PSD Blog - The World Bank Group

Latin America: From disappointment with privatization to innovation in PPP’s

Editor's Note: Bernardo Weaver is a Wharton MBA in Finance Candidate and a consultant at the World Bank working on Public Private Partnerships.

Privatizations in the 80’s and 90’s in Latin America proved to be disastrous by many accounts. The success of the Thatcher administration in the United Kingdom did not transfer well to the other side of the Atlantic, at least south of the US. Many Latin American politicians found an easy target in privatizations: The sale of state-owned assets at sub-par value.

Politicians also conveyed the idea that the state and the citizens are identical. As a result, the population thought that their assets were sold at fire sale prices to big international companies. These international companies—often connected with aggressive animals like sharks and lions (and even monsters)—became vilified. Governments did not respect clauses and tariff readjustments, and the famous instability of the region was again reconfirmed.

Pollution in Beijing after the Olympics

I knew that Beijing has been cracking down on pollution, but I didn't know how they were going about it. It looks like authorities have banned vehicles on alternate days based on the last number of the vehicle's license plate. However, a representative of the Beijing Municipal Committee of Communications has said they will not extend the law after the end of the Olympic games.

I had heard about bans like this before in Mexico City. I've been told that wealthier families would often buy two cars and drive them on alternate days. As far as I have been able to find out, it looks like this idea started in 1986 with a program called Proconve in Sao Paolo. Apparently, local authorities have attributed large reductions in gaseous pollutants to the program. I'd love to know how many families have opted to buy multiple vehicles to get around restrictions like these. How much more pollution is created by this additional demand for vehicles?

Global trade and the cost of transport

The extraordinary growth in trade seen prior to the First World War and after the Second World War has often been attributed to a decline in the cost of transport. However, a new paper available from the National Bureau of Economic Research called Global Trade and the Maritime Transport Revolution suggests that the decline in the cost of transport had little influence on the growth of trade prior to the First World War:

[W]e find little systematic evidence suggesting that the maritime transport revolution was a primary driver of the late nineteenth century global trade boom. Rather, the most powerful forces driving the boom were those of income growth and convergence. Finally, we suggest that a significant portion of the observed decline in maritime transport costs may have been induced by the trade boom itself.

This is obviously a bit of speculation on my part, but I wonder if this finding suggests that the current rising cost of fuel will do little to dampen global trade nowadays?

Clarification: I should make clear that I am speculating about the impact of the cost of fuel on the cost of transportation and how that would effect global trade. Obviously, the rising cost of fuel will also have consequences for GDP growth, which may also harm global trade flows.

An Acehnese Biker Chick

When most people think about Sabang, they think about diving. For good reason – the diving spots here are among the best in the world. But there’s more to Sabang than diving, as I discovered by chance. It also has biker chicks.

After yet another fabulous weekend of diving, I took the minibus to Balohan, where the ferry port is. But for the first time ever, I could not get a ticket. Normally you can get on the boat by slipping some cash to the crew. But this time it was impossible. When the boat pulled away from the dock, there were people literally hanging off the railings. Definitely a game for younger people than myself.

Luckily, my Indonesian is now good enough to get me through situations like this. I found a little hotel nearby for only 60,000 Rp, leaving just enough for the return ticket and a few meals. Then I decided to go for a good long walk. I was quite a sight – a foreigner huffing along on foot, gushing with sweat. My biggest problem was turning down offers for rides. Saya jalan-jalan saja, I explained. I'm just going for a walk.

Locomotion for $2500

Though above $2000, at $2,500 the Tata Group found a way to build the cheapest car in the world.

Tomorrow, India's biggest company will show what taking out one windshield wiper, radio, moving the engine to the back, and putting in a cheaper, hollowed out steering-wheel shaft can do to a price of an automobile.

Its impact on the environment? It is predicted to be either very positive or negative.

Update: Tata Nano a.k.a the "people's car" is out now.

Islamic car

Islamic banking is centered on the concept of sharing risk and one of its major distinguishing features is a ban on interest payments and speculation.

Exploring the differences beyond finance, The Economist has a story on Proton, the Malaysian carmaker, who toys with the idea of manufacturing an "Islamic" car:

As planned, [Proton's] "Islamic" car will feature a compass to indicate the direction of Mecca, a box in which to store a copy of the Koran and a compartment for a headscarf.

Potent ferment

Today, 3,500 biogas plants generate just under one percent of the energy used in Germany and more are under way. These cone-shaped buildings work much like bovine stomachs. They turn organic material into methane. But unlike cows, they burn gas to produce electricity, which can be sold to the grid.

There's more. Growing one hectare of crops optimized for use in biogas production facilities can create enough energy to run a car for over 40,000 miles compared to 12,000 miles on biodiesel.

The most transformative development technology

Currently there are around 3 billion mobile phone subscribers. By 2015 this number which is expected to reach 5 billion when, according to Nokia, two out of three people in the world will have a cell phone.

Through a combination of a growing coverage with a cheaper technology, mobile telephony is slowly bypassing many obstacles that poor infrastructure has put in the way of economic development:

To the astonishment of the industry, people living on a few dollars a day have proven avid phone users, and in many parts of the world cellular airtime has become a de facto currency. The reason is simple: a mobile phone can dramatically improve living standards by saving wasted trips, providing information about crop prices, summoning medical help, and even serving as the conduit to banking services.

This trend will continue as cell-phone makers and service providers are one-by-one discovering the top dollar at the bottom of the pyramid. More in the BusinessWeek article.

Tajikistan: what about tourism?

I have been in Tajikistan for over one year now and I since had the chance to visit the country and a bit of the region as well. Frankly speaking, Tajikistan lacks the charm of Samarkand and Bukhara, the two central Asian gems, which share with Tajikistan their cultural heritage. But despite its proximity to Afghanistan, you feel quite safe everywhere, so traveling is pleasant and worth a trip. In particular, if you love adventure and the outdoors, the landscape is beautiful (visit the Pamirs!) and in some parts you can still feel the detachment from the West searched for by the most adventurous tourists!

The ingredients are there to make Tajikistan another exotic destination for tourists. So, why did only 30.000 tourists entered the country last year (counting general visitors and multiple entrants)?

Calling out poverty with mobile phones

[..] not only can such technologies increase earnings, but those increased earnings […], in turn, can be expected to lead to improvements in health and education. In addition, because mobile phones in Kerala are a private sector initiative rather than a development project, other than through perhaps raising interest rates for capital, they do not crowd out investments in other projects. Also unlike most development projects, the service is self-sustaining; mobile phone companies provide service because it is profitable to do so, and fishermen are willing to pay for mobile phones because of the increased profits they receive.

In the Quarterly Journal of Economics Robert Jensen provides evidence for why the provision of information technology - mobile service in this case - ought to be a priority, especially for low-income countries.