Interview with Colin Sharp, C2FO SVP EMEA: Feeding the Engine Room of Economies, Maintaining Diversity, and Ensuring that an Efficient Supply Chain is Rewarded

“The way to build economies,” says Colin Sharp, C2FO’s senior vice president for Europe, Middle East and Africa (EMEA), “is through SMEs. Everyone recognises that SMEs are the engine room for the growth of economies.”

[caption id="attachment_20399" align="aligncenter" width="900"] Senior Vice-President: Colin Sharp[/caption]

That’s never been more true than in 2021, as the business world starts to emerge from the shadow of COVID-19. The US-based company, headquartered in Kansas City, is working with a number of organisations at national levels to build a working capital platform that allows liquidity to flow from governments and corporate entities to their suppliers.

Sharp — based in the UK — joined C2FO seven years ago, in his present capacity. The company has had a busy few years working toward its original mission: to help businesses around the world access the liquidity or working capital they need to grow. The company was founded by CEO Sandy Kemper, an ex-banker, to overcome what Sharp describes as “a global problem.”

“The world of finance likes to reward large companies with great credit ratings,” he says, “and penalises the smaller companies — that are the growth engines for many economies — with limited or expensive access to capital and finance markets.

“Our stated mission is to help companies gain access to finance, when they need it. Something like 90 percent of funding through C2FO is going to SMEs. Our go-to-market strategy involves approaching Fortune 500 companies first. We have about 250 programmes with these large corporates, and many of them are among the world’s most prestigious brands.

“They use our platform to offer their suppliers early payment of approved invoices, without changing their contractual payment terms. It’s up to the supplier whether they use this service, and when they use it, and how much they pay for it. A supplier can say, ‘I’d like to accelerate my invoices because I need the working capital now.’ The most attractive place to get that working capital will always be the money that’s owed to them.”

Sharp sees the short- and long-term future of the sector as “incredibly buoyant.” “We started our business by letting corporates use their cash that was in the bank to pay suppliers early. When suppliers ask for early payment, they are usually benchmarking their alternatives, like factoring, to get a cheaper rate. It’s the optionality and flexibility that makes our programmes incredibly popular among suppliers.

“For the corporate buyer, it means that rather than leaving capital languish in the bank doing no economic good for anybody, it can be put to better use towards suppliers, making them financially stronger.

So, he says, C2FO has created a true win-win situation: suppliers get liquidity when they need it, and the buyer gets to use cash more effectively. “C2FO has brought in a network of funding partners, banks and non-banks, to finance those invoices when corporate liquidity is constrained or needed elsewhere or when the corporate focus is more on their own working capital position.”

Colin Sharp’s firm has seen demand spike through the pandemic, largely thanks to another vital string to its bow: inclusivity. “It’s incredibly positive for small businesses, which can be disadvantaged in terms of getting hold of financing and working capital,” he says. “But disadvantaged groups aren't just small suppliers. They include LGBTQ-, women and minority-owned businesses, and they tend to use C2FO up to seven times more than their peers, on average.”

This inclusive policy has always been part of the C2FO strategy— and the emphasis is increasing overtime. “Companies are also focusing on various ESG initiatives. Major corporates have been drawn to us because we provide a service that supports their entire supply chain.”

“Historically, that hasn’t been the case for other providers. We’re not the only company providing working capital, but we’re the only one that’s truly delivering on our ability to get that working capital to all suppliers, large and small. Moreover, we bring in third-party capital so that the buyer can use their own cash, a third-party's, or a combination of both.”

Over the past two years, buyers have turned to C2FO to support their ESG efforts in two main areas: to increase supplier diversity and inclusion, and as a vehicle to support and reward suppliers achieving ESG credentials. “CFOs around the world are focused on ESG and sustainability: 80 percent of the impact for sustainability is in their supply chain. If they’re going to achieve their ESG performance goals, it’s vital that they include and support the entire supply chain. If we can link access to low-cost finance with performance around carbon reduction, then that becomes a positive incentive for buyers and suppliers to commit to positive change.

“Corporates can go beyond simply auditing suppliers. If I can give them finance linked to their ESG performance at an affordable rate, it gives an incentive to those suppliers to incorporate sustainable practices for the long haul.”


CFI.co Meets the CEO of Austrian Anadi Bank - Christian Kubitschek: “FinTech and Full-Service Bank is Not a Contradiction”

In July 2020, Christian Kubitschek became CEO of Austrian Anadi Bank. Before his assignment, Kubitschek was founding Board Member at bank99, CFO and Deputy CEO at Addiko Group and Sberbank Europe Group and had held senior leadership positions in institutions like Deutsche Bank and Swiss Re. Throughout his career, Kubitschek covered more than 25 countries and contributed to transforming business models from traditional banking to hybrid banking solutions.

[caption id="attachment_20402" align="aligncenter" width="900"] CEO: Christian Kubitschek[/caption]

Looking back at an extraordinary year 2020: How did Austrian Anadi Bank perform?

In 2020 we demonstrated the resilience of our business model under the most difficult conditions imaginable. Despite the pandemic, we achieved a positive annual result for 2020. In addition, we increased our capital ratios in the second half of the year – despite an increase in high-margin business areas and significant investments – from 14.1% to 15.2%.

How are you performing in 2021?

Austrian Anadi Bank is doing very well. Our digital loan book is growing strongly. Our investments in digital offerings and in strategic partnerships materialize more and more, with innovations like our digitalized SME credit in Germany, launched in April, and our tablet-based cooperation with the largest retail network in Austria, launched in July. Cost and capital efficiency, keeping risks under control and focusing on the right products with highly motivated teams: These are our five factors of success, all on the basis of a highly scalable and digitalized platform, combined with fast decision-making DNA.

In April you announced the launch of your digital expansion into Germany. What potential do you see in this?

With a wink of an eye, I speak of a ‘piranha strategy’. We will grab small but attractive market shares by focussing on ‘filet pieces’ that the big players hardly notice. The common language and similar legal frameworks between Austria and Germany make things easier. Together with our digital consumer credit strategy in Austria and Germany and with tablet-based strategic partnerships we aim to achieve a digital-based loan volume of around 250 million euros within three years.

Recently, you presented a new cooperation with the Austrian tobacconists: a disruptive move?

Definitely! We bring modern banking services even closer to people, combining two of our key strengths: we are launching a completely new business model with the innovative power and agility of a FinTech, and we did so in a very short time frame - seven months from idea to pilot! Also, we draw on our capabilities as an established full-service bank, since the tablet-based cooperation with Austria’s tobacconists, the largest retail network in Austria, is requiring processes and risk management capabilities of a full-service bank. This is hybrid banking at its best!

Full-service bank and FinTech – is that a contradiction?

To us, no. We combine the best of both worlds in Anadi: 20 percent of our people are already working in our bank-internal FinTech, and this number will definitively increase. As a full-service bank, we have the experience and processes needed for most banking services and products. We have real FinTech DNA in our bank, and more FinTech-based innovations are to come!


Anadi Bank: Hybrid Bank Rises From the Ashes — and Flies

Austrian Anadi Bank is a regional Austrian bank that originated from the crisis-stricken Hypo Alpe Adria Bank. In 2013, the healthy Austrian business of the troubled banking group was acquired by Anadi Financial Holdings owned by a British-Indian investor, the Kanoria family. Since then, Anadi has asserted itself on the Austrian market. Successfully positioned as an agile hybrid bank, it has both a strong digital focus and classic distribution lines.

The bank’s business segments are Digital Banking, Strategic Partnerships, Retail Banking, Corporate Banking and Public Finance. With its modern hybrid banking approach, Anadi Bank challenges traditional banking models. It follows a multi-channel approach with branches, a team of dedicated strategic partnership agents and a very strong digital banking propostion. In this context, Anadi Bank focuses on easy-to-use digital services and is continuously developing its digital value chain and reach, recently shown by its entry into the German market with digital SME credit offering. Around 270 employees work for approximately 57,000 customers.

Being the house bank of numerous companies in trade, industry and real estate, the institution specifically leverages the advantages of its lean structure and high decision-making speed in its traditional banking lines of Corporate Banking and Public Finance. With its deep industry knowledge and experienced relationship managers Anadi Bank focuses on smart and tailored financing solutions for Corporate clients. Its Public Finance division has a long tradition, reflected by Austrian Anadi Bank being the house bank of Austria’s southern state Carinthia and many local municipalities.

In recent years, the bank consistently focused on its hybrid strategy with strong digital elements. Becoming CEO of the Anadi Bank in July 2020, Christian Kubitschek (52), a bank manager with more than two decades of expierence in the financial services industry, immediately set to work: only two months later, Kubitschek called out ‘Strategy 2.0’ building on the digital achievements of Strategy 1.0. The digital-based Strategy 2.0 sets the hybrid banking model to its next level by combining the already strong digital online presence with the elements of digitally enabled strategic sales partnerships, product focus and larger market and distribution reach in Austria and Germany. This highly innovative move was set to prepare the grounds for overproportiante growth in upcoming years on the basis of a scalable and multiplyable platform.

The positioning as a hybrid bank is charged with yet another aspect: Anadi is combining the innovative strength and speed of a FinTech with the competences and possibilities of an established full-service bank. Anadi’s internal “Digital & IT Hub” evolved to a full-fledged internal FinTech – to date, it has grown to include 20 percent of the institution's workforce, and this number is to increase in next years. The FinTech and the banking experts push the expansion of the scalable and multiplyable platform, optimize digitalized end-to-end processes and roll out innovative products and sales cooperations in the digital domain.

In January 2021, the bank was the first full-service bank in the DACH region to publish its annual financial statements 2020, reflecting Anadi’s high speed and process robust DNA. Anadi proved the resilience of its business model in this ‘Corona Year’ 2020: under difficult conditions and given the measures implemented strictly and in a disciplined way, the bank was able to grow with quality in high-margin segments and to make significant key strategic investments while increasing organically its capital ratios.

In April 2021, Anadi kicked off its market entry in Germany: In a strategic partnership with Compeon, the leading digital credit platform for SME financing in Germany, the bank launched a digitally enabled strategic cooperation for German SMEs. With Compeon, Anadi can rely on a financial sales organization with over 30,000 SME customers. The digital SME-credit of Anadi offers great and highly automized usability, an almost real-time credit decision, simultaneous options for fixed and variable interest rates and ready-to-go credit documents. Anadi bases the credit decisions on highly developed risk management models and processes with automated pre-selection criteria and based on external data sources and methodologies from its technology partners. The primary target group are SMEs with good credit ratings and a robust financial position. Loan amounts will range between EUR 50,000 and EUR 250,000. The cooperation opens a new SME market for the bank with a total credit volume of EUR 107 billion.

[caption id="attachment_20406" align="aligncenter" width="900"] Austrian Anadi Bank, Domgasse[/caption]

In July 2021, Anadi launched an highly innovative and groundbreaking digitally enabled sales cooperation with the Austrian tobacconists, the largest retail network of Austria with 2,300 outlets and more than 1 million daily customer visits. Starting in July 2021 under the new ‘MARIE’ brand, modern standard banking services are entering a high-frequency distribution channel. Even during the Corona lockdowns, the tobacco shops remained open given their high importance in Austria as systemically relevant local suppliers.

As a disruptive step, this cooperation is creating a completely new and unconventional access to banking services. Accounts, cards, consumer loans and cash transactions (withdrawals/deposits) will soon be available at many tobacconists’ – all that via a tablet and a web-based and seamless transaction terminal that is directly connected to Anadi’s systems. The product range will be gradually expanded over the next years.

After the pilot phasis, launched beginning of July, the nationwide rollout will follow in September 2021. The rollout will focus on tobacconists that play a particularly important role as local suppliers. By the end of 2022, Anadi Bank aims to be cooperating with at least 500 tobacconists across Austria.

CEO Kubitschek and his team are not done yet: They will determinedly continue their way executing ‘Strategy 2.0’ with further innovative initiatives to come, showing that FinTech and full-service bank is no contradiction, but a synergetic model for the hybrid banking future. To do so, Anadi will focus on its comparative strengths: FinTech and full-service bank DNA, agile and lean structure, embedded in the largest market region within the EU, scalable and multiplyable platform, cost, risk and capital discipline and innovative product and distribution offerings representing hybrid banking at its best: near-to-the-customer products and services, both offline and online.


Co-op Legal Services: Opportunity and Optimism Abound in the Exciting Legal Services Sector

[caption id="attachment_20411" align="alignright" width="300"] Co-op Legal Services[/caption]

Co-op Legal Services, which is part of the Co-op Group, offers legal advice and services for estate planning, probate, family, employment and serious injury compensation and is a leading provider of digital legal services. CFI.co puts questions to managing director Caoilionn Hurley.

What are your hopes for the future of your business, and for the industry as a whole?

Caoilionn Hurley: I have so many hopes! There are many opportunities to make legal services easier for clients to access. The list is long; it’s an exciting market to be in, with so many new legal technology options.

I’d like to see the uses of open banking extended to include the consolidation and sharing of financial data for estate planning and administration. As our digital financial footprint expands and paper trails become obsolete, open banking could evolve to incorporate all financial assets to create open financial ledgers consolidating all financial information for clients. This ledger could be used for estate and retirement planning, as well as estate administration.

Where do you stand on cloud technology, machine learning and AI?

The opportunities to build legal services powered by legal automated reasoning are enormous. These services should be cloud-based, and evolve and be refined with machine learning and AI appropriate to each specific legal area, and for each specific service.

I hope that clients will engage with legal services that deliver swift and effective solutions on technology enabled platforms that give them provisional solutions — supported by legal experts, who provide the polish and finesse. Experts provide the real added value; the technology collects client data and circumstances, defines preferred outcomes, and applies the legal automated reasoning.

My hope is that the industry embraces technology while staying true to the highest professional legal standards of always ensuring the client understands the legal position, their legal options and the lawyers recommendation in the circumstances.

What changes to legislation or regulation would you like to see?

That’s 100 percent connected to the first question. I’d like to see the open banking platform extended with appropriate regulation to protect client security. That would enable new use-cases for personal financial ledgers that support prompt action.

Can you pinpoint any pitfalls to help newcomers to the industry?

It’s important to build businesses that use technology to identify client needs and serve to those needs, rather providing a specific legal service and hoping that clients are the right fit. Business models that are based on provision of service rather than thorough identification of client needs are potentially at risk.

Do you have any anecdotes to illustrate your progress over the years?

My favourite client comment is “CLS is the most talked about partnership in our business”.

How do ESG parameters and sustainability principles affect the way your industries are run?

Everything in our business is looked at through the ESG lens. We have big investments in apprenticeships to support our D&I agenda, and in education and training to support social mobility. Everything we do supports our overarching ambition to build a fairer world, and a fairer society.

What are the mid to long-term challenges faced by your business?

The biggest challenge we face is to re-imagine how legal services can be delivered using technology enablers. Selecting priorities is a challenge when opportunity is in abundance. This is a fantastic time to be in the legal profession. There’s so much opportunity.

What is the single most important requirement to become a global business?

A digital platform that can flex for local legal systems.

How do you see as the short- to mid-term prospects for your industry?

Short- to mid-term, like most industries, we will be embedding our learnings from the pandemic and operating in an increasingly digital environment. Prospects are good, but we have to be prepared for increasingly demanding clients.


Caoilionn Hurley - Listener, Learner, Thinker, Chief: Secrets of an MD

[caption id="attachment_20414" align="alignright" width="300"] Managing Director: Caoilionn Hurley[/caption]

CFI.co in conversation with Caoilionn Hurley, managing director of Co-op Legal Services.

What excites you about the business world in general?

There is always something new to try, whether it is capturing the market with new legal services or digital legal services, finding new distribution routes to market or testing new business models. It could be acquiring a good bolt-on business, there is always something new to experiment with. The buzz getting out of bed never wains.

What lessons did you learn from your earlier career experience?

My first jobs were with Guinness and IBM. I was incredibly lucky to work with amazing people and in businesses that were going through significant transformation periods. Both really focused on understanding their customers and on encouraging their people to understand every function of the business, and how the business connected through the teams to deliver to customers and to be commercially successful at the same time.

I was given enormous latitude to move roles within the businesses and learn, I received tremendous support and friendship from colleagues and managers. To this day I know I got lucky that the director in Guinness who read my CV (I sent it in after I finished my law degree) happened to have also qualified many years previously as a lawyer and he was just curious as to why I randomly (in his opinion!) decided I wanted to work for Guinness — not as a lawyer but in finance.

What motivates and enthuses you about the business you now lead?

We are striving to be the most customer-centric, digital-first law firm that is profitable, ethical and impactful in the community. New technologies give us so many new ways to deliver better legal services, exciting products and better customer service. It is incredibly motivating to have a vision for our business in our sector that could change how people engage with legal services.

We believe that we can shape better outcomes for people by integrating their financial decisions and legal decisions in easy digital journeys. If we can digitalise legal services and distribute them adjacent to the other decisions people are making that most probably have legal consequences, we can help people make much better legal choices.

I’m also passionate about bringing new talent into Co-op Legal Services and want to help erode the misconception that a career in law is for the privileged. We have implemented an apprenticeship scheme for level seven solicitors which means that successful applicants join us on competition of their A-levels and after five years, they are qualified as a solicitor – this qualification transcends a law degree. Our scheme can help young students save over £36,000 in expensive university tuition fees.

What is special about your organisation’s management style? Can you share some management or organisation secrets?

Our management team is long-serving, we have been together for many years and have tremendous loyalty and shared trust and belief in each other and our mission. The secret sauce is that we are there for each other through the good days and bad and we have bonded as a team.

What are the key strengths of the team you lead? How important is your support team?

We are motivated and honest. We want to deliver technology-enabled legal services and we are very open and relaxed about experimentation. When we nail it, and experiments are a success, we are delighted and press on, when it does not go to plan, we are very quick to accept the data and say, ‘Ok, what’s next’. We are one team, we don’t think of legal and support, it takes all of our skills, capabilities and character to achieve the mission.

What are the key traits of a good corporate leader?

Listener, learner, long-term thinker and loyal to the mission and the team.

Co-op Legal Services, which is part of the Co-op Group, became the first alternative business structure (ABS) in the UK in 2012 and is the largest provider of probate services in the UK.


La Maison Guerlain: Its Sweet History Sure Smells of Success

The House of Guerlain story begins in 1828, when Pierre-François Guerlain opens his first boutique on Rue de Rivoli, Paris, selling vinegar, scented soap… and cosmetic gorgeousness.

[caption id="attachment_20477" align="aligncenter" width="900"] Guerlain’s latest offering, Aqua Allegoria Nettare di Sole, features the iconic beehive laced bottle top[/caption]

Parisian high society loved the beautifully packaged products; 12 years later, Guerlain had moved to Rue de la Paix. The company had cemented its place in the Paris fashion and beauty scene.

"There was a branding buzz when a bee first 'landed' on the Guerlain bottle in 1853."

There was a branding buzz when a bee first “landed” on the Guerlain bottle in 1853. The bee has since become the emblem of the house. Beehives, beeswax and honey-gold edging are part of the fragrance and cosmetic offerings — and bees guide the company’s conservation efforts.

Why the bee? The answer tracks back to Napoleon III, nephew of the famous Napoleon I, who emerged from the 1848 revolution to take the country’s top job. Having manoeuvred his way to the throne, Napoleon III revived the symbol of the bee that had been so revered by his famous forebear.

It was seen as an attempt to bolster his connection with the glory years. Napoleon I had worn a robe decorated with 300 bees at his coronation, and was known colloquially as “the Bee”. He had chosen the nectar-seeking insect to represent his imperial rule because of its association with ancient dynasties and Charlemagne, whose crown sat on a purple cushion adorned with bees.

[caption id="attachment_20478" align="aligncenter" width="521"] Guerlain Eau de Cologne Impériale still features the bees on the bottle[/caption]

In 1853, Pierre-François Guerlain presented Napoleon III’s fiancée, the flame-haired Spanish beauty Eugénie de Montjo, with a fragrance inspired by the couple’s love match. Called Eau de Cologne Impériale, it was the first of Guerlain’s eaux de cologne, and De Montjo wore it for her wedding. This earned Guerlain the title of Perfumer to His Majesty. He was then allowed to add the imperial bee to the Guerlain bottle.

The fragrance became known simply as Impériale, featuring a subtle blend of citrus and floral scents with key notes of hesperides and verbena. It enchanted the French court. Creating perfume for royalty literally became du jour for Guerlain. After his success with Empress Eugénie, he went on to create perfumes for Britain’s Queen Victoria and Queen Isabella II of Spain.

Pierre-François Guerlain’s perfume house is woven into French life, and 167 years after Empress Eugénie’s first spritz it’s still possible to buy Eau de Cologne Impériale — and the Guerlain bee bottle has become an icon in itself. The flagship Guerlain store sits on the Champs-Elysees, the quintessential heart of Parisian fashion, and arguably one of the most beautiful and best-known avenues in the world.

This year, Guerlain released a fragrance called Aqua Allegoria Nettare di Sole. An Italian title, this time, and translating roughly as “solar nectar” — but the French would approve. It’s intended to smell like bees landing on flowers and collecting pollen…

By Naomi Snelling


EY: Argentina’s Need for Tax Reforms, and How They Could Be Achieved

The current Argentine macroeconomic situation is characterised by Covid-19 recession, inflation, record tax pressure, a reduction in tax revenues, poverty levels standing at 42 percent and rising, and government spending exceeding genuine financing possibilities.

Sovereign debt refinancing is still under negotiation with IMF and Paris Club as the government lacks genuine sources of funding to face the various due dates.

In the short term, this complex scenario does not allow a tax reform that could decrease revenues. There is no doubt that the medium- and long-term goals are reducing the tax pressure exerted on the private sector. But it must be addressed over several years while spaces for a parallel reduction in public expenditure are created.

The budget restriction may be increased if the government succeeds in articulating a tax policy that incorporates a part of the informal taxpayer universe into the system. Incentives should mostly be focused on generating employment by reducing payroll taxes and promoting exports. A systematic and sustained focus here may give rise to additional tax resources to allow a reduction of the general pressure on taxpayers.

Some 40 percent of the Argentine economy is estimated to be informal. Tax simplification implies not only a reduced administrative effort for taxpayers but also the possibility for authorities to focus their audit efforts.

This change in paradigm would allow the entry of a second segment of taxpayers that would ease the burden on the rest and give rise to better productivity for local products and services. There would be no unlawful competition within the private sector, as the change would level the playing field in the different economic sectors.

The Four Parameters

The four aspects below should be matched by BCRA (Central Bank of Argentina) regulations aimed at freeing the foreign exchange market. A successful outcome of the sovereign debt negotiations may reduce the government’s need for US dollars in coming years. This window of opportunity should be leveraged to create the basis for a tax system that would allow local companies to develop and grow — and to generate the foreign currency required to address future debt commitments.

Employment

The poverty levels shown by the Argentine economy require tax policies aimed at creating registered employment, especially one that strengthens the unified social security system. One of the largest bottlenecks in Argentine public expenditure arose from the integration of millions of people into the retirement and pension fund system over the first decade of this century. This change caused a rigidity in government spending to such extent that about 70 percent of this account is made up of civil servant salaries and retirement and pension funds. The rigidity diminishes with the entry of new workers who start making marginal contributions and achieving a larger number of active contributors for each passive contributor.

Employment incentives should constitute a fundamental pillar of tax reform. Reducing payroll taxes and increasing private activity allow for the following:

financing retirees

bringing genuine and additional resources to present revenues

incorporating employees into the banking system

promoting the formalization of economy and widening the base of taxpayers of other taxes (especially VAT)

reducing the dependency between public expenditure and retirement and pension funds

contributing to the genuine competition in the private sector

gradually transferring social plan beneficiaries to the private sector, freeing government resources.

The following main aspects should be covered from the employment perspective:

Reduction of the employer contribution percentage increasing payroll, with no time limit. This measure does not entail a loss in present tax collection, but a marginal increase in tax resources and the entry into the system of personnel who used to perform informal work (10-year tax stability of the regulation).

Enacting a law aimed at self-employed/payroll professionals which may allow developing a “gig economy” without giving rise to labour costs in the IT or other industries.

Oil and gas, mining and industrial or service-related employment in distant geographic areas: zero employer contributions when there is an increase in payroll for 10 years and when companies are committed to making investments over such a period.

Productivity

The tax system should not be an obstacle to local product and service competitiveness. It is necessary for the system to articulate the various parts and variables to avoid any inefficiencies, tax overlapping, double taxation or just passing on taxes on to end consumers or exports.

After decades of successive changes that failed to prioritise the harmony between the taxes, Argentina no longer has a tax system, but a collection of taxes which, in aggregate, constitute one of the things hurting local companies’ productivity.

Here are the main thoughts on the fundamentals that should be covered from productivity standpoint:

Replacing Turnover Tax by provincial Value Added Tax (VAT). This measure will mitigate the cumulative effect on the cost of products and services.

Stamp tax abrogation.

Tax on bank account transactions performed in connection with checking account transactions, 100 percent of which should be computable against any federal tax or employer contributions.

VAT balance in favour computable against any federal tax or employer contributions after 90 days of being accumulated.

Establish a tax adjustment for inflation on income, balances in favour, NOLs and personal allowances or deduction limits.

20-year tax stability of aforementioned points.

According to financial science, the optimal use of proprietary and third-party capital is essential to address investment projects. The capital market incentive is crucial to promote the construction industry. There are corporate structures subject to the tax promotion system mainly aimed at large construction projects. The same exemptions which are currently available to small construction projects should be extended so that savers may have access to them with transparency guaranteed by a regulated market.

Exports

The Argentine economy needs foreign currency to avoid cyclical shortage periods, implying systematic devaluations and loss of confidence in the Argentine peso. The tax policy should promote tapping into external markets.

Another aspect that should be articulated with this variable is promoting investments from local residents in the actual economy. The proper use of tax policies in line with this goal may enable the repatriation of US dollars from local residents. Direct foreign investments should also be promoted.

The main aspects that should be considered to enhance export transactions would be:

Calculation of the withholdings made on services rendered abroad against Argentine-sourced income

Abrogation of withholdings made to the export sector

Free availability of foreign currency and foreign currency stability for a 20-year period.

Simplification

The idea of maintaining revenue levels does not contradict the tax simplification goal. System simplification may be achieved without reducing revenue levels.

Focusing on auditing and collection tasks involving income tax, VAT and employer contributions within the economy’s informal sector.

Abrogation of distortive taxes and taxes on equity. “PAIS” tax (tax payable on certain transactions in foreign currency), and personal assets tax, among others.

Abrogation of withholding systems related to domestic transactions.

Abrogation of Anti-Evasion Law.

Incentives to the use of the banking system or the use of digital wallets by reimbursing 10 percent of VAT on transactions not involving the use of cash and effective 11 percent VAT rate. Revenue decrease should be offset by widening the base arising from the measure. The private sector itself would manage the incentives.

To achieve long-term sustainable growth, Argentina must focus on fostering investment and the private sector. The current tax system includes regressive type of taxes that prevent local competitiveness of products and services. By tackling the informal sector appropriately, the tax playing field may be levelled among private players while allowing tax cuts without generating an overall loss of government revenues.

In spite of the challenges and difficulties, Argentina has several sectors with high potential for growth and profits, such as energy, mining, agribusiness, food and knowledge-based business models.

About the Authors

[caption id="attachment_15880" align="aligncenter" width="269"] Author: Sergio Caveggia[/caption]

Sergio Caveggia is a tax partner currently in charge of Transaction Tax area in Argentina. He joined EY Argentina in 1994 and has developed expertise over 24 years in international taxation and merger and acquisition matters. Sergio is also focus on servicing clients in the Private Client Services (PCS) area. He is highly experienced in inbound and outbound investments, buy side, sell side and restructuring services within the Transaction Tax area.

Sergio has served in a variety of industries and has also been involved in many due diligence procedures performed in the past 20 years. He has given lectures in national universities and is a frequent speaker in tax seminars. He has also written several articles dealing with Argentina tax issues.

He is a Certified Public Accountant who graduated from University of Belgrano in Argentina. He obtained his Tax Specialist’s Degree at the University of Belgrano and has a postgraduate certificate in Business and Management from Universidad Catolica Argentina (UCA). He is also member of the Professional Council of Economic Sciences of Buenos Aires and the Argentina Fiscal Association.

[caption id="attachment_15881" align="aligncenter" width="268"] Author: Jimena Rocío García[/caption]

Jimena Garcia is a Manager currently working in the International Tax and Transaction Services (ITTS) and Private Client Services (PCS) areas in Argentina. She joined the firm in 2014.

She has extensive experience in social security & labor law buy-side and sell-side due diligence services in numerous companies in different industries. She also participated in the coordination of many cross-border engagements, dealing with foreign labor and social security legislation matters on each transaction. Jimena participates in numerous seminars related to payroll taxes and labor law matters.

Jimena is a Lawyer graduated in 2010 from UNLAM (Universidad de La Matanza). She is enrolled in the Bar Association of the City of Buenos Aires.


World Debt Anchor to Keep Interest Rates and Growth Low

Debt — both public and commercial — is exploding in the US, and internationally.

Interest rates are being kept low by the central banks. The governments in the US and southern Europe cannot afford a rise in the rates on national debt. Nor can the developed world’s private financial system.

One effect would be to decimate commercial banks’ share price by mark-to-market down their bond portfolios. A rise in nominal interest rates would reveal a vulnerable system. Several major central banks across the world share a responsibility to keep rates low and provide the liquidity to support deficit spending. The mortgage and commercial sectors are in continuous need of support.

"Debt requires sustained zero interest rates; yet followed by slow economic growth and modest inflation."

The pandemic has merely exposed and exasperated this stale dynamic, not caused it. The good news is that even in the face of sovereign and private debts, interest rates will stay low. The alternative is an all-and-every bust scenario.

Still, prepare for modest economic growth (longer term two percent per annum is upper end of optimistic) as debt holds it back. Inflation will stay subdued, with a few sectors as temporary exceptions. Velocity (the speed at which money circulates) is slowed by excess debt as it decreases aggregate demand. Also, debt reduces available bank finance.

Debt and Deficits in the Tns

Many summers ago, in 1984, I was shocked — as youth can be — when I was taught at university that the US federal debt caused by fiscal overspending was unsustainable at $1.6 billion, coming to about 39 percent of GDP. Fast forward 37 years, and now all talk about debt and budget is in the trillions. As an example of just how much a trillion is: one trillion seconds ago would take us back to the age of the woolly mammoth.

US federal debt is currently standing at around $28 trillion in national debt. Within five years, perhaps as early as 2025, this debt will have grown to $35-$40tn according to several world-renowned economists.

With a nominal interest rate at 2.5 percent the interest expense for the government could be around $1tn per annum. The interest on US national debt was $0.4tn in 2020, which came to about seven percent of the federal budget. This year the federal budget is $5.8tn of spending or outlays. The tax revenues are budgeted 40 percent less at $3.5tn. It’s hard to see this wide budget deficit be eliminated in light of voter expectations and increased interest expenses.

With the forecast US national debt, the debt-to-GDP ratio could in a few years reach 180 percent. Some economists claim that a 100 percent ratio is the point of no return in the sense of the interest expenses only being serviceable by issuing more debt. In effect, a sort of a governmental Ponzi scheme where the debt service is paid for by issuing yet more new debt — as the interest cannot be covered by the tax revenues less the public spending.

While there is a theoretical possibility that the federal debt could be reduced relative to the size of the economy through a period of strong GDP growth and inflation. However, that may not happen as the higher nominal interest rates that had to follow such a growth scenario would sacrifice much federal spending in lieu of the higher interest bill on the national debt. Also, higher nominal rates from the Federal Reserve System (the Fed) may collapse the whole or part of the private sector financial system.

A further obstacle is that the services component has grown to 45 percent of the US GDP — and there has been no inflation for the services sector over recent decades. The services sector has a high remuneration proportion, leaving little scope for productivity growth.

But let’s not undercut future fiscal and financial innovation such as creative bookkeeping, moratoriums, new sources of government revenues, and new sources of technological productivity. Also, the growth of population is critical — a point not lost on the US immigration policies of the new Biden administration.

With a debt of $40tn, the US population (328 million) may ask themselves what happened to that money. In a few years, a family of four’s share of the national debt will be half a $million (that they “owe”) and they will have to service through their taxes. Certainly, a dampener on private consumption.

Consider the last economic crisis — 2007-8. That was in part caused by conditions set up by low rates with ample liquidity as well as light touch regulation on rating agencies, mortgage companies and investment banks. The result was the subprime mortgages, an asset price and housing bubble — and the financial system’s meltdown.

Not so different from what we are facing today. The irony is that what set up the last financial crisis was low interest rates whereas in the future it may be an increase. While the Great Recession was caused by US financial engineering in home mortgage derivatives the next crisis could be caused by non-transparent commercial real estate securities innovation. Or just that the rates go up and expose some businesses cannot afford their rent — think high street retail, shopping malls, empty offices, cinemas, hotels etc. Subsequent, the landlords and financial institutions may fold like some intertangled house of cards.

Federal Reserve system chairperson Jerome Powell and his international central bank colleagues have no alternative but to keep rates low and suck up weak corporate paper and support mortgage institutions.

QE+

The Fed under the QE programmes has expanded liquidity to $2tn per annum. This about matches the budget deficit. The sequence goes: the government (over-)spends, issues treasury bills, -notes and -bonds which the Fed then purchases.

The Fed has expanded (say QE+) its purchase mandate and major activities to also buy mortgage bonds, commercial paper, high yield bonds, and direct loans.

High yield bonds are commercial paper which includes “junk bonds” (which is a near-equity security) issued by companies such as Ford and General Motors. Under QE+ the Feds also support industries such as airlines and cruise lines with direct loans.

Corporations have used the low interest rates and central bank liquidity to load up on debt and many sectors are vulnerable.

The industry sector most supported by the Fed is the banking sector with funding rates at minus-one percent interest per annum. This means that when invested in T-paper yielding 1.5 percent p.a. the carry trade is 2.5 percent per annum return, a very benign environment. Should this negative funding rate turn to positive the whole financial system would experience a shot that it might not be able to recover from.

Recently, the inflation monster has surfaced again to dampen expansionary fiscal policies. The “post pandemic” world is experiencing rising prices in commodities. Could that be that sudden higher global demand-supply balance has to adjust after a “quiet” period with little demand and thus supply?

Wage inflation (total compensation) in the US has been subdued for decades. Wage and product inflation in the developed world will be kept in check by low-cost producers in the emerging markets and robotics at home.

However unlikely, inflation taking off would truncate the recovery. If prices rise quicker than wages, real income and any expansion suffers.

The US and thus the global financial system leave no room for increased interest rates from the Feds, nor increased market induced credit spreads. Same story in Europe. Thus, expect the rates to stay low and QE+ to keep a helping hand under the housing market and the US companies.

Rest of the Developed World

Also, the bank of England has joined the $trillion debt party that cannot afford increased interest rates. The pandemic has added $1/2 trillion to the UK national debt. For the next 12 months, double this to an even $1 trillion, as the UK government is borrowing £1.06bn per day since the pandemic struck.

Europe’s ECB has kept deposit rates negative for over two years. While the ECB is lacking in transparency, it’s not lacking in support for the commercial banking system. It’s fair to assume that should base rates, sovereign, and commercial rates as well as credit spreads rise the European banking system would be under assault. Banks are being subsidised with negative funding rates and can carry trade that into long government bond paper — and are thus heavily exposed. The first to go would be the share prices of the major German, Spanish, Italian and other banks.

For decades, Japan’s economy has been one of minuscule growth, low rates, and little inflation. Japan’s national debt has risen, and its debt-to-GDP ratio is currently standing at 256 percent.

Expect that across the developed world the indebtedness will counter intuitively keep a lid on interest rates. And — also counter intuitively — the low interest rates will not spur growth and inflation. The high amounts of debt serve as an anchor.

There may be an innovative financial solution out there.


China’s Renminbi Needs Convertibility to Internationalise

On July 21, the Official Monetary and Financial Institutions Forum (OMFIF) published its eighth annual report on Global Public Investors (GPI). It included a survey the asset allocation plans of reserve managers of central banks, sovereign wealth funds, and public pension funds. Together, the 102 investors who responded to the survey manage $42.7 trillion in assets (Figure 1).

[caption id="attachment_20506" align="aligncenter" width="624"] Figure 1: Total GPI Assets by Institution Type, $ trillions. Source: OMFIF analysis (GPI 2021)[/caption]

The survey highlighted notable changes in the composition of portfolios planned by global public investors. About 18% of respondents said they intend to reduce their holdings in euros over the next 12 to 24 months, while 20% said the same but with respect to the dollar.

Twenty years ago, the dollar represented 71% of reserve assets, whereas today it corresponds to 59%. The presence of the euro increased from 18% to 21% over the same period. Such changes have been smooth, progressive, and orderly over the past 20 years, noted Jean-Claude Trichet, former president of the European Central Bank, during the report's launch.

One notable shift shown by the survey appears to be that the renminbi is set to become a more significant part of the global financial system as central banks add the Chinese currency to their reserve assets. About 30% of central banks plan to increase their allocations to renminbi in the next 12-24 months, compared with just 10% in last year's report, while 70% said they intended to do it in the long term.

Central banks in all regions will be net buyers of Chinese bonds over the medium term. This is particularly the case in Africa, where nearly half of central banks plan to increase their reserves in renminbi. Asian assets in general are in high demand, with 40% of global public investors hoping to increase their exposure to the region (Figure 2).

[caption id="attachment_20507" align="aligncenter" width="624"] Figure 2: Total GPI Assets by Region, $ trillions, 2016-20. Source: OMFIF analysis (GPI 2021)[/caption]

However, the starting point for the inclusion of the renminbi in the composition of reserve assets is still low, at only 2.5%, indicating that its inflection point as an international reserve currency remains somewhat distant.

In fact, in 2015, when the renminbi was incorporated into the currency basket that serves as the basis for Special Drawing Rights (SDR)—the accounting currency issued by the International Monetary Fund (IMF) to be used among central banks—while China easily met the requirement of being among the world's five largest exporters, its currency did not fully meet the requirement of being ‘freely usable’, for which it would need to be to be used widely for payments in international transactions and traded widely in major foreign exchange markets.

The expansion of commercial transactions, and increases in official reserves denominated in renminbi, the expansion of which was captured in the OMFIF report, have not yet been accompanied by an equivalent increase in transactions and in unofficial reserves with Chinese bonds. Also in the week the OMFIF report was published, the Institute of International Finance (IIF) published a separate report on the presence of the renminbi in international reserves, observed from purchases of Chinese bonds by non-residents, official or private.

According to the IIF, although Chinese government bond purchase flows have increased since last year, central banks accounted for a third of the total flow in 2020 and more than half in the first quarter of this year.

Total Chinese bonds held by foreigners are still small by the standards of emerging and developed economies. Despite the recent increases, Chinese external bond liabilities remain small relative to China's GDP and its share of global trade (Figure 3).

[caption id="attachment_20508" align="aligncenter" width="624"]<img class="size-full wp-image-20508" src="https://cfi.co/wp-content/uploads/2021/08/Picture3.png" alt="Figure 3: Despite the Recent Increase in Flows, Foreign Bond Holdings are Small in China. Note: USD = U.S. dollar; GBP = pound sterling; EUR = euro; AUD = Australian dollar; JPY = Japanese yen; CHF = Swiss franc; CNY = Chinese renminbi. Source: Lanau, S.; Ma, G.; and Feng, P. (2021). Economic Views – Reserve Holdings in Renminbi, Institute of International Finance, July 20" width="624" height="256" /> Figure 3: Despite the Recent Increase in Flows, Foreign Bond Holdings are Small in China.Note: USD = U.S. dollar; GBP = pound sterling; EUR = euro; AUD = Australian dollar; JPY = Japanese yen; CHF = Swiss franc; CNY = Chinese renminbi. Source: Lanau, S.; Ma, G.; and Feng, P. (2021). Economic Views – Reserve Holdings in Renminbi, Institute of International Finance, July 20[/caption]

Less than 3% of international payments are made in renminbi. Global reserves in renminbi are modest as a percentage of China's GDP and relative to its international trade, especially when compared to well-established reserve currency issuers.

As Trichet said on the launch of the OMFIF report:

“The problem remains that the renminbi is not yet fully convertible. When the renminbi becomes fully convertible, I expect a big jump ahead. This is the view of Chinese friends, including the former governor of the central bank, Zhou Xiaochuan, who called for complete liberalisation of the renminbi. That time will come. And when it comes, you will see the full realisation [of what the OMFIF survey suggests].”

Given the size of China and the limited role of foreigners in local markets, it is safe to say that foreign acquisition of bonds and foreign reserves in renminbi could grow. However, it is best to avoid working with big, fast-rise scenarios. The U.S.-China relationship could remain tense and complex, possibly dampening the appetite of risk-averse reserve managers for renminbi bonds.

That said, the contribution of reserve accumulation to China's bond flows could be large, even under conservative scenarios. If global reserves in renminbi increase from 1.8% to 3% of China's GDP over the next decade, annual flows to the local bond market would consistently exceed $400 billion. If purchases by private investors remain stable, total foreign holdings in government bonds could reach 5% of GDP, not far from the median of emerging markets: 5.6% of GDP.

Commercial transactions and reserves of central banks and other global public investors could strengthen the position of the renminbi as an alternative to the dollar, euro, yen and pound sterling. But the qualitative leap towards the internationalisation of the Chinese currency as a full reserve currency will only happen when confidence in its convertibility is sufficient to convince unofficial (private) investors to hold much more of their reserves in renminbi.

First appeared at Policy Center for the New South.

About the Author

Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a professorial lecturer of international affairs at the Elliott School of International Affairs – George Washington University, and principal at Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.

On July 21, the Official Monetary and Financial Institutions Forum (OMFIF) published its eighth annual report on Global Public Investors (GPI). It included a survey the asset allocation plans of reserve managers of central banks, sovereign wealth funds, and public pension funds. Together, the 102 investors who responded to the survey manage $42.7 trillion in assets (Figure 1).

[caption id="attachment_20506" align="aligncenter" width="624"] Figure 1: Total GPI Assets by Institution Type, $ trillions. Source: OMFIF analysis (GPI 2021)[/caption]
The survey highlighted notable changes in the composition of portfolios planned by global public investors. About 18% of respondents said they intend to reduce their holdings in euros over the next 12 to 24 months, while 20% said the same but with respect to the dollar.

Twenty years ago, the dollar represented 71% of reserve assets, whereas today it corresponds to 59%. The presence of the euro increased from 18% to 21% over the same period. Such changes have been smooth, progressive, and orderly over the past 20 years, noted Jean-Claude Trichet, former president of the European Central Bank, during the report's launch.

One notable shift shown by the survey appears to be that the renminbi is set to become a more significant part of the global financial system as central banks add the Chinese currency to their reserve assets. About 30% of central banks plan to increase their allocations to renminbi in the next 12-24 months, compared with just 10% in last year's report, while 70% said they intended to do it in the long term.

Central banks in all regions will be net buyers of Chinese bonds over the medium term. This is particularly the case in Africa, where nearly half of central banks plan to increase their reserves in renminbi. Asian assets in general are in high demand, with 40% of global public investors hoping to increase their exposure to the region (Figure 2).

[caption id="attachment_20507" align="aligncenter" width="624"] Figure 2: Total GPI Assets by Region, $ trillions, 2016-20. Source: OMFIF analysis (GPI 2021)[/caption]
However, the starting point for the inclusion of the renminbi in the composition of reserve assets is still low, at only 2.5%, indicating that its inflection point as an international reserve currency remains somewhat distant.

In fact, in 2015, when the renminbi was incorporated into the currency basket that serves as the basis for Special Drawing Rights (SDR)—the accounting currency issued by the International Monetary Fund (IMF) to be used among central banks—while China easily met the requirement of being among the world's five largest exporters, its currency did not fully meet the requirement of being ‘freely usable’, for which it would need to be to be used widely for payments in international transactions and traded widely in major foreign exchange markets.

The expansion of commercial transactions, and increases in official reserves denominated in renminbi, the expansion of which was captured in the OMFIF report, have not yet been accompanied by an equivalent increase in transactions and in unofficial reserves with Chinese bonds. Also in the week the OMFIF report was published, the Institute of International Finance (IIF) published a separate report on the presence of the renminbi in international reserves, observed from purchases of Chinese bonds by non-residents, official or private.

According to the IIF, although Chinese government bond purchase flows have increased since last year, central banks accounted for a third of the total flow in 2020 and more than half in the first quarter of this year.

Total Chinese bonds held by foreigners are still small by the standards of emerging and developed economies. Despite the recent increases, Chinese external bond liabilities remain small relative to China's GDP and its share of global trade (Figure 3).

[caption id="attachment_20508" align="aligncenter" width="624"] Figure 3: Despite the Recent Increase in Flows, Foreign Bond Holdings are Small in China.Note: USD = U.S. dollar; GBP = pound sterling; EUR = euro; AUD = Australian dollar; JPY = Japanese yen; CHF = Swiss franc; CNY = Chinese renminbi. Source: Lanau, S.; Ma, G.; and Feng, P. (2021). Economic Views – Reserve Holdings in Renminbi, Institute of International Finance, July 20[/caption]
Less than 3% of international payments are made in renminbi. Global reserves in renminbi are modest as a percentage of China's GDP and relative to its international trade, especially when compared to well-established reserve currency issuers.

As Trichet said on the launch of the OMFIF report:

“The problem remains that the renminbi is not yet fully convertible. When the renminbi becomes fully convertible, I expect a big jump ahead. This is the view of Chinese friends, including the former governor of the central bank, Zhou Xiaochuan, who called for complete liberalisation of the renminbi. That time will come. And when it comes, you will see the full realisation [of what the OMFIF survey suggests].”

Given the size of China and the limited role of foreigners in local markets, it is safe to say that foreign acquisition of bonds and foreign reserves in renminbi could grow. However, it is best to avoid working with big, fast-rise scenarios. The U.S.-China relationship could remain tense and complex, possibly dampening the appetite of risk-averse reserve managers for renminbi bonds.

That said, the contribution of reserve accumulation to China's bond flows could be large, even under conservative scenarios. If global reserves in renminbi increase from 1.8% to 3% of China's GDP over the next decade, annual flows to the local bond market would consistently exceed $400 billion. If purchases by private investors remain stable, total foreign holdings in government bonds could reach 5% of GDP, not far from the median of emerging markets: 5.6% of GDP.

Commercial transactions and reserves of central banks and other global public investors could strengthen the position of the renminbi as an alternative to the dollar, euro, yen and pound sterling. But the qualitative leap towards the internationalisation of the Chinese currency as a full reserve currency will only happen when confidence in its convertibility is sufficient to convince unofficial (private) investors to hold much more of their reserves in renminbi.

First appeared at Policy Center for the New South.
About the Author

Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a professorial lecturer of international affairs at the Elliott School of International Affairs – George Washington University, and principal at Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.


Deloitte: Constructing a Sustainable Future in the Middle East

Towards the end of 2019, at the United Nations Climate Change (COP25) conference, the UN Secretary-General António Guterres warned that a “point of no-return” on climate change is “in sight and hurtling toward us.”

Against this warning, the World Economic Forum, an international organisation of political and business leaders reported in its 2020 Risk Report that, for the first time in the history of its Global Risk Perception Survey, climate-related issues dominated all of the top-five long term risks by likelihood among members of its multi-stakeholder community. These risks included extreme weather, climate action failure, natural disaster, biodiversity loss and human-made environmental disasters.

Given the link between Climate Change and human activity, international focus is leveled at industries that are significant contributors to greenhouse gas emission and users of energy.

According to the 2020 Global Status Report for Buildings and Construction, the buildings and construction sector accounted for 35% of final energy use and 38% of energy and process-related carbon dioxide (CO2) emissions in 2019.

With the Buildings and Construction industry being a key industry in the Middle East, what role can the industry play to reverse climate change?

"Over recent years, the industry has strived to understand its impact on the environment, innovate its methods and process and its resource use. In driving a sustainable industry across the Middle East, the construction industry has made considerable progress in its overall impact.’"

- Cynthia Corby Partner & Middle East Construction Leader, Deloitte

The Hidden Environmental Costs

The staggering amount of energy used, and the high levels of emissions produced by the industry is a result of the significant use of resources and the nature of its construction processes and production methods.

For example, as Chatham House, an International Affairs think tank reported, a key input into concrete, the most widely used construction material in the world, is cement. This is a major contributor to climate change as the chemical and thermal combustion processes involved in the production of cement are a large source of carbon dioxide (CO2) emissions. Each year, more than 4 billion tonnes of cement are produced, accounting for around 8 per cent of global CO2 emissions.

Not only does the industry’s use of energy and emissions release significantly influence Climate Change, but it also has a wider impact on the environment. According to the World Green Building Council, the industry accounts for more than 50% of all material extracted globally; and construction demolition waste contributes 35% to the world's landfill.

Furthermore, the industry also contributes to noise pollution, changes landscapes and threatens biodiversity. The process of construction, often dangerous, also requires high levels of Health & Safety protection and regulations to ensure that workers’ welfare is protected.

"With its considerable environmental, social and economic impact and potential force for good, by embracing Sustainably at the heart of its processes, the Construction Industry is a very important ally in creating a Sustainable future for all."

- Cynthia Corby

Once built and operational, buildings themselves also have an environmental cost, using electricity to power light, heating and air-conditioning, transporting water and waste.

As the output of the construction and real estate industry grows to meet demands of growing populations, so can its damaging effects.
Balanced against this however is the considerable social and economic benefit that construction brings in terms of infrastructure, housing, jobs, technological innovation and economic stimulus and development.

How Can Organisations Build and Construct Sustainably in the Middle East?

The premise of Sustainability is that it seeks to use and manage resources responsibly today in order to ensure the availability of resources for future generations.

Sustainable construction can be expressed as a number of principles focusing on:

Minimising resource consumption (Conserve)

Maximising resource reuse (Reuse)

Using renewable or recyclable resources (Renew/Recycle)

Protecting the natural environment (Protect Nature)

Creating a healthy, non-toxic environment (Non-Toxics)

Pursuing quality in creating the built environment (Quality)

This approach seeks to reduce the industry’s impact on the environment by utilising sustainable development practices, employing energy efficiency, taking advantage of green technology and processes, adopting the right health and safety processes and worker welfare concerns.

A UNEP report on Greening the Building Supply Chain states: “It has been estimated that in use, emissions account for over 80 percent of the total life cycle carbon emissions of buildings, with a further 15 percent of emissions embodied in materials and around one percent resulting from the construction process itself.”

As more energy-efficient buildings are constructed, more focus will be on alternate construction materials that reduce carbon emissions in their production and their use when the building is operational through creating a more ecofriendly building that needs less heating or cooling; and then the construction process itself, can reduce this through more ecofriendly processes.

Construction as a Stimulus

If building and construction is done in a sustainable way, the benefits are significant. Governments are not only seeing this industry as a stimulus for the economy but also an opportunity to significantly affect climate change.

Many Middle Eastern countries are focused on activities to try and mitigate climate related impacts.

In Saudi Arabia, the government has created the National Transformation Project and the Vision 2030 strategy to innovate and diversify, providing a foundation to underpin the integration of sustainable development goals into the national planning process. It is planning to invest approximately USD1 trillion in the country’s non-hydrocarbon sector by 2030. Some of the key projects include Neom, the Red Sea Project, Qiddiya Entertainment City, King Abdullah Financial District and Amaala.

The recently launched Saudi Green Initiative and Middle East Green Initiative, are two large scale initiatives that are ‘defining an ambitious road map that rallies the region and significantly contributes to achieving global targets in confronting climate change.’

Faced with growing desertification, increased air pollution and threats to marina and coastal environments, the initiatives seek to rehabilitate 40 million hectares of degraded lands, generate 50% of Saudi Arabia’s energy from renewables by 2030, and raise the rate of waste diversion from landfills to reach 94%. Through coordination with neighboring countries of the Gulf Cooperation Council (GCC) and other Middle East countries, the initiative will extend rehabilitation to 200 million hectares of degraded land.

In the UAE, the world’s largest single-site solar project, Noor Abu Dhabi covers an area of 8 kilometers and features 3.2 million solar panels. The project enables increased production of renewable energy and reduces reliance on the use of natural gas for electricity generation resulting in a carbon footprint reduction of 1 million metric tons per year, which is equivalent to taking 200,000 cars off the road.

Other significant alternative energy projects in the UAE include the Al Dafra Solar PV plant, which is expected to provide approximately 160,000 households across the UAE with electricity when finished; and the Mohammed bin Rashid Al Maktoum Solar Park, which is a phased project delivering a variety of photovoltaic and Concentrated Solar Power technologies, and, when completed, will save over 6.5 million tons of carbon emissions annually.

Expo 2020 Dubai, the international exhibition show-casing scientific, technological, economic and social progress, is set to be the ‘cleanest and greenest’ world exposition ever staged in October 2021. There are clean energy solutions powering the expo site together with recycling and reusage programmes. The key buildings are LEED Gold-certified, ensuring they meet the highest sustainable construction standards, and 85% of all waste generated during the construction of the site and during the event itself will be recycled. When the six-month-long exhibition is finished the site will be developed into District 2020 – a dedicated mixed-use business hub that will promote and foster innovation. It is anticipated that more than 80% of Expo 2020’s built environment will be repurposed in the transition to District 2020.

In Qatar, preparations for the FIFA 2022 World Cup continue as the eight sports stadiums which will host the matches are being built with high levels of energy and water efficiency, to provide legacy buildings with year- round use. Extensive use of modular design will enable 170,000 seats to be relocated to countries that lack sporting facilities; and one building is the world’s first ‘dismountable stadium’, enabling its parts to be repurposed after use and the land redeveloped into a waterfront development.

Substantial visionary infrastructure investments such as these, coupled with sustainable construction principles, have the potential to allow the industry to help mitigate Climate Change. By building in energy and water efficiency, waste recycling and green technology into projects, these initiatives will bring many sustainability benefits throughout the project lives. Contractors will, however, still need to be careful and consider the wider impacts of construction on natural environments to justify the development and ensure an appropriate balance is achieved.

About the Author

[caption id="attachment_20513" align="aligncenter" width="300"] Author: Damian Regan Deloitte Middle East Assurance Leader for Sustainability[/caption]

Damian Regan is currently based in Dubai, UAE, having spent the last four years working across the Middle East and over 20 years in London, UK. He has worked within International Accountancy firms during his career and assists clients understand their contribution to society and the environment. In particular he assists them in effectively communicating and reporting their sustainability goals, results and impacts. He also works with industry bodies and regulators to help develop standards of sustainable practices, reporting and assurance.

About Deloitte & Touche

Deloitte & Touche (M.E.) LLP (“DME”) is the affiliate for the territories of the Middle East and Cyprus of Deloitte NSE LLP (“NSE”), a UK limited liability partnership and member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DME’s presence in the Middle East region is established through its affiliated independent legal entities, which are licensed to operate and to provide services under the applicable laws and regulations of the relevant country. DME’s affiliates and related entities cannot oblige each other and/or DME, and when providing services, each affiliate and related entity engages directly and independently with its own clients and shall only be liable for its own acts or omissions and not those of any other affiliate. DME provides Audit and Assurance, Consulting, Financial Advisory, Risk Advisory and Tax services through 27 offices in 15 countries with more than 5,000 partners, directors and staff. It has also received numerous awards in the last few years which include, Middle East Best Continuity and Resilience provider (2016), World Tax Awards (2017), Best Advisory and Consultancy Firm (2016), the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW), as well as the best CSR integrated organisation.

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Rescue by Helicopter Reserves

The world woke up on Monday 23 with higher international reserves for all countries. A new allocation of US$650 billion (SDR450 billion) in Special Drawing Rights (SDRs) by the International Monetary Fund (IMF) to its member countries has entered into force.

SDRs are an international reserve asset created by the IMF and added to the countries' other foreign reserves. It is not a currency that can be used by private agents. Governments, on the other hand, can – unconditionality – exchange them for currencies from other countries and thus make payments with them. It is, therefore, a supplement to the countries' foreign reserves, without depending on the issuance of external or domestic debt for its acquisition.

The SDR value is calculated daily by the IMF based on a basket of international currencies which, in fixed proportions, currently includes the US dollar, Japanese yen, euro, pound sterling and Chinese renminbi. The composition of the basket is reassessed every 5 years.

It is an asset that simultaneously pays and charges interest. It all depends on the balance between the allocations received by the country and their use. If it does not use its SDRs, interest income and payments outweigh each other, and the cost is zero.

The SDR interest rate is set weekly as a weighted average of interest rates on short-term government bonds in the money markets of the countries of the basket. It is currently at its floor:  0.05% (Figure 1). At least in the case of non-advanced economies it is still below the rates charged by the markets.

[caption id="attachment_20520" align="aligncenter" width="584"] Figure 1: SDR Composite Interest Rate. Source: Ramos, A. and Moreno, D. (2021). IMF Ready for Sizeable “Helicopter Reserves” Allocation, Goldman Sachs, July 20.[/caption]

There is, therefore, even a potential pecuniary advantage of using SDR to redeem other external debts. Everything depends, however, on institutional arrangements within countries, particularly regarding who holds foreign reserves and manages foreign exchange flows, as well as the transfer of resources from central banks to the Treasury. About 70% of countries have their central banks as SDR recipients, while in the US, for example, SDR assets and liabilities are recorded on the government balance sheet.

President Lopez Obrador of Mexico, for example, has already referred to using the opportunity to prepay external public debt. Although local law does not allow transfers from the central bank to the executive, the government can acquire reserves other than SDR if it has balances in Mexican pesos with the central bank, as part of public debt management. Basically, this would result in an exchange of reserves in hard currencies for the added SDR.

SDRs were created in 1969 and their general allocations are made to IMF member countries according to their quotas in the Fund. The IMF has the prerogative to ask for its cancellation, but that never happened. Previous general allocations occurred in 1970-72, 1979-81 and 2009, in the latter case accompanied by a special allocation. The extraordinary character of the allocation initiated this time is seen in the fact that its amount corresponds to more than double the sum of all allocations made to date.

The exceptional circumstances of the pandemic crisis, putting the external accounts of many economies in a precarious situation, were the motivation. However, as allocations follow country IMF quotas, relief for those in need of reserves will come as an excess in other cases.

China has added another $41.6 billion to its already high reserves, Brazil another $15.1 billion and 35 advanced economies another $399 billion. On the other hand, the arrival of reserves in the form of SDRs will be extremely welcome and will give some breath in cases such as Argentina, Ecuador, and El Salvador, in Latin America, as well as several countries in other regions (Sri Lanka, Zambia, Liberia etc.). Venezuela will receive its allocation, but without unconditional access, given the Maduro government's non-recognition as legitimate by more than 50 member countries, including the largest shareholder, the US.

The increase in reserves globally will not have a great impact, being equivalent to something around 0.7% of the world GDP. However, it will provide a lifeline, temporary or not, for countries facing low reserves and high external financing requirements ahead.

Sub Saharan Africa received a small share of the newly created SDR (Figure 2, left side). However, they will be substantial as a share of GDP in some cases (Figure 2, right side).

[caption id="attachment_20521" align="aligncenter" width="638"] Figure 2: Sub Saharan Africa’s share of newly created SDRs and their share to countries’ GDPs. Source: Hilgenstock, B. and Sezercan, D. (2021). The 2021 SDR Allocation’s Effect on SSA, Institute of International Finance – IIF, June 14.[/caption]

As a next step, the IMF set out to find ways in which countries with SDR surpluses can voluntarily channel them to those in need. For example, they can be lent to the fund that the IMF uses to make concessional loans to low-income countries (Poverty Reduction and Growth Trust - PRGT), as well as to another fund to be created to support more vulnerable countries to undertake structural transformation, including adaptation to climate change (Resilience and Sustainability Trust – RST).

Surplus SDR could also be channeled to support lending by multilateral development banks and even donations to the concessional arm of the World Bank: The International Development Agency (IDA). The development impact of the SDR allocation can be magnified. The fact is that creation of SDR following IMF quotas provided a very small share for low-income countries (69 economies that will receive US$ 21.2 billion), while they are precisely the most negatively affected by the crisis, with slower vaccination and the worst debt problems.

As noted in a report by Alberto Ramos and Daniel Moreno (Goldman Sachs, July 20), the increase in SDR stocks does not automatically correspond to an increase of money supply in the global economy. The use of SDR only transfers hard currency from one country to another, with corresponding changes in the composition of reserves. There will only be such an increase if the central bank that issues the hard and convertible currency granted in exchange for the SDR does not sterilize its monetary impact.

SDRs, therefore, do not constitute money thrown from a helicopter, as in the famous image used by Nobel Prize-winning economist Milton Friedman in 1969 and cited in Ramos and Moreno's “Helicopter Reserves” report. But one cannot deny that this allocation fell from the sky at a good time for economies struggling with a shortage of reserves and immediate needs for external financing.

About the Author

Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a professorial lecturer of international affairs at the Elliott School of International Affairs - George Washington University, and principal at Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.

Summary

A new allocation of US$650 billion in Special Drawing Rights (SDRs) by the International Monetary Fund (IMF) to its member countries has entered into force last Monday. The extraordinary character of the allocation initiated this time is seen in the fact that its amount corresponds to more than double the sum of all allocations made to date. As allocations follow country IMF quotas, relief for those in need of reserves will come as an excess in other cases. The IMF set out to find ways in which countries with SDR surpluses can voluntarily channel them to those in need.


Matchmaking Private Finance and Green Infrastructure

The contrast between the scarcity of investments in infrastructure and the excess of savings invested in liquid and low-return assets in the global economy must be dealt with.

Greening infrastructure in emerging and developing economies would benefit from being able to attract greenbacks into the business.

Development of pipelines of projects with homogeneous regulations and standards, as well as with minimum mismatch between risks and comfort of private investors to manage them will be needed.

First appeared at Policy Center for the New South (July 7, 2021)

The world faces a huge shortfall of infrastructure investment relative to its needs. With a few exceptions, such as China, this shortfall is greatest in emerging and developing countries.

The G20 Infrastructure Investors Dialogue estimated the volume of global infrastructure investment needed by 2040 to be $81 trillion, $53 trillion of which will be needed in non-advanced countries. The Dialogue projected a gap—in other words, a shortfall in relation to the investment needs foreseen today—of around $15 trillion globally, of which $10 trillion is in emerging economies (Figure 1, left panel). The World Bank has estimated that, for emerging and developing economies to reach the Millennium Development Goals set for 2030, their infrastructure investment would have to correspond to 4.5% of their annual GDPs (Figure 1, right panel).

<picture class="wp-image-2097"><source srcset="https://blog.cfi.co/wp-content/uploads/2021/08/Picture1.jpg.webp 941w, https://blog.cfi.co/wp-content/uploads/2021/08/Picture1-300x168.jpg.webp 300w, https://blog.cfi.co/wp-content/uploads/2021/08/Picture1-768x429.jpg.webp 768w" type="image/webp" sizes="(max-width: 941px) 100vw, 941px" /></picture>

In addition to the need for infrastructure investment, there is a need for that investment to be ‘greened’ as rapidly and extensively as possible, in order to minimize the negative impact in terms of increased global warming. For example, the energy sector must be decarbonized by expanding the use of renewable sources instead of coal. Increases in use efficiency, and the elimination of subsidies for the use of fossil fuels, would be part of this strategy.

Transport is now responsible for 25% of the world’s greenhouse-gas emissions. This must be reduced by shifting transportation to low-carbon options, in addition to investments in energy-efficient equipment, and supporting the transition to electric vehicles and fleets.

A major part of the ‘greening’ will be in cities: improved water supply and sanitation services, changes in energy supply, waste recycling, and greater energy efficiency through better building standards and/or renovation of existing buildings. This transition, as for manufacturing and agricultural activities, will require investment in infrastructure.

A major obstacle holding back such investment is the lack of fiscal space, which is constraining public spending. This problem has been made worse by the fiscal packages adopted because of the pandemic. While the largest advanced economies can afford to increase their public debt, with a low risk they will face deteriorating financing conditions, this does not apply to most emerging economies, let alone low-income countries grappling with unsustainable debt trajectories (Figure 2).

<picture class="wp-image-2098"><source srcset="https://blog.cfi.co/wp-content/uploads/2021/08/Picture2.jpg.webp 784w, https://blog.cfi.co/wp-content/uploads/2021/08/Picture2-300x196.jpg.webp 300w, https://blog.cfi.co/wp-content/uploads/2021/08/Picture2-768x501.jpg.webp 768w" type="image/webp" sizes="(max-width: 784px) 100vw, 784px" /></picture>

Consequently, measures need to be taken to expand the options for private financing of infrastructure projects. Indeed, according to data from the Institute of International Finance, over the past 15 years, institutional investors with long time profiles in their assets, such as pension funds, have been gradually increasing their allocations to infrastructure investments and alternatives to fixed income instruments, equity, and other traditional instruments.

Stable and long-term returns from infrastructure projects dovetail well with the long-term commitments of those financial institutions, particularly in the context of declining long-term real interest rates on public and private bonds, as seen in recent decades in advanced countries. Surveys carried out by Preqin show fund managers already pointing to the decarbonization of energy as a factor in attracting private investment to infrastructure.

The biggest challenge is to build bridges between, on the one hand, infrastructure investment needs in non-advanced countries and, on the other, private sources of finance abundant in dollars and other convertible currencies with few opportunities to obtain returns compatible with their requirements on their liability side.

Building such bridges requires the completion of two tasks. First, the development of properly structured projects, with risks and returns in line with the preferences of the different types of financial intermediation, would help close the private financing gap in infrastructure.

Investors have different mandates and skills regarding the management of risks associated with types of projects, and phases of project investment cycles. They demand coverage of risks whose exposure is not adequate or permitted by regulation. The absence of complementary instruments or investors is one of the most frequently identified causes of failure in the financial completion of projects. Figure 3 provides a snapshot of the diversity of instruments and vehicles through which private finance can participate in infrastructure projects.

<picture class="wp-image-2099"><source srcset="https://blog.cfi.co/wp-content/uploads/2021/08/Picture3.png.webp 800w, https://blog.cfi.co/wp-content/uploads/2021/08/Picture3-300x169.png.webp 300w, https://blog.cfi.co/wp-content/uploads/2021/08/Picture3-768x432.png.webp 768w" type="image/webp" sizes="(max-width: 800px) 100vw, 800px" /></picture>

The constrained fiscal space in emerging and developing countries can be used to mainly cover such risks and enable the building up of investment, rather than replacing private investment: crowding-in private finance rather than crowding it out. National and multilateral development banks could prioritize this instead of financing total investments.

Identifying attractive investment opportunities for different types of investors and combining these perspectives more systematically around specific projects or asset pools is a promising way to fill the infrastructure financing gap. The planning and integrated issuance—with different time profiles—of fixed-income securities, bank loans, credit insurance, and others, for the different phases from project preparation to operation, make that combination possible.

The second task to boost private infrastructure investment in emerging and developing economies is the reduction of legal, regulatory, and political risks. Transparency and harmonization of rules and standards can increase the scale of comparable projects and make it possible to build project portfolios. Non-banking financial institutions often highlight the absence of large enough project portfolios as a disincentive deterring the setting up of business lines focused on the area. This is a particular weakness in the case of smaller countries.

The contrast between the scarcity of investments in infrastructure—particularly in non-advanced economies—and the excess of savings invested in liquid and low-yield assets in the global economy deserves to be confronted. Greening infrastructure in non-advanced economies would benefit from being able to attract greenbacks into the business.

Watch Bridging Private Finance and Green Infrastructure

Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a professorial lecturer of international affairs at the Elliott School of International Affairs – George Washington University, and principal at Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.

The contrast between the scarcity of investments in infrastructure and the excess of savings invested in liquid and low-return assets in the global economy must be dealt with.

Greening infrastructure in emerging and developing economies would benefit from being able to attract greenbacks into the business.

Development of pipelines of projects with homogeneous regulations and standards, as well as with minimum mismatch between risks and comfort of private investors to manage them will be needed.

First appeared at Policy Center for the New South (July 7, 2021)

The world faces a huge shortfall of infrastructure investment relative to its needs. With a few exceptions, such as China, this shortfall is greatest in emerging and developing countries.

The G20 Infrastructure Investors Dialogue estimated the volume of global infrastructure investment needed by 2040 to be $81 trillion, $53 trillion of which will be needed in non-advanced countries. The Dialogue projected a gap—in other words, a shortfall in relation to the investment needs foreseen today—of around $15 trillion globally, of which $10 trillion is in emerging economies (Figure 1, left panel). The World Bank has estimated that, for emerging and developing economies to reach the Millennium Development Goals set for 2030, their infrastructure investment would have to correspond to 4.5% of their annual GDPs (Figure 1, right panel).

In addition to the need for infrastructure investment, there is a need for that investment to be ‘greened’ as rapidly and extensively as possible, in order to minimize the negative impact in terms of increased global warming. For example, the energy sector must be decarbonized by expanding the use of renewable sources instead of coal. Increases in use efficiency, and the elimination of subsidies for the use of fossil fuels, would be part of this strategy.

Transport is now responsible for 25% of the world’s greenhouse-gas emissions. This must be reduced by shifting transportation to low-carbon options, in addition to investments in energy-efficient equipment, and supporting the transition to electric vehicles and fleets.

A major part of the ‘greening’ will be in cities: improved water supply and sanitation services, changes in energy supply, waste recycling, and greater energy efficiency through better building standards and/or renovation of existing buildings. This transition, as for manufacturing and agricultural activities, will require investment in infrastructure.

A major obstacle holding back such investment is the lack of fiscal space, which is constraining public spending. This problem has been made worse by the fiscal packages adopted because of the pandemic. While the largest advanced economies can afford to increase their public debt, with a low risk they will face deteriorating financing conditions, this does not apply to most emerging economies, let alone low-income countries grappling with unsustainable debt trajectories (Figure 2).

Consequently, measures need to be taken to expand the options for private financing of infrastructure projects. Indeed, according to data from the Institute of International Finance, over the past 15 years, institutional investors with long time profiles in their assets, such as pension funds, have been gradually increasing their allocations to infrastructure investments and alternatives to fixed income instruments, equity, and other traditional instruments.

Stable and long-term returns from infrastructure projects dovetail well with the long-term commitments of those financial institutions, particularly in the context of declining long-term real interest rates on public and private bonds, as seen in recent decades in advanced countries. Surveys carried out by Preqin show fund managers already pointing to the decarbonization of energy as a factor in attracting private investment to infrastructure.

The biggest challenge is to build bridges between, on the one hand, infrastructure investment needs in non-advanced countries and, on the other, private sources of finance abundant in dollars and other convertible currencies with few opportunities to obtain returns compatible with their requirements on their liability side.

Building such bridges requires the completion of two tasks. First, the development of properly structured projects, with risks and returns in line with the preferences of the different types of financial intermediation, would help close the private financing gap in infrastructure.

Investors have different mandates and skills regarding the management of risks associated with types of projects, and phases of project investment cycles. They demand coverage of risks whose exposure is not adequate or permitted by regulation. The absence of complementary instruments or investors is one of the most frequently identified causes of failure in the financial completion of projects. Figure 3 provides a snapshot of the diversity of instruments and vehicles through which private finance can participate in infrastructure projects.

The constrained fiscal space in emerging and developing countries can be used to mainly cover such risks and enable the building up of investment, rather than replacing private investment: crowding-in private finance rather than crowding it out. National and multilateral development banks could prioritize this instead of financing total investments.

Identifying attractive investment opportunities for different types of investors and combining these perspectives more systematically around specific projects or asset pools is a promising way to fill the infrastructure financing gap. The planning and integrated issuance—with different time profiles—of fixed-income securities, bank loans, credit insurance, and others, for the different phases from project preparation to operation, make that combination possible.

The second task to boost private infrastructure investment in emerging and developing economies is the reduction of legal, regulatory, and political risks. Transparency and harmonization of rules and standards can increase the scale of comparable projects and make it possible to build project portfolios. Non-banking financial institutions often highlight the absence of large enough project portfolios as a disincentive deterring the setting up of business lines focused on the area. This is a particular weakness in the case of smaller countries.

The contrast between the scarcity of investments in infrastructure—particularly in non-advanced economies—and the excess of savings invested in liquid and low-yield assets in the global economy deserves to be confronted. Greening infrastructure in non-advanced economies would benefit from being able to attract greenbacks into the business.

Watch Bridging Private Finance and Green Infrastructure

Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a professorial lecturer of international affairs at the Elliott School of International Affairs – George Washington University, and principal at Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.