WORLD ECONOMIC NEWS
Exports to Asia Saved German Industry in 2002
To a great extent, increased exports to Asia saved German industry from drowning in 2002. Whereas imports declined by a total of 4% to a total of 520 billion euros, Germany can report an all-time export record total of 647 billions, 52 billion over the export total of 595 billion for 2001. This means a trade surplus of 127 billion euros, in 2002.
Automobiles, machines and machine-tools, and chemical products were the top categories in exports, with China, Russia, and India being markets with significant increases in purchases from Germany. German exports to China jumped by a total of 19% this year.
The export dependency of German industry, at 35% GDP, is way above that of the United States and Japan, where it is only at 10%. France and Italy remain somewhat behind Germany, with 28% GDP dependency each, still significantly greater than the U.S. or Japan.
Italians Pay More for Pasta, Other Food, in 2002
Inflation for food items in Italy was 30-50% in 2002, says a report by Eurispes, a center-left think tank, according to Il Nuovo Jan. 2. According to the report, prices for vegetables, sausages, drinks, and frozen food have risen an average of 29%. Eurispes uses methods different from Istat, the public statistic agency, but applying Istat methods, Eurispes achieved for the same group of items the figure of 13%, still a remarkable increase.
Single items increased as following: vegetables 50.8%; drinks 32.9%; canned food 30.9%; sausages 27.5%; frozen foods 23.6%. The price of carbohydrates (i.e., rice and pasta), a staple consumption item among Italians, increased 20%; coffee by 37%; mineral water by 48%. Generally, Eurispes calculated that Italians spent 343 euros more per capita on food in 2002.
Dramatic Drop in Mexico's Maquiladora 'Industry'
The drop in employment in Mexico's maquiladora "industry"--which was touted as the savior for the country's economy--has been dramatic throughout the country's northern region. In Baja California Sur, employment through October of 2002 declined by a whopping 43%, while in Sonora, the decline was 17.4%, compared to the same period of 2001. Big drops also occurred in Nuevo Leon, Chihuahua, Guanajuato, Puebla, Mexico State, and Zacatecas, all due to the cancellation of maquiladora "programs," which produce solely for export, and have nothing to do with Mexico's physical economy. Textile and electronic assembly plants were particularly hard hit. Activity in plants that assemble electronic components dropped by 15.2% annually.
Argentina Unemployment 'Miraculously' Reduced--Through Statistical Fraud
Statistical fraud "miraculously" reduced Argentina's unemployment from 21.5% to 17.8%, as of October, Clarin reported at the end of December. As the national statistical agency INDEC explained, the drop is due only to government-sponsored social programs which provide a minimal monthly subsidy of 150 pesos to heads of households, in exchange for a few hours of work. The latter is then counted as "employment" for 2 million people, although 798,000 of them actually do no work at all! Put another way, 71% of all "new jobs" between May and October of this year were accounted for by the government's head of household plans. INDEC president Juan Carlos del Bello said that without these programs, "unemployment would have been more than 23%."
At the same time, poverty for the May-October period reached a shocking 54.3% of the population for the capital of Buenos Aires and the surrounding metropolitan area. Had it not been for social programs, del Bello admitted, instead of 24.7%, indigence would have been at 27%; poverty would have risen to 54.7% nationwide.
Argentina Bows to IMF Demand; Lifts Some Exchange Controls
Reversing strict controls imposed by Finance Minister Lavagna last September to protect the country's dwindling reserves, on Dec. 26 the Argentine Central Bank raised from $100,000 to $150,000 the monthly ceiling on individuals' purchase of dollars, and also made it easier to send dollars out of the country. Other measures passed included raising the percentage of its total capital that a bank may hold in dollars; removing limits on interest payments on debts contracted abroad; extending to one year the timeframe for exporters who sell capital goods abroad to liquidate their reserves, and authorizing prior payment of 100% of the cost of capital goods, spare parts, and other goods purchased abroad.
As soon as Lavagna imposed the controls in September, the Fund griped that they were "too rigid," but shut up when it became clear that the measures were allowing the Central Bank to build up its reserves, as well as prevent further instability in the exchange rate. More recently, the Fund has demanded the lifting of controls as its conditionality for the granting of a "transitional" accord that would extend only through August 2003, and would allow for the refinancing of some $8 billion in debt. Lavagna reportedly agreed to this.
The lifting of controls having gotten under way, IMF Director "Dragon Lady" Anne Krueger said that everything now hinged on the Supreme Court's Dec. 30 decision on whether to re-dollarize bank deposits that had been forcibly converted to pesos early this year. Now, the court has said it will move back that decision until sometime in 2003.
Italian Says IMF Will Sign New Pact with Argentina Soon
Italy's Undersecretary for Foreign Affairs Mario Baccini is certain that the IMF will sign a new agreement with Argentina very shortly. Baccini just returned from Brasilia, where he represented his government at the inauguration of "Lula" da Silva, and reported that while there, he held "important" bilateral talks with John Maisto of the U.S. National Security Council, and with Argentine President Eduardo Duhalde and Foreign Minister Carlos Ruckauf. Out of these discussions, Baccini said, "It emerged that Argentina is near an agreement with the IMF, a paramount step towards the solution of the crisis."
Italy has played a central role in supporting Argentina in its fight with the IMF, and urging the Fund to come to an agreement quickly. However, no one should have any illusions that any new deal with the Fund means a solution to Argentina's crisis. President Duhalde is deluding himself that his country is already on the path to recovery, and that an agreement with the Fund will consolidate this. The word out now is that Argentina will sign a "pre-agreement" with the IMF on Jan. 8, perhaps motivated by the fact that the country has $1 billion due to the Fund on Jan. 15. Baccini said he wanted the Argentine government to repay Italian investors holding Argentine bonds, and expected to visit Buenos Aires as soon as the deal with the Fund is signed.
Thailand To Pay Off Its IMF Debt by July
Thai Finance Minister Somkid Jatusripitak announced Jan. 2 that the outstanding $4.8 billion the kingdom owes to the IMF will be paid out in three installments over the next six months, starting with the first payment later in January, with the third and final payment by July, Business Day said Jan. 3. The payoff will save Thailand an estimated $126 million in interest.
In his New Year's message, Prime Minister Thaksin Shinawatra called the planned payoff a "symbolic liberation" from the IMF, as Thailand "will be free and does not have to seek help or give anybody more bargaining power, or to make demands on us." In the summer of 1997, when Thailand lost in its attempt to beat international speculators at their own game, the kingdom borrowed $12.8 billion from the IMF.
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