1 Promosalons Paris 20 February 2006 Javier Santiso Chief Development Economist & Deputy Director OECD Development Centre LATIN AMERICA: LATIN AMERICA: The political economy of the possible The political economy of the possible
Mar 27, 2015
1
Promosalons
Paris 20 February 2006
Javier SantisoChief Development Economist & Deputy Director
OECD Development Centre
LATIN AMERICA:LATIN AMERICA:The political economy of the possibleThe political economy of the possible
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 famous decalogue of the Washington Consensus: yet another variation on this waltz.
THE FLOOD OF PARADIGMS IN LATIN THE FLOOD OF PARADIGMS IN LATIN AMERICAAMERICA
4
FROM MARXISM TO LIBERALISM: FROM MARXISM TO LIBERALISM: MODELS TO BE CREATEDMODELS TO BE CREATED
“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.
5
The transormations 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: THE DEMOCRACY AND THE MARKET: THE NEW ALPHABETNEW ALPHABET
6
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
7
Perhaps we should not spend too much time mourning the passing away of the great reforming impulses.
A detailed study carried out by Hausmann and Rodrik in 2004, proves that most economic accelerations were not preceded by reforming big-bangs, or by marked politicial or economic ruptures.
This empirical study covers a wide range of 83 sustained world growth patterms between 1957 and 1992 (above two percentage points over a period of at least eight years).
A BLESSING IN DISGUISE FOR LATIN A BLESSING IN DISGUISE FOR LATIN AMERICA?AMERICA?
8
THE EMERGENCE OF THE POLITICAL THE EMERGENCE OF THE POLITICAL ECONOMY OF THE POSSIBLEECONOMY OF 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- in the region: one is an anchor of endogenous credibility, coming from within, and the other isan anchor of exognous credibility, getting its inspiration from external factors.
9
THE POLITICAL ECONOMY OF THE POSSIBLE:THE POLITICAL ECONOMY OF THE POSSIBLE:THE LATAM SILENT TRANSFORMATIONTHE LATAM SILENT TRANSFORMATION
10
11 Latin America’s CrusadeLatin America’s Crusade
The Great Latin American TransformationThe Great Latin American Transformation22
11
33 ConclusionConclusion
11
CEPAL: Latin American Economic Commission
THE BIG CHALLENGE: THE LIFE AFTER THE BIG CHALLENGE: THE LIFE AFTER THE “WASHINGTON CONSENSUS”THE “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 CEPAL and IDB
12
A DISAPPOINTING PERFORMANCE IN A DISAPPOINTING PERFORMANCE IN THE REGION…THE 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
13
……THE CONSEQUENCE HAS BEEN A THE CONSEQUENCE HAS BEEN A DIVERGENCE IN THE EVOLUTION OF DIVERGENCE IN THE EVOLUTION OF
INCOME PER CAPITAINCOME 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
14
HOWEVER, 2003 BROUGHT A CHANGE HOWEVER, 2003 BROUGHT A CHANGE IN TENDENCY...IN TENDENCY...
Source: BBVA
4.0E+10
4.5E+10
5.0E+10
5.5E+10
6.0E+10
6.5E+10
7.0E+10
7.5E+10
8.0E+10
8.5E+10
9.0E+10
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
-4%
-2%
0%
2%
4%
6%
8%
Crecimiento Latam y cambios de tendencia
Indicador de cambios de tendencia
Crecimiento
During the second half of the 90’s, the tendency in regional growth broke down and suffered a deceleration.
Since 2003, the region is booming in a synchronised way.
The indicator for the change in tendency is an index of measurement for changes in the cycle. It marks the beginning of expansive and recessive stages of the economic cycles.
15
AN UPWARD TURN BEGAN WITH A NEW AN UPWARD TURN BEGAN WITH A NEW CYCLE IN 2004-2006....CYCLE IN 2004-2006....
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
16
ARE WE REACHING A NEW CYCLE?ARE WE REACHING A NEW CYCLE?
Cycles in Latin America
Source: BBVA
8 años 8 años 11 años
Moreover, there were two “sharp interruptions” (the Tequila crisis in 1995 and the Russian crisis in 1998).
2004
17
THE SCENARIO OF US AND WORLD THE SCENARIO OF US AND WORLD ACTIVITY IS KEY ACTIVITY IS KEY
In spite of the fact that variable factors such as the cost of raw materials cause the opposite economic effect in Latin America as opposed to developped countries, regional growth is closely linked to the growth patterns of USA.
Correlation = 0,80
Cyclical Situation in USA and Latin America
Source: Based on ECLAC and IMF
USA
Latin America
Tendency
18
THE WORLD OUTLOOK FOR THE THE WORLD OUTLOOK FOR THE FOLLOWING YEARS IS GOODFOLLOWING YEARS IS GOOD
0
1
2
3
4
5
6
19
811
982
19
831
984
19
851
986
19
871
988
19
891
990
19
911
992
19
931
994
19
951
996
19
971
998
19
992
000
20
012
002
20
032
004
20
052
006
World growth exLatam%
Source: OECD
Growth in USA remained strong in 2005 and will keep growing in 2006.
China will continue to boost world demand in 2006 having grown 9,9% in 2005 and 9,6% on average over the last 25 years.
Evolution of income percapita
(constant dollars in 1996)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Brazil
China
19
CHINA CONTRIBUTE TO GROWTH IN CHINA CONTRIBUTE TO GROWTH IN LATIN AMERICALATIN 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 2003(Percentage of total)
20
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: 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: 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
21
… … BOOSTING GROWTHBOOSTING GROWTH
The higher volatility in the price of these products is reflected in the cycle.
-1%
0%
1%
2%
3%
4%
5%
6%
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04 -30%
-20%
-10%
0%
10%
20%
30%GDP and BBVA MAP Latam
Source: BBVA
GDP growth
Crecim BBVA-MAP
The BBVA-MAP Latin America is a price indicator for net exports of raw materials in the region.
Correlación = 0,65
22
11 Latin America’s CrusadeLatin America’s Crusade
The Great Latin American TransformationThe Great Latin American Transformation22
11
33 ConclusionConclusion
23
THE GREAT TRANSFORMATION: THE MONETARY MAST
0
50
100
150
200
250
Latin America Total Emerging Markets
Inflation (%)
Source: Based on IMF
24
With the sole exception of Venezuela, significant advances are being achieved in the reduction of fiscal deficit.
In the last recessive phase the consensus in fiscal discipline became apparent.
THE GREAT TRANSFORMATION: THE FISCAL MAST
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%Public deficit (% over GDP)
1999
2004p
Source : BBVA
25
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)
Commercial Openings in Latin America
Source: BBVA
0% 10% 20% 30% 40% 50% 60% 70%
Mexico
Chile
Venezuela
Uruguay
Argentina
Colombia
Peru
Brazil
Commercial Openings in 2004
Source: BBVA en base a fuentes nacionales
-3,2
-4,3
-3,1
-2,3 -2,5
-0,5
0,1
1,30,7
-5
-4
-3
-2
-1
0
1
2
1997 1998 1999 2000 2001 2002 2003 2004 2005
Current Account Latam
Source BBVA
% s
obre
PIB
26
The political economy of the possible: ChileThe political economy of the possible: Chile
27
CHILE HAS INNOVATED IN ECONOMIC CHILE HAS INNOVATED IN ECONOMIC POLICY ...POLICY ...
Year Goal Adopted and Initial Inflation
Chile
CanadaN. Zealand
Israel
UK
Finland
Suecia
Spain
Australia
Rep. Czechj
KoreaPoland
S.Africa
Brazil ThailandSuiza
Island
Norway
Colombia
Mexico
Peru
0
5
10
15
20
25
30
35
40
45
1990 1992 1994 1996 1998 2000 2002
Ta
sa d
e In
fla
ció
n (
%)
Source: Central Bank of Chile
28
… … FAVOURING GRADUAL ADJUSTMENTS FAVOURING GRADUAL ADJUSTMENTS ……
Anual Inflation (%)
0
5
10
15
20
25
30
3519
83
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Source: BBVA
29
… … AGAINST THE “RAGE DE VOULOIR AGAINST THE “RAGE DE VOULOIR CONCLURE”CONCLURE”
0
20
40
60
80
100
120
1960-64 1965-70 1971-73 1974-81 1982-84 1985-95 1995-00 2000-05
Average Tariff (%)
Country Subscribed Validity
Bolivia 06/04/1993 07/07/1993Colombia 06/12/1993 01/01/1994Ecuador 20/12/1994 01/01/1995Mercosur 25/06/1996 01/10/1996Perú 22/06/1998 01/07/1998Cuba 21/08/1998Venezuela 02/04/1993 01/07/1993Canadá 05/12/1996 05/07/1997Corea del Sur 15/02/2003 01/04/2004Costa Rica 18/10/1999 14/02/2002El Salvador 18/10/1999 03/06/2002EEUU 06/06/2003 01/01/2004Guatemala 18/10/1999Honduras 18/10/1999México 01/10/1998 01/08/1999Nicaragua 18/10/1999UE 18/11/2002 01/02/2003 .
Free Trade Agreements
In the 1960s, there was already consensus in favour of an opening. The debate centred on two main issues:The spread of opening and the advantage/disadvantage of differentiated tariffs. With the return of democracy, The process of unilateral and joint reductions of tariffs was complemented with bilateral treaties.
30
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
SUCCESSFUL POLICIES ARE CONTINUED: SUCCESSFUL POLICIES ARE CONTINUED: PENSION SYSTEMPENSION SYSTEM
31
…….. BUT WITH GRADUAL INCREASES.. BUT WITH GRADUAL INCREASES
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)
32
The political economy of the possible: MexicoThe political economy of the possible: Mexico
33
MONETARY ANCHOR: THE CENTRAL BANK MONETARY ANCHOR: THE CENTRAL BANK A KEY ACTOR FOR LOWERING INFLATIONA KEY ACTOR FOR LOWERING INFLATION
Source: Banxico
Inflation(Percentage)
0
20
40
60
80
100
120
140
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
Difference between underlying inflation and Banxico goal
(Percentage)
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
may-9
8
sep
-98
ene-9
9
may-9
9
sep
-99
ene-0
0
may-0
0
sep
-00
ene-0
1
may-0
1
sep
-01
ene-0
2
may-0
2
sep
-02
ene-0
3
may-0
3
sep
-03
ene-0
4
may-0
4
sep
-04
... Perspectives are now anchored at levels around
4%.
As in the rest of the region inflation has been considerably reduced ...
34
FISCAL ANCHOR: HEALTHY PUBLIC FISCAL ANCHOR: HEALTHY PUBLIC FINANCESFINANCES
Source: Banxico figures
Public Sector financing requirements(Percentage of GDP)
-10
-5
0
5
10
15
20
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
Income from OilAs a percentage of the total)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
.. .. however, the government still depends on oil to finance it’s expenditures.
Public debt has been considerably reduced ...
35
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
36
THE COUNTRY NOW DEPENDS A LOT THE COUNTRY NOW DEPENDS A LOT LESS ON RAW MATERIALES 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
No petroleras
Petroleras0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1,0
Arg
entin
a
Bol
ivia
Bra
sil
Chi
le
Col
ombi
a
Cos
ta R
ica
Ecua
dor
El S
alva
dor
Gua
tem
ala
Hon
dura
s
Méx
ico
Nic
arag
ua
Para
guay
Perú
Uru
guay
Vene
zuel
a
1986-1988 1999-2001
Herfindahl-Hirschman Index Exports by receiver countries (1986-1988 y 1999-2001).
37
MOREOVER, TLCAN HAS MEANT THAT THE MOREOVER, TLCAN HAS MEANT THAT THE COUNTRY HAS BECOME “ANCHORED” TO THE COUNTRY HAS BECOME “ANCHORED” TO THE
ECONOMY OF USAECONOMY OF USA
The new productive structure has caused the economic cycle to become more stable , and volatility has become a thing of the past.
GDP in Mexico and Industrial Production in USA .(Percentage of Anual Exchange)
-8
-6
-4
-2
0
2
4
6
8
10
19
96
19
97
19
98
19
99
20
00
20
01
p/
20
02
20
03
20
04
Mexico GDP
US industrial production.
Recovery of GDP(Índice=100 maximum)
80
85
90
95
100
105
110
-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
1981 1985 1994 2000
Quarters after the crisis
Source: INEGI and Banxico
38
The political economy of the possible: BrazilThe political economy of the possible: Brazil
39
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
Commercial opening(Exports + Imports) / GDP
40
TRADE OPENESS AND CATCHING UP TRADE OPENESS AND CATCHING UP PROCESSPROCESS
Successful Asian emerging countries were able to simultaneously combine growth with a trade openness proccess.
Brazil has recently started to open up its economy. It is also obtaining record trade surpluses: nearly 45 billion dollars in 2005; up 25% from the previous year.
-1,0
-0,8
-0,6
-0,4
-0,2
0,0
0,2
0,4
0,6
0,8
1,0
0,0 0,2 0,4 0,6 0,8 1,0 1,2
Thailand Taiwan South Korea Japan India China
2001-04
1951-55
2001-04
1951-55
Trade openness and development
Real tradeopenness(as a % of GDP)
Dev
iation
ofRea
l GDP pe
rcap
ita with
resp
ectt
owor
ldav
erag
e(in
loga
rith
ms)
Source: BBVA using Penn World Tables and IMF data
1951-55
2001-04
0%
5%
10%
15%
20%
25%
30%
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Brazilian Real Trade Openness(as a % of GDP)
Source: BBVA
41
Top 100 firms in Latin-America
45
40
8
31 1 1 1
0
10
20
30
40
50
Brazil Mexico Chile Argentina Ecuador Colombia Peru Venezuela
Source: America Economia 2005
BRAZILIAN FIRMS BEGAN TO EXPAND BRAZILIAN FIRMS BEGAN TO EXPAND OVERSEASOVERSEAS
Rk Firm Sector Exports04 (US$ Mill) % of sales % of sales
3 Petrobras Petroleum 6.728,7 16,5 11,212 Vale do Rio Doce Mining 2.433,5 23,5 30,632 Grupo Votorantim Holding 1.544,6 26,6 18,948 Usiminas Steel 1.137,3 24,7 9,121 Gerdau Steel 1.066,7 14,4 11,663 Gerdau Açominas Steel 935,6 24,5 22,440 Telesp Telecom 821,7 16,4 -66 CSN Steel 746,6 20,2 20,2
144 CST Steel 611,9 31,9 53,594 Cemig Electricity 521,7 19,4 -20 Electrobras Electricity 487,2 6,5 -62 Embraer Aerospace 473,1 12,3 86,952 Ambev-CBB Drinks 437,6 9,7 -
208 Aracruz Celulose Paper 402,5 31,3 61,8102 Balgo Mineira Steel 391,6 15,5 -143 Cosipa Steel 363,2 18,8 33,531 Telemar Norte Leste Telecom 345,5 5,9 -16 Odebrecht Holding 320,2 3,9 -
Utility
42
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
43
THE CHINESE BONANZATHE CHINESE BONANZA
Brazilian products hardly compete at all with Chinese goods in international goods markets, and, moreover, the tendency is for these levels to drop.
Commercial Competition with China
0.200.250.30
0.350.400.450.500.550.600.650.70
0.25 0.35 0.45 0.55 0.65
México
Source: Blázquez, Rodríguez y Santiso, 2005
TailandiaHungría
EEUU Rep. Checa
España
PoloniaJapón
Brazil
Coe
f de
conf
orm
idad
Coef de especializaciónCommercial competition between China and Brazil
25%
27%
30% 30%
28%
25%
23%24%25%26%27%28%29%30%31%
1998 1999 2000 2001 2002 2003Source: Blázquez, Rodríguez y Santiso, 2005
44
11 Latin America’s CrusadeLatin America’s Crusade
The Great Latin American TransformationThe Great Latin American Transformation22
11
33 ConclusionConclusion
45
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
46
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
47
During the period 2000-2005, some During the period 2000-2005, 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
48
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
49
Thank youThank youfor your attention!for your attention!