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CGD in the News

July 8, 2017

A Crackdown on Financial Crime Means Global Banks Are Derisking (The Economist)

From the article:

Strict new rules on capital and liquidity after the financial crisis have tilted the cost-benefit balance away from global banks’ least-profitable clients. But another cause of Latvia’s travails is “derisking”: banks dropping customers in places or sectors deemed to pose a high risk of money-laundering, sanctions evasion or terrorist financing. Though correspondent-banking traffic has continued to rise, banks in small or poor countries are increasingly shut out. The number of correspondent-banking relationships fell in all regions between 2011 and 2016, according to a survey of banks and payments data published on July 4th by the Financial Stability Board, a group of international policymakers (see chart 1). Worst-hit was eastern Europe, which saw a decline of more than 20%. The number in the Caribbean fell by around 10% in 2016 alone. Money-transfer firms and charities have also been hit. Big banks have “unbanked everyone from porn actors to pawnbrokers”, says a regulator...

Better, cheaper compliance should allow banks to take back some of the clients who were ditched because they were not profitable enough to outweigh the risk, says Vijaya Ramachandran of the Centre for Global Development, a think-tank. About 3,700 of the banks that are members of SWIFT now use the payment-messaging system’s data registry to collect required information about the banks for which they act as correspondents, thus cutting compliance costs. Takis Georgakopoulos of JPMorgan Chase, the largest clearer of dollar transactions, holds out hope for the blockchain technology behind bitcoin, a digital currency. This encodes a record of valid transactions with time stamps, which can be a cheap, easy way to verify customers.

Read full article here.

June 27, 2016

Repercusiones del Brexit en la Economia Latinoamericana (CNN Portafolio Global)

From the interview:

Brexit is the latest shock Latin America has received. How many more can the region take without entering into a crisis? Not many, believes Liliana Rojas-Suarez. Brexit should be the alarm for policymakers to implement structural reforms to ensure long-term growth, less dependent on external shocks.

Watch the full interview here.

September 16, 2015

El Dilema De La Fed Por El Alza En Tasas De Interés (CNN en Español)

In this CNN en Español interview, Liliana Rojas-Suarez, senior fellow with the Center for Global Development, explores the financial fragilities of Latin America’s economy ahead of a Fed rate hike. 

Watch full interview on YouTube

March 30, 2015

Predicting the Next Crisis (The Economist)

From the article:

How resilient are emerging-market economies? Many are struggling, thanks to the economic impact of a strong dollar. But what would happen if things suddenly got a lot tougher? A new paper, from Liliana Rojas-Suarez of the Centre for Global Development, a think-tank, offers some interesting data.

Let’s imagine that something really bad happens. The Federal Reserve tightens its monetary policy too soon; some new global debt crisis begins; Russia launches a full-scale invasion of Ukraine. Ms Rojas-Suarez wants to understand which emerging-market economies are most vulnerable.

To do so she creates a “resilience indicator”. The ingredients of the index are listed at the bottom of the piece. In short, the indicator measures how indebted a given country is; how reliant it is on foreign funding; and how much scope it has to fight the markets if things go wrong.

Read the article here

March 2, 2015

The Debt Dilemma (Monocle 24: The Foreign Desk)

Senior Fellow Liliana Rojas-Suarez tells Monocle 24 about the 1994 Mexico Peso Crisis and US bailout, a story that offers possible lessons for current and future crises.

From the episode:

Greece’s creditors may not like it but debt write-offs have succeeded in the past. Monocle’s Steve Bloomfield hears from a campaigner, an economist and a historian to learn why old battles point the way forward to a Greek solution.

"Rubin and Summers were right: the Mexicans... repaid very quickly at a gain to the US government.  So the Tequila Crisis itself was kind of a breaking point for the international community to realize that if you're going to be dealing with situations of crisis and you see a point of supporting certain countries, you need to have instruments in place." - Rojas-Suarez

Listen to the episode.

January 12, 2015

How Optimism Strengthens Economies (Bloomberg Businessweek)

From the article:

Over the short term, it’s unsurprising that fast economic growth makes people more optimistic. Over the long term—periods of 15 years—it appears that happiness and optimism are a driving force behind even stronger economic performance, encouraging risk, experimentation, and hard work, according to a cross-country analysis by Stefano Bartolini of the University of Siena. Some of Bartolini’s colleagues found that higher surveyed happiness was associated with more rapid productivity growth across Europe from 2004 to 2010. On a point scale with 10 being extremely satisfied, the average response from Greece in 2006 was 6.2, compared with 8 in Switzerland and 8.5 in Denmark. Greeks were relatively depressed even before the global financial crisis, from which they emerged for the worse.

Read the article here

November 12, 2014

Peru is One of the Most Resilient Countries Against New External Shocks (GanaMás)

CGD Senior Fellow Liliana Rojas-Suarez discusses Peru's preparedness in the face of fluctuations within the international market.  

From the article

Peru is the second most resilient Latin-American country against new external shocks during the next year. Peru is only surpassed by Chile according to the Resilience Index 2014, says CGD Senior Fellow Liliana Rojas-Suarez.

Read the article here


Additionally, in an interview with Andina, Rojas-Suarez highlights Peru's fiscal, monetary tools to mitigate impact of external crisis.

Rojas-Suarez also explains how Pacific Alliance countries have better strengths than Argentina and Brazil in an interview with Gestión.

February 4, 2014

Emerging Markets' Victimhood

From the Article:

From Istanbul to Brasilia to Mumbai comes a crescendo of complaints about dollar imperialism. Heads of state and central bank governors allege that the policies of central banks in industrial countries, especially the U.S. Federal Reserve, pursued in self-interest, are wreaking havoc in emerging-market economies. This allegation is mostly unfair. Emerging markets aren’t hapless and undeserved victims; for the most part they are simply reaping what they sowed.

Read it here

October 25, 2013

Interview: Fitch move warns US of "lousy governance," fiscal challenge (Xinhua)

From the Article:

Fitch Ratings' decision to place the AAA credit rating of the United States on a negative watch list is a timely reminder for some Republicans and the world 's largest economy needs to improve its long-term fiscal sustainability, said Arvind Subramanian, a senior fellow at the Washington-based Peterson Institute for International Economics, Wednesday.

"For any other country that is likely to default, it will immediately be put on the watch list," Subramanian said in an interview with Xinhua.

Fitch Ratings, a global rating agency based in New York City, on Tuesday placed U.S. "AAA" credit rating on rating watch negative, as American authorities have not raised the federal debt ceiling in a timely manner before the U.S. Department of Treasury exhausts its extraordinary measures Thursday. The U.S. government has been forced to close partially for the first time in 17 years starting Oct. 1 due to a lack of money to fund the federal governmental agencies. Treasury Secretary Jacob Lew has warned that a debt limit agreement needs to be reached no later than Oct. 17.

"It's a warning to the extremists in the Republican party, because they are saying nothing will happen," said Subramanian, who described the latest round of fiscal wrangle between U.S. Democrats and Republicans was an example of "lousy governance.

The United States is confronted with long-term fiscal challenges and it should endeavor to control its spiking health care costs, he stressed.

Read it here

October 25, 2013

The U.S. Can Survive a Shutdown but Not a Default (Bloomberg Businessweek)

From the Article:

On a global scale, then, the volatility caused by furloughs and sequesters looks pretty small. But the relative impact of default will be much worse in the case of the U.S. than it is when it comes to smaller, poorer countries. A recent review of sovereign default in the Journal of Economic Literature concluded that over the past 20 years, defaulting countries had seen limited access to international capital markets and more expensive borrowing for the two years after default—but a small impact after that. And the impact on GDP growth was only around 1 percent.

The difference is that U.S. Treasury bonds are vital to the functioning of the global financial system. The government has $12 trillion in outstanding debt that is used (not least) to underpin short-term borrowing among banks and investment houses on Wall Street. A default could freeze that market and lead to widespread bank collapse, a debacle that would be sure to spread worldwide. Because a U.S. default would be such an unprecedented event, it’s hard to know how bad it could be—but Goldman Sachs (GS) suggests it could cost at least 4.2 percent of GDP over the year.

Read it Here