Strong currencies move talent around; the Swiss got it right
Last month the leading Sao Paolo club SC Corinthians Paulista paid 40 million Euro for Argentinean striker Carlos Tevez, poaching him from English premier league champions Manchester United. This is one of a number of recent moves of top football players into (and many times back to) Brazil.
The reforms of Brazil’s professional football league, the rise of new directors with business experience replacing amateur presidents and the hosting of the 2014 World Cup all have helped this trend. But perhaps most importantly, as Andrew Downie and Joe Leahy explain, it is the Brazilian Real’s “12-year high against the dollar and its 35% gain against both the euro and the pound since 2008” that has fuelled it.
That clinking clanking sound, that FX-driven lever for outrooting people is - the argument would logically go - a key driver of international talent migration, also beyond football.
Within Europe, a 2008 research by Experteer identified Switzerland as the most attractive economy for executive talent with a net inflow of 42 per cent. A similar Insead paper also looked at world-wide talent moves concluding Switzerland had the largest proportional percentage influx in Europe. Now guess how the Swiss Franc has been doing against the Euro (graph from The Economist).
Before concluding that strong currencies are the cause and an influx of international talent the effect, we should perhaps - on a rather humanistic strike - consider whether a much stronger, albeit longer-term correlation is found the other way round.
Switzerland has lured international talent for many years now. It evolved from being a relatively poor country with no natural resources and net emigration in 1800 to being one of the richest countries of the world in 2000. A 2008 study by Beatrice Weder of the University of Mainz, Germany and Rolf Weder of the University of Basel, Switzerland argued that "early internationalization, open and flexible markets as well as a high degree of competition were crucial for the development of the Swiss economy."
Many of these sames reasons have been brining multinationals and talent into the country. A 2006 E&Y study found that beyond just tax reasons, multinational companies rated Switzerland the number one Headquarter destination for its outstanding quality of life (71% of respondents); its clear and stable political, legislative and administrative environment (75%); the stable social environment (65%); and its flexible labor laws (56%).
Not just cheese and chocolate
Humanists will be drawn to this second hypothesis but perhaps both (put in the mixer with a million other variables) hold true. For the time being the Swiss government is concerned with the Franc. As reported last week, "for the second time (...) the Swiss National Bank intervened in the currency market to halt the franc’s appreciation". If there is a virtuous cycle for talent and FX it is perhaps as well one that can overheat.
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