Government regulations and FDI: a historical perspective of mexico

This article analyzes the development of foreign investment regulations and their impact on FDI flows in Mexico. The study covers the evolution of sectoral and aggregate investment patterns from the independence period to the 1994 Peso crisis and its aftermath. The pattern followed by FDI in Mexico has paralleled the transformation of the Mexican economy itself, focusing initially on the extractive and agricultural sectors, then on manufacturing activities, and recently on the services sector. Mexico has continuously reformed and modernized its regulatory system in order to adapt to internal political changes and changes in the world economic environment. Recent economic reforms and liberalization of FDI regulations have had a major positive impact on capital inflows, but more needs to be done, especially in the area of financial services in order to achieve a higher level of economic efficiency and to prevent financial breakdowns like the one experienced in 1994.     

Regional trade and foreign currency regimes among the former Soviet Republics

The paper examines the problems arising from the adoption of national currencies in former Soviet Republics, and advances proposals to avoid excessive trade and output contractions. The move towards national currencies in many republics — though politically unavoidable and economically efficient in the medium term — is seen as having disruptive effects on interrepublican trade in the short term, with heavy losses of incomes and employment, which add to the costs of market transition. Mutual convertibility among the new currencies could allow some of the negative consequences on trade and production to be overcome, while in the event of mutual currently inconvertibility the effects on interrepublic trade could be disastrous and only some form of payments agreement could reduce the magnitude of the contraction. An intermediate currency regime which could sustain the level of income and employment would be based on the use of the Russian rouble as a regional means of payment. Such an event, however, would require as a pre-condition the stabilization of the Russian currency.     

Prediction and management of currency crises in latin America

In recent decades, currency crises in Latin America have often marked the beginning of prolonged periods of inflation, economic recession, and depressed foreign investment. Attempts to anticipate such financial breakdowns have met with relatively little success. As the survey of existing models indicates, there seems to be little hope for the development of a forecasting framework able to predict exchange rate movements with a sufficient degree of accuracy and anticipation that would allow policy makers to mount a timely intervention in currency markets. The analysis of past currency crises, however, shows some common elements which might help formulate benchmarks that could be used as predictive parameters in the future. This paper provides a survey of the models and tools currently used to predict exchange rate movements. It analyzes the origin and evolution of the 1994 Mexican Peso crisis, its contagion effects on other Latin American economies, and the measures taken by the affected countries to manage the crisis. We summarize some of the market solutions, economic policy measures and institutional arrangements adopted in the wake of the December 1994 events as well as some of the lessons that seem to have transpired from this experience.     

No iceberg in sight: on the absence of WTO disputes challenging fossil fuel subsidies

The empirical record of dispute settlement cases under World Trade Organization (WTO) rules on energy subsidies consists only of cases against renewable energy (RE) subsidies, whereas WTO members have not challenged others’ much larger and environmentally harmful fossil fuel subsidies. Yet, the WTO agreement on subsidies and countervailing measures would at first sight seem to create possibilities to forestall environmentally harmful subsidization. In this article, we assess possible explanations for the skewed distribution of energy subsidies dispute settlement complaints at the WTO. We argue that differences in legally relevant characteristics of fossil fuel subsidies, on the one hand, and RE subsidies, on the other hand, largely explain this observation. In the case of RE subsidies, in particular, the disputes filed to date have targeted a much narrower set of measures than the whole range of RE subsidies currently in place, namely those incorporating a local content requirement component. Although this finding is not new, we have probed into this question more systematically, both by widening the scope of the empirical analysis from actual to potential WTO disputes on energy-related policies the European Union and the USA might have initiated, and by systematically assessing the plausibility of alternative explanations.