Person:

Arcay Finlay, Guillermo

This paper examines Japan’s economic performance in recent years, uncovering a narrative that challenges conventional views. Despite slow productivity growth, Japan maintains the highest economic complexity globally due to its sophisticated export portfolio. The study reveals that while Japan has been experiencing a decline in goods export market shares it has had a rise in services exports, particularly in R&D licensing. Furthermore, Japan has significantly increased its net foreign assets and direct investments abroad, resulting in abnormal high returns. These results put together suggest that Japanese firms —perhaps in reaction to a stagnant domestic labor force—are leveraging their extensive knowledge capital by investing and redeploying resources internationally, which are generating these higher returns. The increasing wealth generated abroad results, we show, in an expansion of non-tradable activities which are less productive, driving down aggregate productivity growth. The paper also highlights concerns over declining innovation quality, posing risks to Japan’s future economic performance and its ability to redeploy its accumulated knowledge to enjoy from unusually high returns from their foreign investments. The findings emphasize the need for policy reforms to enhance innovation quality to sustain Japan’s productivity of non-tradable activities and with an immigration policy that may change the downward trend in labor supply.

In this report, we study Hermosillo’s economic performance and assess critical issues affecting the city’s ability to achieve stronger economic growth. Although Hermosillo is far from experiencing economic stagnation, it fell behind other cities that managed to become successful economic hubs between 2010 and 2020. The main reason behind this trailing growth is Hermosillo’s relatively low diversification and investment dynamics, especially in the manufacturing sector. We apply growth diagnostic testing on various potential constraints to economic growth: logistics, electricity, water, human capital, housing, and transportation. Although none of them have directly constrained economic growth in the past, some are explicit threats to increasing growth in the future, thus catching up with high-performing peers. Electricity, human capital, and logistics are comparative advantages, while water, housing, and transportation are threats.

In 2025, Mexico is expected to start a new period in its economic history marked by the promise of nearshoring and a new presidential administration. In the past, Mexico has gone through milestones that heavily impacted its economic development path, like the establishment of NAFTA and the China Shock (Hanson, 2010). The rise of Northern Mexico and other regions like El Bajío as global manufacturing hubs has resulted from greater integration with the North American market. This has brought foreign direct investments (FDI) targeted at establishing manufacturing sites primarily to cater to US demand and exports to the rest of the world. Mexico holds high expectations that nearshoring will bring opportunities of the same or greater magnitude. In that context, Hermosillo stands out as a city with the potential to exploit those opportunities and enhance its economic transformation. It is crucial to analyze its binding constraints for economic growth, comparative advantages, and potential concerns to understand how well-positioned Hermosillo is to take advantage of this momentum.

Following the introduction and a methodological overview, the report is divided into four main sections. Section 3 provides a growth perspective on Hermosillo; Section 4 presents an analysis of growth constraints; Section 5 explains the local diversification challenge in detail; and Section 6 describes strategic policy areas to accelerate growth that result from this growth diagnostic analysis.

This publication synthesizes the main findings and recommendations from a series of reports on Bolivia’s Economic Pivot. We examine the origins of the current crisis and propose a strategy to restore macroeconomic stability while supporting long-term growth. Bolivia’s macroeconomic collapse is the most visible symptom of a much deeper crisis. While the contraction of natural gas production was a key trigger, the country’s crisis stems from a broader institutional breakdown that weakened private investment, export capacity, and productivity growth across the economy. In response, we outline a comprehensive reform plan based on 5 pillars: 1) a growth-enhancing and credible fiscal consolidation; 2) an effective and targeted social compensation network; 3) a restoration of external balance and monetary credibility; 4) renewed investment attractiveness and restored export potential in strategic sectors; and 5) a new institutional foundation for developing new productive capabilities.

This paper assesses Bolivia’s macroeconomic stabilization prospects through a macro-financial scenario framework, comparing three distinct trajectories: a counterfactual absent any reforms, the path under reforms implemented or announced to date (April 2026), and one that assumes a select set of additional reforms. Bolivia’s crisis, rooted in the absence of fiscal adjustment after the collapse of natural gas revenues, ranks among the most challenging in this century. Absent any reform, Bolivia was on the verge of a collapse, including a sharp contraction of imports, deep recession, runaway monetary financing, accelerating inflation, and a high probability of external default. The new government’s initial measures have reduced immediate risks. However, the initial reform package remains insufficient for full stabilization. The paper describes a feasible set of additional reforms to achieve stabilization and growth. An expansionary fiscal consolidation is still possible if reforms are carried out following a specific set of conditions, given Bolivia’s current economic constraints. Stabilization and growth are achievable, but the window of opportunity will narrow if critical reforms are delayed.

Bolivia’s macroeconomic crisis was long in the making. A temporary commodity windfall and a gas export engine built in the 1990s delivered a decade of growth, rising fiscal revenues, and an unprecedented buildup of foreign assets. But instead of using that window to build new sources of tradable income and productive capacity, the country adopted policies that gradually weakened the very gas sector on which the model depended. As gas production and hydrocarbon revenues fell, the state chose to preserve spending and the fixed exchange rate. The result was a sequence of increasingly costly stopgaps: first the depletion of international reserves, then the collapse of the peg, the rise of the inflation tax, and financial repression. In the process, households saw the real value of their savings eroded through the pension system and bank deposits. This paper shows how that strategy delayed adjustment for nearly a decade while making the eventual crisis more severe. Using counterfactual benchmarks for output and the real exchange rate, it quantifies the cost of delay and the scale of the distortions that any stabilization program must now unwind.