Emerging Markets at a turning point Columbia Global Centers - PowerPoint PPT Presentation

Emerging Markets at a turning point Columbia Global Centers Santiago, Chile Julio 3, 2018 Alonso Martinez Senior Lecturer Columbia Business School am3638@columbia.edu 0

Emerging Markets at a turning point  Emerging markets in my lifetime  The Changing Landscape  The turning point – New global order – Changing demographics – Resource challenges  Emerging markets in your lifetime – New challenges – New opportunities 1

Rural / urban development – my simple model middle class poor Income/ poor capita Rural Urban Population 2

Rural / urban development – examples Population vs. GDP/Capita PPP 2010 (US=100)* India Mexico GDP/Capita $120.000 36 $100.000 average 31 $80.000 GDP/Capita $60.000 Urban 16 $40.000 $2.500 Rural 12 76% $2.000 average 24% $1.500 $20.000 6 $1.000 Rural Urban 3 $500 70% 30% $0 $0 %Population %Population * Estimates based on The Economist Intelligence Unit, Price Waterhouse Cooper and country statistics 3

Rural/ urban development – some key variables Technology , , Job creation and productivity Agricultural productivity x arable land middle In industry and services Rural population class Education poor Income/ Urban migration poor capita Rural Urban Population , , Fertility 4

The world in 1960 Urban wealthy Rural poor 5

1960 – 1980 Japan/Korea and Brazilian miracle 6

The world in 1980 7

1980 – 2015 The rise of China 8

The world today 9

The world today – still a way to go 10

Changing landscape Nov 19, 2016 Jan 17th 2017 Jan 21, 2017 11

Emerging Markets at a turning point Past 25 years Next decades  Fast rise of China  Uncertain China  Collapse of USSR  Steady rise of India/Africa  A poor rural EM world  An aspiring urban EM world  Too many young  Too many old  Green Revolution  Scramble for food  Securing oil  End of oil/ biofuels 12

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China ´ s five year plan -- from land-driven to people-oriented urbanization Key Priority Leaving from the rural Transferring the land-use right farmland Migrating into the urban Integrated into the basic public city services Reform on the Hukou (household registration) system Prospect Flow from the rural to the urban area, and vice versa 14

Connecting inland China 15

China vs. Brazil models and challenges Technology , , Job creation and productivity Agricultural productivity x arable land middle In industry and services Rural population class Education poor Income/ Urban migration poor capita Rural Urban Population growth China ´ s challenges Brazil ´ s challenges and demographics 16

Possible pathways to China’s Future Neo-Totalitarianism Hard Autoritharianism Soft Autorirarianism Semi-Democracy 17

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The changing landscape GDP is projected to grow at a similar rate to past 25 years… At 3.25% pa growth, total output of the world will more than double by 2040 GDP growth by region and factor • 80% of the expansion in % per annum world output will be driven by emerging economies 10% 1990- 2016- 2016 2040 9% Productivity Population 8% 7% 6% 5% 4% 3% 2% 1% 0% Chin India Africa OEC Other a D 19

Emerging Markets at a turning point Past 25 years Next decades  Fast rise of China  Uncertain China  Collapse of USSR  Steady rise of India/Africa  A poor rural EM world  An aspiring urban EM world  Too many young  Too many old  Green Revolution  Scramble for food  Securing oil  End of oil/ biofuels 20

The world will be increasingly urban – 2.5 billion more 21

https://www.unicef.org/sowc2012/urbanmap/ 22

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India ´ s urbanization challenge – good or bad for development? 27

A slum in Mumbai 28

The big challenge: urban poverty… 29

…coupled with income inequality 30

Inequality and violence 31

Emerging Markets at a turning point Past 25 years Next decades  Fast rise of China  Uncertain China  Collapse of USSR  Steady rise of India/Africa  A poor rural EM world  An aspiring urban EM world  Too many young  Too many old  Green Revolution  Scramble for food  Securing oil  End of oil/ biofuels 32

USA demographic pyramid vs. Nigeria’s “youth bulge” 33

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Aging China vs. India ´ s demographic dividend 35

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Living longer and having less children as countries develop 37

Emerging Markets at a turning point Past 25 years Next decades  Fast rise of China  Uncertain China  Collapse of USSR  Steady rise of India/Africa  A poor rural EM world  An aspiring urban EM world  Too many young  Too many old  Green Revolution  Scramble for food  Securing oil  End of oil/ biofuels 38

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Food is, after energy, the largest global resource challenge… 40

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Available arable land 48

All the BRICs are heavily involved in the African scramble Russia China Brazil 49

Global warming impact -- may actually help 50

Emerging Markets at a turning point Past 25 years Next decades  Fast rise of China  Uncertain China  Collapse of USSR  Steady rise of India/Africa  A poor rural EM world  An aspiring urban EM world  Too many young  Too many old  Green Revolution  Scramble for food  Securing oil  End of oil/ biofuels 51

Oil production/consumption by region Million barrels daily Production by region Consumption by region 52

The passenger car parc grows substantially, but becomes more efficient... Passenger car parc by type Fuel economy of new cars Litres/100km** Billions of vehicles 2.5 Battery electric E China US Plug-in hybrid U 2. ICE* 8 0 1. 6 5 1. 4 0 0. 2 5 0.0 0 2000 2010 2020. 2030 2040 201 202 203 204 0 0 0 0 *ICE vehicles includes hybrid vehicles which do not plug into the power grid **Based on the NEDC (New European Drive Cycle), gasoline fuel 53

Transport demand continues to be dominated by oil, but decreasing Transport energy consumption by fuel type Transport energy consumption growth by region Mtoe Billion toe India 350 China 3.5 Other non-OECD Other* 300 OECD Electricity 3.0 250 Gas Total 200 2.5 Oil 150 2.0 100 50 1.5 0 1.0 -50 -100 0.5 0.0 2000 2010 2020 2030 2040 2000- 2005- 2010- 2015- 2020- 2025- 2030- 2035- 2005. 2010. 2015 2020. 2025. 2030 2035. 2040 *Other includes biofuels, gas-to-liquids, coal-to-liquids, hydrogen 54

The increasing share of renewables is led by China and OECD... Growth of power generation, 2016-2040 Shares of power generation, 2016 and 2040 Thousand TWh 100% 6 5 Non-fossil 80% 4 3 Ga 60% s 2 Coal & oil 1 40% 0 20% - 1 Renewables Hydro Nuclear Coal - 0% 2 2016 2040 2016 2040 2016 2040 2016 2040 Gas Oil - OEC China India & Other OEC Chin Indi Other 3 D a a Asia D Other Asia 55

The world still has abundant oil reserves…loosing value and power Distribution of proved oil reserves: 1996, 2006 and 2016 Percentage 56

Emerging Markets at a turning point Past 25 years Next decades  Fast rise of China  Uncertain China  Collapse of USSR  Steady rise of India/Africa  A poor rural EM world  An aspiring urban EM world  Too many young  Too many old  Green Revolution  Scramble for food  Securing oil  End of oil/ biofuels 57

Emerging Markets in your lifetime Next decades  Uncertain China  Steady rise of India/Africa  Challenges?  An aspiring urban EM world  Opportunities?  Too many old  Scramble for food  End of oil/ biofuels 58