International Economics Digest
Worldwide Hunger Rising Rapidly
In its latest annual report issued Nov. 25, the Food and Agriculture Organization of the United Nations, titled "The State of Food Insecurity in the World, 2003," reveals that hunger is rising rapidly in the world after having fallen off in the first half of the 1990s.
After falling by 37 million during the first half of the 1990s, the number of hungry people in developing countries increased by 18 million in the second half of the decade.
The FAO report estimates that 842 million people were undernourished in 1999-2001, the most recent years for which figures are available. This includes 10 million in industrialized countries, 34 million in "countries in transition," and 798 million in developing countries.
Only 19 countries, including China, had some success in reducing the number of undernourished throughout the 1990s. The report claims: "In these successful countries, the total number of hungry people fell by over 80 million." At the other end of the scale, however, are 26 countries where the number of undernourished people increased by 60 million during the same period. In 17 countries, including some of the most populous countries in the world, such as India, Indonesia, Pakistan, along with Nigeria and Sudan, hunger is rising, and the report warns that "these countries can no longer be expected to propel progress for the developing world."
With regard to southern Africa, the report says the food crisis of 2002-2003 showed that "hunger cannot be combatted effectively in regions ravaged by AIDS, unless interventions address the particular needs of AIDS-affected households and incorporate measures both to prevent and to mitigate the spread of HIV/AIDS. Estimates are that 60-70% of farms have suffered labor losses due to HIV/AIDS, lack the labor, resources, and know-how for "survival" cultivation and in many cases have abandoned farming, but the report also underscores the critical lack of water.
'Decline and Fall' of U.S. Dollar
Headlined "Decline and Fall," the lead editorial in the Nov. 24 London Guardian comments on the collapse of the U.S. dollar. Beginning with an ironic assessment of the allegation that "the world economy is clearly on a roll," the Guardian's editors express great concern about the international effects of "feeding the 'feel-good factor' in the U.S." The Bush Administration "is prepared to do almost anything, however imprudent, in its dash to increase jobs and growth in advance of next year's election," the Guardian muses.
Then, there is the fall of the U.S. dollar, now exacerbated by the collapse of foreign investment into U.S. stocks and bonds, which the paper calls "a kind of Marshall Plan in reverse as the rest of the world lends money to the U.S. to finance its import binge.... There are now worrying signs that the rest of the world is no longer willing to finance the U.S. spending binge.
"The danger is that the Bush Administration's ham-fisted attempts to play politics with international trade and currency markets may turn an orderly decline of the dollar into a rout as investors lose confidence.... Of course, predictions that the U.S. economy is about to collapse under the weight of its own debt have been made for years withoutas yetcoming true.
"We can only hope and pray that doomsday will continue to be postponed."
Gold Jumps to Over $400; Dollar Continues Decline
The dollar dropped to $1.1941 per euro on Nov. 26, near the record low around $1.1975 set Nov. 19, reflecting worries about capital inflows from foreign central banks needed to finance the U.S. current account deficit. "The U.S. is struggling to finance its deficit, and the underlying flow picture is poor," warned Shahab Jalinoos, senior currency strategist at ABN Amro in London.
Underscoring these concerns, was the poor showing at an auction of two-year Treasury notes, which drew bids for only 1.75 times the amount on offer, well below the 2.12 achieved at the last sale, in a sign of falling demand from foreign bidders, particularly central banks. Indirect bidders, likely foreign central banks that have been major buyers of Treasuries, purchased only 32% of the total amount sold, below the 44% level in October. "The market is obsessed with ... the deterioration in the external deficit," said Mitul Kotcha, head of global foreign exchange research at Credit Agricole Indosuez.
Meanwhile, gold jumped nearly $10 on Nov. 26 to $402 per ounce in New York trading, its highest price since March 1996. The story being peddled for the price rise, was that six New York City subway workers were hospitalized for exposure to fumes from an unknown source, raising fears of a terrorist attack. In fact, this subway incident "certainly [was] a good excuse" for the gold price to move higher, said the president of Altavest Worldwide Trading, but he pointed to the fall in the dollar as the real reason.
OECD Warns of Housing Market Crash Due To Sudden Interest Rate Hike
The Organization for Economic Cooperation and Development's "Economic Outlook" report, released Nov. 20, predicts a rise in interest rates, and expresses real concern that nations such as Australia, the United States, and Britain "may suffer large wealth losses, especially in the housing sector, should interest rates increase abruptly."
OECD also cautioned that the U.S. dollar could face a "sudden weakening," triggered by a reversal of capital flows into the U.S. from foreign central banksmoney which the U.S. depends on to finance its "persistent," "very large" current account deficit.
Alarming Decline of Investments in German Industry Sectors
The latest, updated report on investments for 2002, issued by Germany's Federal Office of Statistics on Nov. 25, points to a major decline for 2003 as well. The report documents that in 2002, investments dropped by 11%: minus 9% for the industries in the western states of Germany, and 25% for the eastern states.
With the exception of the automobile and food industry sectors, investments were down in all other sectors of industry, in 2002. Especially alarming, is the fact that the machine-builders invested 8.2% less, metal-processing manufacturers 13.2% less nationally. Chemical industry investments dropped by 3.2%.
Wal-Mart To Buy Brazil's Third-Largest Retail Chain
Wal-Mart is in the advanced stages of negotiations to buy Bompreco, Brazil's third largest retail chainwhich owns mostly supermarketsfrom its current owner, the Dutch company, Ahold, according to the Brazil daily Valor Economico Nov. 26. The U.S. Godzilla of retailers is trying to acquire Ahold's credit-card operation, HiperCard, as well, Valor Economico's sources report. Wal-Mart is also trying to buy a smaller Brazilian supermarket chain, Barbosa Commercial, from Ahold, but a court injunction is delaying that deal.
Wal-Mart arrived in Brazil in 1995, and has subsequently opened 25 stores, mostly in the southeastern region, including Sao Paolo and Rio de Janeiro. Were it to be successful in buying the 120-store Bompreco chain, the mega-superstore would leap from sixth- to third-largest retail chain in Brazil, and would be in a position to dictate a restructuring of the entire Brazilian retail business, one economic consultant told Valor. Wal-Mart is, already, the largest retailer in Mexico, with over 400 stores, and is expanding in Argentina.
Russian Economic Data Indicate Significant Growth Dynamic
New economic data published by the Russian Economics Ministry indicate a significant growth dynamic in the Russian economy, according to the Neue Zuercher Zeitung Nov. 28. Gross Domestic Product grew 6.6% from January to October, on an annualized basis. Industrial production increased by 6.8%. Investment increased by 12.2% Real wages increased in the first 10 months by 9.1%, and the perspective is that the growth dynamic will continue. In October, Russian GDP grew on an annual basis by 7.3%. For 2003, the ministry reported that the official growth prognosis grew from 5.9% to 6.6% (in 2002, it was 4.3%.)
Aside from the stability-oriented economic policy and robust domestic demand, especially high raw-materials prices are credited with driving the economic recovery in Russia.
|