Post on 27-Mar-2015
1
BBVA Japan
Tokyo May 30th 2006
Javier SantisoChief Economist & Deputy Director
OECD Development Centre
LATIN AMERICA 2006:LATIN AMERICA 2006:Beyond Good Revolutionaries and Free MarketeersBeyond Good Revolutionaries and Free Marketeers
2
LATIN AMERICA: IN THE GARDEN OF LATIN AMERICA: IN THE GARDEN OF DELIGHTS?DELIGHTS?
3
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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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 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.
6
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.
7
11 Latin America’s CrusadeLatin America’s Crusade
The Great Latin American TransformationThe Great Latin American Transformation22
11
33 ConclusionConclusion
8
CEPAL: Latin American Economic Commission
THE BIG CHALLENGE: THE LIFE AFTER THE THE BIG CHALLENGE: THE LIFE AFTER THE “WASHINGTON CONSENSUS”“WASHINGTON CONSENSUS”
Index of Structural Reforms in Latin America
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
CEPAL
IDB
IDB: Inter American Development Bank
Source: Based on ECLAC and IADB
9
A DISAPPOINTING PERFORMANCE IN THE A DISAPPOINTING PERFORMANCE IN THE REGION…REGION…
Source: Based on World Bank
Not only was growth poor but it was also very volatile.
Sout East Asia 7.7%
World 3.3%
USA 3.1%
Latin America 2.8%
EU 2.3%
last 25 years
Latin America 2.3%
South East Asia 2.2%
USA 2.1%
EU 1.1%
World 1.0%
Volatibility of growth
last 25 years
Source: Based on World Bank
10
……THE CONSEQUENCE HAS BEEN A DIVERGENCE THE CONSEQUENCE HAS BEEN A DIVERGENCE IN THE EVOLUTION OF INCOME PER CAPITAIN THE EVOLUTION OF INCOME PER CAPITA
With the exception of the 70s when Latin America attained an average growth rate of 6% ...
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
70's 80's 90's 00's
Crecimiento promedio
Sudeste asiático
América Latina
EEUU
UE
… during succeeding decades the income per capita gap between the developped regions widened. 8600
29700
Evolución del PIB per cápita ($ PPP)
0
5000
10000
15000
20000
25000
30000
35000
40000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Fuente: BBVA en base a FMI
América Latina
UE (15)
EEUU
11
HOWEVER AN UPWARD TURN BEGAN WITH A HOWEVER AN UPWARD TURN BEGAN WITH A NEW CYCLE IN 2003-2006....NEW CYCLE IN 2003-2006....
Latin American Cycles
The last cycle in the region was very long (11 years), especially compared to previous ones which lasted 8 years.
Source : BBVA
8 años 8 años 11 años
1980
1987
1997
1983
19912003
Average LengthExpansions: 5,3 yearsDecelerations: 4 years
12
CHINA AND ASIA CONTRIBUTE ALSO TO CHINA AND ASIA CONTRIBUTE ALSO TO GROWTH IN LATIN AMERICAGROWTH IN LATIN AMERICA
Source: Based on domestic sources, before the revised figures released in Jnauary 2006.
0
1
2
3
4
5
6
7
8
9
10
1997 1999 2001 2003 2005
Growth of GDP in China(Annual percentage
variation)
0
1
2
3
4
5
6
7
8
9
10
Chile
Arg
enti
na
Perú
Bra
sil
Uru
guay
Venezu
ela
Colo
mbia
Méxic
o
Exports to China in 2004(Percentage of total)
13
Venezuela 83.1%
Peru 70.7%
Chile 59.1%
Colombia 46.3%
Argentina 38.0%
Brazil 29.6%
Mexico 14.6%
Latam 31.2%
Source: Based BBVA
over total exports (2004)
Exports of commodities
60
70
80
90
100
110
120
130
140
150
160
170
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
Source: Based on BBVA
BBVA-MAP Index of Latin America commodity prices (100 =jan03)
TOTAL
Without oil
COMMODITY BOOM HAS BEEN A BONANZACOMMODITY BOOM HAS BEEN A BONANZA
14
11 Latin America’s CrusadeLatin America’s Crusade
The Great Latin American TransformationThe Great Latin American Transformation22
11
33 ConclusionConclusion
15
THE GREAT TRANSFORMATION: THE MONETARY MAST
0
50
100
150
200
250
Latin America Total Emerging Markets
Inflation (%)
Source: Based on IMF
16
*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
17
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
18
The political economy of the possible: ChileThe political economy of the possible: Chile
19
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 REFORMSPENSIONS REFORMS
20
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 REFORMSPENSIONS REFORMS
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CHILE: A MAJOR PERFORMER IN LATIN CHILE: A MAJOR PERFORMER IN LATIN AMERICA IN TERMS OF POLICY STABILITYAMERICA IN TERMS OF POLICY STABILITY
Source: IADB Politics of Policies Report, 2006Source: IADB Politics of Policies Report, 2006
Policy Stability Index (2005)
0 0.5 1 1.5 2 2.5 3 3.5 4
Venezuela
Argentina
Peru
Mexico
Colombia
Brazil
Chile
Stability Index (1-4 scale)
AverageAverage
22
The political economy of the possible: MexicoThe political economy of the possible: Mexico
23
EXTERNAL ANCHOR: THE EMERGENCE OF A EXTERNAL ANCHOR: THE EMERGENCE OF A GLOBAL TRADERGLOBAL TRADER
Mexican exports increased on average by 17% each year between 1989 and 2004 ...
Total 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
Degree of Openness((X+M)/PIB)
20
25
30
35
40
45
50
55
60
China Chile Mex Tur Col Arg Perú Bra Ind
... Which has resulted in a greater degree of openness
Source: INEGI and Banxico
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THE COUNTRY NOW DEPENDS A LOT LESS ON THE COUNTRY NOW DEPENDS A LOT LESS ON RAW MATERIALESRAW 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
25
The political economy of the possible: BrazilThe political economy of the possible: Brazil
26
EXTERNAL TRANSFORMATIONEXTERNAL TRANSFORMATION
Following the 1999 devaluation which give way to the floating of the real, the economy has gradually opened up, making it less vulnerable to external shocks.
Source: Based on BCB figures
0%
5%
10%
15%
20%
25%
30%
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Trade Opennes(Exports + Imports) / GDP
27
Number of firms in Forbes 2000
0
5
10
15
20
25
30
35
India Spain China Brazil Mexico Chile
Source: Forbes 2000
BRAZILIAN FIRMS RALLIED MEXICAN BRAZILIAN FIRMS RALLIED MEXICAN MULTILATINASMULTILATINAS
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
28
11 Latin America’s CrusadeLatin America’s Crusade
The Great Latin American TransformationThe Great Latin American Transformation22
11
33 ConclusionConclusion
29
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 political cycle is Latin America 2006: The political cycle is backback
30
The timing game: Political cycles and crises The timing game: Political cycles and crises in Latin America used to be synchronized, in Latin America used to be synchronized,
1970-20001970-2000
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
31
During the period 2000-2006, some During the period 2000-2006, some countries achieved a decoupling: The case countries achieved a decoupling: The case
of Mexicoof Mexico
-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
32
While others had overcome the test of While others had overcome the test of fire more recently: The case of Brazilfire more recently: The case of Brazil
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
33
Emerging Democracies in Latin America: Emerging Democracies in Latin America: Trends and issuesTrends and issues
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
34
The quality of policy making: The quality of policy making: A pending issue for Latin AmericanA pending issue for Latin American
Source: IADB Politics of Policies Report, 2006 and World Economic Forum, 2005
0 0.5 1 1.5 2 2.5 3 3.5 4
Stability
Enforcement andimplementation
Public regardedness
Efficiency
Policy index
Scale 1-4
OECD
East Asia
LatinAmerica
Key features of Public Policies: Inter-regional comparison
35
BBVA Japan
Tokyo May 30th 2006
Javier SantisoChief Economist & Deputy Director
OECD Development Centre
LATIN AMERICA 2006:LATIN AMERICA 2006:Beyond Good Revolutionaries and Free MarketeersBeyond Good Revolutionaries and Free Marketeers