Esther Dweck Chief Economist , Ministry of Planning and

LAC-EU ECONOMIC FORUM 2013

Globalization, International Trade and the Welfare State at Crossroads:

Converging Views in European and Latam countries?

Session 2 Real imbalances: trade, industrial development and

environmental issues

Esther DweckChief Economist, Ministry of Planning and

Professor of Economics, Universidade Federal do Rio de Janeiro

SANTIAGO, 21 – 22 DE ENERO DE 2013

Fiscal Problem might be a Crisis Problem

International Monetary Fund, World Economic Outlook Database, October 2012

72

4955

41

60 60

16

67

43

74

35

67

44

9

65

20

65

38

105

36

103

82

12

81

26

65

44

Public Sector Gross Debt (% GDP)

2000 2007 2011

From Private to Public Debt

The Economist, ???

New Monetary Standard: Dollar Standard

Source: BEA

78

88

98

108

118

128

138

jan/

73de

z/74

nov/

76ou

t/78

set/

80ag

o/82

jul/8

4ju

n/86

mai

/88

abr/

90m

ar/9

2fe

v/94

jan/

96de

z/97

nov/

99ou

t/01

set/

03ag

o/05

jul/0

7ju

n/09

mai

/11

Price-adjusted Broad Dollar Index --Monthly Index

Global Imbalances

-1500

-1000

-500

0

500

1000

1980 1990 1995 1998 2007 2011

World Current Account Balance - Sellected Countries(US$ Billion)

Brazil China Germany

Japan Mexico Russia

United Kingdom United States SpainSource: IMF

Global Imbalances

Important argument in UNCTAD TDR 2012 (ch. 4):• There was an important change in strategy chosen by

developed country enterprises :– During the 1990s: productivity growth and output expansion

through investment in innovation – During the 2000: greater emphasis on becoming more

competitive internationally through wage restraints and reduced employment opportunities, combined with attempts to boost profits through financial investments

• This strategy was facilitated by the deregulation of financial markets and greater flexibility of the labour market

Global Imbalances

-500

-400

-300

-200

-100

0

100

200

300

Current Account in 2011 (US $ billion)


Global Imbalances

Source: Un Statistics

-12

-10

-8

-6

-4

-2

0

2

4

6

8

Current Account in 2011 (%GDP)

Global Imbalances

-300

-200

-100

0

100

200

300

1980 1990 1995 1998 2007 2011

Euro Area Current Account Balance- Sellected Countries(US$ Billion)

Germany France Greece Portugal Spain Italy

Source: IMF

Global ImbalancesSome authors (e.g. Bibow, 2008 and Blecker, 2011) argument:

• Economic conditions and policies in the surplus makes some sense if interpreted as reflecting “deficient demand” in the global economy

• The real issue is why consumption and investment have been systematically depressed in the surplus countries, relative to their national incomes.

• The core reason why consumption is repressed in most of the surplus countries is the phenomenon of wages lagging behind productivity (von Arnim, 2010; Cripps et al., 2011)

Global Imbalances

-15

-10

-5

0

5

10

15

Germany current account, government budget, andprivate saving-investment balances as percentages of GDP

General government net lending/borrowingprivate saving-investment balances

Source: IMF

Global Imbalances

Source: IMF

-15

-10

-5

0

5

10

15

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

US current account, government budget, andprivate saving-investment balances as percentages of GDP

General government net lending/borrowing

private saving-investment balances

Current account balance

Global Imbalances

Source: Blecker, 2011

Global Imbalances

“the object of the new system must be to require the chief initiative from the creditors countries”

“nothing is more certain than that he movement of capital funds must be regulated; - which in itself will involve far-reaching departures from laissez faire arrangements”

New Monetary Standard: Dollar Standard

Source: BEA

78

88

98

108

118

128

138

jan/

73de

z/74

nov/

76ou

t/78

set/

80ag

o/82

jul/8

4ju

n/86

mai

/88

abr/

90m

ar/9

2fe

v/94

jan/

96de

z/97

nov/

99ou

t/01

set/

03ag

o/05

jul/0

7ju

n/09

mai

/11

Price-adjusted Broad Dollar Index --Monthly Index

Exchange Rate Mismatch


01.0002.0003.0004.0005.0006.000

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

r

US$

Billi

ons

Foreign official assets in the United States

Convergence?

0

50

100

150

200

250

300

0

50

100

150

200

250

300

GDP Index, Selected Groups, (1995=100)

World

Advanced economies

Emerging market and developing economies


Convergence among advanced economies

0

50

100

150

200

250GDP Index, Selected Groups, (1995=100)

WorldAdvanced economiesEuro area Major advanced economies (G7)Newly industrialized Asian economies


Divergence among developing economies


0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350GDP Index, Selected Groups, (1995=100)

WorldCentral and eastern EuropeDeveloping AsiaASEAN-5Latin America and the CaribbeanMiddle East and North AfricaSub-Saharan AfricaAdvanced economiesEmerging market and developing economies

China is the main new player

Source: World Bank

Share in Wolrd Industrial Production (US$ ppp)

Advanced Economies

80%

Emerging and

Developing (except China)16%

China4%

1995

Advanced Economies

78%

Emerging and


China6%

2000

Advanced Economies

66%

Emerging and


China15%

2010

80,00

100,00

120,00

140,00

160,00

180,00

200,00

80

100

120

140

160

180

200

2000

.01

2000

.07

2001

.01

2001

.07

2002

.01

2002

.07

2003

.01

2003

.07

2004

.01

2004

.07

2005

.01

2005

.07

2006

.01

2006

.07

2007

.01

2007

.07

2008

.01

2008

.07

2009

.01

2009

.07

2010

.01

2010

.07

2011

.01

2011

.07

2012

.01

2012

.07

Manufacturing Production and Retail Trade Seasonally Adjusted Volume Index (jan/200 = 100)

Manufacturing

Retail Trade

Brazil – leakage of Domestic Demand

Source: IBGE

25 25

Brazil – Worsening Trade BalanceQuantum do comércio de manufaturados a preços de 1995

Fonte: FUNCEX

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

em U

S$ M

ilhõe

s

0

20

40

60

80

100

120

140

Índi

ce 2

005

= 10

0

EXPORTAÇÕES

IMPORTAÇÕES

TAXA DE CÂMBIO EFETIVA REAL

Imports and Exports Volume Index and Real Effective Exchange Rate

26 26

Brazil – Worsening Trade Balance

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

0

20

40

60

80

100

120

140

160

Balance Trade by Sector [US$ million] and Real Effective Exchange Rate

Saldo Bens de Capital Saldo Agricultura/PecuáriaTx câmbio efetiva real (2005=100)

27

Brazil: capital control measures

1.691

1.676

1.565

1.634

1.563

1.53526/07

1.633

1.677

1.450

1.500

1.550

1.600

1.650

1.700

1.750

03/01/2011 03/02/2011 03/03/2011 03/04/2011 03/05/2011 03/06/2011 03/07/2011 03/08/2011 03/09/2011

Taxa de Câmbio COPOM reduz a taxa básica para 12%

Medidas no Mercado de Derivativos

Medida no Mercado à vista para redução de posição vendida dos bancos

Mudanças nas alíquotas do IOF

28

Brazil –capital control measures

1,45

1,55

1,65

1,75

1,85

1,95

2,05

2,15

2,25

Financial Operation Tax Increase

Medida no Mercado à vista para redução da posição vendida dos bancos e no Mercado de Derivativos

estabilização da flutuação do câmbio

liberalização das posições vendidas

Nominal Exchange Rate

flexibilização do recebimento de exportações,redução de prazo de empréstimo externo c/ IOF

crise externa e deterioração do cenário mundial


50

60

70

80

90

100

110

120

130

140

Brasil Austrália Indonésia RússiaFonte: BIS. Elaboração: ASSEC/MP.

TAXA DE CÂMBIO EFETIVA REAL - Paises Exportadores de Commodities(Índice 2010 = 100)

DESVALORIZAÇÃO

VALORIZAÇÃO


50

60

70

80

90

100

110

120

130

Brasil China Índia RússiaFonte: BIS. Elaboração: ASSEC/MP.

TAXA DE CÂMBIO EFETIVA REAL - BRICS(Índice 2010 = 100)

DESVALORIZAÇÃO

VALORIZAÇÃO

Brazil – New Macroeconomic Setting?

Source: IBGE1º

trim2º

trim3º

trim4º

trim1º

trim2º

trim3º

trim4º

trim1º

trim2º

trim3º

trim4º

trim1º

trim2º

trim3º

trim4º

trim1º

trim2º

trim3º

trim4º

trim1º

trim2º

trim3º

trim4º

trim2007 2008 2009 2010 2011 2012

0.0

20.0

40.0

60.0

80.0

100.0

120.0

0.0

5.0

10.0

15.0

20.0

25.0

Import Coefficient, Real Effective Exchange Rate and Interest Rates

Índice de Taxa de Câmbio Efetiva Real (IPCA, 1995=100) EE

Coeficiente de Importação (acumulado em 4 TRI) ED

Taxa de Juros (selic - média 3 M) ED

Taxa de Juros Real (IPCA) ED

Brazil – Import Coefficient and Exchange rate

4%

6%

8%

10%

12%

14%

16%

18%

20%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

CIN

SU

0

20

40

60

80

100

120

140

160

Taxa

de

câm

bio

real

efe

tiva

Industria de transformação

Manufaturados baixa e média-baixa tecnologiaManufaturados média-alta ealta tecnologiaTaxa de câmbio real efetiva

Fonte: Marconi e Rocha (2012).

Exchange Rate

Low and Median-Low

Technology

Manufacturing

High and Median-High

Technology

Brazil – New Macroeconomic Setting?

Source: IBGE

Share of Imported Vehicules in new liscensing

Brazil – Industrial Policy• Exchange Rate Policy• Tax Measures

– Payroll Tax, IPI and Infraestructure

• Public Procurement Measures• Funding for International Trade • Trade Defence Mechanisms • Incentives to ICT sector

– Broad Band Plan and Semiconductors (PADIS)

• Funding for the private sector investment (BNDES)– More credit, Lowering interest rates and Longer Term

• Vehicles Regime

35

1998 2008 2012

26.5

12.0 11.8

5.311.7

14.8

- 4.0 - 1.7 - 2.0

Dívida Externa TotalReservas InternacionaisTransações CorrentesSource: BCB

External Vulnerability (% GDP)

Brazil – Lower External Vulnerability

Regional Integration


49%54%

68%74%

56%

26%

53%

67% 65%71%

48%

27%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

Asia Ásia* to Asia European Union

European Union to Europe

North America

Latin America

2000 2011

Share of Exports to the same Region

(*)Hong Kong, China, Rep. of Korea, Singapore and Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Taipei, Chinese). Fonte: WTO Elaboração: MP/Assec.

37 37

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Brazilian Primary Exports by Partner(Share of total %)

EUA China Europa América do Sul


38 38

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Brazilian Manufacturing Imports by Partner (Share in total %)

China EUA Europa


Esther Dweck Chief Economist , Ministry of Planning and

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