México – a new regional power in the Américas

México in the 21st Century

The stereotypical image of México, particularly the steady flow of security-related stories in the international media, is not flattering. However the numbers tell a different story.

México is roughly the size of Western Europe. It is the world's 14th largest economy, producing 2.2pc of global GDP and the world's 10th largest producer of oil. Goldman Sachs and The Economist predict that México has the potential to become the 7th largest economy within the next 40 years. It has a young and urbanised population. Around 50pc of the population are under 25 and around 77pc live in urban areas.

México is a trading nation with more Free Trade Agreements than any other country (13 agreements with 44 countries including the US and the EU). Around 80pc of Mexican exports have a US destination. Nearly 1million people and $1bn in trade travel between the US and México border everyday – making it the world's busiest border.

It shares similar values to Europe and the US: political openness, free trade and a willingness to debate and act on key 21^st century challenges. México is a member of the G20 and was previously a co-ordinator of the G5 major emerging economies.

Position in the world in 21^st century

However México does not yet project a clear strategy for its long-term development. It remains uncertain about its role and position in the world – now and in the future. It has yet to work out whether it is serious about challenging Brazilian regional leadership, and about becoming a global power too.

It appears that within México there are still conflicting views on how much it should aspire to play a wider regional role. It has a strong history of non-interventionism in the region. But México could do so much more in light of its economic weight. It could position itself as a convening power and deal-maker in the Americas. It could also be much more demanding of other neighbouring countries in the region if it wanted to.

Relations with the US have never been better

The importance that the US attaches to its bilateral relationship with México was illustrated in President Calderón's first State Visit to Washington in May 2010. President Calderón was granted generous access to President Obama, a one-on-one meeting, a press conference and he was granted only the second State Dinner to be celebrated under the Obama Administration at the White House. As a result both President Calderón and President Obama have built a genuinely strong and productive relationship.

During the State Visit, President Calderón became the first Mexican President to lay a wreath at Arlington National Cemetery's Tomb of the Unknown Soldier. Previously Mexican presidents had declined this request, not wanting to dwell on US military incursions into México, but President Calderón's visit to Arlington represented the 21^st relationship between México and the US, in which Calderón used the opportunity to recognise the role of Mexican Americans in the US military.

The State Visit showed that México-US relations were on a good footing with the US characterising the relationship as: “The United States is proud to be México's friend, partner and neighbour...we will succeed or fail as one...”

Mexican innovations for the north

The US economy has been undergoing a massive economic structural shift over recent decades with those at the bottom feeling the pinch of stagnating wages and even more so after the 2007 financial crisis. Mexican companies, seeing an opportunity, a growing demographic of increasingly poorer people in the US, have begun to export their own emerging economy innovations. For example, MedicallHome, a Mexican company that provides medical advice over the phone for $5 a month, as well as access to its network of 6,000 doctors has expanded north of the border with great sucess. Similarly, a subsidary of Carlos Slim's América Móvil, has also been selling pre-paid mobile phones popular in México. More than 3 million phones have already been sold in the US.

So what role should México play

México appears to be punching below its weight in the region in the 21st century. Even though it has only half the population of Brazil, geographically it is the US' closest neighbour and in many ways its most like-minded “ally” in the Americas, where more countries are increasingly becoming hostile to free trade and political openness. If México is serious about becoming a major emerging regional player, it needs to begin to act like one in the eyes of the other players on the world stage.

To do this, México needs to gain momentum across bilateral and multilateral issues to win it influence with the other big players like the EU and China. If this were to happen, México would be in a position to become a strong regional player with the ability to shape the outcomes on some of the big questions of the 21st century. The key challenge is, will México and its leaders step up to the fray?

Water for the North of China – 南水北调



Map of the three routes for the South-to-North Water Transfer Project to
alleviate the lack of water in the north of China


Water scarcity in Chinese history is a big issue. China has suffered from water scarcity in the north since ancient times. Summer monsoon winds originating in the Indian Ocean sweep into China. When the summer monsoon is stronger, the moisture-laden winds push the rains farther northwest into China. But when the monsoon is weak, the rains fall farther south and east, depriving northern and western parts of China of summer rains.

Recent research on the strength of monsoon rains over the last two millenia has thrown up some interesting results. The research was based on the layers of stone in a 118-mm-long stalagmite dating from 190 AD found in a cave in Gansu Province in China. It has allowed researchers to match, the amounts of uranium and thorium throughout the stalagmite, to tell the date each layer was formed with the “oxygen signature” in the stalagmite that shows the amounts of rainfall—a measure of summer monsoon strength—to those dates. The researchers discovered that periods of weak summer monsoons coincided with the final years of the Tang (618-906AD), Yuan (1279-1368AD) and Ming (1368-1644AD) dynasties, which are known to have been times of popular unrest and social upheaval. In contrast, strong summer monsoons prevailed during one of China's "golden ages," the Northern Song Dynasty (960-1279AD).

Without the strong rains, food becomes scarce causing social problems and unrest. Hence it is no coincidence that China's most successful dynasties all fell in times of water scarcity. In the 20th century Mao was greatly aware of the need to keep the north watered, in 1952, he called for a scheme that would divert water from the southern Chinese rivers to the north to ease the growing water shortages in the cities of Beijing and Tianjin and the northern provinces of Hebei, Henan and Shandong.

The South-to-North Water Transfer Project

In the 21st century, the mammoth task of transferring water to the north has begun. The South-to-North Water Transfer Project is an incredible feat of engineering on a very grand scale, the aim of the project is to transfer at least 44.8bn cubic metres of water each year from the the Yangtze River in the south, to counter the thirst of the north China plain and its 440 million people. It is the largest project of its kind ever undertaken in the world. The rapid growth of megacities — around 22 million people in Beijing and 12 million in Tianjin alone — has put considerable strain on the ground water aquifiers in the north. In recent years, urban and industrial development has often been supplied with water at the expense of agriculture leading to severe water shortages in rural areas.

Map of the the three routes of South-to-North Water Diversion Project

The project will link China's four main rivers – the Yangtze, Yellow River, Huaihe and Haihe – and requires the construction of three transfer routes, stretching south-to-north across the eastern, central and western parts of the country. In August 2002, the project was approved  and work began on the eastern route of the project in late 2002, and on the central route in 2003. The Central route is due to be completed shortly. Work on the western route is more complicated and is not due to be completed until 2050.

But not everyone is in favour

The project has been criticised for its lack of concern for the environmental impact and the human impact on people being relocated to make way for the canal on the central route. Questions about the cleanliness of some of the water being transferred have also been raised. In the US, the New York Times said the project was like "...channeling water from the Mississippi River to meet the drinking needs of Boston, New York and Washington." 

The below video report provides some further opinions on the the South-to-North Water Transfer Project:

Nevertheless, it is clear, that if China is to continue its growth and development in the 21st century, it must resolve the problem of water scarcity in the north. With 22pc of the world's population, China has only 8pc of the world's fresh water which adds to the challenge. Its per capita availability of fresh water is barely a quarter of the world average. Furthermore, the north accounts for around 37pc of the country's total population, but has only 12pc of the country's total water resources. Yet, in the south, about 1,000bn cubic meters of water from the Yangtze River empties into the sea each year. There is no easy solution to this geographical conundrum and the scale of the problem is huge.

The Geo-Trade Blog believes the South-to-North Water Transfer Project provides a practical solution to a tricky geographical problem that goes back thousands of years. The water transfer project appears to be a logical trade-off as long as the north continues to play fair and does not take advantage of the arrangement to develop further at the south's expense by taking a greater share of the water from the Yangtze River. Although if water remains at present levels, there appears to be enough water for all.

Turkey, the 'European BRIC'– a new regional power in 21st century

An aerial view of Istanbul - the Bosphorus

At the beginning of the 21st century Turkey is once again rising to become an economic and political power, both in its region and in the world. The rise of Turkey is one of the last decade’s most important stories. Last year it grew faster than any other big economy except China and India. As the world’s 17th-biggest economy, Turkey has become a leading member of the G20 club. It has NATO’s largest army after the US.

The reach of Turkish companies is also spreading. They operate not just across the region but around the globe. Many construction projects in the Middle East involve Turkish firms and workers. Turkish Airlines, has turned into a global force as Istanbul, now Europe’s biggest city by far (at around 15m), has become an aviation hub.

A new canal linking the Black Sea and the Sea of Marmara

Map showing where the proposed new Canal Istanbul
will be built by 2023

In the run up to the latest Turkish elections, the ruling AK party which won a new mandate on 12 June 2011, pleged to build another bridge across the Bosphorus and more spectacularly a new canal linking the Black Sea and the Sea of Marmara that would be a match for the Panama Canal. This project was first proposed by Sultan Suleiman the Magnificent in the 16th century.

The new canal will be called 'Canal Istanbul', it will link the Black Sea to the Sea of Marmara, which leads to the Aegean Sea. The new waterway will be located on the European side of the Bosphorus. Its main purpose is to reduce the heavily congested tanker traffic through the Bosphorus Strait and to minimise the risk of accidents. The proposed Canal will have a length of around 48km with a depth of 25m, a width of 150m on the surface and 120m at the canal bed. This will allow the largest vessels to pass.

The project is intended to be completed in time for the 100th anniversary of the Turkish Republic in 2023.

A new regional player

Turkey's location between Europe and the Middle East lends it huge geo-trade significance, not least as an energy and pipeline corridor. Over the last decade, it has developed closer relations with Georgia and with Iran, Iraq, Syria and other Middle Eastern countries, to the consternation of its traditional allies, the US and Israel.

Azerbaijan provides Turkey with access to the energy-rich Caspian Sea states of Kazakhstan, Turkmenistan and Uzbekistan. Turkey is also a strong supporter of the 1,768km Baku-Tbilisi-Ceyhan pipeline that runs from Baku to its Mediterrenean port of Ceyhan.

The EU accounts for 75pc of foreign investment in Turkey and roughly half its exports and inward tourism. Turkey is Europe’s third-biggest producer of televisions. Likewise, Europe's energy security depends on the transit of oil and gas from Central Asia and the Middle East through Turkey.

Europe and Istanbul relations

Europe in its history has had an uneasy relationship with Istanbul during the Ottoman Empire, in fact, some might say that Europe has been almost defined, through the centuries, by a tension between Christian and Islamic boundaries and by Muslim encroachment in Europe from the East and the South. To some extent, in some European countries, this view still pervades policy makers today when considering Turkey's accession to the EU.

Today the EU needs to ensure that it does not turn inwards and become fixated on internal questions. There is a real danger that Islamic identity is defined as 'the other' and while this debate ensues, Europe misses the bigger picture of what is happening in the world in the 21st century. The EU – with 330m people alone in the Euro-zone area has a key role to play in the 21st century. But it needs to remain outward-looking to understand the changes taking place in emerging economies and in the greater world in Asia-Pacific to become an active global player.

In the 21^st century, Turkey is the closest thing Europe has to a BRIC. The EU must find ways to enhance its relations with this important new emerging regional power. Perhaps through a Special Economic Zone to provide access to the EU internal market, the EU's greatest success to date. Then maybe with the option for Turkey to join the Euro too if it meets the fiscal criteria. Turkey could also be invited to join the Schengen agreement to enable free movement of persons through the Schengen Member States. Europe needs badly to embrace Turkey, it needs the fresh perspective and energy of the Turk people and to harness the economic firepower of an important emerging economy on its dooorstep.

The InterOceanic Highway between Brazil and Perú connecting the Atlantic and Pacific Oceans

InterOceanic Highway between Perú and Brazil that connects the Atlantic
and Pacific Oceans



The InterOceanic Highway (Carretera Interoceánica is the official Spanish name and Estrada do Pacífico is the Brasilian name) will have a total distance by road of 5440kms from the Atlantic to the Pacific.

The road is one of the biggest construction projects ever undertaken in América Latina. The highest point is 4850m or 42m higher than Mont Blanc, Europe's highest mountain. Twenty two bridges are being built including a spectacular new bridge of 722m across the Madre de Dios River at Puerto Maldonado in Perú.



 The InterOceanic Highway got off the ground due to the support from three Presidents Lula da Silva (Brazil), Alan García (Perú) and Evo Morales (Bolivia). All were key supporters of the project through which they sought the further integration and development of the three countries: Brazil – the giant of América Latina with its huge area of the Amazon, Perú with its Pacific coast and also with more than half its land area in the Amazon and the land-locked Bolivia with massive energy resources in need of infrastructure to transport them to the sea ports.

Over 4650km are complete and fully asphalt covered. Work is progressing on the final section 736kms from the Amazon basin and over the Andes mountains. The cost has been budgeted at 1.3 billion dollars.

The InterOceanic Highway will open up the Pacific Ocean to Brazil and Bolivia. It will connect América Latina's biggest mega-city São Paulo with Perú's three ports on the Pacific Coast; San Juan, Mataraní and Ilo. América Latina has benefited from the boom in the world price for mineral resources. Perú is the world’s largest silver producer, second largest producer in copper and zinc and sixth in gold.

Peru has advanced considerably over the last five years. Since 2006 growth has accelerated, averaging 7% despite the world recession. The share of Peruvians living in poverty has fallen from 49% in 2004 to 35% in 2009. Social indicators have improved immensely - between 2005 and 2010 Perú climbed 24 places in the United Nations Human Development Report.

Much of the Pacific coast, where farmers export asparagus, grapes and other products enjoys almost full employment in 2011. Though many parts of the Andean highlands remain poor, the arrival of the InterOceanic Highway has cut journey times meaning that many farmers there too have joined the export boom. Much of this succes is due to the vision of outgoing Peruvian President Alan García and his predecessor Alejandro Toledo. Both pursued policies of price stability, fiscal rigour, foreign investment, open trade and investment in major civil works infrastructure.

Perhaps Alan García's vision for Perú and América Latina is best summed up in his own words:

"We will be a first-world country soon, but we need to keep the goal in sight, and the goal is work, effort, execution of public works. We don’t live on words, we don’t live on promises, we live on concrete works.”

Unfortunately Alan García was not able to choose a sucessor in the same way that Brazil’s Luiz Inácio Lula da Silva and Colombia’s Álvaro Uribe had managed to do in 2010. His party, did not even have a candiate in the first round of presidential elections held in April 2011. None of the three centrist moderate candidates made it to the second round of voting on 5 June 2011. Instead the Peruvian electorate was presented with Ollanta Humala, an ex-army officer with affiliatons with Hugo Chavéz and Keiko Fujimori, the daughter of the former president now serving a 25 year prison term for human rights abuses. Ollanta Humala, prevailed by a narrow 3% margen with a manifesto programme that looks unlikely to deliver the growth rates needed to continue to lift peruvians out of poverty and at best reads like a recipe of missed opportunities for the next five years.

Cities in the 21st century — a city-dominated world

Picture of Beijing in the 21st century

The 18th and 19th centuries were the last centuries of empire in the world. The idea of the nation-state took hold in the 19th century. The Wesphalian idea of nation-state sovereignty that basically says that a nation's affairs are its own, and no other state has the right to act within its borders has been the basic diplomatic template since the 17th century. The limits to the nation-state were shown by European rivalries at the beginning of the 20th century while growth in cities began to flourish from the mid-20th century across the world. As a consequence the 21st century looks set to become the 'century of the cities'.

By the year 2030, three out of five people will live in cities. The UN forecasts that today's urban population of 3.2 billion will rise to nearly 5 billion by then. The top 25 cities in the world account for more than half of the world's wealth. And the five largest cities in China and India account for 50pc of those countries' wealth.

This increase will be most dramatic on the least-urbanised continents, Asia, América Latina and Africa. Surveys and projections indicate that most urban growth in coming years will be in emerging economies as the map below indicates.


Map of Growth in Cities since 1950s, 2000s and projected to 2015

Mega-regions

A new concept has recently arisen in the growth of cities known as the 'mega-region'. A mega-region occurs when growth in cities in a particular region is accelerated. Research shows that the world's largest 40 mega-regions cover only a tiny fraction of the habitable surface of the planet and are home to fewer than 18pc of the world's population but account for 66pc of all economic activity and about 85pc of technological and scientific innovation. The mega-regions, rather than countries, are becoming the key driver behind economic development and wealth creation.

The largest of these is the Shenhzen-Guangzhou region in China, home to about 120 million people. China is planning to create the world's biggest 'mega-region' by merging nine cities to create a metropolis twice the size of Wales with a population of 42 million.

Map of new Chinese mega-region

The new mega-region will cover a large part of China's manufacturing heartland, stretching from Guangzhou to Shenzhen and including Foshan, Dongguan, Zhongshan, Zhuhai, Jiangmen, Huizhou and Zhaoqing. Together, they account for nearly a tenth of the Chinese economy.

By 2015, around 150 major infrastructure projects will mesh the transport, energy, water and telecommunications networks of the nine cities together, at a cost of some 2 trillion yuan (£190 billion). An express rail line will also connect the hub with nearby Hong Kong.

A new concept 'Aerotropolis'

In a new book titled “Aerotropolis: The Way We’ll Live Next” by Kasarda and Lindsay, the authors develop a vision of the 'aerotropolis' as a symbol of a city-dominated world. The aerotropolis is “glocal,” a place that draws on local competitive advantages (like cheap labor) as it plugs into the  21^st century global on-demand-production supply chains. Therefore it makes sense to affix cities to airports on the model of the aerotropoli for air transport companies such as Fedex and UPS. Hence an airport, having begun life as an outlying curiosity, on the edge of the city, becomes the heart of the mega-region or mega-city, its raison d’être.

The book illustrates this new concept through a series of compelling numbers. While world GDP rose 154pc between 1975 and 2005, world trade grew 355pc. Meanwhile, the value of air cargo climbed an astonishing 1,395pc. More than a third of all the goods traded in the world, some $3 trillion worth - but barely one percent of its weight! - travels via air freight.

If the book is right and Aerotropoli do take off, then, this has the potential to further push international trade relations between mega cities and mega-regions into the foreframe and leave the country relationship as a minor detail. For example, when New Songdo, an aerotropolis near Seoul, does business with São Paulo, the South Korean-Brazilian relationship is of little interest. Likewise the new Chinese Shenhzen-Guangzhou mega-region is likely to pay little attention to what the UK thinks, but will be very interested in London.

Mongolia – a new concept for "buffer states" in the 21st Century

Map of Mongolia, geographically located between China and Russia, 
the 21st century regional powers in the former "buffer states" of Central Asia



Qing (Manchu) Dynasty

The 清朝Qing (Manchu) Dynasty (1644-1911) was China's last dynasty. The Manchus were Mongol-like horsemen turned merchants from Manchuria. They were of mixed Mongolian, Korean, Chinese and Jurchen stock. The Manchus sucessfully expanded the Chinese Qing empire far into Central and Southeast Asia and managed to bring Tibet and Mongolia under Chinese control through a system of buffer states. The Manchu success was attributed to their ability to marry Mongol military technique with Chinese administrative government.

Buffer states and Chinese territorial control up until 19^th century

For around 18 centuries, China's geographical position was protected in all directions by a system of buffer states. The aim was to carefully administer and rule a “China territorial core” (which roughly hadn't changed territorially since China's first unification under the Qin emperor in 221 BC) and then surround this with a group of buffer states or territories, ruled through different forms of agreements. This system granted security, trade and served to expand Chinese imperial virtue to the outside world.

In the 17th century the 清朝Qing dynasty conquered China, taking over the Ming Dynasty. At the same time Russian encroachment started into the once deserted and loosely controlled Siberia. The Russians started thinking of Siberia in terms of the European state, that is they wanted clear, limited frontier positions, not loosely ruled, buffer zones. This led to a series of treaties and wars marking the borders between Qing China and Russia for over two centuries, by which Russia took large parts of Siberia's frozen desert.

In the 19th and 20th centuries, the buffer states were increasingly encroached upon from all sides. While the Russians were coming from the north, the British were coming from the sea and from the south. The first opium war came in 1839-42, which led China to accept different rules of trade and administration of foreign merchants working in China, and in 1939-42 the first British-Afghan war saw British forces reaching the south west frontier of one territory which was loosely under China control - Tibet. In the same period the French conquered Indochina, a buffer state of the Qing dynasty, and the Japanese rejected Chinese patronage and conquered Korea, also a part of the Qing empire. The Qing dynasty eventually collapsed in 1911. But encroachment by foreign powers on all the sides of the Chinese border changed China's perception of its own territory and of the use of buffer states.

Mongolia today in 21^st century

Today the concept of buffer states for security and trade with Central Asia and other surrounding countries is no longer relevant. Instead Mongolia and other former buffer states in Central Asia are now the subject of intense commercial interest due to their immense mineral resouces and proximity to China. Mongolia has some of the largest coal mineral resources in the world as well as immense reserves of copper, gold and uranium.

China's national energy strategy is currently focused on securing increasingly scarce resources while diversifying away from the western world. Hence China is investing heavily in mineral resources from Mongolia. Since 2003, it has invested around $500m in FDI in Mongolia. This is because much of Mongolia's coal is the high-quality “coking” variety vital to steel production and it is located only 145km from the Chinese border. Interestingly, China now produces 50pc of the world's steel. Hence Mongolian coal is set to become a cornerstone of Chinese energy policy that will fuel Chinese economic growth in the 21^st century. 

Mongolia and other Central Asian States have long been intertwined with Chinese history and its system of "buffer state" territorial control. But today, China's investment in this former buffer zone, where a third of Mongolians are still nomadic or semi-nomadic in the 21st century, is beginning to open it up to the outside world. A further development is the beginning of a new wave of commercial relations between China and Russia that the US is unable to compete with.

So far, it appears, in the 21^st century, that neither China nor Russia sees Central Asia as its exclusive domain. In Mongolia, both Russia and China are treading carefully. Russia's influence in Central Asia combined with Chinese investment cash, together, is working to transform what were fragile buffer states into a transit corridor based on trade in energy and minerals. The Geo-Trade Blog believes that it is highly possible that this could give rise to trade in a whole range of goods and services in a flourishing new trading corridor through the former Central Asian buffer states which the European bloc countries could also tap into due to their geographical proximity. It is here where economic power is being exerted and the shape of the world in the 21st century is beginning to emerge.

Piracy on the high seas in the 21st Century – Somalia the new pirate base

Pirate Ship on the high seas

Far from the one-eyed barbarians and the Long John Silvers of folklore and fiction, pirates in the 17th and 18th centuries tended to come from highly skilled sailors who rebelled against the tyranny of their imperial masters. Once they had procured their own ship, articles were drawn up governing the conduct of the pirates. These articles were remarkably egalitarian. The captain of the ship was elected by the sailors and a quartermaster was elected to administer booty and to act as a counterweight in order to keep the captain’s power in check. Profits from shipping raids were distributed equally among all the sailors. When a pirate misbehaved, a meeting of all the sailors was called to determine the appropriate punishment. The pirates of the 17th and 18th centuries developed their own unique form of distributive justice.

New pirate base in Somalia in 21st century

Over the last decade Somalia has become synonymous with piracy. In 2010, alone nearly 1,200 people were taken hostage in the waters of Somalia. Rather than the more conventional 17th and 18th century "robbery at sea" piracy, Somali piracy takes the form of hijacking and extortion. This pattern evolved from so called "defensive" piracy that began early in the last decade as a response by local Somali tribal fishermen to unlicensed foreign trawlers and the dumping of toxic waste. These outsiders exploited the absence of a functioning Somali state capable of protecting its coastal waters.

The way the pirates operate is to take the commercial vessels usually by only firing warning shots before boarding the vessel. The goal is then to extract the highest possible cash ransom and to return the ship, its cargo and its crew in decent condition. So far this business model has proved very lucrative. It is estimated that Somali pirates may have earned around $238m last year alone.



Somali Pirate on board a hijacked commercial trade ship
know as a "mothership"

In 2008, almost all the attacks were in the Gulf of Aden – a passage for 20pc of the world's commercial shipping between Asia and Europe. But when international anti-piracy navy ships began to patrol these waters, the pirates modified their strategy to roam farther by using "mother ships" seized earlier as floating bases in the Indian Ocean. The below map sourced from The Economist shows the increased area of pirate operation in recent years:



Map of Somali Pirate Areas of Operation from 2008-2010


Piracy and ‘lawlessness’ in Somalia

A new study published in February 2011 shows that state failure is not necessarily a significant predictor of piracy. The study shows that for countries with very poor levels of governance, small improvements in such things as law enforcement, stability and security can actually lead to more piracy. 

Truly well-governed countries produce few pirates. However within Somalia– a so called "failed state", the report points out, most pirates originate from the relatively stable Puntland rather than the truly anarchic south and piracy is reduced when violent territorial conflict intensifies. The report argues that this is no coincidence: a basic level of law and order is necessary for pirates to ply their illegal trade.

The implications of this report are that Governments and multilateral organisations working on initiatives against Somali piracy in the region ought to focus on assisting Somalia and other neighbouring countries to truly enforce the rule of law. So far the EU has launched Operation Atalanta in 2008 and the UK has provided the Royal Navy's UK Maritime Trade Operations office in Dubai as a reporting hub for pirate activity. But much more needs to be done along the lines of Article 100 in the preamble to the UN Convention on the Law of the Sea:

"All states shall cooperate to the fullest possible extent in the repression of piracy on the high seas or in any place outside the jurisdiction of any state".

Until this happens, it is highly likely that the Somali pirates will continue with their devastatingly effective business model.

From the Spanish dollar to the US dollar – a new international world currency for the 21st Century?

 

Printing press making US dollars, the world's currency reserve at present

In the 18^th century, the Spanish dollar (real de a ocho or the piece of eight in English) became the first ever, truly, world currency. It was used in Europe, the Americas, the Middle East and throughout Asia. It was minted in the Spanish Empire in the Americas from 1497.

Spanish-American silver was used for the world currency. Mints set up in the new world produced silver coins, mostly for export to Spain. Trade and Spanish Government spending spread the Spanish dollar coins into the rest of Europe. They were carried by merchants into the Middle East and beyond by the new sea routes to India and China. Spanish-American silver dollar coins crossed the Pacific to the Philippines and on into China and Greater Asia. Hence it was that the Spanish dollar was the first world currency and the real de a ocho coin became the coin upon which the US dollar was later based.

US dollar's reserve currency status

In the 21^st Century, the US dollar has the all important world reserve currency status. The bedrock of the dollar's reserve status is its role as the global petro-currency. This status often allows the dollar to defy gravity even though the US keeps borrowing and expanding its money supply.

At a Summit in April 2011 attended by the BRIC countries (Brazil, Russia, India and China) in China, a key topic on the agenda was the US dollar's reserve currency status. There have been rumblings for a while that the BRIC countries would like to see their economic power mirrored in the reserve currency. They view the advantages that the US gains from the dollar holding the reserve currency status to be unfair. As a result the BRIC countries have recently begun to offer each other loans in their own national currencies, not in US dollars. And the Chinese Development Bank has now formally offered 10bn yuan loans to other BRIC members for large oil and gas projects. Russia and China are now too trading oil in rubles, rather than dollars. This is of enormous Geo-Trade strategic importance as it could begin to weaken the dollar's role as the global reserve currency especially since a new Sino-Russian oil pipeline has recently opened that will pump 1bn barrels of oil a year from Russia to China.

Furthermore the BRICs are all creditors to the US – with the Chinese in particular holding vast amounts of US Treasury bonds. Due to this, it is unlikely that they will make moves to dislodge the dollar as this would harm the value of their own Treasury bond holdings. Instead, the BRIC countries are pushing for the IMF to overhaul the role of Special Drawing Rights (SDR), the international unit of account comprising the US dollar, euro, yen and sterling.

The BRICs would like the IMF to include the yuan and the ruble in the Special Drawing Rights (SDR), if that were to happen, then the SDR would be able to ultimately replace the US dollar as the global reserve currency. That would mean the end of US global hegemony and it would force the US to address its massive overseas debts.

The US dollar keeps on falling

The US dollar has been on the decline for some time but recently decline has taken it to new lows. The chart below sourced from The Economist shows the nominal exchange rate, in trade-weighted terms (ie, against the country’s trading partners). The index is now 30% below its level when the Bretton Woods System was abandoned in the early 1970s.



Chart of US Dollar Exchange Rates for the last 40 years

What does this all add up to?

At present the US' creditors (many of them BRIC countries) are having to cope with the unappealing combination of holding low-yielding Treasury bonds in a depreciating currency combined with their desire to begin to exert influence on the global economy in line with their economic weight. The 21^st century looks certain to see in a new era and a potential new international world currency emerging. It is wholly possible that a revised basket of currencies making up the Special Drawing Rights Reserve could take on this role.

América Latina – an Atlantic Side and a Pacific Side



 

América Latina with the Atlantic Ocean to the right and the Pacific Ocean to the left



The Atlantic Side

Latin America is a Continent that straddles the two big oceans of the world – the Atlantic and the Pacific. In the past two decades, the Atlantic side has led on regional integration initiatives. In the 1990s, Brazil and Argentina forged Mercosur, a four country group together with Uruguay and Paraguay. Mercosur was based on a vision of free trade and a quest to expand markets.

Talks even began for an even grander project to create a 34-country free trade area of the Americas. But free trade was not to the liking of the left-wing governments that came to power over the last decade. The former Brazilian President, Lula da Silva, ended the talks for the Americas Free Trade Area preferring a much scaled back forum for political cooperation known as the South American Union (UNASUL in Portuguese) which he sponsored.

Meanwhile Hugo Chavéz, Venezuela's president, formed ALBA, an anti-US bloc, with Cuba and Bolivia and other allies. Up until now, Latin America has seen endless talk of regional integration, but it has all added up to rather less action.

The Pacific Side

But in the 21st century, in May 2011, the Pacific facing countries Chile, Colombia and Perú are about to embark on a new Pacific Integration project that returns to the free trade vision of the 1990s. It is based on a growing affinity between the Pacific countries who are keen on using market economies, foreign investment and trade with Asia to achieve development.

After two years of negotiation, the Integrated Latin American Market or in Spanish, Mercado Integrado Latinoaméricano (MILA) is about to be born. It will mean that traders on the stock markets of Chile, Colombia and Perú will be able to buy and sell shares of companies listed on the other two. Operations of a joint stock market linking Chile, Colombia and Perú are scheduled to begin on 30 May 2011.

The new Integrated Latin American Bolsa (Stock Market) will have a market capitalisation of over $600 billion making it the second biggest after Brazil's BM&FBovespa. It will mark a new closeness in economic relations between these three Pacific Latin American countries and will be one of the first steps towards their aspiration to form a common market.

The idea of a new Pacific Common Market project was launched by Peruvian President Alan García, in 2010. At Chile's request, the original three countries will be joined by México at a series of meetings over the coming year aimed at exploring deeper economic integration with each other. All these countries already have free trade agreements with the others (except México and Perú, which are now negotiating one).

Chile, Perú and México are members of the Asia-Pacific Economic Cooperation organisation (APEC) which Colombia would also like to join.



Map of Asia-Pacific Economic Cooperation (APEC) members


Chile and Perú also have free trade agreements with China. The idea is that Chile, Colombia, Perú and perhaps México will join together to bundle products for export to achieve the scale that importers in China are looking for.

The three Pacific countries already trade closely together. For example, Chile's LAN airline has its main Latin American hub in Lima, Peru. Chilean retailers too have invested heavily in Perú and are now looking to Colombia. And Colombia already manages much of Perú's electricity grids. Through the new deeper Pacific integration, Colombia would like to integrate the electricity grids from México to Chile and to build the missing links.

What does the future hold

If the Pacific Countries economic integration precedes as planned, the Pacific side of Latin America could form an alternative pole of attraction to Brazil. The MILA stock market might also attract foreign investors looking for an alternative to Brazil's over brought markets. Recently, Brazil has shown more interest in becoming a global power than in deepening Latin American integration. So if the Pacific side project takes off, it may become attractive to other mid-sized Atlantic countries too. Eventually, the Pacific Integration Project could team up with the stock market of Brazil to become a big player on the world financial scene as a joint Latin American Bolsa.

Latin American governments have failed to advance the cause of integration despite much talk at regional summits. Maybe the Pacific region's stock exchanges will be able to start doing what politicians have failed to do for so many years. Whatever happens the Pacific side of Latin America looks set to play a prominent role in the 21st century.

Space exploration in the 21st century – who will go forth?



The Russian Mir Space Station

In April 2011, it is 50 years since a Russian cosmonaut, Yuri Gagarin became the first man in space. Since then progress was rapid, in full Cold-War fervour, only 8 years separated Neil Armstrong and Buzz Aldrin landing on the surface of the moon. Although the moon landings handed a temporary victory to the US, the Soviet Union dominated spaceflight for the next decade (the seventies) with pioneering missions to the first space stations Salyut and Mir to experiment on the effects of long periods in space.

In a new film called First Orbit original footage of Yuri Gagarin's 108-minute voyage is spliced together with new shots of the exact route he would have taken, filmed by an astronaut on board the International Space Station. The station's orbit was specially changed to mirror the Russian's 1961 flight path. The film was released on 12 April to mark the 50th anniversary. Below is a trailer of the film:

US Space Exploration

Gagarin's solo mission signaled an early milestone in a Cold War space race between the former Soviet Union and the US. Eventually, NASA caught up and raced ahead, landing a dozen men on the moon as part of the Apollo program between 1969 and 1972. The US really began to lead the space race with the launch of its Space Shuttle Programme in 1981. The US was the Space Leader by the early 1990s. But the risk and cost were so great, the US retreated. The Cold War ended, and the Soviet Union dissolved into member states. As one of the surviving states, Russia inherited the Soviet strides in space and joined with the US, Europe, Japan and Canada to forge the 15-nation space station.

NASA's decision to retire the 30-year old shuttle fleet without a replacement in sight to continue the human push beyond Low-Earth-Orbit to explore the Solar System has not been popular - the last shuttle mission is due to launch in July 2011. Many working within the US Space Industry disagree with the US decision to cancel the Constellation Program that set out to do just that, and many are not happy that US astronauts will have to rely on the Russian Soyuz capsules to reach the International Space Station for the foreseeable future. The video below shows a new initiative called Why Space Matters recently launched to communicate the wider benefits of space exploration to the US public.

Russian Space Exploration

In the 21^st century, Russian President, Medvedev, stated that the country's space programme will remain a key government priority, but sceptics say the nation has done virtually nothing to develop a successor to the 43-year-old Soyuz spaceship. Russia has used the Soyuz and Progress spacecraft, whose designs date back to the 1960s, to send an increasing number of crew and cargo to their Space Stations and now to the International Space Station.

Russia announced recently three objectives for its space programme: it would test a next-generation spacecraft, build a new cosmodrome and consider a manned mission to Mars after 2035 and after new nuclear engines are developed.

Russian officials have set the tentative launch of a new spacecraft to replace Soyuz for 2015, but cosmonauts and industry watchers have said its development has barely begun. Russia will need to make at least 15 successful unmanned launches of the new craft, named Rus, before it can carry crew into orbit.

Russia is also due to start building a new launch pad in Russia's Far East in 2011, called Vostochny. Officials have said the first launches from Vostochny are expected in 2015. Russia still uses the Soviet-built Baikonur Cosmodrome in Kazakhstan for all its manned space flights and a large share of its satellite launches. Baikonur is where the history of space exploration began. The first space satellite, "Sputnik," was launched from there in 1957, as was the first manned space flight with Yuri Gagarin in 1961. Since then, over 1,200 spacecraft have been launched from the Baikonur Cosmodrome.

However despite the positive political announcements, the Chief of the Russian Space Agency said on the anniversary of Yuri Gangarin's first space flight that the Russian Space Agency's current budget was not enough to finance breakthrough projects and that China might soon overtake Russian space technology.

Chinese Space Exploration

General Xu Qiliang, the Commander of the People’s Liberation Army Air Force believes space exploration is critical to China’s national security interests. His views reflect the Chinese government’s growing interest in space exploration and the development of space technology. China’s space program has made significant progress over the past decade. China is scheduled to start building its own space station in 2011 with the launch of an unmanned module named Tiangong-1(天宫一号).

China has collaborated mostly with other emerging economies on its space technology, especially Russia and Brazil. Russia is working with China to help the Chinese refine their Shenzhou manned vehicles (based on the Russian Soyuz design). China has also purchased spacesuit designs from Russia.



 

The new Chinese Space Station Tiangong -1

天宫一号 means "Heavenly Palace"


Tiangong -1 (天宫一号) is the first module of an unmanned space station that is expected to launch in the second half of 2011. The Tiangong -1 space module is expected to carry out China's first space docking with the Shenzhou-8 spacecraft, allowing for the building of the Space Station.

China now has the technology to be able to reach into outer space with its unmanned spacecraft and since 2003, for humans to enter space too. By operating at the highest level of space activities China has confirmed its potential place as a new 'Space Power' in the 21st Century. China too will inevitably have to reach a view on the value of its space program compared to its high costs and the potential likelihood of dramatic failure set against Chinese priorities for space exploration.

No matter who goes forth to explore the Solar System, humankind's thirst for a greater understanding of 'space' and our solar system means the world will be eagerly watching new space exploration and awaiting the new discoveries to come.

The Biggest Container Ships the World has ever seen

 

Artist’s impression of the new colossal “Triple E” container ship

Source: Maersk



Maersk Line, a Danish shipper, announced in February 2011 that it had ordered ten new colossal container ships. The new ships known as “Triple-E” ships will carry 18,000 boxes each, that is 2,500 more than the biggest container ship currently in service also operated by Maersk. The new vessels will come into service in 2013.

The new ships will sail the trade routes between Asia and Europe, arriving in Europe packed with Chinese-made TVs and fridges but sailing back much lighter. Container shipping rates are rising and global trade is predicted to grow by 6-8% this year. Some believe global trade in shipping could grow even further— Clarksons—the world’s biggest shipbroker, is predicting growth of around 10%.

From the 1990s and into the first decade of the 21^st century the volume of container cargo traded through the world’s biggest container ports has increased nearly sixfold as globalisation has taken hold.

Twenty years ago more than half of the top 20 container ports were in the US or Europe. Now, Asia's strength as an exporter is in evidence in the location of the top container ports. Singapore now has the top spot. 14 of the top 20 container ports are now in Asia, with eight in China. The below chart from the Economist's recent survey of container ports charts the changes of the last 20 years:

Invention of the container ship

The first container ship voyage took place on 26 April 1956, the ship was an oil tanker whose deck had been strengthened to accommodate 58 well-filled boxes each some 30ft (9 metres) long. The boxes were shipped down the east coast of the US into the Gulf of Mexico and on to Houston. They survived the journey. They were not swept unrecoverably into the sea, as some doubters had predicted.

Trade was ready for a new mode of transport. The savings made by moving freight from roads to sea were huge. For centuries the trade of the world had depended on there being a vast labour force at every port to handle goods in manageable quantities. Container shipping required less dock labour and as a result savings of as much as 25% could be passed on to the shippers. As containerisation spread around the world, ships were turned round more quickly with even more savings.

By the 40th anniversary of container shipping in 1996, around 90% of world trade was moving in containers on specially designed ships. At that time Bill Clinton correctly proclaimed that container ships were aiding to “fuel the world’s economy”.

Since then Container ships have continued to grow and grow.

But container ships are still slow

Some fast ships have been developed, but these are mostly passenger ferries. The big container ships that carry most of the world's long-haul manufactured exports (by weight) travel at 23 knots (26.5 miles an hour) at best, and barely 17 knots in heavy weather.

The jet age that sank passenger liners has so far failed to take hold on the ocean. The Boeing 707 jet transformed aviation because it could fly faster, farther and higher than propeller-driven aircraft, clear of storms and turbulence.

Ever since the Vikings built their longboats it has been accepted that the way to move quickly across water is to have long, thin boats. This is because the faster a ship travels, the more water it drags along with it. Not only does this drag consume much energy, it causes high-speed vessels to squat low in the water, pulled down behind the “captive wave” at the bow. Propellers vibrate at high speeds, causing shocks that can break hulls. Hydrofoils that lift the hull out of the water and use water jets are fine for passenger ferries, but not for big, heavy container ships.

In the 21st century, container cargo of cars, tractors, cookers and washing machines still travel at about the speed of a running man. It takes a ship full of car parts a week or more to cross the Atlantic and around three weeks to go from Asia to Europe. The next challenge will be to design a faster colossal vessel capable of carrying 18,000 containers but at a much greater speed. Surely with such high inter-continental trade forecasts between Asia and the US and Europe, the incentives to develop a new high-speed container ship have never been better.