globalEDGE Blog - By Author: James McKillop

It is no secret that the new President of the United States, Donald Trump, favors protectionist economic policies. We are most used to hearing how his policies might affect relationships with China, Mexico, and Russia, but almost all countries will be impacted by the new president's policies. One of the countries who might see significant economic change from Trump's economy is India. India’s largest export, IT Services, face a particularly concentrated threat, and other industries such as pharmaceuticals also find themselves impacted by Trump’s America first policies.

In the third installment of the long-term mega trends blog series from globalEDGE we will examine urbanization and its implications for economic growth. Urbanization is taking place across the globe from the developed nations of North America & Western Europe, to some of the poorest places on Earth, including Sub-Saharan Africa and Southern Asia. Each region of the world is urbanizing at different paces and are creating different degrees of economic growth as a result of urbanization. In this blog we will examine how the world is urbanizing and the differences in urban population growth rate/population percentage throughout the world.

Last month we wrote a blog series on Central Banking policy in several regions of the world. One region that was not covered in that series was the second biggest country by population, and the world’s 7th largest economy by GDP; India. India has come into focus in recent weeks as Prime Minister Narendra Modi has called for India to demonetize, particularly calling for a ban on high-value bank notes in an effort to cut down on corruption and tax evasion. This has had several side effects on the Indian economy, most of which seem to be negatively impacting the nation as a whole, and sending India on a path towards cutting interest rates at a time when the US is heading towards possibly a series of rate hikes.

In conjunction with our blog series on central banking policy throughout the world, today we turn our attention to Central America and the unique fiscal and monetary landscape that is often an afterthought when examining the world economy. For the purposes of this blog, when referencing Central America, we are incorporating Mexico and all other continental countries of North America that are south of the United States of America. While Europe, Japan, and the US are locked into low interest rate environments, Central America offers a unique landscape for central banking.

In 2016 much of the world’s focus has been on turmoil in the Middle East, the rise of populist governments in the western world, and Brexit. While all of these massive movements have been taking place, one of the biggest economic stories of last year seems to be on the back burner for now, the Greek debt crisis. It wasn’t so long ago that Grexit was a much more real possibility than Brexit. With the overleveraging of almost every aspect of the Greek economy and the rise of a socialist government, many were worried that Greece would be the first southern European domino to fall in a rush of indebted countries leaving the European Union. Although things are quieter in Greece for now, things are still unsteady, and it is not definitive whether Greece will experience an economic resurgence or fall further.

In an age where low and negative interest rates dominate the central banking scene for most of the developed world, one major nation has a target interest rate of 14.25%. The country in question has been all over the news in the past few years, from the World Cup and the Olympics, to the impeachment of a president and a deep recession. It is Brazil whose official interest rate stands at 14.25%, which is entirely counterintuitive given the information that Brazil is mired in a deep recession. Brazil has to maintain such a high official interest rate due to the fact that they are facing issues with inflation that have persisted for years. Since 2000, Brazil has only had three years where average inflation in the country ran below 5%, and in both 2015 and year to date 2016 Brazil has seen inflation run above 9%. The inflation issue has hampered Brazil’s ability to encourage growth through monetary policy and as such Brazil’s recession, which now spans over 2 years dating back to 2014, has persisted. In recent months, however, Brazil’s economy has hit several key targets and as such a rate cut is officially on the table.

Brand is bond in the world of business. The first thing we think of when someone mentions a company name is not their most recent financial statements or their internal initiatives to cut costs or boost R&D. The first thought is of the brand that company has built. Take for example, Nike. When someone mentions Nike, by and large it conjures images of cutting edge athletic wear and oozes cool. It is clear that brand is crucial to a company’s success, and while scores of other factors go into success with international business, one of the key components is building a global brand. You don’t want, however, to automatically assume that one broad brand for the entire world will be the perfect strategy for your particular company. Instead, in most cases it makes much more sense to approach different markets in varying ways.

A major alliance between two ascending regions of the world has been bubbling under the surface of public awareness for years. This alliance is of the economic variety, and has the potential to reshape the socioeconomic and political future of our world. The size of China’s investment in Africa is truly massive; or is it? As many may not know, China has been in the news for its lending and investing activities in Africa over the recent years. According to new research and investigation, however, the scope and hype of the Chinese activity in Africa may be over-exaggerated.

For pro basketball fans everywhere, it comes as no news that last night was Kobe Bryant’s final game as a basketball player for the Los Angeles Lakers. Kobe Bryant has become a household name, not just in America, but globally. Kobe Bryant has ridden the larger wave of global basketball, with a particularly massive (and growing) fan following in China. Sports, and American culture of many varieties have become commoditized and are now consumed in massive quantities throughout the world.

It is no secret that China has experienced massive capital outflows over the past year, and it also isn’t a secret where a lot of this capital is going. Capital flows from China to the U.S. have occurred at record levels in 2015 and the first quarter of 2016, with a large portion of these flows going into real estate and other hard assets. What is particularly interesting, however, is the recent acceleration of Chinese investment in the hospitality industry of the U.S., mainly hotels. It isn’t an entirely new phenomena, as evidenced by the Chinese purchase of the historic Waldorf Astoria in 2014 for $1.95 Billion. It is striking, however, how quickly the pace of investments has increased. Much of the high profile purchasing comes from one company, Anbang Insurance, but represents a larger ideal within China.

The ASEAN trade community encompasses a group of dynamic economies that seem poised to experience rapid growth and gains in wealth. As with any entity that exudes potential, however, the ASEAN trade bloc faces significant challenges as a trade bloc and as independent nations. The beginning of the AEC (ASEAN Economic Community) will present a whole list of new issues along with its great promise.

Japan’s tough economic sledding continues. The Land of the Rising Sun faces currency appreciation without the underlying fundamentals to support it. A myriad of issues have led to weak economic conditions in Japan, and the recent appreciation of the yen isn’t helping at all. In fact, it is a counteractive force to Japanese monetary policy, and is causing headaches for Japanese firms.

Islamic finance presents an interesting contradiction between religion and modern economics. The world of finance is in large part built on the premise of interest. The debt market now dwarfs the equity (stock) market, and a majority of debt products inherently carry some form of interest. The world of Islam, however, strictly forbids usury, or the practice of charging interest. Islam is also the world’s second largest religion with over a billion adherents, which makes it impossible for its practitioners to not participate in the world of finance. This seemingly huge dilemma is solved by the practice of Islamic finance. Bridging the gap between religion and business, Islamic finance is quickly growing in both size and importance.

Throughout human history, natural resources have been the bedrock of human development and commerce. In ancient times, civilizations flourished based on vast amounts of precious minerals or other valuable resources. Is it possible, however, that in modern times an abundance of natural resources can be as much a curse as a blessing to a nation state? This is not a brand new thesis, in fact many have covered it from academia to national publications and everything in between.

The Celtic Tiger is roaring again. After an economic downturn in 2008, Ireland was in dire straits. It was more often associated with the failing economies in Southern European countries than its peers in Northern Europe. In 2015, however, these troubles seem to be a relic of the distant past. Ireland’s GDP has grown at an astounding 7% through this point in 2015, while most of Western Europe is marred in low growth in the 0 to 2 percent growth range. This positive trend in the Irish economy has been spurred mainly by investment from overseas, particularly U.S. pharmaceutical and tech companies.  A skilled workforce, and a minimal corporate tax rate of 12.5% has led many of these U.S. corporations to set up their base European operations in Ireland. Companies such as Pfizer, Apple, Facebook, and Google have built up major operations in Ireland’s main cities. Some major US companies have even completed mergers or acquisitions to execute a tax inversion, and move their base of operations for tax purposes to Ireland. Not only are these countries creating jobs and bringing in tax income to help the public financing of Ireland, but they are helping to offset all of the negative aspects that were dragging down the Irish economy.

One of the many great resources available on globalEDGE is the export tutorials. This resource is located in the Reference Desk section of the globalEDGE website. The export tutorials offer information and helpful tips for individuals or companies looking to take their products internationally. There are five main headers: export readiness, government regulations, financial considerations, sales and marketing, and logistics. Under each header are important questions relating to that particular topic, accompanied by answers to those questions.

China has a problem. In fact, China has multiple problems, but perhaps the most concerning issue is its greying populace. Throughout the world, advances in technology and knowledge in the general population of birth control, have left advanced countries facing demographic crises. China is no different, and while not considered an advanced country, it faces similar issues that are plaguing its population.

Private Equity and Africa are not often associated with one another. Most notable private equity firms stick to established and stable markets such as the U.S. & Europe, where there are ample opportunities to invest in mature and steady companies. However, times change, and this is apparent in Africa, where the opportunity to connect the continent like never before is drawing in unprecedented amounts of capital. 

South Korea is in uncharted waters. Amid recent economic turmoil in Asia, South Korea has become a safe haven for foreign assets. Some have speculated that emerging market investors have gotten smarter, and therefore can identify countries within the space that are better long term investments. Another school of thought, however, is that South Korea has transcended from an emerging market to a fully developed nation, and therefore presents more security in the face of economic trouble. 

Since the financial crisis, the economic situation in the European Union has been stagnant. Years of low growth and low inflation have left the Eurozone seeking answers. In January 2015, the ECB sought to find these answers through a massive bond purchase program similar to the quantitative easing program that the Federal Reserve carried out in the United States. The plan entailed the creation of €1 Trillion, or approximately €60 billion per month, by September 2016 to carry out the purchase of bonds in Europe. This plan was put in place to push down interest rates, therefore boosting inflation and creating a more attractive environment for credit creation. In turn, this would effectively result in a stimulation of growth throughout the European economy.