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February, 2018
Emerging Markets Journal
Location: United Arab Emirates Indian migrant workers walk to their construction site after a lunch break
Featuring: Peru, South Africa & Norway
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Table of Contents
Overview: Introduction to EM Journal.………………………………………………………………….3
Peru: Uncovering Peruvian Economic Influences…………………………………………………….4
South Africa: Growth Turbulence……………………………………………………………………….9
Norway: Developed Nation Support to Emerging and Frontier Markets ………………………….13
2018 Outlook…………………………………………………………………………………………….20
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Introduction
Welcome to the Emerging Markets Club’s February, 2018 issue on international
development, geopolitical risks, and global finance fueling growth of developing nations.
The Emerging Markets Club is a student run, faculty assisted organization designed to
expose students to international markets alike. We observe economic trends impacting
business and sovereign nation growth. An emerging market is one which seeks to
increase consumption to those of developed countries through productivity and
government policy reform that lead to GDP growth. More importantly, GDP per Capita is
the true measure of a nation’s wealth.
2017-18 EMC Officers
President: Alexander Russo
Vice President (Internal): Kush Aggarwal
Vice President (External): Ethan Miller
Treasurer: Griffin Berenske
Chief Editor: Max Milejczak
Marketing Chair: Hyeseon Oh (Claire)
Secretary: Alex Gillespie
EMC Staff
Faculty Advisor: Alison Kvetko (Kelley Business Honors Program)
Kelley Student Gov’t Rep: Daniel Mayer
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Uncovering Peruvian Economic Influences
Authors: Nicole Cadarso & Maria Laura Castedo
To discover the complexities of Peru’s economic situation, we have decided to conduct
some in-depth research about significant economic growth. Over the past few years, Peru has had
significant economic growth, it is one of the fastest growing economies in the world, classifying
as the 39th largest GDP in the world and 6th in South America. Although Peru is economically
improving more and more every day, there is a high economic informality with how they handle
their economy resulting in a weak education system, low productivity in many sectors and a
corrupt government. Furthermore, 75% workforce is associated with the informal sector resulting
in lack of social benefits for the lower class and missed opportunities for the government to earn
potential tax revenue. Although Peru is a growing economy, informality is a persistent problem
in Peru because it is the most profitable economic opportunity for poor citizens. We will, later
on, uncover the factors that lead to this issue and how it affects the socio-political and economic
areas in diverse ways.
In the past decade, Peru’s economy
has experienced a significant boom. It
successfully doubled the size of its economy
in just ten years and reached one of the
highest GDP growth rates in the region.
Because of this, people think Peru’s
population now lives in better conditions.
However, that is not the case. The majority
of Peru’s workforce, 73%, is still under the informal economy. The informal economy can best
be defined as all the economic activities that contribute to the nations GDP but isn’t registered.
Which leads to a lot of its recognition and benefits in the workforce to be unacknowledged. The
informal sector feeds jobs for a significant portion of Peru’s population which may sound like a
good thing, but in reality, it is just hurting the economy and is avoiding it to grow to its full
potential. These informal sectors are all due to the high levels of poverty, income inequality, and
social exclusion. There are two main groups of bodies who make the informal economy a
reality. The people who participate in order to provide for their families and survive, and the
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people who participate with the primary goal to make a profit out of it. These primarily include
private businesses who don’t provide the formal documentation that the government requires and
don’t pay social contributions.
The informal economy in general, whether speaking of Peru’s or any other Country
prominent in it, is vast and complex. Its main causes are made of a combination of uncontrollable
factors, but specifically speaking about Peru’s high informality, we can narrow it down to two
factors. One is the survivalist segment, and another is the entrepreneurial drive of citizens.
In one hand we have the survivalists, whose struggle is the incapacity to acquire human capital.
On the other side, for entrepreneurial participants, their struggle is the inability to overcome the
forces that serve as boundaries for individuals to enter the formal sector. What this means is
there is not an easy way to enter the formal market, and it takes more than it seems to entirely
leave the informal sector once in it, since the informal field has so many temptations as
government regulation, taxation, and corruption. These factors, being government regulation the
most vital, are what led the start of what is now known as a high informal sector in Peru.
Moreover, the high demand of informality also has a profound impact on Peru’s general
education systems. The fact that there are policies that favor investment in human capital which
includes cutting the cost of education and security are extremely affecting the priorities of all the
limited funds for education. Having this financial burden is not allowing the 43.8 poor
population rate in Peru to educate children. The government doesn’t provide public schools with
enough fund and resources to teach kids all the things they need to learn in school. Education is
one of the most demanding components to success and in order to receive a good one in Peru
kids must be enrolled in private schools costing an average of $20,000 per year. This cost is
impossible for people from less developed areas to afford which results in them having their kids
attend public school where they are not receiving a proper education. Due to this lack of
knowledge, data tells us thatches adolescents will most likely automatically fall into the informal
sector. The development of human Capital, as education is a critical point that will leverage
Peru’s competitiveness.
Furthermore, having uncovered what Peru's informal area is made out of, it leads us to
ask ourselves how do these factors makeup to become the root and reason behind low
productivity, and thus hurts the economy. Findings from a World Bank study named "Doing
Business 2016" state that Peru's rank on "ease of paying taxes" is as the 50th and its "total tax
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burden of 35.9% of profits" are way weaker than "41.2% average in developed countries."
Nevertheless, when Peruvian businesses come to preparing, filing and paying the taxes and
social contributions, the study states that "these firms on average spend 260 hours per year
compared to 176-hour average in developed countries." (World Bank). This significant variation
of rakings and percentages happens because of the tax filing process, inspired by all the stringent
government regulation and untidy legislative policies as found in the study and as identified in
all research of low productivity as the common ground. Nonetheless, despite the fact that we
have a common ground on the problem, sources of productivity are known to vary between both
sectors. This has to do mainly with the fact that informal companies cannot reach other markets
and services. The informal firms/businesses indeed bypass the social security payments, taxes,
and could benefit from adjustable employment, which are the costs of operating formally, but
regardless, they are still much less productive than formal firms.
On the other hand, researchers from the Department of Economics in Middle East
Technical University found that "the lack of access to credit provided by state-owned or private
banks may have a detrimental impact on productivity." Aforementioned, this is because of the
prominent downscale that "capitals constraining informal firms" will have because they will be
operating beneath the practical scale of production. Lastly, all these factors mentioned will cause
informal firms to find themselves having a lower capital intensity, labor production, and high
costs of capital limited outside financing that will demand them to replace their labor for
physical capital.
The main reason why business’ in
Peru can go along with such an informal
economy and so many informal sectors is
that of the corrupt government that’s in
place. Peru placed as the 101st most
corrupt country out of 176 while other
Southern American countries such as
Chile and Uruguay placed 24th and 21st.
Peru’s corruption is the direct source as to
why the country is the way it is. For as long as Peru can remember its government has used most
of their profits on themselves rather than focusing on making Peru a better nation to be a part of.
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Studies have shown that this has resulted in businesses keeping extra money off the books to be
able to support their families just in case the government was to do something unexpected
someday putting them in harm. For example, when Ollanta Humala was elected president in
2011 there were infamous scandals. After becoming president, Humala once said one car was
only going to be allowed per family. Meaning that families of high income who have multiple
cars would have their 2nd, 3rd, 4th car taken away by the government and given to families of
lower income. This, of course, didn’t end up happening but the speculation that it could and
possibilities of what else he could only give business’s more motivation to keep things off the
books. Another factor that leads to such informality is the fact that the government openly
received bribes whether it be for something as simple as getting off a driving ticket to bribing a
judge to keep a loved one out of jail. The fact that the government promotes this behavior has
set the example for the nation as if it’s something they can openly do as well.
The critical condition Peru’s economy is something that requires immediate action. If
this isn’t something that is taken care of soon, the informal sector will continue to drag on the
nation's economic state and will permanently determine its future. Peru must address its
informal industries and integrate it with formal jobs with equal benefits to break the barrier that’s
keeping the country on hold. By doing this, Peru won’t only reduce informal sectors, but it will
increase the economy, strengthen the education system, raise productivity and most importantly,
reform the government ways. This will improve the lives of millions of its citizens and will
eventually lead to Peru not only increasing its GDP but growing together as a whole rather than
everyone on its own. Local people who drive the buses, or as they’re called in Peru ‘the micros,’
will be able to register their vehicle making it easier for them to expand their business and make
a bigger profit while doing the same amount of work. By registering, the self-employed street
vendors will now have a better opportunity to gain capital. 73% of the population will finally be
able to have access to healthcare, proper housing, real education, and most importantly a better
lifestyle for them and their families. Investing in the locals is the way to invest in Peru’s future.
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Work Cited
Finn, Korey. e Informal Economy in Peru: A Blueprint for Systemic Reform. Vol. 35,
Lehigh University ,2017.
Hughes, Barry B, and John Evans. Economía Informal En Perú: Situación Actual y
Perspectivas. Derechos Reservados, 2016.
Loayza, Norman. “The Economics of the Informal Sector: a Simple Model and Some
Empirical Evidence from Latin America.” Carnegie-Rochester Conference Series on Public
Policy, North-Holland, 8 Dec. 1999,
www.sciencedirect.com/science/article/pii/S0167223196000218.
Portes, Alejandro, and Richard Schauffler. Competing Perspectives on the Latin America
Informal Sector. Vol. 19, 1993.
Saavedra, Jaime, and Alberto Chong. Structural Reform, Institutions and Earnings:
Evidence from the Formal and Informal Sectors in Urban Perú. 2007.
Taymaz, Erol. Informality and Productivity Differentials between Formal and Informal
Firms in Turkey. 2009.
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South Africa Growth Turbulence
Authors: Brendan Smith, Drew Vesling, Jack Brzakala
South Africa is a country of 55 million people, that has relative macroeconomic stability
and a largely pro-business environment. South Africa is the most advanced, diversified and
productive economy in Africa. However, its actual growth does not match that of other African
economies. In 2016, its gross domestic product (GDP) grew by 0.5% to an estimated $ 736.3
billion. The nature of the South African economy is reflected in the mix of economic sectors:
Primary (including agriculture, fishing and mining) includes 10% of the GDP, Secondary
(manufacturing, construction and utilities) comprises 21% of the GDP, and Tertiary (trade,
transport and services) includes 69% of the GDP. The country covers 1.22 million square
kilometers and is the world’s largest producer of platinum, vanadium, chromium and manganese.
South Africans unfortunately have 6.2
million people of working age without jobs.
Workers out of school are finding it very
challenging to secure a job. This can be
shown in the graphic below with data from the
Statistics South Africa. Women also remain
the most vulnerable to the forces of the labor,
especially women of color who mainly hold
low-skilled jobs. These women struggle because of the 30% difference in wages between men
vs. women. Community and social services, which include the government, is the largest sector
in the economy. Agriculture jobs declined by 44,000 and employment in trade by 15,000, the
statistics office said.
South Africa’s business management environment (legal, publicity, marketing,
accounting, forensics, process outsour cing, etc.) is arguably the best in Africa, and boasts many
advantages. The Johannesburg Stock Exchange (JSE) ranks among the top emerging market
exchanges in the world, helping establish South Africa’s position as an entryway to other
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countries and markets in sub-
Saharan Africa. Democratic life
is well-established with
transparent and contested
elections, an appreciation for the
rule of law, and citizens
maintaining significant pride in
the constitution and the peaceful
formation of the post-Apartheid
state. The graphic expresses the
relative strength of the economy in comparison with other African countries with data from the
World Bank.
Some of the main challenges endured in the South African Economy include:
corruption/ineptitude in high government circles, significant unemployment, violent crime,
insufficient infrastructure, and poor government service delivery to impoverished communities.
There is also a trade agreement with the European Union enables many European products to
enter South Africa duty-free or at lower rates than U.S. products. The documentation of these
risks can be seen with data provided by Allianz Global Corporate and Specialty.
Since the abolishment of Apartheid, the wages of whites and Asians, primarily of Indian
descent, have increased while the wages of black-Africans have remained relatively flat. Since
corruption is an issue, private interests are capturing contracts to secure state-owned resources.
Ten percent of All South Africans - the majority white - owns more than 90 percent of national
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wealth, according to a 2016 research paper by Anna Orthofer, a graduate student at Stellenbosch
University. As seen in the graphic; the Black African and Coloured groups are characteristically
defined with a high percentage of low-skilled jobs and conversely, Whites and Indian/Asian
groups have higher percentages of their population in high-skilled or semi-skilled occupations.
The President stated the government will pursue economic transformation by ensuring that 30%
of government’s spending goes to black businesses, but still not enough when four out of every
five individuals in South Africa are included in this category. The best possible way of
combating income inequality is through increasing the minimum wage. South Africa has already
adopted a minimum wage which is R3500 per month and R20 per hour however, the problem is
that this minimum wage is below the poverty line. Because average monthly earnings of
Africans are not increasing at the same pace as of white counterparts the government should
implement policies that will focus on household income level in regard to minimum wage and
prioritize increasing wages for people who are in the lowest income order.
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Work Cited
Anna Orthofer Economics PhD Candidate, Stellenbosch University. “South Africa needs to fix
its dangerously wide wealth gap.” The Conversation, 5 Feb. 2018, theconversation.com/south-
africa-needs-to-fix-its-dangerously-wide-wealth-gap-66355.
“How Inequalities undermine Social Cohesion: A Case study of South Africa.” G20 Insights, www.g20-insights.org/policy_briefs/inequalities-undermine-social-cohesion-case-study-south-africa/. “Race,Class,Gender in an unequal South Africa.” News24, 18 Jan. 2016, www.news24.com/MyNews24/raceclassgender-in-an-unequal-south-africa-20160118. Sedghi, Amy, and Mark Anderson. “African rich get richer even as poverty grows and inequality deepens | Ami Sedghi and Mark Anderson.” The Guardian, Guardian News and Media, 31 July 2015, www.theguardian.com/global-development/datablog/2015/jul/31/africa-wealth-report-2015-rich-get-richer-poverty-grows-and-inequality-deepens-new-world-wealth.
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Norway: Supporting Emerging and Frontier Markets
Author: Alex Russo
WTO Trade Policy Review
To provide a backdrop of the Norwegian economy, an analysis of the Norway’s Trade
Policy Review by the World Trade Organization was done. The country eliminated its “most-
favored nation” policy on a majority of manufactured goods. This meant certain trade partners
previously received better tariff standards. In terms of bound rates, Norway tops out at 11 to 14%
in order to enhance production quality with a small population of 5.2 million. The public has
created an economy built on high standards relevant to its competing position and cultural ideals.
One example is increasing fish diets in developed nations. The demand in arctic water delicacies
is attracting consumers around the globe. Norway also justifies these rates with efficient dispute
settlements in its multilateral trade system. Trade disputes are settled in Geneva at the WTO
headquarters. Their role as an European Free Tarde Association (EFTA) member appears as a
discrimination loophole around GATT (General Agreement on Tariff and Trade) policy and
allow Norway to trade with regional partners over others. In further support of bound rates for
developed countries, Norway provides duty and quota free benefits for countries considered
‘low-income’; These are commonly referred to as Least Developed Countries (LDCs).
Supporting such classified nations is building future trade partners and international support,
much like China’s initiative to enter African and the Middle-East regions for pure economic
operations. To the contrary, Norway is not structuring vast debt financing that will have systemic
risk to its domestic economy (NY Times, May 2017).
Asia-Pacific nations have begun to seek
Norway’s resources, especially fresh fish
thriving in the waters off its impeccable coast.
It’s an essential area for Norway who heavily
relies on petroleum exports at 25% of GDP
(OECD 2017). Fish and aquaculture sit at just
about 1% due to its low cost and EU import
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quotas for specific seafood products. As its fish exports become prevalent in more global
regions, the country could begin increasing toward bound rate levels. We will explore these
Asian trade agreements in the next section. They can claim environmental damages under the
GATT and charge all trade partners a greater price. Though price is the most delicate economic
tool, small increases to combat domestic and global inflation may become necessary.
According to the WTO Trade Policy Review in 2012, no significant changes have
occurred in Norway’s general framework since the last review in 2004. Lingering issues from the
global financial crisis have left a potential asset bubble in the housing market as interest rates
were left low for quite some time. More dramatically, as of February 2018, the European Central
Bank interest rates still remain near zero. A similar situation to Norway is currently happening in
the US. They see a shortage of affordable housing with baby-boomers retiring and Millennial
first-time buyers. Low inflation will play a major role to come as wage growth was absent in
2016-17. Norway’s true liquid gold is its vast ecosystem of lakes, rivers, and waterfalls.
Hydropower and fresh water extractions are scattered between beautiful fjords. Environmental
constraints remain in supporting tourism growth but managing the precious resource. It could be
an effective way to off-set reliability on crude oil and natural gas. The European Union has an
ease of access with their Regional Trade Agreement (RTA) but will see competition from other
Norwegian RTAs.
Regional Trade Agreements
At the time of Norway’s last TPR review in August of 2012, the country was approaching
full-economic capacity. Unemployment was nearing 3% and taxation of petroleum and crude oil
companies allowed assets under management to sustain through the financial crisis and recovery
period. Like the United States, pension liabilities will be difficult to fulfill even with these funds
are managed effectively. Many of the high tariff rates are expected to protect domestic industries
and help areas like consumer goods prices remain low through trade agreements. According to
Norway.no, Norway continues to work with the WTO in Geneva and assist other nations in
trade. The site outlines direct communication with developing and Least Developed Country
(LDC) to establish trade relations.
The Norwegian government is set up in a democratic style like the US. The main
difference is a legislative process known as ‘Storting’. A group of 169 representatives decide
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custom tariffs on an annual basis. All international agreements are reviewed with the foreign
affairs committee. However, it is the Ministry of Foreign Affairs who is responsible for all trade
policy. They also oversee all multi-national trade and represent Norway at the WTO. Assisting
the Ministry of Foreign Affairs is Siv Jensen. She is the current Minister of Finance and is
responsible for planning and implementing economic policy (Regjeringen, 2017). This involves
work with the fiscal budget, which includes investing the trade surplus into the Sovereign Wealth
Fund. Regarding trade, Norway benefits from EU inclusion through the European Free Trade
Association (EFTA). They are given access to the internal market without being a member of the
EU. The two institutions have been working together with the WTO. Their cooperation is
focused on opening trade with smaller economies across the globe. A number of regional trade
agreements have been formed with the EFTA while led by Norway. Their participation in the
European Economic Area (EEA) means they adopt most legislation from the EU regarding the
single market, removing internal borders and regulatory obstacles. However, agriculture and
fisheries are excluded.
The significant economic feature that lies with Norway may just be the fishery market.
While the United Kingdom and the European Union battle over Brexit, it is raising major
concerns over shared fishing areas. Norway has little to worry. Their exclusion within the EFTA
retains their water rights, placing a strategic card in their hand to maintain world trade, including
Asia. An early announcement has been made for a China-Norway free trade agreement (FTA).
Negotiations began in 2008 and have since held 9 rounds before finally being signed by both
parties (fta.mofcom.gov). This is intriguing considering that the EFTA has a bilateral RTA with
Hong Kong and China since 2012. It may explain the length negotiations took. A noticeable
difference in the two agreements is the inclusion of “E-commerce” stated in the new Norway
RTA (EFTA.int, Nov 2017). This is the only pure bilateral deal Norway has made since its first
trade deal with the Faroe Islands in 1992; Those not-considered ‘pure’ are those through the
EFTA and EU. Another agreement recently announced through the EFTA is
Russia/Belarus/Kazakhstan, of whom not all are WTO members. The EFTA also announced
individual Indo-Pacific deals with India, Indonesia, Vietnam, and the Philippines, as well as a
middle-east deal slated to the WTO.
Referred to as a “fax democracy”, Norway implements the so-called “1st pillar of the
EU”. This is when legislation is sent through fax by the European Commission. The Prime
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Minister of Norway reports receiving roughly 5 pieces each day (Politico, May 2016) The
Norwegians do not participate in the European Commission or European Parliament but are
consulted at various points in time during the drafting process. Aspects of the 1st pillar of the EU
include the union’s social policy, consumer protection, environment and company law. Between
free trade access with large economies and sole protection of its fisheries and agriculture,
Norway is in a unique position as an EFTA member. They benefit without direct participation in
all of the European Union.
Norway is a ‘founding father’ of the GATT and considered an original member of the
WTO. They have made long strides in every round and never had a complaint ruled against
them. In one issue resolved, Norway objected the EU, South American, and Asian nations
regarding “MFN” importation of processed and unprocessed seal products by the EU. They won
this Dispute Settlement Resolution (DSR), which solidified the provision as an EFTA member. It
states their right to deal seal products at their effective tariff. Outside of Europe, Norway has
made strides in the last decade to grow their trade network. They are importing low-cost
consumer goods from Asia and trading fishery stock in exchange. They also continue to invest in
least-developed countries, seeking to build personal bilateral and regional agreements in decades
to come. They can solidify themselves from full-fledged EU membership and prosper in
economic growth.
Use of Account Surplus
As a result of fiscal and monetary responsibility, Norway International payments is a
surplus of roughly $40 Billion, placing it 6th in the world (See graph below). Such a remarkable
feat for a developed European nation
offers positive externalities with
their global monetary policy. Often
supporting Least developed
countries (LDCs), like Malawi, with
budget support. Malawi received $3
million as a part of the last tranche
in 2004. More recently, a new fund
was created totaling $18 million for
Norway
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a just phase 2 of the Enhanced Integrated Framework (EIF) in order to develop trade. Initiatives
like this allow payment imbalance shortfalls of small economies generate growth and establish
positive relations with other countries. Sub-Saharan nations struggle to meet budget constraints
because they lack the control over prices of natural resources, which most often are traded cross-
border below market value. Foreign powers often arm-strangle LDC’s as they know the countries
must export to offset high import levels.
China has expanded its global reach in the last decade, targeting Middle-east and African
countries. They offer migrant workers and infrastructure projects in exchange for access to
natural resource concessions. While the infrastructure is extremely poor, migrant workers force
up unemployment, which lowers government revenue and increases expenditures for social
welfare. Additionally, these projects keep the countries indebted even on 2% loans from the
Chinese government. They favor these for two reasons. The interest rates are lower, helping
decrease payment imbalances, and China promises a don’t ask, don’t tell philosophy regarding
how the governments create policy. Partnering with China has become popular for many
developing countries. China finances capital projects, sends migrant Chinese workers, and
usually requires concessions for lower rates. An example is the rights to most Cobalt that comes
from the Democratic Republic of Congo. Cobalt is the essential commodity used in lithium-ion
batteries for electric cars. This is an illustration of economic abuse by a more advanced
economy. The Congo has been forced to request China stop exporting the raw copper and cobalt
before processing (Reuters, 2017). Without being processed, the minerals are of significantly
lower value. An argument for this foreign direct investment (FDI) is the economic cycle
compared to developed countries. According to the figure, EM is in the early cycle where DM is
in the late cycle, signaling a pullback in leverage toward EM with lower debt-GDP ratios.
Conclusion
Norway understands emerging and least developed countries face fiscal obstacles. They
are prepared to lend support and meet IMF regulatory measures into the distant future. A right-
leaning party recently took control as PM with parliament support. This makes it difficult for
migrants to travel into Norway and remain settled. Pro-business policies will spur continued
economic growth through shifting resource exporting to more sustainable measures for the
region. The sovereign wealth fund is being put to use improving infrastructure, supporting social
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programs, and investment abroad in equity and debt capital markets. Their investments have
return modestly, helping support sovereign wealth fund contributions.
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Work Cited
https://atlas.media.mit.edu/en/profile/country/nor/ https://data.oecd.org/trade/trade-in-goods-and-services.htm http://ec.europa.eu/trade/policy/countries-and-regions/countries/norway/ https://www.nytimes.com/2017/05/13/business/china-railway-one-belt-one-road-1-trillion-plan.html http://www.worldstopexports.com/norways-top-10-exports/ http://www.nytimes.com/2005/10/27/world/europe/in-norway-eu-pros-and-cons-the-cons-still-win.html http://rtais.wto.org/UI/PublicSearchByMemberResult.aspx?MemberCode=578&lang=1&redirect=1 https://www.wto.org/english/tratop_e/region_e/rta_participation_map_e.htm https://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds401sum_e.pdf https://www.regjeringen.no/en/dep/fin/id216/
http://rtais.wto.org/UI/PublicSearchByMemberResult.aspx?MemberCode=578&lang=1&redirec
t=1
https://www.norway.no/en/missions/wto-un/our-priorities/trade/norwegian-
priorities/norwegian-priorities2/
https://www.wto.org/english/tratop_e/region_e/rta_participation_map_e.htm
http://fta.mofcom.gov.cn/english/
http://www.efta.int/free-trade/free-trade-agreements/hong-kong
http://www.ssb.no/en/nasjonalregnskap-og-konjunkturer/nokkeltall/economic-and-financial-data-for-norway https://www.wto.org/english/news_e/news16_e/if_20dec16_e.htm http://www.irinnews.org/news/2004/10/06/norway-releases-balance-payments-aid https://tradingeconomics.com/norway/balance-of-trade http://www.ssb.no/en/ur http://www.imf.org/en/News/Articles/2016/11/17/MS111716-Norway-Staff-Concluding-Statement-of-an-IMF-Staff-Visit
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2018 Outlook
Large sums of capital have flowed into EM and
international markets in the past year. Institutional
investors, once again, were the first to begin shifting
asset allocations as banks struck record total bond
offerings since before the financial crisis. The
Emerging Markets Club does agree with economists’
view that growth is slowing in many developing
countries, but we do see healthy signs in a couple regions.
The Asia-Pacific has seen an increase in productivity with help from Singapore
continuing its rivalry with Hong Kong as the financial capital. Fintech is assisting local
businesses to better handle money and secure funding on local market exchanges. China’s
corporate debt is of concern at 230% of GDP. India appears a better alternative with GDP growth
accelerating. Thailand geopolitical risk remains with the welcome of its new King atop its
Monarchy who has close control over the
military government.
Peru is another growth prospect,
given recent reforms will remain in place
and stabilize the federal government. Its
ability to limit illegal trade within the
country borders can increase government
revenue for capital projects. In turn, better
infrastructure will move goods and services
efficiently across regions.
Developed market investors are chasing yields and have shifted from equity to debt as
well. This demand is already forcing US equity dividend rate to increase and maintain pace.
Cobalt was one mineral mentioned but global commodity prices have been subdued and are
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primed for an increase. A rise in inflation is expected and would further boost prices. A
weakening dollar assists emerging economies to export to the US as it is cheaper for Americans.
Overall, we like what we see in the emerging market cycle and suggests exposure to
South American commodities and Asia-pacific manufacturing excluding China.