across Asia. Also, the Philippines is increasingly open to international trade. By 2015, Southeast Asia will have the advantage of a single market through the Association of Southeast Asian Nations Economic Community (ASEAN).  According to data provided in the World Economic Forum’s Global Enabling Trade Report 2012, the country’s macroeconomic fundamentals are strong, making it attractive to at least a fraction of the foreign investors concerned over the Euro crisis.

Despite the improvement in the Philippine investment climate, the Philippine Constitution (1987) still has an antiquated article that supports laws restricting foreign ownership of property to 40% (Article XII), with minor adjustments and deviations by subsequent legislation. Removing the clause, and improving access and protections of foreign-owned business, would lead to a quantum leap in FDI and Philippine economic growth. Small changes to legislation are not enough. The Constitution needs to be changed in order to fully welcome foreign investors to the Philippines. Continue reading

Russian weapons delivery in Syria likely met with cooling of East-West relations

Russian naval vessel in Sevastopol. May 2009. Credit: Pavel Parmenov.

Russian naval vessel in Sevastopol. May 2009. Credit: Pavel Parmenov.

Journal of Political Risk, Vol. 1, No. 1, May 2013.

By Anders Corr, Ph.D.

Russia has deployed at least a dozen warships near the coast of Syria in the past few months, the largest Russian naval deployment since the end of the Cold War. Yesterday, Russia delivered sophisticated radar-guided Yakhont anti-ship cruise missiles to Assad’s Syrian forces. The Russian actions are strategically offensive to the United States, as well its European and Israeli allies. They are meant to dissuade Israel, the US, and Europe from increased involvement. The anti-ship weapons, in particular, are offensive weapons that could be used by Assad’s Syrian forces to attack NATO naval platforms necessary for intervention in Syria  (WSJNYT).

Russian actions with respect to Syria complicate the war from a primarily internal issue, to one over international influence between aspirant global and regional hegemons. Because the weapons delivery could be seen to counter Western military actions in the region, they have already increased US congressional criticism of Russia. Such criticism will likely increase in future, especially if the weapons are used against Western assets. This strategic offense to Western military commanders will lead them to more strongly support military options. Ironically, the Russian action increases pressure on Western political leaders to order intervention. Continue reading

Philippine Growth Prospects: Shopping Malls as Positive Indicator

By Priscilla Tacujan, Ph.D.

The Mall of Asia, in Manila, Philippines, is the 4th-largest shopping mall in the world. Photo credit: Ivan Tykhy, 2012.

The Mall of Asia, in Manila, Philippines, is the 4th-largest shopping mall in the world. Photo credit: Ivan Tykhy, 2012.

Just a few years ago, the Philippines was dubbed as “the sick man of Asia.”  Today, it is a regional star, with its stellar economic performance at 6.6% in 2012, coming second only to China’s 7.8%.  Standard & Poor’s (S&P) elevated the country’s credit rating from “stable” to “positive,” and may, according to the Philippine Finance Minister, soon get an investment grade that will enable it to attract even more foreign direct investment (FDI).  Likewise, the World Bank has for the third time upgraded the country’s growth forecast.  Its stock market is one of the best performers in the region.  According to HSBC estimates, if current trends hold up, the Philippines by 2050 can become the 16th largest economy in the world, a giant leap from its current ranking of 44th.

Private investments, especially in the retail industry, are creating major contributions to the country’s economic success, including the modest shopping mall.  Shopping malls are proliferating in towns and cities far beyond Metro Manila.  According to data provided by the Philippine Retailers Association, shopping malls account for about 15% of the country’s GNP and 33% of the entire services sector.  They employ about 18% of the Philippine labor force, translating into about 5.25 million employed Filipinos. Continue reading

Syria Strategy: Add Fuel to the Fire

Bomb crater in Serekaneye, Syria. Photo Credit: Fatih Polat., March 22, 2013.

Bomb crater in Serekaneye, Syria. Photo Credit: Fatih Polat., March 22, 2013.

By Anders Corr, Ph.D.

The US and NATO could be pursuing a strategy of adding fuel to the fire in Syria. The Government of Syria has been allied with Iran, and irritated the US and NATO from a nonproliferation perspective, for a long time. The US has consequently wanted to destabilize the Syrian Government. Now, that wish has been met. The Syrian Government is in a counterinsurgency against rebels that are closely allied with Al Qaeda. Other than humanitarian considerations, the US and NATO should be quietly overjoyed that two enemies are fighting. Continue reading

Expect increased Islamist instability in Bangladesh

By Anders Corr, Ph.D. On Sunday and Monday in Dhaka and Chittagong, Bangladesh, from 70,000 to 200,000 Islamist protesters called for adoption of Islamic law (Sharia) by the secular government. The government responded with force to related road blockages, violent riots, and primitive thrown explosives. The government use of force included some live fire, and a total of approximately 37 killed over two days. That number will likely rise, and thrice that number were likely wounded. The largest opposition party, which is allied with the Islamists, called for a 2-day general strike (WSJ, NYT, CNN, WP, AJ). Footage of the protests is below, courtesy of Associated Press.

The effects of such force will be to increase the number and militancy of islamists in Bangladesh. A minority will likely turn to more subversive violence, such as terrorist assassinations, extortion, and bombings. Such action and reaction by the government and protesters has no obvious resolution in sight. Combined with Islamist anger at continuing legal proceedings against prominent Islamist politicians and public anger at mounting factory deaths, the last two days is likely a turning point for Bangladesh’s stability — in a decidedly negative direction. At least some of this increasing unrest may soon target foreign visitors, investments, and suppliers in the country.

JPR Blog

Biased wording in Syria Poll by CBS/New York Times

By Anders Corr, Ph.D.

Responses of Don't Know or No Answer for 28 New York Times/CBS polls. Blocks represent the density of observed DK/NA percentages for the 28 polls. The black line represents the probability of each DK/NA rate given a poisson distribution. The green dotted line depicts the mean of the observations. The black dotted lines depict two standard deviations above and below the mean. The most recent Syria poll, with a 14% DK/NA rate, is well above 10.5 (two standard deviations from the mean). It is therefore highly likely to be invalid based on an overly-ambiguous question format.

Responses of Don’t Know or No Answer for 28 New York Times/CBS polls. Blocks represent the density of observed DK/NA percentages for the 28 polls. The black line represents the probability of each DK/NA rate given a poisson distribution. The green dotted line depicts the mean of the observations. The black dotted lines depict two standard deviations above and below the mean. The most recent Syria poll, with a 14% DK/NA rate, is well above 10.5 (two standard deviations above the mean). The question is therefore highly unlikely to be valid and should be clarified for future polls.

CBS News and the New York Times released a poll yesterday on opinions regarding Syria. The poll posed a question to 965 adults nationwide worded as such: “Do you think the United States has a responsibility to do something about the fighting in Syria between government forces and anti-government groups, or doesn’t the United States have this responsibility?” Answers included “Yes” by 24% of respondents and “No” by 62% of respondents. CBS headlines interpreted the poll as “Americans Against Intervention in Syria.” The New York Times stated, “Americans are exhibiting an isolationist streak, with majorities across party lines decidedly opposed to American intervention in North Korea or Syria, according to the latest New York Times/CBS News poll.”

While the wording of the poll question on North Korea was acceptable, the question on Syria was ambiguous due to usage of the word “responsibility” and the phrase “do something”. It would be very possible to think that the US has no responsibility to act in Syria, but should do something nonetheless. It is also possible to think that the U.S. has a responsibility to do something, but should nevertheless refrain from acting. Finally, “doing something” is ambiguous, and does not necessarily mean “intervention” as asserted in the reporting of the poll by the New York Times. The biases are countervailing, and lead to ambiguity. Continue reading