BUSINESS & ECONOMICS

Monday, May 31, 1999 Online Edition 159

World Bank to hold development conference on Americas

WASHINGTON -- The World Bank will hold its fifth annual Conference on Development in Latin America and the Caribbean in Valdivia, Chile, from June 20-22; this year's theme will be "Decentralization and Accountability of the Public Sector."

According to a Bank press release, about 350 people are expected to attend, including ministers of finance, governors of central banks, and government leaders from the region.

The conference will be co-sponsored by the Bank's Latin America and the Caribbean (LAC) Regional Office, in conjunction with Chile's Ministry of Finance. Private-sector representatives, staff from international and non-governmental organizations, journalists and academics will also participate, the Bank said, adding that prominent fiscal specialists, political scientists and policymakers have agreed to take part in panel discussions.

The conference will explore such subjects as: making local governments accountable to average persons in cities and villages; making decentralization compatible with macroeconomic stability; equity and decentralization; and recent developments in subnational tax regimes.

Breakout sessions will feature discussions on decentralization, education, decentralized environmental management, public health, road systems, local property taxes, integrated management of local sanitation, access to credit markets by states and municipalities, and capacity-building for local delivery of services.

Among those expected to attend are Guillermo Perry from the World Bank; J.A. Ocampo, director of the Chile-based United Nations Economic Commission for Latin America and the Caribbean; Eduardo Aninat, Chile's Minister of Finance; Ramon Borges from the John Hopkins School for Advanced International Studies in Washington; Ronald MacLean, former mayor of La Paz, Bolivia; and Rene Safirio, the present mayor of Temuco, Chile.

The World Bank will also host a conference June 17-18 in Buenos Aires, Argentina, about international economic integration.

According to organizers, the "Conference on Integration and Contagion" will highlight new research and analyze the policy options available to Latin American countries, and examine the performance of the global financial system during the recent economic crisis that struck Asia and other parts of the world.

Organizers say the conference will center on three main themes: the international transmission of shocks through trade links, the transmission of shocks through financial links, and policy responses to these shocks.

The aim of the conference, organizers say, is "to create a forum where academics, policy-makers, and business leaders will meet and discuss their views on these issues."

Among those scheduled to make presentations at the conference are Nouriel Roubini from the White House Council of Economic Advisors; Ricardo Hausmann, chief economist at the Inter-American Development Bank; and Shahid Javed Burki, regional vice president of the World Bank.

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Monday, May 17, 1999 Online Edition 157

U.N. hails drop in Latin American poverty rate
WASHINGTON, D.C. -- A "significant" reduction in the rate of poverty over the past decade is Latin America's "most outstanding achievement," according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).

In the latest edition of ECLAC's annual report, the "Social Panorama of Latin America," regional poverty rates were found to have fallen from 41 percent to 36 percent in the first eight years of the decade.

The report highlights notable successes in the region. Chile lowered its poverty rate by 13 percent, Brazil by 12 percent, and Panama by nine percent, according to the report written by Rolando Franco, director of ECLAC's social development division at the commission's Santiago, Chile, headquarters.

Countries with lower reductions included Costa Rica, where the poverty rate fell by four percent. Peru lowered its poverty rate by four percent, and Colombia by two percent. In a few countries, however, poverty rates rose: Venezuela's grew by eight percent, and Mexico's by four percent.

The report found that poverty levels in the region remain very high. About 204 million people are still living below the poverty line, as compared to 200.2 million in 1990 and 135.9 million in 1980. The report warned that the slowdown of economic growth in this decade's latter years will make it hard to reduce poverty further, and even threatens to increase it in a number of countries.

The report also found a clear positive relationship between economic growth and the reduction of poverty.

Using Chile and Venezuela as examples, the report said that per capita income in Chile went up by 47.8 percent between 1990 and 1996, while the proportion of poor households fell from 33 percent to 20 percent. In Venezuela, a drop of 0.5 percent in per capita income between 1990 and 1997 was accompanied by an increase in the proportion of poor homes from 34 percent to 42 percent.

However, the report found that in other countries economic growth does not always translate into a large reduction in poverty. In Argentina, for example, a 37 percent rise in per capita income between 1990 and 1997 was accompanied by a decrease of only three percent in the number of poor households. Brazil, on the other hand, had a 12.5 percent increase of per capita income with a 12 percent reduction in poverty.

Franco wrote in his report that if poverty is to be further reduced, "it is very important to avoid recession. The experience of the region shows that a single year of recession is enough to wipe out between half and all the ground gained in reducing poverty during four or five years of economic growth."

A further challenge, he said, "comes from the diminishing returns of poverty reduction. These are due most of all to the existence of sectors of 'hardcore poverty' which are not benefitted by growth."

To meet this challenge, Franco said, "persistence is needed not only in employment policies, but also in training human capital and providing basic social services such as water and sewage disposal."

In addition, Franco said that while providing educational opportunities to young people is helpful in lowering poverty, "job

opportunities must be created and certain demographic trends changed."

He explained that poverty levels fall as more members of poor

households are able to find work, thus increasing income. In the

lower-income sector today, Franco said, an average of one person works in each household with five or six members, while high-income families with three or four members generally have two people working.

* The last figure for Guatemala was 68% in 1986.

** For the years 1989 and 1996.

+ 1991.

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Actions available when the neighbors get out of line

By MELANIE WETZEL

Everyone has heard the old saying that you have a right to swing your arms, but that right ends where your neighbor's right to swing his arms begins. This adage is especially applicable in real estate and property matters. The owners of contiguous properties obviously want to be able to take advantage of every square foot of their land, and this leaves no buffer zone between the properties. And if one owner swings his arms a little too far, he is infringing the rights of his neighbors.

There are two actions available under Honduran law to protect property from disturbances (usually construction) on a neighboring property. They are the denouncement of a "ruinous construction" and the denouncement of a "new construction."

The denouncement of a ruinous construction takes place when a property owner feels that a neighboring building presents a danger to his or her property or its inhabitants. This can be an old structure or it can be a new structure that is of poor quality or design. This denouncement can also be applied to trees that are in danger of falling.

The denouncement of a new construction can be used by a property owner when construction in a neighboring lot violates any of the rights associated with the property. This could be a violation of an obvious right such as ownership, if the new construction is extending over the property line.

But in matters of real estate there are many invisible rights that can be connected with the property. For example, it is illegal to build a construction that has windows overlooking the patio of the neighbors. If there are any easements, or servidumbres, such as a right to transit, a new construction cannot impede this right.

The Civil Code establishes that these actions can be taken by any possessor, not just the owner. Therefore a renter or leaseholder can feasibly use these actions. These actions can also be taken by any citizen in favor of a park, plaza, sidewalk, or other area of public use.

These denouncements follow a summary process, one that is short and heard in verbal audiences. Usually the judge will issue a decree halting construction while the issue is being decided.

Monday, May 10, 1999 Online Edition 156 Special Edition

New survey finds strong investor confidence in Americas

WASHINGTON, D.C. -- Despite recent economic crises, investors are optimistic about the business climate of Latin America and the Caribbean, according to a new survey sponsored by the Association of American Chambers of Commerce in Latin America (AACCLA) and PriceWaterhouseCoopers, which bills itself as the world's leading professional services organization.

At a May 5 news conference, AACCLA's president, Charles Preble, said that while short-term problems need to be ironed out, the survey showed that business is "bullish about the market potential of the region."

The survey polled executives from more than 200 of the largest multinational corporations operating in the region, which sponsors said made it one of the most extensive business surveys ever compiled about corporate attitudes toward trade and investment opportunities in the Americas.

Important findings from the 56-page "Survey of Investment Climate in Latin America and the Caribbean" said that market potential is the primary reason companies invest in the region. The survey found that 55 percent of respondents said they plan to make significant new investments in operations, 45 percent are planning joint ventures, and 30 percent are planning acquisitions over the next two years.

In addition, almost 72 percent of the executives polled said they believe that regional trade agreements have a positive effect on their operations. The North American Free Trade Agreement (composed of the United States, Mexico, and Canada), and the South American customs union called Mercosur (composed of Argentina, Brazil, Paraguay, and Uruguay) received particularly high marks from respondents.

The survey reported that last January's currency devaluation in Brazil is not expected to affect operations of companies in the region, despite the fact that Brazil has one of the largest economies in the Americas. Participants in the survey said they expected a decline in Brazil's gross domestic product (GDP) for 1999. A negative GDP growth rate was also predicted for Argentina, Ecuador, Honduras, Jamaica, Uruguay and Venezuela.

Countries that were projected to have moderate a GDP growth rate (about three to four percent) were Bolivia, Costa Rica, El Salvador, Guatemala, Mexico, Nicaragua, and Panama. The Dominican Republic was projected to have a high GDP growth rate (over five percent), while Chile, Colombia, Paraguay, Peru, and Trinidad and Tobago were predicted to have a low GDP growth rate of about one to two percent.

The survey said that not only are business people interested in reinvesting in their operations with their own funds, but that nearly a quarter of those polled indicated they are interested in working with outside equity investors, such as private equity funds. With $3,600 million in private equity money committed in 1998, "private equity players may become a more noticeable source of investment" to enable the region to move forward, according to the survey.

One of the top barriers to investment in the region was considered to be unclear foreign investment laws by host countries. Investors said governments in the region also needed to improve their infrastructure and reduce corruption.

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Respecting intellectual property benefits countries

WASHINGTON -- Countries that protect intellectual property rights (IPR) are far better off economically than those that allow copyrights and patents to be pirated, says a U.S. expert on the subject.

Reliable data show that maintaining the integrity of IPR adds greatly to economic prosperity in the United States and other countries, according to Maria Strong, vice president of the International Intellectual Property Alliance, a U.S.-based champion for IPR around the world.

Strong spoke with reporters in Managua, Guatemala City, and Tegucigalpa in a U.S. Information Agency TV satellite broadcast May 4, explaining that her industry compiles a report on the subject every 14 months using statistics provided primarily by the U.S. government and various member associations.

The data track the economic impact of copyrights across relevant industries -- motion pictures, computer software, books, music and publishing.

Industries that rely on copyrights and patents are now the largest export sector of the U.S. economy -- more than $60,000 million a year. "This shows that our industries are truly a powerhouse to the U.S. economy," she asserted.

Data from other industrialized countries, including Australia and members of the European Union, also indicate a high degree of economic benefit from these industries. "Were other countries to perform similar statistical surveys, you would find it at about the same level in Latin America, the Caribbean, Central America," Strong predicted.

Strong attributed this to the solid copyright protection regimes enforced by the United States and other industrialized countries. "We have a legal system and a judiciary that works. We have criminal penalties that are very deterrent [to intellectual piracy]," she said.

"The key is, we have to go abroad to protect our rights in other countries," she added. Countries that ratify IPR treaties and adhere to those agreements can enjoy the same economic benefits as countries that currently enforce laws that allow IPR-related industries to thrive, she said.

Strong pointed out several benefits to countries respecting IPR. One example, she said, is cultural: when people create new kinds of products "they have some degree of protection that their work will be seen by the audience for which it is intended."

A second benefit is to the local economy. "Creating storefronts that sell legitimate goods employs the local people," she told reporters.

Monday, May 3, 1999 Online Edition 155 Special Edition

Avoid problems: Get a contract before renting

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Benefits of dollarization tied to healthy economy

WASHINGTON, D.C. - U.S. Deputy Treasury Secretary Lawrence Summers says Latin American countries that choose to peg their currencies to the dollar must realize that the potential gains from this approach won't be realized unless the fundamentals of their economies are sound.

"To make another country's currency one's own is a momentous decision for any country and will need to be considered with a very careful eye to the potential costs and benefits," Summers said in a prepared statement April 22 to the Senate Banking Committee's Subcommittee on Economic Policy and Subcommittee on International Trade and Finance.

Solid monetary fundamentals, such as a sustainable fiscal position, well functioning labor and capital markets, credible protection of private property rights and enforcement of contracts would probably enable any exchange system to function effectively, Summers said.

Listing possible benefits of dollarization, Summers said countries might enjoy lower interests rates, greater stability and possibly deeper financial markets. "It is striking that dollarized Panama is the only country in Latin America with an active 30-year fixed mortgage market," Summers said.

On the other hand, surrender of domestic monetary independence would mean a country would no longer be able to use monetary or exchange rate policies to cushion its economy against external shocks, Summers said.

A number of Latin American countries, notably Argentina, are

considering dollarizing their economies as a result of the emerging markets crisis and the monetary consolidation in the European Union.

Any country can adopt the dollar as its own currency without the assent of the United States, but Summers says the U.S. government hopes and expects to be consulted before that happens.