Tuesday, July 20, 2010

Where do remittances come from?

Courtesy of the Inter-American Development Bank, we get this nice map breaking down the sources of US remittance flows to Latin America by state (click to enlarge).

No real surprises here but it's a kinda nice map, no?

Monday, July 19, 2010

Toward a better understanding of poverty (wonkish)

Allow me to get my wonk on. It's becoming an increasingly mainstream idea that our traditional poverty measures just don't cut it. For years the UN Human Development Report has been playing with alternative measures. Well, this year we get the latest: the Multidimensional Poverty Index (MPI). In their own words, the new index "measures the combination of deprivations that each household experiences. The MPI uses microeconomic data to reflect the percentage of households that experience overlapping deprivations in three dimensions—education, health and living conditions." This month we get a lil taste of what's to come. The Oxford Poverty & Human Development Initiative (OPHI), with the support of the United Nations Development Programme, have released some preliminary results (104 developing countries) in advance of the upcoming 2010 Human Development Report to be released in the fall. 

First off, a little bit more about the MPI. The idea is that by looking beyond mere income poverty, one can ascertain a better understanding of the specific things (health, education, sanitation, electricity), that contribute to the overall picture of poverty. Governments, NGOs, or even random bloggers can then look at the data to figure out what the greatest needs are, and where it makes sense to intervene. The MPI also calculates the intensity of poverty by looking at how many different measures a certain population is lacking. As OPHI notes, "A person who is deprived in 70% of the indicators is clearly worse off than someone who is deprived in 40% of the indicators."

Sounds good in theory, but what about in practice? Well, some countries have already adopted a similar index, including Mexico. The index can be tailored to individual countries specific circumstances, different countries have different needs, different areas in need of improvement. In Mexico for instance the indicators used are: Current income per capita, Education, Access to healthcare, Access to social security, Housing quality and space, Basic services in homes, and Access to food. In December 2009 Mexico became the first country to implement a form of the MPI, with some astonishing results. As OPHI writes:

The results show that there is a striking contrast between deprivation in income-only and the multidimensional measure: only 1.2 per cent of indigenous people are vulnerable strictly in terms of income. Even across the entire population, only 4.4 per cent of Mexicans are income vulnerable only, whereas 44.2 per cent live in multidimensional poverty.

The measure distinguishes between a household which is poor in one dimension and one that is poor in several dimensions simultaneously. It is also decomposable by population group (indigenous/non-indigenous, over 65, under 17, etc) and by geographic regions. 

For example, comparison of Mexico City and Oaxaca shows that households in Oaxaca are more deprived in terms of basic services at home, but residents of the Mexico City are lacking in healthcare access. Nationally, the rate of extreme multidimensional poverty (defined as at least three deprivations plus insufficient income) is 10.5 per cent with an average of 3.9 deprivations, whereas among the indigenous people of Mexico the rate of extreme multidimensional poverty is 39.2 per cent with an average of 4.2 deprivations.

Some really interesting and positive findings. Positive in the sense that one can gain a much more accurate picture of what the problems are, and where they are. I would think that these sorts of measures would gain in popularity pretty quickly, maybe especially in Latin America. Venezuela, although not included in the preliminary findings, would stand to be an ideal candidate for this measure. Poverty measures in Venezuela largely rely solely on income, but over the last decade access to health care, education, food, etc. have, by and large, all increased dramatically. A new poverty measure may more accurately reflect that reality.

In any case, onto the data. One thing to remember though is that not all these numbers are from the same year. Bolivia for instance is calculated based on 2003 data, Argentina with data from 2005. Also, for each country measured there is a more detailed country breakdown, so if you got a hankerin' to see the complete breakdown of poverty in, say, Burkina Faso, look no further. Perhaps the coolest thing about the data is the interactive map that lets you scroll over countries, sort the data every which way, and is pleasing on the eyes as well. But, since it's not embeddable, we'll just give you less pretty, but just as useful charts. I suggest checking out the site though and playing with the data yourself.

Let's take a look at the three dimensions the MPI looks at, deprived in education, deprived in health and deprived in living standards. But first a look at the percent of people who are MPI poor, after being put through Maladjusted Charts™:

Pretty interesting stuff here. First thing that jumps out at me is the low levels seen in many countries, especially Ecuador for example, with just 2.2% of people MPI poor (2003 data). Compare this to the 51.2% poverty rate from 2004, based on CEPAL's numbers. My gut reaction is that this could be counter-productive by making it look as though poverty isn't as big an issue, although maybe it's just a reflection of some really outstanding social policies. On the other end of the spectrum, free market darling Peru has an outstanding 19.8% of her people MPI poor (the data is from 2004).  This puts Peru closer to the Central American countries than to most of South America.

Next, we'll take a look at the breakdown of those "poor and deprived in education":

So for instance Brazil, who is at the lower end of MPI poverty rates, still has a significant problem with access to education. This is the type of analysis these alternative measures allow. On the other hand, it seems like Peru's high MPI poverty rate is not being driven by a lack of access to education, but perhaps health? Let's take a look:

So, it doesn't look like access to health care is driving Peru's high MPI rate, must be the final measure, "poor and deprived in living standards". Colombia, where there is currently a pretty large debate over health care, ranks pretty poorly here with 17.5%. Argentina, middle of the road for education, has the top rank in health. Finally, a look at living standards, which includes things such as electricity, sanitation, having a floor, cooking fuel, etc.

Indeed, here we see that Peru's high MPI rate is largely driven by deprivation in living standards, even topping Bolivia and Honduras in this category. Although for the most part you can tell what is causing the MPI rates by looking at these three measures, the specific country breakdowns provided by OPHI are even more detailed and contain pretty lil pie charts like this one, for Peru:

You might need to click that for a larger image, but you can see the green shaded area (living standards) makes up the largest contribution to MPI. Although it's pretty evenly distributed, a lack of cooking fuel is a significant driver. Overall, a high level of child mortality is the leading contributor to Peru's MPI. Each country that the researchers look at are broken down like this, so I chose to look at Peru, but go to the site and pick your poison. The country breakdowns also include comparisons to the national poverty measure, and other measures like % living on $2 a day, $1.25 a day, etc.

There's a lot to chew on here, and plenty more you can find out over at the database, but definitely some food for thought. I'm not sure if this is the best measure, and as the example of Mexico shows, it may be more beneficial to tailor these indexes on a country level, although this would sure make comparisons harder. What is clear is that how one calculates poverty has a significant impact on the results, and it would certainly behoove us all to have a more accurate picture of what poverty is, and how to combat it. I'm sure there are flaws here, not the least of which is the outdated data, but I commend the researchers at OPHI and UNDP with a solid step in the right direction.

(cartoon from Polyp, check out the website for more)

Do financial markets think Spain will default?


But that won't stop the government and european authorities from inflicting pain on their populations in the name of fiscal austerity.

As I'm sure Maladjusted's readers already know, Spain is the latest object of European sovereign debt fears. Following Greece's lead, Spain's borrowing costs have increased over the last two months on concerns that the government won't be able to service it's debt and will face a rollover crisis. As a consequence the government is moving ahead with large austerity plans--cutting spending and raising taxes while unemployment remains above 20 percent.

Advocates of austerity claim that if the government doesn't make tough choices to bring down its deficit and reassure creditors interest rates will spike emerging market-style, causing the debt to explode. Spain, the argument goes, will find itself forced to default on its debt, potentially bringing down the whole Eurozone with it.

Austerity advocates, in other words, argue that markets think Spain is in danger of defaulting, and if we don't heed their warning we'll have serious trouble. But first of all, that's a stupid anthropomorphism (markets don't have agency or thoughts, last time I checked). But more to the point, assuming markets are capable of "thinking" anything, do they actually think Spain is in danger of defaulting?

Well, one way of answering that question is to use the price of credit default swaps (CDS) on Spain's public debt--that is, how much it costs to insure oneself against the possibility of a default.

[Spain: Implicit probably of default, April-July, 2010]

The graph above, courtesy of Maladjusted Graphs™, shows the "implicit" probability of default on Spain's government bonds. The idea is simple: the price of ensuring oneself against a default should reflect the chance of default and how much of their money investors expect to get back in the event of a default (i.e. how big of a "haircut" bondholders expect). In other words, the price of a CDS should equal the chance of default times the haircut rate. The price to insure oneself against default is higher the higher the expected chance of default and the larger the haircut.

So, the orange line above shows the implicit probability of default under a relatively optimistic assumption about the size of expected haircuts. In this case, I'm assuming markets only expect to lose $10 on every $100 worth of bonds. As can be seen above, under this assumption at the beginning of April markets only thought there was an 11% chance of default. But then as all the sovereign debt hysteria surrounding Greece started making headlines markets started to "think" the chance of default was much higher, reaching 28% on May 6.

But here's the thing. This is only the case if markets expect the default to be a very small one. Getting back 90% of your money when a government defaults is relatively rare in the history of sovereign debt crises.

So, what if we assume Spain is like Argentina or Russia and if the government defaults investors would only get back $30 for every $100? Well, the yellow line above shows just this scenario, and as can be seen the chance of default is really, really low. In fact, the crisis hysteria back in May shows up as nothing but a tiny blip, peaking at a terrifying 3.9%!

So what's the moral of the story?

The fact of the matter is that if markets really do think a default is likely, it's not reflected in market prices, which are, after all, the only coherent measure of what markets "think." That, or they don't expect to take a very big hit in the unlikely event the government decides to default.

In other words, markets either think Spain is like Argentina but the actual chance of default is really low or they think the chance of default is high but don't expect to actually lose any significant amount of money.

Then do the markets think Spain will default? Sorta! Should the government heed their warning? No! But that doesn't mean it can't seriously structurally maladjust itself to fight imaginary threats in the meantime.

Sunday, July 18, 2010

Weekend Update

Shall we begin:

  • Our journey through the intertubes begins with the 10 year commemoration of beloved Plan Colombia, which was last Tuesday. WOLA has the good word.  Despite the popular belief that it has been a "success", WOLA writes:

    Looked at more closely, though, Colombia’s security gains are partial, possibly reversible, and weighed down by “collateral damage.” They have carried a great cost in lives and resources. Progress on security has been stagnating, and even reversing. Scandals show that the government carrying out these security policies has harmed human rights and democratic institutions. Progress against illegal drug supplies has been disappointing. And wealth is being concentrated in ever fewer hands.

    Check out the link to read the whole report, complete with all the statistics (complete with pretty charts) to back it up.
  • In the polling department, Otto's got the breakdown in Peru. Puts it better than I could, so in his own words: "Lord help the world, Keiko "I'm not the continuation of Fujimori policies" Fujimori (make that Fuji-Freakin-Mori) is ahead with 22% of voter intention. Second is Luis "Interesting" Castañeda and third....still creeping up...is ex-Pres Alejandro Toledo, who still has my five bucks as most likely winner right now (and I'm no real fan of his, before you say anything)."
  • Sue Myrick (R-NC) takes home the "wild-eyed theory of the week", from Peter Krupa at Lat/Am Daily. Ladies and gentleman, your U.S Congress.
  • Great post at the Mex Files on a Spanish vocab website that is "entertaining and instructing in equal measure". Check out some hilarious examples. Or check out the site itself, "Effective Swearing in the D.F."
  • Colombia made a totally unsurprising announcement, saying there are guerilla camps on the Venezuelan side of the border. They even gave the coordinates, 23 kilometers from the border. C'mon Colombia, that's a pretty big, remote border. I'm not impressed. I also would disagree with Boz that Uribe is doing Santos a favor by taking the hit right before he leaves office. If Santos denounces the whole thing and calls for dialogue with Chavez directly then maybe he makes out okay, but it is pretty unreasonable to think that Chavez wouldn't hold Santos, who was responsible for the raid into Ecuador, as equally responsible for this.  There was just no need to make a big public display over this except to do exactly that; make a big public display.  Now Colombia says they will take it to the OAS on Thursday. If you want to listen to the whole thing, you can do it at the OAS website, might prove entertaining.
  • Benjamin Dangl at Upside Down World, shares his Foreward to Raul Zibechi's book, "Dispersing Power: Social Movements as Anti-State Forces", recently translated into English.  To read some recent article's of Zibechi's, check them out at Foreign Policy in Focus.
  • Good and bad news out of the case that pitted "Crude" director Joe Berlinger against Chevron, another subplot of the $28 billion lawsuit against Chevron brought by communities in Ecuador's Amazon. Lisa Derrick, at La Figa (FDL) has the dirty details.  Berlinger still has to hand over footage to Chevron, but conversations "with defendants, lawyers and their families are protected."
  • The New York Times has a long article on "cattle-ranching drug barons" who are destroying parts of the Maya Biosphere Reserve, the largest swatch of protected land in Central America. 
  • Great article (in Spanish) in La Jornada, on the reasons why both the National party and Liberal party are pushing for Zelaya's return to Honduras. The National party wants to gain recognition from countries other than Peru and Colombia, the Liberal party needs him to avoid marginalization, and it's the first priority of the Resistance, who just appointed him coordinator. For more on Zelaya's relations with the Liberal party and the Resistance, and for all your Honduran needs, be sure to keep apace with Honduras Culture and Politics.
  • In the latest example of the US' intervention in Central America coming back to haunt them...and others, the Washington Post has a long report on how Mexican drug cartels are stepping up their use of grenades. And where did they find all these grenades? From the WaPo: "The administrations of Ronald Reagan and George H.W. Bush sent 300,000 hand grenades to friendly regimes in Central America to fight leftist insurgents in the civil wars of the 1980s and early 1990s, according to declassified military data obtained through the Freedom of Information Act by the Federation of American Scientists." And according to the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, some 90% of the grenades in Mexico are at least 20 years old. Check out the article for more.
  • A real interesting article in the Economist on Brazil becoming "one of the world's biggest aid donors." Like China, Brazilian aid does not come with "Western-style conditions". The head of Brazil's development agency explains, "Marco Farani, the head of ABC, argues there is a specifically Brazilian way of doing aid, based on the social programmes that have accompanied its recent economic success. Brazil has a comparative advantage, he says, in providing HIV/AIDS treatment to the poor and in conditional cash-transfer schemes like Bolsa Família. Its tropical-agriculture research is among the world’s best. But Brazil also still receives aid so, for good or ill, its aid programme is eroding the distinction between donors and recipients, thus undermining the old system of donor-dictated, top-down aid." Sounds like a positive development, although problems clearly remain as the Economist article notes.
  • The generally odious Andres Oppenheimer writes something worth a damn for a change. Comparing the US' denial of a visa for Hollman Morris to "a page right out of the Cuba-North Korea-Iran playbook." Most interesting fact from the piece though comes from the PEN Club, a free press group, who estimate that "about 250 academics, journalists and writers had their visa denied between 2001 and the end of the Bush administration," for ideological reasons. 
  • Finally, mad props to Argentina, who passed a law recognizing same-sex marriages last week. Glenn Greenwald has a nice take and relates it to the treatment of the issue in the U.S. Greenwald writes, "That's what is most striking here:  this is not happening in some small Northern European country renown for its ahead-of-the-curve social progressivism (though gay marriage or civil unions are now the norm in Western Europe).   Just as is true for Brazil, which I've written about before with regard to my personal situation, Argentina is a country with a fairly recent history of dictatorships, an overwhelmingly Catholic population (at least in name), and pervasive social conservatism, with extreme restrictions on abortion rights similar to those found on much of the continent.  The Catholic Church in Argentina vehemently opposed the enactment of this law.  But no matter.  Ending discrimination against same-sex couples is understood as a matter of basic equality, not social progressivism, and it thus commands widespread support." For the contrast with the U.S., check out the link.

Saturday, July 17, 2010

Warning: This movie may contain revolution footage

From the San Francisco Chronicle review of "South of the Border":

Advisory: Violence, corpses, revolution footage.

Really? Don't want to rile up the youth I suppose.

(image from vencentral)

Thursday, July 15, 2010

Who said the press was free

This needs no additional commentary, from Jeremy Bigwood writing for NACLA:

Buying Venezuela’s Press With U.S. Tax Dollars

The U.S. State Department is secretly funneling millions of dollars to Latin American journalists, according to documents obtained in June under the Freedom of Information Act (FOIA). The 20 documents released to this author—including grant proposals, awards, and quarterly reports—show that between 2007 and 2009, the State Department’s little-known Bureau of Democracy, Human Rights and Labor channeled at least $4 million to journalists in Bolivia, Nicaragua, and Venezuela through the Pan American Development Foundation (PADF), a Washington-based grant maker that has worked in Latin America since 1962. Thus far, only documents pertaining to Venezuela have been released. They reveal that the PADF, collaborating with Venezuelan NGOs associated with the country’s political opposition, has been supplied with at least $700,000 to give out journalism grants and sponsor journalism education programs.

Until now, the State Department has hidden its role in funding the Venezuelan news media, one of the opposition’s most powerful weapons against President Hugo Chávez and his Bolivarian movement. The PADF, serving as an intermediary, effectively removed the government’s fingerprints from the money. Yet, as noted in a State Department document titled “Bureau/Program Specific Requirements,” the State Department’s own policies require that “all publications” funded by the department “acknowledge the support.” But the provision was simply waived for the PADF. “For the purposes of this award,” the requirements document adds, “ . . . the recipient is not required to publicly acknowledge the support of the U.S. Department of State.”

Before 2007, the largest funder of U.S. “democracy promotion” activities in Venezuela was not the State Department but the U.S. Agency for International Development (USAID), together with the National Endowment for Democracy (NED). But in 2005, these organizations’ underhanded funding was exposed by Venezuelan American attorney Eva Golinger in a series of articles, books, and lectures (disclosure: This author obtained many of the documents). After the USAID and NED covers were blown wide open—forcing USAID’s main intermediary, Development Alternatives Inc. (DAI), a Maryland–based contractor, to close its office in Caracas—the U.S. government apparently sought new funding channels, one of which the PADF appears to have provided.

Although the $700,000 allocated to the PADF, which is noted in the State Department’s requirements document, may not seem like a lot of money, the funds have been strategically used to buy off the best of Venezuela’s news media and recruit young journalists. This has been achieved by collaborating with opposition NGOs, many of which have a strong media focus. The requirements document is the only document that names any of these organizations—which was probably an oversight on the State Department’s part, since the recipients’ names and a lot of other information are excised in the rest of the documents. The requirements document names Espacio Público and Instituto Prensa y Sociedad, two leading organizations linked to the Venezuelan opposition, as recipients of “subgrants.”

I urge you to go read the whole thing. Seriously, do it. Also make sure to check out the documents for yourself.

I told you to come back for an update....

As most of you have already realized, and some of you have let me know in comments, the statement from the French Foreign Ministry that I posted yesterday was an extremely well done and brilliant hoax. Did I know that when I posted it? Yes (astute readers may have noticed the post was tagged with "yes-men").

So why didn't I tell you, the faithful readers? Simple, it would have blown their cover! As of last night, I wasn't aware of anybody who had publicly labeled it a hoax, you think I could be the first? No way. The point was for the statement to get as much attention as possible, and downright shame the French government...what if some press agency used da google and saw my blog post outing it as a hoax? I would have ruined it all! And so I'm glad I didn't, even if it was slightly deceptive. So, did any major news outlets pick it up? I don't think so, but here is a snapshot of AFP's website this morning (not sure if the link will still work):

The headline reads: "France Pledges € 17 Billion to Help Haiti".

Okay, so my guess is that this is actually just part of the hoax (I swear, I don't know). In any case, today there are multiple news stories about how a fake press statement went out, but you know what? Mission accomplished. As Brooke Jarvis writes for YES!:

While the fake news release—a common tactic of the prankster activists the Yes Men, but not yet traced to a particular group—doesn’t seem to have fooled any major news outlets, it did bring the debt (and its contradiction with France’s public stance) into the spotlight.
And after all, that is what it is all about. So to those aspiring "Yes-Men" out there, keep up the good work.