For
Marcellus Elizondo
President of the Argentine Committee of the International Chamber of Commerce (ICC) and Director of the Master in Strategic-Technological Management at ITBA
Nietzsche wrote that the world is a force in permanent imbalance of which the human being is only a part.
It is therefore no surprise that, starting from 2023, the prospects for the world economy will confirm this. Not even us Argentines neglecting the impacts that always come to us from the rest of the planet (although we tend to ignore cause and effect relationships) in the midst of what John Chambers has described as an “intertwined economy”.
It is always difficult to make predictions because it is impossible to know the future. But predictions can be made.
What will happen in the world in 2023 will influence (at least in part) our exports and imports, the investment rate, the exchange rate situation, public and private financing, the general economic trend and our technological evolution. Y in the various effects of this entire set of variables.
The IMF forecasts that the planetary economy will grow by 2.7% this year, after 3.2% in 2022. World GDP is slowing its growth, even if For the first time, it will just exceed $100 trillion. It will do so with squalid developments such as those expected for the big ones: USA, 1%; China, 4.4%; Japan, 1.6% and UK, 0.3%. There will also be setbacks in the GDP of some notable economies such as Germany and Italy. And other nations among the big ones that will do better: India presents an increase forecast of 6.1%.
Euromonitor estimates it the planetary inflation rate, which reached 8.9% in 2022, will drop slightly, through global monetary efforts (which are not free) to 6.9%.
Lower world growth, in turn, will generate a slowdown in international tradewhich last year -recorded a 3.5% increase in volumes- it reached an all-time high of nearly $32 trillion (goods plus services). This was $10 trillion more than a decade ago and nearly $7 trillion more than pre-pandemic 2019. By 2023, the World Trade Organization (WTO) expects trades of only 1%.
the latter it is fundamental for Argentina: our exports go to markets that weaken their purchases. According to the WTO, imports of all origins from South America (which receives 30% of our external sales) will decrease by 1%, as will those from Europe (-0.7%), which receives 15% of our exports. Meanwhile, imports from Asia, destination of 33% of our sales, will grow by only 2.2% and those from North America, where 9% of our sales arrive, will grow by just 0.8%.
For the Argentine economy, the above is related, at the same time, with the prediction of lower prices for raw materials (representing two-thirds of our total exports). Fitch Solutions assumes commodity prices will decline 6.1% year-over-year in 2023 after an estimated 23.8% growth in 2022. } Remarkably, various geopolitical events will affect the global economy this year. The world is going through turbulent times and this reduces comfort for emerging countries.
Therefore, while the future of the war in Ukraine and its effects – economically more serious than the war itself – such as the energy difficulties in Europe, is not clear, the Fed is expected to continue raising interest rates (according to the Financial Times by 4.9% in the first half), which keeps the dollar strong against emerging currencies.
In turn, COVID will maintain its impact in China in the first part of the year (will it have consequences outside the Asian giant?), while some risks due to social conflicts – such as the protests in Iran – will consolidate, while the S&P500 it will continue to be weak and energy prices will remain high.
And for Argentina, a new question has just arisen: will the current political events in Brazil be just a passing event or a future limitation for the governability of President Lula da Silva? In the latter case, Brazil’s economic performance will be even lower than (poor) already expected and Argentina will suffer from foreign trade, inbound tourism, the impact of what happens in the neighborhood’s largest subcontinental economy, of lower regional investments and decline in confidence in Latin America.
geopolitics it is affecting global business. Countries are settling into their relationships based on redefined ties. Today at least four categories play explicit roles: there are the “allies”, such as Western democracies among themselves; there are “adversaries”, such as USA/China or USA/Iran); there are simple “customers”, like allies with each other; but, also, like the USA/China) and there are “remote” countries, such as the poorest and least relevant. But in economic terms it should be noted that those categories are mixed Y the private agenda sometimes parallels the public one. And there are opponents who are also clients and in some cases very relevant clients as well.
This occurs because in the global economy the agenda of the mega-companies prints its strength by competing with state tensions. Thus, for example, while the United States and China are engaged in a bitter geostrategic dispute, the companies of both giants make the United States China’s largest customer in the world (16% of all its sales), and to China, the largest US customer outside the ex-NAFTA (9% of all its sales). Paralleling two governments that are tightening up, no international trade in the world is more important than that of these two economies with each other.
That’s not the only thing in question: intra-European discussions on energy supply and the role of Russia, the recent trip of the German Chancellor to China and the role of some “equidistant” countries in the most relevant disputes (India, Turkey, Saudi Arabia) demonstrate this complicated multiple surface. Politics, therefore, is not the only reality: the world combines tensions between governments with the needs of companies in global networks.
For the rest, on the planet free trade agreements continue between the various markets: there were 25 new ones in 2021/2022 -an average of one per month across the globe-; and the accumulated figure exceeds 60 since the outbreak of COVID on the planet. A fact to bear in mind: the most intense actor in agreements in these three years has been the United Kingdom (post-Brexit).
For Argentina, the problem is no less. 70% of all global trade occurs between countries that have reduced their tariffs to 0% at the border through international agreements and specific policies. Something that the country for the most part does not follow (our access to markets with agreed preferences is less than 25% of exports), which generates related entrance fees, not only tariffs but also extra-tariffs, in our major markets in Asia, Europe and the United States).
This brings us to challenge related to Mercosur and Brazil’s new agenda. Mercosur is the integration agreement with the lowest international trade relative to its aggregate GDP among the 20 largest on the planet. Will the new government in Brasilia promote a more intense foreign agenda? A more active Brazil, if after the current crisis in Brazil the intentions announced by President Lula da Silva are maintained, could force Argentina out of its lethargy in international negotiations.
Argentina has barely 5 of the 100 largest Latin American multinationals (multilatinas) and has generated only 0.1% of the stock of sunk foreign direct investment (emissions) in the planet. Among us, only about 70 companies manage to export more than 100 million dollars a year. And our weakness in participating in international value chains survives.
In 2023 it will be consolidated greater complexity in the functioning of those ecosystems which integrate innovation, investment, production and trade. And these networks are expected to increase the demands: Julie Gerdeman, CEO of Everstream Analytics, says in a recent note from Bloomberg, anticipating a recent easing of supply chain stress, that “we are on the path of transformation” and that “the pandemic the cadence, variety and intensity has increased, sweeping through an already overloaded system, and – now – the faster companies engage and leverage technologies, the greater the impact and improvement they can achieve in value chains” .
International value chains (70% of all global international trade takes place within them, according to the OECD) continue in a trend of sophistication. And accompanying it is a requirement for success. The the requirements refer to 5 critical topics: technological response, human capital, compliance with quality standards, openness and integration for transversal innovation and guarantee of legitimacy and response.
For Argentina, moreover, in 2023 it will be relevant to warn the reorganization of countries and regions in the planning of alliance strategies (considering that this year the future should be discussed among us before the presidential election). And, in this regard, it is worth noting that emerging India, already the fifth largest economy on the planet, stands out among the most dynamic countries in the world, in a top 15 that also includes Indonesia, Brazil and South Korea.
And while looking at the potential for specifically commercial links, it’s also worth it avoid nostalgia and to discover that – by market volume – Asia and Europe are each ten times more than Latin America, which generates just 3% of global trade. Duty matching the reasons to the successes.
The world, then, in motion, provides at the same time hardships and opportunities. And the results will depend on our predisposition.
Chesterton once stated that there is something called destiny, but that there is also something else, called will; and that what qualifies the human being is the wise balance in that contradiction.
Source: Clarin
