The economies of the republic of Azerbaijan and latin American countries as a subject of the world economy: search for new prospects. (the first is years of independence-1991-2005)

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The economies of the republic of Azerbaijan and latin American countries as a subject of the world economy: search for new prospects. (the first is years of independence-1991-2005)

Seyidov Bunyamin

The mutual relations of Latin American countries in the context of various unions of this region, which set out the aspects of the economic development of the countries has been analyzed in this article. Cooperation in the framework of these associations has affected investment in regional countries and helped generally to develop Latin American countries in all directions. Furthermore, the economies of the Republic of Azerbaijan and the Latin American countries have been mutually compared and have been carried out analyzes of future perspectives in cooperation.

Keywords: Latin America, economic relations, independence, economic systems. latin america investment regional

В цій статті проаналізовано взаємні відносини країн Латинської Америки в контексті різних союзів цього регіону, які визначають аспекти економічного розвитку країн. Співпраця в рамках цих асоціацій вплинула на інвестиції в регіональні країни та допомогла загалом розвивати країни Латинської Америки у всіх напрямках. Крім того, економіки Азербайджанської Республіки та країн Латинської Америки взаємно порівнюються та проводиться аналіз майбутніх перспектив у співпраці.

Ключові слова: Латинська Америка, економічні відносини, незалежність, економічні системи.

The countries of the world differ in natural, material and economic resources in many ways. Along with such countries, they repeat each other their geographical position, climatic conditions and labor resources. Referring to above-mentioned factors, we can say that in each country of the world economic potential is different, and this difference is always developing noticeably. It should be noted that individual States and the division of international labor as a subject of the world economy, at the same time, increase their mutual dependence, as it separates production and economic activities from objective necessity. It is no coincidence that international economic integration plays an important role in modern inter-state relations [4]. Merging national economies with the world economy requires its activities as an integral part of integration into the world economic system. It is interesting to note that the main role in the integration of the world countries and their relationship with local, regional and international organizations has great importance for studying of economic knowledge.

After the restoration of independence in 1991 the Republic of Azerbaijan began to implement their sovereign rights and pursue an independent policy in the field of economy. The main directions of this policy were an organized economic system based on different types of property, the transition to a market economy and integration into the world economy.

In the short period since the restoration of the State independence of the Republic of Azerbaijan as a result of strenuous activity and economic policy, despite the difficult initial conditions, great success has been achieved in the socio-economic development and integration into the world economic system. The greatest achievement of economic reform and development in our country at that period, was the process of building an independent state, in essence, creating a new model - Azerbaijan model.

Since the Republic of Azerbaijan gained its independence, one of the important aspects of its foreign economic policy has been related to international finance-loans and economic institutions. For over the past period in this area has been done enough work. In 1999 the Republic of Azerbaijan became a member almost of all leading international organizations, including the international monetary Fund in 1992, the World Bank, the European Bank for reconstruction and development, the Islamic Development Bank and the Asian Development Bank [2].

It is interesting that the development of entrepreneurship, the creation of a favorable business and investment environment, achieving to attract internal and foreign investments in non-oil sector was one of the characteristic features of economic policy has been carried out at this phase. It is no coincidence that as a result of expediently actions was formed entrepreneurship group and the role of private sector in the social and economic development of the country has increased [6].

As a result of the implementation of the oil strategy in the early years of independence, it has successfully prevented the recessionary and began a new phase of the transition period in 1995 - a period of recovery and dynamic growth. For the period 19952003 in Azerbaijan, the GDP increased by 90.1%, the state budget revenues increased 3-fold, the country's currency reserves-85 times, the volume of industrial production by 25.2%., the volume of agricultural production 53.9%, foreign trade turnover 4 times, the average monthly real wages engaged in the economy by 5.6 times, inflation rate was reduced up to 2-3% , the economy, focusing on the total volume of investments from all sources topped 20 billion US dollars [1].

Already, the strategic aims of the new enriched social-economic policy of the Republic of Azerbaijan were increasingly oriented towards free-trade relations. Likewise, the development of a self-developed, social- oriented, diversified national economy and integration into the global economic system have been started.

Note that in recent years the development and establishment of economic ties with the countries of Latin America have been at a high level and is one of the leading places in the foreign policy priorities of Azerbaijan. The most important issues here are the raising of the welfare of the people, increasing investments to ensure the efficiency of oil revenues, as well as ensuring foreign capital and investments, also new technologies implementation into the economy of the country. It is no coincidence that the main tasks and targets of contemporary Azerbaijan's foreign policy are to participate effectively in the rapidly changing world system, toward to ensure the sustainable development of the state, the capacities of the regional and world powers, as well as to use other foreign actors, political, economic and geo-strategic control over national resources [5].

It should be noted that many Latin American countries have also geostrategic and geopolitical interests in in the Caucasus, as well as in Azerbaijan. The rich natural resources of Azerbaijan, the favorable geopolitical and strategic situation, the location of the three continents in the center of the transport and communication system, the peaceful co-existence of foreign policy and stability in the region, as well as democracy and market economy and the tendency towards the West in the foreign policy course, and so on. Such factors have recently turned Azerbaijan into a more important partner for Latin America [5]. All these factors, taking into account the attractiveness factor of Latin America and countries of integration processes in the modern structure, international currency flows and its role (export and import of capital), including these factors in the context of the country mentioned in the countries of relations of the region with us, in addition to this, what other dividends can bring? We will try to find answers to such questions throughout the study.

First, let me briefly tell you about Latin America. Latin America borders on the North with the United States, including South America. The population usually consists of Spanish and Portuguese. These countries have a history of painful colonialism. In the terms of independence, the socio-economic development of these countries had been weak, but after independence, the development of these countries especially in the last decade of the twentieth century has significantly increased. The role of the United States in the economic and practical development of Latin American countries (especially Mexico) has been greater. Mexico's participation in the same block as the United States (NAFTA) is likely to have benefited Mexico's economic development [12; 19].

It is known that, the Latin America region is rich with natural resources (Brazil, Argentina forest resources, and agriculture, Mexican Gulf coast with oil and gas supplies, Andean countries with mining sprouts, etc.) Thereby, such factors, like capital flowing into Latin America are characterized by its own flexibility. From 1959 to 1999, the region's development rate increased by more than four times [13; 17]. This development is also linked to the choice by Latin American countries of an appropriate economic model in today's world economy.*

The fast-growing economy, the region's access to new technologies, the free market economy, the stability and sustainability have made Latin American countries more attractive. As a result, the interest of developing countries in Latin America and the Caribbean region has increased considerably. Thus, the important economic compounds have been formed in this region now are known as Latin American Free Trade Area (LAFTA), CACM, Andean Pact, CARICOM, Southern General Market (MERCOSUR) and the Organization of Eastern Caribbean States (OECS) [33; 22; 20; 36; 34; 35].

Latin American Free Trade Association (LAFTA) and Latin America Integration Area (LAIA).

Let's note that LAFTA was established by the Montevideo Agreement and signed by 7 members on 1 February 1960. Three founders- Argentina, Brazil, and Mexico have the widest economic power. Other founding members included- Paraguay, Peru, Uruguay, and Chile. The territory of LAFTA was expanded including Mexico, with the participation of Colombia and Ecuador in 1961, Venezuela in 1966 and Bolivia in 1967 to and the whole of South America (excluding Guyana, Suriname, French Guiana).

LAFTA encompasses a free trade zone as a form of unity. The main purpose is to reinforce the trade among the members and agreement of rural development and industrialization policies in the region. The organization had made great progress in its early years and had made significant strides in removing barriers to foreign trade among members and in developing predictable and regional trade. However, the sudden decline in 1967 led to the creation of a smaller Andean pact of member states. The failure of the negotiations on the Montevideo agreement in 1980 led to the stopping of activities LAFTA. Instead, a new organization was established called the Latin American region of integration (LAO) [33].

LAIA is a more comprehensive organization than LAFTA. In contrast to LAFTA, this organization gradually organizes the common market of Latin America. For realization of this aim, some factors such as mutual trade, economic integration, and realization of cooperation have been accepted. Member countries are divided into 3 groups as developed, developing and medium developing countries and the last 2 groups are specially developed for protecting against the contention of others. As a result, the differences in levels of development among members have attracted more attention to the role that LAFTA had failed, and more cautious approach to the merger in LAIA so, special regulators were established to the developmental levels of member states. According to the statistics, member countries account for 4.4% of the world exports and 4.3% of the returning shares. The share of intragroup trade in general group's export is 15.9%.

Andean Pact. As mentioned above, despite the weakness of LAFTA, some member countries have decided to act more effectively in the area of economic cooperation, and finally the Andean Treaty with the Cartogen agreement was signed in 1969. The Andean Pact is currently at the level of the LAIA subgroup and at the same time it was established by these LAIA member countries: Bolivia, Colombia, Peru, Chile and Ecuador. Then Venezuela joined to the organization and Chile left the organization. Andean Pact is a regional comprehensive small institution. Member states which are closer to each other in development levels and ideological sides. They are on a higher level than the LAIA. According this case Bolivia and Ecuador were given special status.

According to Cartagena agreement, the aims of the Andean Pact included special purposes such as increasing industrial production and productivity growth, more efficient use of the resources of the region, and balanced coordination of integration advantages. The great importance in Andean Pact is the “equal distribution” factor. The share of the Andean pact in world trade is 0.8%, while the intra-group trade is 8.9% [20].

Central American General Market (CACM). As a result of this effect, in the 1950s, the United Nations Commission on Latin America (ECLA) was integrating. At that time, the commission foresaw the model of industrialization based on the import policy in increasing strategy of developing countries. However, this factor, which was mentioned above, had great importance in the formation of the Central American General Market. Thus, the small size of the region's countries, along with the merging of industrialization and the creation of a large market, has led to the possibility of high-cost and low-cost production. With these considerations, a key agreement on economic integration was signed in Managua in the late 1960s and the Central American General Market was established. The countries joining the treaty are Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica. The main purpose of CACM has been concerned with increasing the method of industrialization in the member countries. (7) During the first 10 years of the CACM had made significant increases in regional trade flows, led to a lower level of trade with the United States. After 1970, the share of intraregional trade had declined, accompanied by a weakness in industrialization, which had emphasized the importance of internal policies and focused on export policies. According to the data of 1998, CACM has 0.1% and 0.2% of world exports and imports. The share of intra-firm trade is equal to 14.4% [23].

Association of Caribbean States (CARICOM).

CARICOM was established in 1973 with the Treaty of Chaguaramas. Members of the association are Bahamas, Barbados, Belize, Guatemala, Jamaica, Trinidad and Tabaco, Antiqua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines. CARICOM is a small region and the population is about 5 million. The countries of the region are very slow in terms of development, and the main export products are butter, bauxite, aluminum, and sugar. Among the most developed countries are Jamaica, Trinidad and Tobago and Barbados. The above-mentioned community considers to establish a Customs Union between the member countries. Its share in world exports is 0,1% and its share in world imports is 0,2%. The regional trade rate is 9.1% [21].

The Organization of Eastern Caribbean States (OECS). Antiqua and Barbuda, Dominica, Grenada, Montserrat, Anguilla, Saint Kitts and Nevis, Saint Vincent and Grenada, St. Lucia organized the Organization of Eastern Caribbean States OECS)(18 June 1981). Then Anguilla and the Virgin Islands joined to the OECS [14; 15]. OECS is administered by the Central Secretariat in Marne, Saint Lucia. The Directorate of Secretariat is chaired by the General Director, who is the responsible representative.

Southern General Market (MERCOSUR). MERCOSUR is a larger commercial and political trade block in Latin America. The Union covers 45% of the Latin American population, more than 50% of GDP and 40% of the investment of the region. It was established in 1991 with the participation of four countries. MERCOSUR members are: Permanent Members: Argentina (1991), Paraguay (1991), Brazil (1991), Uruguay (1991), Venezuela (2006); Correspondent Members: Chile (1996), Peru (2003), Ecuador (2004), Bolivia (1997), Colombia (2004), Suriname (2015);

Observers: New Zealand and Mexico. In 2016 Venezuela stopped its activities in this integration block. The purpose of the organization is the free movement of commodities, capital and labor force, and the introduction of unified foreign trade tariffs in relation to third countries. The organization also carries out a policy of centralization in such areas as agriculture, transport, communications, financial and currency systems, Currency Exchange, taxation, and others.

MERCOSUR has the following governing bodies: Executive - General Market Consulate; Common Market Group; Administrative Office and Social-Economic Forum; Market Commission; Work Subgroup; Joint Parliamentary Committee. In addition, there are 10 technical committees, including adjusting market group and some related institutions in the field of financial and monetary and macroeconomic policy, agriculture and energy. The Export block increased nearly four-fold in the years 1991-1997 [34].

Of course, these unions were the unique place and the role in the international traffic (exports and imports) of Latin American countries. In order to get way out of poverty, it needs to stabilize the formation of key sectors of the economy, and bring dynamism to the economy in entirely to Latin American developing countries are currently actively attracting foreign capital. For this purpose, each country has been able to improve its investment share for foreign entrepreneurial capital but has been also taken important steps to create the necessary infrastructure.

Currently, the decline in growth of the non-conformity (5-7%) between the volume of national investments and the volume of investments in Latin American countries still needs the foreign capital for the development of the economies of the region. Actually, the flow of direct foreign investment to Latin America in the 1990s has sharply increased, but later these indicators have gradually declined. [18].

In recent years, the main inflow of foreign capital into the continent is largely due to portfolio investments, where the sale of government securities has gradually exceeded the company's shares. The emergence of an economic slumping indicated that “hot money” has gradually disappeared from the country and inevitably led to a financial crisis. However, a significant part of foreign investments is still speculative short-term capital, in the case of political and economic inefficiencies, causes such investments to leave the countries sooner.

Such situations were more common in Mexico in 1995 and in Brazil in 1998, which had a huge impact on the known Asian crisis.*(9) All this indicates that there is weakness in the economic structure compared to the internationalization of the financial capital of the region.

The slowdown in Latin American economic growth continued from 1998 until 1999. However, since 2000, the development of rehabilitation has begun in several countries of the region. In 1999 the development rate of the zone was less than 2% in 1998 level [11]. This factor was related to the worsening of foreign trade conditions and the factors of the decrease in the capital market.

It should be noted that the current balance of payments in the countries of the region decreased mainly due to the decline in imports and despite the deterioration of the budgetary situation of the countries, the situation is expected to improve. In the context of existing situations, there is much hope for foreign investment.

Interestingly, the size of the weakening of development and its recovery rates are observed in different countries with different indicators. Some large states have better indicators. For example, the Brazilian “quick response strategy” on the currency crisis has ended the speculative capital inflow and has created considerable opportunities for short-term recovery. The rigid budget-tax policy and the flexible regime in foreign currency of Mexico turned back the trust of foreign lenders and managed to achieve 3.5% growth [8]. Since 2000, regional economic growth has been at the level of 3-4%, with Chile, Mexico and Peru being especially chosen as the countries that are taking this increase.

Argentina, on the other hand, has succeeded more often in the development of such indications in the international capital markets, with the expansion of more targeted interests.

However, this is a bitter fact, even though economic development in the region is still maintaining the imbalance of property in the vast majority of the region's countries, with 35% of the region's population or about 177 million poor people are still reducing existing risk factors [8].

Foreign Direct Investment environment in Latin America and the Caribbean: In 2005, the flow of capital in Latin America was weakly developed. Thus, Direct Foreign Investment receipts have increased slightly as a result of its substantial component of its high reinvestment wage.

It should be noted that the major part of investments in Latin America and the Caribbean are directed to the countries of the region, which is mainly aimed at promoting the development of their Foreign Direct Investment. Which, in turn, is accompanied by the weakening of the service areas and the transition to the foreground. The rise in commodity stocks contributed to the improvement of current account balance in many countries and the pricing policy on the contrary.

Strong development of Foreign Direct Investment receipts in Andean region: In 2005, Foreign Direct Investment receipts reached $ 104 billion in Latin America and the Caribbean Basin, while offshore finance centers were 3% higher than in previous year, including the outbreak. So, here the receipts grew by 12%, reaching $ 67 billion in 2005.

Which, these receipts has grown to about $ 45 billion in South America, expanding by 20% [16].

Note that, while Latin American countries and their countries helped them, their high expansion was accomplished. At the same time, offshore financial centers in Andean states also remained at the same level as in 2004 ($ 23 billion). Outflows to offshore financial centers declined by 10% to $ 36 billion. (16) This shows that large-scale fixed capital formation has slowly improved in Foreign Direct Investment receipts. This indicator increased by 16% in 2004, to 17% in 2005.

In 2005, Foreign Direct Investment receipts expanded slightly with the exception of offshore financial centers, and the countries of the region remained behind in their own sales declines. As a result, revenues Foreign Direct Investment receipts in the six major recipients in the top six countries, including other financial centers, increased by 177% in 2002-2003 and amounted to $ 42 billion dollars. In this expansion, only the Foreign Direct Investment revenues of Brazil and Chile amounted to $ 11 billion. Because of the transparent receipt of reinvestment salaries in the named countries, in 2003, it was a component of some FDI [16].

Source: UNCTAD, FDI/TNC www.unctad.org/ fdistatistics

Finally, consider the diversification of existing diversity for different countries.

- Direct Foreign Investment receipts declined in Brazil and Mexico in 2005. In addition, Brazil's continued circulation of currency may have a negative impact on the prospects for export-oriented assets.

- Although revenue in Colombia was high in 2005, as the mining industry, oil and telecommunications spurred the CPI's dynamic development, this factor led to the capture of foreign companies by local companies.

- In 2005, the local Almendral group bought and sold 934 million Dollars of Telecom Italias in Chile, resulting in a reduction in FDI diversification. Reinvestment wages grew by 7% to $ 6.3 billion, and their share in FDI receipts increased from 83% in 2004 to 95% in 2005.

- The 9% increase in DFI receipts in Argentina had a positive effect on economic growth (8% over the past 3 years - more than 9%).

As a result, the research of development features and models of Azerbaijan and Latin America allows to put a satisfactory position on these countries and in general for the countries of the region. Although Latin America still has not achieved a significant economic breakthrough as a result of many economic reforms, the drop in the level of inflation suggests that the countries of the region are making more effective use of their economic instruments. However, in the period when the economic development of the United States declined, have been obligated the activation of tax, finance and trade reforms in accordance with the demands of the International Monetary Fund in the region.

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