Download Reforming Latin American Economies

FROM REGRESSIVE FINANCIERISM TO
PROGRESSIVE PRODUCTIVISM
Ricardo Ffrench-Davis
UNIVERSIDAD DE CHILE
CEPAL:LAC-UE ECONOMIC FORUM, 2013
January 21,2013
1
Success in exports growth up to 2008, but meager performance in nonexported GDP. Real instability has focused heavily on GDP directed to
domestic markets rather than to foreign markets: this implies that effective
demand has been the most unstable. The latter depends on domestic
macroeconomics, which has failed for the real economy.
Latin America (19) and World: Exports and economic growth, 1990-2012
(annual average rates of growth, %))
Latin America (19)
GDP
1990-1997
1998-2003
2004-2008
2009-2012
3.3
1.4
5.4
3.1
Exports
World
Non -exported GDP
8.4
2.5
(1.1)
(2.2)
5.1
0.7
(0.9)
(0.6)
6.8
5.0
(1.3)
(4.0)
2.6
3.3
(0.5)
(2.5)
GDP
Exports
2.9
6.2
3.3
4.9
3.4
7.5
2.3
3.2
Fuente: Ffrench-Davis (2005) y actualizaciones, sobre la base de cifras oficiales de América Latina, y FMI y OMC para el mundo en dólares constantes.
Entre paréntesis las contribuciones al crecimiento total de la economía del PIB no exportado y exportado, respectivamente. El valor agregado exportado fue estimado
descontando desde las exportaciones brutas de bienes y servicios, su contenido importado. Este último se asumió igual a la participación de bienes importados de
capital e intermedios en el PIB total. Para la maquila mexicana se utilizaron datos efectivos de valor agregado.
2
Financial Liberalization in LA Led
to a Regressive “Financierism”
 Boom in financial savings without an
increase in domestic savings (DS crowdedout).
 Financial markets dominated by agents
especialized in short-term finance (“overnight”)
and not in GKF (“overdecade”: crucial role of
influential agents, which --by training and
reward-- are away from productive investment.
3
MEDIUM-TERM CYCLES OF CAPITAL
FLOWS ARE UNFRIENDLY TO GKF
• Weak link with domestic GKF.
• Even by FDI, because of a surge in
M&A, rather than greenfield investment.
Volatile capital inflows have generated
macro instability, with large output gaps
between actual and potential GDP.
Discourages GKF,employment and SMEs.
4
Capital flows and terms of trade, both cyclical,--instead of relative
productivities a la B&S-- have determined RER and aggregate demand
behavior in Latin America. RER medium-term instability has tended to
weaken value-added in exports and its links with the rest of the economy.
Latin America (19): Net capital inflows and RER, 1990-2011
(RER index 2000=100, inflows in % of GDP)
140
5.5
5.0
4.5
130
4.0
3.5
120
3.0
2.5
RER
2000=100
110
2.0
1.5
100
1.0
0.5
0.0
90
-0.5
-1.0
80
-1.5
-2.0
70
-2.5
-3.0
TCR
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
-3.5
1990
60
Flujo Neto de Capitales
5
Source: Author’s calculations based on ECLAC figures. Real exchange rate defined in terms of local currency per dollars
Real instability of volatile financial flows and of terms of trade
have led fluctuations in aggregate demand that generate changes in
GDP. That is possible only if potential GDP is being underutilized.
Latin America (19): Aggregate Demand AND GDP, 1990-2012
(annual growth rates, %)
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
Aggregate demand
GDP
Fuente: Ffrench-Davis (2005) and updates based on ECLAC (2012) for 19 countries.
5
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
-4.0%
Real instability has also been unfriendly to the productive sector via its
negative impact on capital formation. As a result, the investment ratio sharply
declined in the eighties and remained low in the 90s and 2000s. Ups-anddowns are significantly correlated with the evolution of the recessive gap".
Latin America: Gross Fixed Capital Formation, 1970-2012
(% GDP, constant dollars 2000)
27
25
23,5
23
21,5
21
18,5
19
17,6
17,6
17
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
15
7
Fuente: ECLAC data for 19 countries
In fact, high real instability generates underutilization of potential GDP, which
along with the incompleteness of the factor markets, are significant
explanations of reduced productive investment ratios; it is a depressive and
regressive dynamic effect.
América Latina (9): Brecha de producto y tasa de inversión bruta 1970-2009
26,0
10,0
25,0
9,0
8,0
24,0
Tasa de inversión (% PIB)
6,0
22,0
5,0
21,0
4,0
20,0
3,0
19,0
2,0
1,0
18,0
0,0
17,0
Brecha de producto (% del PIB*)
7,0
23,0
-1,0
16,0
-2,0
Tasa de inversión
15,0
Brecha de producto
-3,0
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
-4,0
1970
14,0
8
Fuente: Ffrench-Davis (2005) y actualizaciones, basado en datos de CEPAL y Hofman y Tapia (2004). Incluye Argentina, Bolivia, Brasil, Chile, Colombia, Costa Rica,
México, Perú y Venezuela.
• Predomina la creencia, equivocada, de que la autoridad
económica no tiene capacidad de afectar el tipo de cambio, pues
sería ir “contra el mercado”. El argumento central alternativo es
que hay segmentos diferentes en el mercado y se trata de operar
a favor del segmento más relevante para el desarrollo productivo
(esto es, el de productores de transables). Se evita así que
agentes cortoplacistas o shocks transitorios de términos de
intercambio lleven el tipo de cambio de corto plazo fuera de
niveles sostenibles a mediano plazo. Por lo tanto, implica una
intervención a favor del mercado más relevante para el
crecimiento económico.
• En breve, la permanencia de una política de tasa libre-libre
implica la renuncia a hacer política macroeconómica sostenible.
9
Latin America (19): Evolution of exports and imports of goods and services, 20042011
(annual real growth rates, %)
25.0%
22.2%
20.0%
15.0%
14.5%
14.3%
12.9%
12.2%
10.0%
12.8%
11.2%
7.6%
10.3%
9.8%
7.9%
7.4%
6.1%
5.7%
5.4%
5.0%
1.5%
0.0%
-5.0%
-10.0%
-9.8%
-15.0%
-15.1%
-20.0%
2004
2005
2006
2007
Exports
2008
2009
2010
2011
Promedio
Imports
10
Sources: Based on ECLAC for 19 countries. Exports and imports cover volume (quantum) of goods and services. The horizontal lines correspond to the simple
average of the growth rates in the period 2004-11; imports and exports show an annual average of 9.8% and 5.4%, respectively.
Four severe expresions of the costly
consequences of financierism for EE
• Unstable real exchange rates, led by pro-cyclical
capital flows and terms of trade.
• Large capital inflows and financial domestic savings
with low capital formation. Poor “financing for
development” à la Monterrey.
• Aggregate demand and economic activity extremely
dependent on swinging (roller coaster) external
shocks.
• Insufficient compensatory financing, frequently with
pro-cyclical conditionality.
11
A PROGRESSIVE POLICY
APPROACH
1.
To take account of great Structural Heterogeneity of
diverse agents or factors: heterogeneity of their
productivities, their access to markets, and their
capacity to respond to policy changes and reforms.
2.
Asymmetries in the capacity to respond are stressed
by neo-liberal policies with the pro-cyclical bias of
financierism.
3.
Compensate or counter asymmetric effects: a)
seeking to avoid abrupt changes in capital flows and
terms of trade, b) leveling off capacities with reforms
of domestic capital markets, and c) impose
coordination in domestic macro policies and
12
rebalance of its objectives.
Latin America (19): Terms of trade indices for goods and services, 1990-2012
(index1990=100)
160
150
149.6
140.6
140
130
133.5
120
111.6
110
100
98.0
90
13
Sources: Based on ECLAC for 19 countries (2012)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
80
Double divergence in economic development
Latin America vs Developed Countries, Per capita GDP and Income
Distribution, 2011
(US$, PPP)
45,000
Per capita
GDP
40,000
20% richest v/s
20% poorest
41,189
35,000
30,000
25,000
Per capita
GDP
7 VECES*
20% richestv/s
20% poorest
(USA. 9
Times)
19 Times
USA
48.442
20,000
15,000
11,863
10,000
5,000
0
G-7
Latin America
14
Sources: IMF, World Economic Outlook Database (2012), World Development Indicators (2012). G7 includes: USA, Japan, United Kingdom, Germany, France,
Canada and Italy.