Guatemala maintains its high ranking in... low taxation

Guatemala´s tax burden in 2013 was lower than expected: less than 11% of GDP. With this level of public income, it is almost impossible to meet any of the key development challenges that a country like Guatemala has. yet the likelihood of significant increases in the tax revenue are almost zero, a point Aaron Schneider made clearly in his 2012 book . Yet what are the main challenges for next year according to the Minister of Finance? Fiscal consolidation and to guarantee the payment of the public debt!

More of the same: fear of the bad left

Costa Rica will celebrate elections in less than a month and the candidate from the left-wing Frente Amplio, Jose María Villalta is polling quite well. This could seem surprisingly, but it reflects how tired Costa Ricans are with the PLN in power and how weak is the traditional leadership of the opposition PAC. Costa Rica's main newspaper has become nervous and has responded with the traditional approach of the Latin American elite: warning again the evils of communist. Yesterday's editorial reflects the power of the traditional division between good and bad left and how Venezuela has become the old Cuba. It also reflects how difficult it is to create modern, progressive movements in Central America... even after Funes' experience in El Salvador. This type of approach weakens democracy and prevents serious discussion of alternative social and economic policies to take place.

Inequality is receiving more and more attention... but is too focused on the US

This blog called Inequality Matters is one more sign of the growing attention to inequality among policymakers, academics and the press. One striking characteristic of this new move is its focus on the US and, to a lesser extent, the UK. It is much harder to find good discussions about the increase of inequality in Spain or other South European countries. Moreover, there is also limited attention to what other high inequality contexts can teach about the economic and political costs of a worsening in the income distribution. This provides a great opportunity for Latin Americanists, who understand this problem quite well and have witnessed its negative consequences for quite some time.

How worried should be about Latin America's future?

Check the interesting article on Latin America's future at Vox written by World Bank experts. It offers a nice contrast with the Wall Street Journal article I mentioned last week, and reminds us that all is not bad in Latin America. Many of the countries in the region increased investment during the 2000s and were careful in the management of inflation, their budget and their foreign reserves. The data is fascinating and all the arguments interesting even if controversial: 1. As the article recognizes, the region has failed to undertake important reforms. By this we should read market-friendly reforms, but policy changes that could contribute to improve productivity and reduce structural heterogeneity. Education systems are still problematic and unequal, industrial policy insufficient and support to small, informal firms quite absent and disorganized. More importantly, these problems are as significant in Mexico or Peru as they are in Brazil or Argentina--there are no two Latin Americas there. 2. Notice the significant differences between Central and South America in the numbers. Central America still invests little and grows through remittance-fueled consumption and growing imports. The key division in Latin America takes place between countries North and South of Panama and not between "good" and "bad" countries. 3. With some exceptions (sadly, Venezuela comes to mind), a sudden financial crisis is unlikely to happen in the region. Yet what we still can have is a long period of low growth and stagnant income distribution--sometimes these lack of advance is politically more worrying than sudden crises.

The good and bad Latin American again

An article on the Wall Street Journal a week ago echoes the traditional division between a "good" Latin America (opened to the world, responsible, modern) and a "bad" Latin America (closed to the world, opposed to globalization, irresponsible). Unfortunately this is still the type of simplistic dichotomy that does not take us anywhere... even more when Brazil is included as part of the bad group. There are several problems with the article: a. Is any one calling China "bad" in terms of its policies? Is Brazil doing any different when protecting certain sectors and making (a weak and ineffective) effort to develop its national champions? b. How much longer will we evaluate the success of specific policies through the growth rate of a few months or a year? And is anyone really going to call Mexico´s current performance successful?

Is De Guindos jocking?

I have not written in this blog for a long time and intend to do it more from October onward. Before that, however, I could not resit to include a quote from the Spanish Minister De Guindos today: "Si hay algo de lo que estamos lejanos es del modelo chino. España es un país competitivo y su competitividad no se tienen que basar en salarios bajos, sino en la productividad, el capital humano, la formación y el desarrollo de la investigación con productos de valor añadido elevado". Does Spain really have a model? And how they plan to develop that kind of model with sharp cuts in research and development and the university sector?

Income inequality increases in Spain... and will likely keep increasing in the future!

According to El Pais, Spain is the fourth most unequal country in the European Union after Lithuania, Romania and Latvia. The Gini coefficient was in 2010 at the highest level since 1995 and as a result of the crisis more than one person in five is in below the poverty line. One would think that this would lead to social mobilization beyond the "Indigandos" and inequality playing a large role in the next elections. Instead, the conservative Partido Popular (likely winner in November) has promised to further liberalize the labour market AND reduce income taxes on capital gains. How is this possible? What will be the Gini coefficient in a few years? And how can Spaniards accept all these reforms? There is little doubt that some countries are more conservative than others and, implicitly or explicitly, are willing to accept market reforms without much opposition...