Speaker 2013

Carlos A. Primo BragaEconomist, Director of the Evian Group@IMD

Latin America: has the future arrived ?

Swiss entrepreneur and diplomat Uli Sigg has assembled the most comprehensive collection of contemporary Chinese art worldwide. He began his collection in the 1990s and will donate a large part of it (almost 1,500 works) to the Museum of Visual Culture of Hong Kong. He first travelled to China in 1979 on behalf of Swiss firm Schindler to establish the first joint-venture between China and a foreign company. In the second half of the 1990s he was Swiss ambassador to China, North Korea and Mongolia. He is Vice Chairman of Ringier and a Member of the Advisory Boards of the China Development Bank, of the International Council of MoMA (NY), and of the International Advisory Council of the Tate Gallery (London).

Report : Latin America: has the future arrived ?

At the recent Forum organised by the Fondation de la Haute Horlogerie at Lausanne’s IMD, Carlos A. Primo Braga focused on the current economic situation in Brazil and Argentina, in comparison with what is happening in Europe. One of the BRIC countries, Brazil has seen its middle classes expand progressively since 2003 and income inequality radically reduced. “As the third most unequal country in the world in 1989, Brazil has clearly improved its position since then. One of the principal reasons for this is that it couldn’t really have been doing worse,” he explains, not without a touch of humour.…

At the recent Forum organised by the Fondation de la Haute Horlogerie at Lausanne’s IMD, Carlos A. Primo Braga focused on the current economic situation in Brazil and Argentina, in comparison with what is happening in Europe. One of the BRIC countries, Brazil has seen its middle classes expand progressively since 2003 and income inequality radically reduced. “As the third most unequal country in the world in 1989, Brazil has clearly improved its position since then. One of the principal reasons for this is that it couldn’t really have been doing worse,” he explains, not without a touch of humour. “The strong trend towards urbanisation is the central factor, characterised by an exodus of rural populations to towns and cities. Added to this, the birth rate has dropped to 1.8 children per woman today, down from 6 in 1996.”

Brazil nevertheless remains an economy that is far too inward-looking and relatively closed internationally, even if the country is, for example, China’s biggest agricultural trade partner. “As things stand, Brazil has sufficient infrastructure, but the fact remains that it was among the countries with the worst ratings in this area according to a global study carried out by Credit Suisse this year,” Carlos A. Primo Braga continues. “Brazil must do everything it can to attract investment to develop its infrastructure. The growth of society as whole depends on it.”

Carlos A. Primo Braga went on to talk about how the Argentine economy was fairing following the 2001 crisis and the end of the peso-dollar peg. There was an immediate impact on debt to GDP ratio, which skyrocketed. The good news is that, from 2003, this ratio had already started to decrease progressively, and has now stabilised at an average of 6% per year. This brings the economist to the question of whether Greece should follow suit and return to the drachma. Definitely not, is the answer. Argentina has benefited from a high demand for its raw materials, particularly from China. These are resources that Greece simply doesn’t have. For this reason it would be an extremely risky exercise, not to say a counterproductive one, if such a strategy were to be adopted by the cradle of democracy.

At the same time, Carlos A. Primo Braga was keen to stress that the austerity measures imposed on eurozone countries in difficulty are not enough to resolve the debt crisis. The social fatigue that such measures engender is a crucial element to factor in. So why not a debt restructuring to give a bit of breathing space to these economies that have been bled dry, and end the prospect of no future faced by younger generations.

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