Argentine Economic Crisis - ahmad janahi - s200306271

            The economic crisis in Argentina occurred between 1999 and 2002. It commenced in 1999 with a sharp decline of the Gross Domestic Product (Taylor 67). The crisis caused numerous problems for the country. It resulted to the crumbling of the government, rise in the country’s external debt, high unemployment rates, civil unrests, and deterioration of the local currency against the dollar (Taylor 71). By the end of 2002, economic growth had returned to normal levels. This was contrary to the expectations of economic experts and analysts. Due to this recovery, the government managed to pay IMF loans (Epstein 43). The crisis was attributed to the country’s history of military dictatorship. The military rule was responsible for numerous economic hardships that were encountered by the country. During this period, the country accumulated foreign debts for non-existent projects (Epstein 46). By the end of military rule, the levels of employment were high and unprecedented. After holding democratic elections in 1983, the government embarked on implementing new economic policies with a view to change the country’s economic course (Bao 11). The new administration had to borrow funds to finance the implementation of these policies. Eventually, the country failed to finance the loans. This eroded the confidence of donors and other financiers in the international community. The economic crisis has resulted in political and economic turmoil that has had adverse effects on the image of the country (Bao 14). 

References:

Bao, Sandra. Argentina. London: Lonely Planet, 2010. Print.

Epstein, Edward. Broken Promises: The Argentine Crisis and Argentine Democracy.

London: Lexington Books, 2006. Print.

Taylor, Alan. A New Economic History of Argentina. London: Cambridge University

Press, 2003. Print.

 

Brazilian Economy

Brazil; a country located in South America, known for its developing economy, famous soccer team and its agriculture and livestock.  During 1981 – 1993 Brazil has faced one of its most deadly and most severe economic crises in its history.

Brazil has always been an agricultural nation with a boom-and-bust economy based on world demand for rubber, Sugarcane, coffee and cotton. Industries started to emerge and the development of resources started to dominate the economy. Today, although agriculture remains important, Brazil is a world industrial power with a diversified economy. Brazil now a day is considered as one of the most developing economies in the world, also noted as being one of the “BRICK” countries. However, you might ask how is it that it went from facing one of the most severe economic crisis to one of the most booming and developing economies?

There were many factors that resulted in this crisis such as the East Asian Financial Crisis of 1997. However, I will only be talking about the internal factors that built up and triggered the Brazilian economic crisis.

In 1994, after years of inflation and failed price stabilization plans, Brazil initiated a new stabilized plan for its new currency, the real. In addition, the Brazilian real also pegged its currency with the US dollar to ease and to bring in foreign investments. However, for a currency to efficiently peg itself to the dollar, a country must follow the same monetary policy as that of the United States. In 1994, the year the Real plan began, Brazil’s annual inflation rate exceeded 900%! By the end of 1998 the price direction was negative. The peg to the US dollar made Brazilian export to be very expensive and harder to sell in US dollars due to the diverse inflation rates and systems both countries have.

Another aspect that caused the Brazilian financial crisis was due to Financial Contagion. Brazil started to suffer from financial contagion partly due to the worries of overvaluation. Financial contagion occurs when a financial crisis in one country motivates to move their funds from other countries. When financial crisis hit Asia and Russia in 1997, this caused investors to withdraw their money from Brazil as well, fear of losing their money. This discouraged the outflow of dollars and interest rates increased, in hope that investors would keep their money in with high interest rates. However high the interest rates may have been, they were not enough to keep foreign investment in Brazil. This has caused a severe deficit in the economy due to the central bank devoting all its money to keep the Real high and pegged with the USD. The outflows and exports of the country remained falling, until in December 1998 it hit a bottom low in losing $350 million a day!

The crisis stayed for all of 1998 and half of 1999. When the new president of Brazil stepped in, he initiated a $23 billion monetary budget plan in addition to the $41.5 billion international monetary fund given by the IMF to keep the economy alive.

Reference

http://www.twnside.org.sg/title/twr122f.htm

http://www.dallasfed.org/assets/documents/research/swe/1999/swe9902c.pdf

http://en.wikipedia.org/wiki/Economic_history_of_Brazil#Stagnation.2C_inflation.2C_and_crisis.2C_1981-93

The Banana War - Obaid Al Muhairi

The Banana Trade War

 

 

 

The banana wars were a series of trade disputes between the USA and the European Union. The origins of the debate date back to the 1940s, although the most heated wars took place between 1993 and 2001. The US and the EU were the biggest players, although many other countries were also affected . Free trade and tariffs were some of the fundamental reasons on which the banana wars were fought. The EU favors trade preferences, higher tariffs, and import licenses, where as the US prefers lower tariffs and free trade to encourage competitiveness and the constant search for lower prices.

The American approach leads to large scale plantations such as those in Latin America. Caribbean bananas, for example, are grown on very small plantations, and it is difficult to produce them cheaply in large quantities. Several important debate issues were as follows: the UK, who was then president of the European Union, were very much interested in protecting the banana industry in the Caribbean and wanted to foster trade with their former colonies.

  

Furthermore, in the early 1990s a banana import policy (the Lomé Convention) was created, which restricted the amount of Latin American bananas imported to Europe. This infuriated the United States because they led the banana trade in Latin America and were afraid of losing their market. The World Trade Organization got involved in the disputes after the EU finalized and signed the Lomé Convention with its banana trade partners in 1993. This convention allowed European Union members to import from all ACP exporters (previously European countries only imported from former colonies). This accord also allowed European countries to favor ACP bananas. This greatly concerned the WTO, who favored more free trade. The disputes cooled off in November 2001 when negotiations began in order to find a new trade regime that would please both parties and these negotiations continue until today . These wars demonstrated the globalization of the agricultural industry, the importance that a single trade item holds, and most notably, it showed the power of the American corporation and its ability to influence trade policies.

 

Although bananas may only look like a fruit, they represent a wide variety of environmental, economic, social, and political problems. The banana trade symbolizes economic imperialism, injustices in the global trade market, and the globalization of the agricultural economy. Bananas are also number four on the list of staple crops in the world and one of the biggest profit makers in supermarkets, making them critical for economic and global food security. As one of the first tropical fruits to be exported, bananas were a cheap way to bring “the tropics” to North America and Europe. Bananas have become such a common, inexpensive grocery item that we often forget where they come from and how they got here.

 

http://www.scq.ubc.ca/global-issues-for-breakfast-the-banana-industry-and-its-problems-faq-cohen-mix/

UAE Monetary Policy, Wages and Output Growth " article "

UAE Monetary Policy, Wages and Output Growth Dr Tarek Coury / 2 August 2009 Interesting news about the current rate of inflation in the UAE and the rate of domestic money growth sheds some light on the relative health of the UAE economy. First, we’ve seen a fall in prices in June, driven by housing and food and beverages. These account for about 44 per cent of the composition of CPI and therefore impact inflation in a substantial way. On the other hand, data on M3, a measure of broad domestic money, shows that the rate of growth of money supply in the UAE has fallen to its lowest level since 2001. M3 has seen growth of about 9 per cent on an annualised basis so far this year; this compares to 22 per cent for last year and 37 per cent in 2007. Is this recent data consistent with a recovery or a continued contraction? The data on inflation is relatively straightforward to interpret: the deflationary episode is being driven by the fall in equity prices which, in turn, was caused by a mass sell-off of properties and stocks. This is causing a negative wealth effect which is making aggregate demand fall. In an economy where the currency is allowed to float, the resulting fall in demand for the domestic currency would cause a fall in the nominal value of the dirham. But the UAE Central Bank follows a policy of pegging the dirham to the dollar. As a result, any fall in currency demand has to be met by a fall in the supply of the currency to keep the nominal exchange rate stable. This is reflected in the data as slowing money growth rates. So the current data suggests that the economy is continuing to adjust to the fall in domestic aggregate demand. Interestingly, the current monetary regime causes output to contract by more than it would have under other exchange rate mechanisms. The Central Bank has maintained the peg to the dollar since the late 1970s but the price of gaining monetary credibility is an accentuated business cycle. The economy, however, has a self-correcting mechanism to deal with the current downward trend in the form the private sector. As inflation slows, so do money wages that firms pay their workers; they do this to keep their profits up. Because the economy is currently operating under its potential, the fall in money wages may be more substantial than the associated fall in prices. The net effect is to eventually push up the competitiveness of the UAE economy: as prices fall, the real value of the currency drops, driving up demand for domestic goods and services, like tourism. This self-correcting mechanism will therefore be associated with slow growth of inflation, and even a potential prolonged deflationary episode. It will, however, be associated with increased money growth rates and a recovery in output growth. Domestic output is likely to recover once firms trim their costs: In the UAE, the process of cutting input costs may be substantially faster than in other countries. Indeed, the competitive nature of the labour market, and the high turnover rate of the foreign workforce is likely to ensure that domestic money wages adjust much faster than in economies where labour markets are subject to various frictions. On a final, (and I hope) positive note, it is unlikely that the UAE will experience the dreaded “deflationary trap” experienced by some economies in the past few decades. The Central Bank cannot control inflation as it uses its monetary instrument to control the nominal exchange rate. On the other hand, high inflation volatility is likely to persist. It has been with us for the past few decades precisely because of the current monetary arrangement. Inflation reflects the imported price of goods and services but also has a substantial self-fulfilling component. In economies where the Central Bank targets a rate of inflation credibly, the private sector uses inflation projections in wage bargaining. As a result, inflation ends up reflecting bargained wages. Because this self-fulfilling process of inflation adjustment is severely attenuated in the UAE, inflation dynamics tend to be fairly erratic as they have been since the early 1980s. This, in turn, has an effect on the level of investment in the UAE: investment decisions on the aggregate level are made according to the real rate of interest and as a result investment dynamics also tend to be volatile. This cost to economic performance is, on balance, well worth paying. Since, in the long-run, output reflects underlying productive capacity, a monetary policy of pegging the dirham to the dollar ensures that monetary disturbances are minimised. This policy is especially well-suited for an emerging, open economy like the UAE. (Dr Tarek Coury is an economist at the Dubai School of Government and the Harvard Kennedy School.) http://www.khaleejtimes.com/DisplayArticleNew.asp?section=business&xfile=data/business/2009/august/business_august21.xml

Hyper Inflation in Zimbabwe-Mansoor Hussien

Zimbabwe hyperinflation begins shortly after Zimbabwe civil war and confiscation of white-owned farmland.

You can see in the table above each year the inflation rate is increasing the biggest increase was in 2008 which had led to abandonment of the currency. In January 2009 finance minister Patrick Chinamasa that Zimbabweans will be allowed to conduct business in other currencies alongside with Zimbabwe dollar in effort to steam country’s runaway inflation. The economic situation of the country is getting worse and about 7 million Zimbabweans are needed of food and aid.

Because of the hyperinflation Zimbabwe printed new notes ten million dollar, fifty million dollar and fifty billion dollar, because 100 US dollar cost Z$36,190 that lot of money. As can see in the picture above child caring Zimbabwe money, the money he is caring can only buy about 2 breads and milk. That why Zimbabwe printed new notes because the value is decreasing in about every 24 hours and so Zimbabweans carry fewer papers notes.

Zimbabwe population is about 12,619,600 and their unemployment Rate is about 94%. The hyperinflation affected a lot of people and make money business to shut down because the value of the currency decreasing but the value of the products remain the same and customers cannot afford to buy it which lead the shop owner to shut down.

this a video about The Zimbabwean Trillion Dollar campaign

The Asian financial crisis on the late 1990's

The Asian financial crisis started on the period between the years 1997-1999. The crisis had been started on July of 1997 as a result of it many Asian countries suffered its consequences during that time. The most affected countries that suffered from it are Thailand, Malaysia, Indonesia, Philippines and South Korea. The financial crisis on Thailand with the fall or collapse of the Thai Baht after the Thai government was required to float its currency and to cut the pegging to the dollar that is fixed with the Thai official currency, because of the Thai financial problem had a negative. Let’s look now at the conditions of some Asian countries got caught with Asian financial crisis which started with Thailand. Before exactly one before the crisis, it seems that the Indonesian economy was in a good condition. This country had low inflation and a trade surplus of $900 million and huge exchanges which about $20 billion. As a result of the Thailand float of its currency, the Indonesian monetary authorities decided to contract the rupiah currency trading band from 8% to 12%. On the long run, it had a negative effect, and made Moody’s to rate the Indonesian long term debt to junk bond. However, the situation is different in South Korea. The banking sector was held back with non-performing loans as large companies and corporations used these loans for funding aggressive expansions for their operations. As a result many Korean companies and businesses failed to make profits during that period. For example: KIA Motors the third largest car maker on South Korea had emergency loans in order to use to expand its operations. The company suffered too many losses during 1997-1998. Finally, Hyundai took over KIA, and Samsung motors venture failed and costs about 5 billion dollars, and Daewoo been sold to General Motors.

Brazilian Economic Crisis- Fahad

Brazil is currently experiencing an acute economic crisis that continues to ravage its prospects for a strong and stable economy. The crisis presents numerous challenges to poor Brazilians who struggle for survival. The crisis has worsened because of economic policies put in place by the government and ratified by the International Monetary Fund and the United States’ authorities (Brainard). The crisis continues to generate international concern, especially from international press and economic observers (Brainard). Many international powers viewed Brazil as an emerging economic powerhouse. However, the current economic crisis has lowered the prospects of Brazil’s rise to economic supremacy. The crisis resulted from economic policies enacted by president Cardoso during his re-election campaigns (Cohen ). Attempts to diffuse the crisis, supported by international monetary institutions, have failed. Experts have tried synchronising the local currency with the American currency. This attempt has failed to generate expected results (Cohen). This aimed to increase the inflow of foreign exchange with a view to collect sufficient reserves to sustain the exchange rate. This strategy has produced unsatisfactory results. Consequently, citizens no longer believe in the government’s ability to manage the economy (Nanto). The current economic down turn is attributed to historical practices that continue to have negative effects on the country’s economy. Analysts believe that political patronage and interference are key contributors to the current economic crisis (Nanto)

Works Cited
Brainard, Lael. Brazil as an Economic Superpower: Understanding Brazils Changing
Role in the Global Economy. London: Brookings Press, 2012. Print.

Cohen, Michael. The Global Economic Crisis in Latin America: Impacts and
Responses. Newyork: Routledge, 2012. Print.

Nanto, Dick. Global Financial Crisis: Analysis and Policy Implications. London:
DIANE Publishing, 2010. Print.