March 23, 2010

1. FINANCIAL FLOWS TO DEVELOPING COUNTRIES: RECENT TRENDS AND PROSPECTS Namaacha, 22 - 24 March - MOZAMBIQUELuiz A. Pereira da Silva – World Bank March 23, 2010

2. Introduction • The Global Crisis, Causes, Where Are We Today... • Financial and Real Impacts of the Crisis • Lessons from the Crisis • Post-Crisis Risks and Opportunities for Developing Countries • Conclusions and Implications for Mozambique

3. 1. The Global Crisis, Causes • “Great moderation”, productivity gains • Entry of China and ex-USSR into the market • Global financial innovations with inadequate risk pricing and very complex assets in the balance of institutions TBTF • Pro-ciclicality of the financial system without adequate regulation in a globalized world • Global disequilibria USA-China and within the EU

5. The Global Crisis, where are we today...

6. 2. The Crisis, Financial Implications • In the short term, a run to “safe harbors”, paradox, the USA Dollar, wwith implicaitons in liquidity (interbank market), exchanges rate and risk premia (CDS, etc.)  “Credit Crunch” • In the medium to long term: • Cost of capital will increase • Better risk pricing and differentiation • More financial regulation • Reduction in the official flows and transfers

7. The Crisis, Financial Implications

8. Differentiated Financial Impacts

9. Private Capital Flows Private Capital Flows to developing countries Milhares de Milhões $ Países de Rendimento Baixo Fluxos de capital privado Percentagem do PIB (eixo à direita) Fonte: DataStream, World Bank, Global Economic Prospects 2010: Crisis, finance, and growth

10. Global Economic Crisis Real GDP growth rates in percent Developing World High-income Source: World Bank, Global Economic Prospects 2010: Crisis, finance, and growth

11. The Crisis, Real Impacts

12. 3. Lessons from the Crisis • Macro-Financial stability has to combine low inflation and prevention of bubbles (Financial Regulation) • Countries with solid foundations (Internal and External) can better weather financial turbulence, even of a global nature

13. 4. Risks and Opportunities • Evaluate the “Pull” & “Push” factors in future capital flows to developing countries (Demand, Risk adjusted returns, Institutions) • Global growth in the next few years will be driven by the South (Emerging, other developing countries) • Demand for higher returns with adequate risk can favour FDI, stock markets, emissions from developing countries • Fiscal adjustment in the North will reduce aid flows and transfers

14. Riscos e Oportunidades

15. Riscos e Oportunidades • Quando e Como Acelerar no Processo de Reducao a Dependencia da Ajuda Internacional? • Condicoes: • Mercados Internacionais Mais Estaveis • Manutencao da Estabilidade Macro-Financeira Local • Fortalecimento da Percepcao de Estabilidade na Governanca Economica e Politica Local • Visao Estrategica, Projeto de Crescimento Sustentavel, i.e. integracao economica, espacial, externalidades multi-setoriais • Aproveitar Novos Temas e Tecnologias

16. 6. Conclusion and Questions (Part II) • Will Mozambique be ready for the international Bond Market? (Andrea Dore e Christian Mulder – FMI) • How to use guarantees to facilitate private sector fianncing? (Farida Mazhar – BM, Alastair Campbell e Jonathan Wood – Standard Bank) • Will Mozambican firms be able to issue corporate bonds in national and international markets? (Evans Osano – IFC) • What are the appropriate financial models for Public-Private Partnerships? (Jose Luis Guash – BM e Justin Tyson, Karen Breytenbach – FMI)

17. “the pessimism of intellect and the optimism of the (will) practice”(Antonio Gramsci)THANK YOU 23 de Março, 2010