Trump´s impact in Latin America

I have not written much in this blog lately... partly because of the depression regarding Trump´s victory.   Things are going to be rather bleak from now on.

Meanwhile, here is my column in El Periodico on the likely impact of Trump in Latin America (in Spanish).  We have no idea who will be his main advisors in the region so it is all speculation... but there is no doubt that new problems may emerge and some countries should be quite worried.  Comments most welcome!

New Op-Ed on the two oppositions to globalisation

A call to distinguish our position from those of the right-wing nationalism.  The column is in Spanish and will also be published by Agenda Pública.

Discount for our new book

As I have written in this blog in the past, my friend Juliana Martínez Franzoni and I have just finished a book on how to build universal social policy in the South.  I hope to write a longer summary/discussion of the book here soon, but now I would like to encourage all of you to buy it or order it for the library.  You can get a 20% discount here.

Here the abstract:

Universal social policies have the power to reduce inequality and create more cohesive societies. How can countries in the South deliver universalism? This book answers this question through a comparative analysis of Costa Rica, Mauritius, South Korea, and Uruguay, and a detailed historical account of Costa Rica's successful trajectory. Against the backdrop of democracy and progressive parties, the authors place at center stage the policy architectures defined as the combination of instruments that dictate the benefits available to people. The volume also explores the role of state actors in building pro-universal architectures. This book will interest advanced students and scholars of human development and public and social policies, as well as policymakers eager to promote universal policies across the South. 

Hard to believe: evolution of income at the top

I am trying to write an article summarising the recent evolution of income inequality in Latin America.  The reduction in all countries but Honduras is well known, but some numbers are just hard to believe.  This is the reduction experienced by top incomes during the period 2001-2012.  The share decreased in almost all countries and in several by more than 20%.  This is hard to reconcile with the evolution of political economy and also with the limited data we have based on tax receipts.

Percentage change in the income share of the top decile, 2001-2012

Source: own calculations with data from SCEDLAS

A review of the links between the commodity boom and inequality in Latin America

Thanks to the kind invitation from Carmen Díaz Roldán to give a lecture at the Jornadas de Economía Internacional, I had the opportunity to reflect on why Latin America used the latest commodity boom better than in the past to reduce income inequality.  The expansion of unskilled jobs together seems to be at the heart of the region´s success...but also relatively unexplained.  Here the presentation in English and here in Spanish.  I hope to write a paper on it soon, so comments welcome!

Too much data vs no data at all

Two recent articles in the FT and the NYT illustrate how many political debates are taking place without serious empirical evidence.   As the NYT article says, we are at a moment when "money-fueled culture where tweets, not position papers, shape the national conversation."  Yet, in contrast, we are also at a time when there is a big accent on big data and the need to have "evidence-based" policymaking (which usually means statistical data).  At times, I am afraid that qualitative researchers are in the middle of both worlds and will have diminished influence over time: they are compared with the type of research that bad think tanks do or they are considered second rate when compared to quantitative research.  A rather worrying trend!

Dilma's impeachment is totally unjustified

I wrote a column in El Pais today about the crises in Brazil.  The corruption scandal is severe but does not justify the impeachment at this point.  Moreover, the disappearance the PT (which is an obvious goal of a large segment of the upper middle class and the rich) would be a disaster for Brazil's redistributive agenda.

You can also find an interesting interview to Lula here.

Article for Elcano

A few weeks ago the Foundation Elcano organised an interesting closed door debate on the Sustainable Development Goals and Spanish aid in Latin America.  They asked me to prepare a document with some of the most significant challenges for the region... not an easy task!  Here is the final version in Spanish.  Of course, the region has many more challenges but it is important to stay focus on inequality, human rights/violence, economic transformation together with the role of institutions.

Latin America in the last ten years

Today I briefly talked on BBC radio Scotland on the situation in Latin America. Having only five minutes forces you to think about what is the headline that should be emphasise.  I think it is four points:

1. The economic basis of the region are the same as a century ago: commodities and agricultural products.

2. The region used the commodity boom MUCH better than before: it promoted formal employment and expanded social incorporation for new groups. The result was the reduction of inequality and the growth of an emerging middle class.  

3. Yet governments did not pay enough attention to three factors that are now in creating problems:

a. High levels of corruption (these were not created by the left but the left has happily participated).

b. Economic dependence on natural resources and difficulties to create other sources of growth.

c. Governing through polarization means that there are now groups (the elite, the upper middle class) that are more than happy to support protests against these groups.

So yes, the region has many problems, but the last ten years were not a wasted opportunity as some people now claim.

The crisis in Brazil

Spending a week in Brazil in the middle of this crisis is really interesting.  There is so much going on and so many layers.  As an academic told me today, there are quite a few actors following their own agenda and nobody thinking about the national needs and priorities.  You have:

• An unpopular president in the midst of a serious corruption scandal that she probably knew about.
• A former president coming back to the government for different reasons (some more justified than others).
• A judge who is behaving in the worst possible way: spying on the President of the Republic and then publicising conversations is unprecedented.

The lack of social trust is particularly striking: nobody is willing to give others the benefit of the doubt or respect the institutional framework.  As a result, you have the left warning against a coup, a judge behaving unethically in his thirst for glory and the press adding fuel to fire.

A very interesting aspect of the last few days is the characteristics of the demonstrators.  I realise that there were millions in the street and that Dilma's opposition goes beyond class lines.  Nevertheless, it was clear walking in the Avenida Paulista and watching TV that a large share of the people in the demonstration are part of the upper middle class.  They may have two agendas (anti-PT and anti-corruption).  One is obviously much more positive than the other.  In fact, I wonder if we can place a  the preferences of this group and others in the following two axis:

	Pro-redistribution	Anti-redistribution
Highly concerned with corruption	“Idealised” middle class	Upper middle class
Less concerned with corruption	Non-organised poor	Traditional elite

My hypothesis would be that the current protests are driven by the upper middle class, who has no interest in redistribution and will vote against it.  Moreover, I wonder how big and how mobilised the "idealised" middle class (which is the one we tend to imagine appearing and contributing to democracy and equity) is and whether they will play any role in upcoming months.  In fact, a deeper crisis of the PT could further weakened the chances of having that kind of middle class in the future... or not?

Three key steps in policymaking

I had a great conversation with people from IPEA today (more on social policy trajectories later) and one thing became clear.  When thinking about policymaking, I think we should consider three different steps:

1. Agreeing in the objectives we want to achieve (e.g. universal social policy).

2. Agreeing in the existence of different trajectories to achieve that result but also on the right one in each specific case.

3. Identifying the KEY constraint (binding constraint in the terminology that Rodrik and others introduced about growth a while back) and begin by trying to overcome it.

These steps are probably very clear in the policymaking academic literature... but they are too many times missing in real life debates!  In fact most often there is lack of clarity about objectives and instruments and, more importantly, about the best way to start.

China's problems could hit Latin America hard

During the last few years, China was a mixed blessing for Latin America (see here and my own views here). On the one hand, China's demand for commodities was behind the Latin America's boom. China also offered an alternative development model for the region and financial support.  On the other hand, it helped to consolidate primary specialisation and to accelerate deindustrailasation even in Brazil. 

Worryingly, China's crisis can move all these various impacts in the "wrong" direction:

a. The pending devaluation of the Chinese renminbi could further erode Latin American competitiveness at a time when competing through prices is particularly important in the region.

b. Exports to China will not expand and commodity prices will remain low.

c. China is still lending to Latin America, but it is likely to think harder about how much to lend and in what conditions in the future.

d. The crisis could strengthen neoliberal's hand in Latin America by questioning the Chinese alternative.

Am I missing something?  Is there anything positive for the region coming out of this?  

Deja vu in Brazil (and the rest of Latin America)?

Last week my colleague Tim Power organised a great conference on Brazil at the Latin American Centre. There was a rather pessimistic discussion of Brazil's political and economic problems, but a recognition that the anti-corruption agenda was going in the right direction.

Something left me a little uneasy: the claim that Brazil's (and by extension Latin America's) economic management has been disastrous in recent years and that the country and the region suffer from exactly the same problems than twenty or thirty years ago.  Don't take me wrong: together with my coauthor Juliana Martinez Franzoni, I have been rather critical of the lack of policies in favour of structural change in Latin America (see, for example, this article).  Yet we can not simply assume that Brazil's problems are the same as in the past (and do a "cut and paste" from our analysis of other recessions) and fail to study what has changed.  A few things that we should consider and explore with more detail:

a. The formalisation of employment increased significantly: has this expanded protection for workers in times of crisis?  Could this have a positive effect on aggregate demand in the medium run?

b. The creation of new social programs that could, potentially, protect workers from the crisis: Bolsa Familia is the best well known one.  I realise that most of these programs have been recently cut in real terms... but are still important when comparing Brazil today with Brazil in the last two recessions.

c. Industrial policy: was Brazil's recent industrial policy really very interventionist? Did the role of the state really expanded that much? Didn't the policy try to promote new high tech activities? How much do we know about what was attempted and how successful it was?  We know that policies in some areas like intellectual property rights (see some of the recent work of my friend Ken Shadlen) were actually quite good. We must find ways to evaluate some of these policies independently of their impact on the very short run. Are they promoting structural change? Are the inefficiency costs too high?

d. Macroeconomic policy: I find the analysis in this area particularly frustrating.  As they figure below (that comes from this webpage) shows, Brazil's effort to reduce the external debt was impressive. The recent increases have more to do with the crisis itself that with poor macroeconomic management. Nevertheless, observers talk about Brazil as if were were in the 1970s... does that make any sense?

Of course, Brazil has plenty of economic problems and resolving them will take time.  The 2000s were a lost opportunity in several areas and development policy could have been more ambitious.  Inflation could accelerate in the future if the government is not careful (even if it is now rather sustainable and not the primary concern).  Yet simply arguing that the country faces some long term problems and that the same structural reforms than twenty years ago are required is unsatisfactory and not really useful.

Los problemas del sistema de salud costarricense

La Caja Costarricense del Seguro Social fue durante décadas el soporte de uno de los sistemas de salud más inclusivos no sólo de América Latina sino de todo el mundo en desarrollo. Sin embargo, lleva años con problemas derivados de distintas reformas equivocadas... pero también de la negligencia de actores internos que se han aprovechado de ella para su propio beneficio.  Mi colega, coautora y amiga Juliana Martínez Franzoni explica con enorme claridad y contundencia este problema en la siguiente entrevista televisiva.

Se trata de un caso significativo para entender mejor cómo nacen los problemas del Estado y cómo estos tienen muchas veces nombres y apellidos.  Por desgracia, la falta de respuestas en este momento muestran también la debilidad de la administración de Luis Guillermo Solís que prometía mucho y ha tenido muy pocos resultados.