1 columbia university february 6th 2007 javier santiso chief economist & deputy director oecd...
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1
Columbia University February 6th 2007
Javier SantisoChief Economist & Deputy Director
OECD Development Centre
LATIN AMERICA’S POLITICAL LATIN AMERICA’S POLITICAL ECONOMY OF THE POSSIBLE:ECONOMY OF THE POSSIBLE:Beyond Good Revolutionaries and Free MarketeersBeyond Good Revolutionaries and Free Marketeers
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LATIN AMERICA: IN THE GARDEN OF LATIN AMERICA: IN THE GARDEN OF DELIGHTS?DELIGHTS?
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Utopia in Latin America: from a spacial search to a temporal search.
A search which has impregnated the history of Latin American political economy: from structuralism to monetarism, from Marxism to Liberalism.
In the 20th Century the whole Continent was dancing a waltz of paradigms.
THE FLOOD OF PARADIGMS IN LATIN AMERICATHE FLOOD OF PARADIGMS IN LATIN AMERICA
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FROM MARXISM TO LIBERALISM: FROM MARXISM TO LIBERALISM: THE WALTZ OF PARADIGMSTHE WALTZ OF PARADIGMS
“The great ideological storms” (Isaiah Berlin).
A few decades ago one of the key words in the entire continent was “Revolution”; a projective concept which denotes a temporal Beyond.
Whether Cuban or Chilean, Marxist or Liberal, the Revolution will feed the time of tomorrows and the sacrifices of the immediate present.
The flood, as Albert Hirschman describes it, brought with it an “angry desire to conclude”, where rigid economic models constituted numerous invitations to design alternatives with no chiaroscuro; either all or nothing.
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The transformations of the Latin American continent are now obvious.
In the region as a whole, the conceptual and practical framework of political economies have been transformed.
Democracy and the Market have taken over from Revolution and the State on the altar of references.
To sum up, a complete vocabulary and grammar have disappeared from the political and economic repertoire allowing a new ideology to emerge.
DEMOCRACY AND THE MARKET: DEMOCRACY AND THE MARKET: THE NEW ALPHABETTHE NEW ALPHABET
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The great transformation which took place in Latin America at the end of this century does not herald the arrival of the Good Liberal.
There was no transfer from one paradigm to another, instead a new cognitive style emerged.
We witness the failure of the whole idea of political utopia and the politicial economy of the impossible.
The failure of a cognitive style of macroeconomy of populism, similar to the purist monetarism of the Chicago Boys has only been the defense and illustration of the same concept.
THE GREAT TRANSFORMATION OF LATIN THE GREAT TRANSFORMATION OF LATIN AMERICAAMERICA
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Perhaps we should not spend too much time mourning the passing away of the great reforming impulses.
Hausmann and Rodrik in 2004: most economic accelerations were not preceded by reforming big-bangs, or by marked politicial or economic ruptures.
This empirical study covers 83 sustained world growth patterns between 1957 and 1992 (above two percentage points over a period of at least eight years).
A BLESSING IN DISGUISE FOR LATIN AMERICA?A BLESSING IN DISGUISE FOR LATIN AMERICA?
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THE EMERGENCE OF THE POLITICAL ECONOMY THE EMERGENCE OF THE POLITICAL ECONOMY OF THE POSSIBLEOF THE POSSIBLE
The strategy used by Ulysses: leaders know that they could be in danger of succumbing to the temptation of the sirens chanting the economic politics of the impossible.
They are cautious and they tie themselves to the masts of the fiscal and monetary institutions they have contribute to build.
Two strategies of development are being outlined – and sometimes combined-: one is an anchor of endogenous credibility, coming from within, and the other is an anchor of exognous credibility, coming from outside.
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THE POLITICAL ECONOMY OF THE POSSIBLE:THE POLITICAL ECONOMY OF THE POSSIBLE:THE SILENT TRANSFORMATIONTHE SILENT TRANSFORMATION
Javier Santiso, Latin America's Political Economy of the PossibleBeyond Good Revolutionaries and Free-Marketeers, Cambridge, Mass., MIT Press, 2006.
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THE GREAT TRANSFORMATION: THE MONETARY MAST
0
50
100
150
200
250
Latin America Total Emerging Markets
Inflation (%)
Source: Based on IMF
11
*Central Government
By Country (2005)
-4.0%
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
-3.0*%
+0.3%
-4% -2% 0% 2% 4% 6%
Brasil
Colombia
Peru*
México
Venezuela*
Argentina*
Chile*
LAC-7: FISCAL BALANCE(SPNF, in % of GDP)
THE GREAT TRANSFORMATION: THE FISCAL ANCHOR
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THE GREAT TRANSFORMATION: THE EXTERNAL ANCHOR
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
(e)
Trade openness in Latin America
Source: Based on BBVA
0% 10% 20% 30% 40% 50% 60% 70%
Mexico
Chile
Venezuela
Uruguay
Argentina
Colombia
Peru
Brazil
Trade openness in 2005
Source: OECD Development Centre
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EXTERNAL ANCHORING: MEXICO NOW EXTERNAL ANCHORING: MEXICO NOW DEPENDS A LOT LESS ON RAW MATERIALESDEPENDS A LOT LESS ON RAW MATERIALES
The export of manufactured goods grew on average between 1990 and 2000, about 28% per year and now accounts for 90% of total exports.
Exports
0
20
40
60
80
100
120
140
160
180
200
1980/12 1984/12 1988/12 1992/12 1996/12 2000/12 2004/12
Non Oil
Oil 0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1,0
14
Number of firms in Forbes 2000
0
5
10
15
20
25
30
35
India Spain China Brazil Mexico Chile
Source: Forbes 2000
EXTERNAL ANCHORING: BRAZILIAN FIRMS EXTERNAL ANCHORING: BRAZILIAN FIRMS RALLIED MEXICAN MULTILATINASRALLIED MEXICAN MULTILATINAS
The 50 more profitable firms
19
16
7
3
1 1 1 1 1
0
5
10
15
20
Brazil Mexico Chile Argentina Colombia Ecuador Panama Peru Venezuela
Source: America Economia 2005
15
Evolution of the Pension System in Latin America (in % of GDP)
0%
5%
10%
15%
20%
25%
30%
1 2 3 4 5 6 7 8 9 1 11
Num. periods
ARGENTINA BOLIVIA COLOMBIACOSTA RICA CHILE EL SALVADORMEXICO PERU URUGUAY
Return of Democracy
GRADUALISM AND CONTINUISM: GRADUALISM AND CONTINUISM: PENSIONS REFORMS IN CHILEPENSIONS REFORMS IN CHILE
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0%
10%
20%
30%
40%
50%
60%
70%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Num. periods
ARGENTINA BOLIVIA COLOMBIA COSTA RICA CHILE
EL SALVADOR MEXICO PERU URUGUAY
Retorno a democrácia
Evolution of Pension Funds in Latin America (in % of GDP)
GRADUALISM AND CONTINUISM: GRADUALISM AND CONTINUISM:
PENSIONS REFORMS IN CHILEPENSIONS REFORMS IN CHILE
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Stability Index
0 1 2 3 4
Venezuela
Ecuador
Peru
Argentina
Honduras
Bolivia
Mexico
Uruguay
El Salvador
Brazil
Colombia
Chile
Adaptability Index
0 1 2 3 4
Venezuela
Argentina
Ecuador
Bolivia
Peru
Honduras
El Salvador
Colombia
Mexico
Brazil
Uruguay
Chile
Source: Mariano Tomassi. “The Institutional Foundations of Public Policy”. Journal of the Latin American Economic Association.
Spring 2006.
Public Policies in Latin America
INSTITUTIONAL ANCHORING: INSTITUTIONAL ANCHORING: A KEY DRIVER OF POSSIBILISM A KEY DRIVER OF POSSIBILISM
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INSTITUTIONAL ANCHORING: INSTITUTIONAL ANCHORING: A KEY DRIVER OF POSSIBILISMA KEY DRIVER OF POSSIBILISM
Enforcement and Implementation
0 1 2 3 4
Argentina
Ecuador
Venezuela
Bolivia
Honduras
Peru
Brazil
Colombia
El Salvador
Mexico
Uruguay
Chile
Coordination and Coherence
0 1 2 3 4
Venezuela
Argentina
Ecuador
Peru
Colombia
Honduras
Uruguay
Bolivia
El Salvador
Mexico
Brazil
Chile
Source: Mariano Tomassi. “The Institutional Foundations of Public Policy”. Journal of the Latin American Economic Association.
Spring 2006.
Public Policies in Latin America
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INSTITUTIONAL ANCHORING: INSTITUTIONAL ANCHORING: A KEY DRIVER OF POSSIBILISMA KEY DRIVER OF POSSIBILISM
Public Regard Index
0 1 2 3 4
Ecuador
Honduras
Argentina
Bolivia
Colombia
Venezuela
Brazil
El Salvador
Mexico
Peru
Uruguay
Chile
Efficiency Index
0 1 2 3 4
Venezuela
Argentina
Ecuador
Bolivia
Honduras
Peru
Brazil
Colombia
Uruguay
El Salvador
Mexico
Chile
Source: Mariano Tomassi. “The Institutional Foundations of Public Policy”. Journal of the Latin American Economic Association.
Spring 2006.
Public Policies in Latin America
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VENEZUELA
ECUADOR
PERÚ
PARAGUAY
ARGENTINA
URUGUAY
MÉXICO
BRAZIL
COLOMBIA
CHILE
EL SALVADOR
NICARAGUA
HONDURAS
COSTA RICA
GUATEMALA
PANAMÁ
REPÚBLICA DOMINICANA
BOLIVIA
Next presidential elections
2007 - 200920062004 - 2005
LATIN AMERICA 2006: THE POLITICALCYCLEIS LATIN AMERICA 2006: THE POLITICALCYCLEIS BACKBACK
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EMERGING DEMOCRACIES IN LATIN AMERICAEMERGING DEMOCRACIES IN LATIN AMERICA
AverageAverage
Source: Javier Santiso, “Latin America’s Political Economy of the Possible: Beyond Good Revolutionaries and Free Marketeers”.
MIT Press. Cambridge, Massachusetts, 2006
Based on the Inter-American Development Bank
Democratic regimes in Latin America since transition (1978-2005)
0
5
10
15
20
25
30
35
40
Colombia Venezuela Peru Mexico Argentina Brazil Chile
Yea
rs
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THE TIMING GAME: POLITICAL AND FINANCIAL THE TIMING GAME: POLITICAL AND FINANCIAL CRISISUSED TO BE SYNCHRONIZEDCRISISUSED TO BE SYNCHRONIZED
Nominal exchange rate depreciationand government change
0,94
0,96
0,98
1
1,02
1,04
1,06
1,08
1,1
1,12
1,14
1,16
-9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9
Source: Frieden, Ghezzi y Stein, 2001
Country`s Total Elections 1 Colombia 13 1989 172 Costa Rica 11 1990 143 Guatemala 11 1991 34 Ecuador 10 1992 05 Chile 10 1993 106Peru 10 1994 187 Honduras 10 1995 68 Paraguay 9 1996 89Brazil 9 1997 7
10 El Salvador 9 1998 1511Republica Dom. 9 1999 1212 Uruguay 9 2000 1113Mexico 9 2001 414 Argentina 8 2002 1315 Nicaragua 8 2003 816Panama 8 2004 617 Venezuela 8 2005 518 Bolivia 7 2006 11
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SOME COUNTRIES ACHIEVED TO DECOUPLE BOTH SOME COUNTRIES ACHIEVED TO DECOUPLE BOTH CYCLES: MEXICO IN 2000CYCLES: MEXICO IN 2000
-30
-20
-10
0
10
20
30
40
50
60
7001
/01/
1975
01/1
0/19
76
01/0
7/19
78
01/0
4/19
80
01/0
1/19
82
01/1
0/19
83
01/0
7/19
85
01/0
4/19
87
01/0
1/19
89
01/1
0/19
90
01/0
7/19
92
01/0
4/19
94
01/0
1/19
96
01/1
0/19
97
01/0
7/19
99
01/0
4/20
01
Source: Jorge Blázquez and Javier Santiso, 2004.
Timing of Presidential Elections and Timing of Presidential Elections and Exchange Rate Depreciations in Mexico, Exchange Rate Depreciations in Mexico,
1975-20001975-2000 Election Year
Election Year
Election Year
24
OTHERS HAVE OVERCOME THE TEST OF FIRE OTHERS HAVE OVERCOME THE TEST OF FIRE MORE RECENTLY: BRAZIL IN 2006MORE RECENTLY: BRAZIL IN 2006
20%
25%
30%
35%
40%
45%
-180
-80
20
120
220
320
420
520
bp
Voter intention for Lula in the opinion polls
(left)
Spread Brazil-Emerging Countries and Electoral Polls1994
20%
22%
24%
26%
28%
30%
32%
-100
-50
0
50
100
150
200
pb.
Voter intention for Lula in the opinion polls
(left)
Spread Brazil-Emerging Countries and Electoral Polls1998
Source: Based on Juan Martínez and Javier Santiso, 2003.
20%
25%
30%
35%
40%
45%
0
200
400
600
800
1000
1200
1400
Voter intention for Lula in the opinion polls
(left)
bp.Spread Brazil-Emerging Countries and Electoral Polls2002
Source: Datafolha, JP Morgan
25
VENEZUELA
ECUADOR
PERÚ
PARAGUAY
ARGENTINA
URUGUAY
MÉXICO
BRAZIL
COLOMBIA
CHILE
EL SALVADOR
NICARAGUA
HONDURAS
COSTA RICA
GUATEMALA
PANAMÁ
REPÚBLICA DOMINICANA
BOLIVIA
Next presidential elections
2007 - 200920062004 - 2005
LATIN AMERICA 2007: BEYOND THE POLITICAL LATIN AMERICA 2007: BEYOND THE POLITICAL CYCLECYCLE
26
Latin America: The pending challengesLatin America: The pending challenges
Fuente: The World Bank
Gini – Market Income Gini – Disposable Income
Note: Gini coefficiente calculated before and after taxes, social security and transfers.
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
Latin America EuropeanUnion
USA Spain
Gin
i
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
Latin America EuropeanUnion
USA SpainG
ini
27
Social Pacts and Fiscal PactsSocial Pacts and Fiscal Pacts
Fuente: The World Bank
Gini – Market Income Gini – Disposable Income
Note: Gini coefficient calculated before and after taxes, social security and transfers.
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
Brazil Colombia Mexico Argentina Peru Chile
Gin
i
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
Brazil Colombia Mexico Argentina Peru ChileG
ini