Britain's Prime Minister Cameron stands with other leaders during the family photo session of the G20 Summit in Seoul (Courtesy Reuters).
2012 will be a year to watch Latin America’s rising role on the multilateral stage. The hints of Latin America’s growing stature were already there in 2011. In November, International Monetary Fund (IMF) head Christine Lagarde toured the region, meeting with Brazil, Mexico and Peru to ask for help (and extra funds) to stabilize Europe and the eurozone. But 2012 will be the real stage, as both Mexico and Brazil – the region’s largest economies – take the reins.
The first stage will showcase Mexico’s role at the helm of the G20. Its year of leadership will culminate in the annual summit to be held in Los Cabos in June 2012. Given the eurozone crisis, fights over currency valuations, and volatile financial markets, the path will be choppy at best. Mexico ambitiously wants the issues of the structure of international financial regimes, food security and financial inclusion all on the table, with the goal of transforming, at least somewhat, the role and mandate of this vital multilateral institution for the future.
The second major event will be the 2012 Earth Summit to be held in Rio De Janeiro (just one day after the Group of Twenty meet). It commemorates the first groundbreaking 1992 Earth Summit (also in Rio), where the United Nations Framework Convention on Climate Change (UNFCCC) was adopted, and which still forms the basis of the global climate change regime today. But the Brazilians hope for more — to push forward with international negotiations, perhaps even setting the agenda for the next twenty years. There are real doubts as to what can actually be achieved (particularly given what little happened in Durban, South Africa, which hosted the last UNFCCC negotiation late last November). But, whatever the odds stacked against it, Brazil will be at the fore, burnishing both its environmental credentials as well as its aspirations for global leadership.
Neither climate change nor world financial stability are easy sells today. But both depend on multilateral actions. And whether progress is made in 2012 will very much depend on the leadership of Latin America.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Source: UNCTAD World Investment Report 2011
In the wake of the 2008 economic crisis, economists, investors, and even politicians have pinned their hopes on the major emerging markets as the new engines of global growth. International Monetary Fund Managing Director Christine Lagarde’s recent visit to Latin America (she has also made the rounds in China, Russia, and Japan) demonstrates this increasingly prominent macroeconomic role. Perhaps a first, the multilateral head came to ask for funds, not lay down rules. But for emerging economies to truly drive global growth, the real engine will be the private sector. While less measured than central bank reserves or monetary flows, anecdotal evidence suggests that this too is happening – with foreign direct investment now flowing from emerging to more mature economies. And it isn’t just China searching for bargains.
A recent example of this worldwide trend includes Mexican-based Grupo Bimbo’s purchase of Sara Lee’s U.S. and European operations for close to $1 billion. The acquisition caps a two decade-long global expansion, buying up brands such as Entenmanns and Thomas’ and establishing plants in places as far flung as Beaverton, Oregon and Fort Worth, Texas. Begun by Spanish immigrants, Grupo Bimbo began with a family cake shop on the outskirts of Mexico City. In the post World War II economic boom the Servitje family expanded into breads, cookies, and candies, delivering their wares first in Mexico City, then throughout Mexico, and now throughout the world. Today Bimbo owns plants in 19 countries, and is the largest baker in the United States.
Other recent acquisitions – such as Lenovo’s purchase of German electronics supplier Medion and Tata Group’s buyout of Jaguar and Land Rover – show a similar shift. To be sure, U.S. and European capital still pour into emerging economies – even in the midst of the global recession. FDI from developed to emerging economies nearly doubled from 2007 to 2010. It is not just diplomats but also Wall Street and the City of London that are adapting to a multipolar world. Developing countries are investing abroad more than ever, eating into advanced economies share of overall FDI outflows (down from 84 percent in 2007 to 71 percent in 2010). Most of the investment outflows (almost two thirds) go to their emerging market peers. This, perhaps more than other factors, will lead to the touted “rise of the rest.”
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
