Global Economy and Finance
- Matchmaking Finance and Infrastructure Capital Finance International, summer 2017 (w/ Aleksandra Liaplina)
The world economy – and emerging market and developing economies in particular – display a gap between their infrastructure needs and the available finance. On the one hand, infrastructure investment has fallen far short from of what would be required to support potential growth. On the other, abundant financial resources in world markets have been facing very low and decreasing interest rates, whereas opportunities of higher return from potential infrastructure assets are missed. We approach here how a better match between private sector finance and infrastructure can be obtained if properly structured projects are developed, with risks and returns distributed in accordance with different incentives of stakeholders.
(.pdf version here from OCPPC)
- Bloated central bank balance sheetsCapital Finance International, spring 2017 (w/ Matheus Cavallari)
Central banks of large advanced and many emerging market economies have recently gone through a period of extraordinary expansion of balance sheets and are all now possibly facing a transition to less abnormal times. However, the fact that one group is comprised by global reserve issuers and the other by bystanders receiving impacts of the former’s policies carries substantively different implications. Furthermore, using Brazil and the U.S. as examples, we also illustrate how the relationships between central bank and public sector balance sheets have acquired higher levels of complexity, risks and opacity.
(.pdf version here from OCPPC)
- Global Imbalances on the Rise Capital Finance International, winter 2017
Signs of a possible resurgence of rising global current-account imbalances have returned attention to the issue. We argue here that, while not a threat to global financial stability, the resurgence of these imbalances reveals a sub-par performance of the global economy in terms of foregone product and employment, i.e. a post-crisis global economic recovery below its potential. In addition, we approach how the re-orientation of the US economic policy already announced by president Trump suggests risks of new bouts of tension around global current account imbalances.
- NAFTA at the Crossroads Huffington Post, May 19 (w/ Michael McKeon and Samuel George)
The U.S. Senate voted to confirm Robert Lighthizer as United States Trade Representative last week, rounding out President Donald Trump’s cabinet and giving momentum to his trade agenda. At his swearing-in ceremony on May 15, Ambassador Lighthizer predicted that President Trump would permanently reverse “the dangerous trajectory of American trade,” and in turn make “U.S. farmers, ranchers and workers richer and the country safer.” This policy shift will begin in earnest in the coming weeks, when Lighthizer meets with congressional trade leaders to discuss the administration’s plan to renegotiate the North American Free Trade Agreement (NAFTA).
Brazil
- Does Brazil’s Sector Structure Explain Its Productivity Anemia? Huffington Post, June 20 (w/ Fernanda De Negri)
Brazil’s labor and total-factor productivity (TFP) have featured anemic increases in the last decades. As we illustrate here, contrary to common view, sector structures of the Brazilian GDP and employment cannot be singled out as major determinants of productivity performance. Horizontal, cross-sector factors hampering productivity increases seem to carry more weight.
- Long-term finance and BNDES tapering in Brazil Huffington Post, June 6 (w/ Matheus Cavallari)
One major policy issue in Brazil is how to boost productivity, while following a path of fiscal consolidation that will take at least a decade to bring the public-debt-to-GDP ratio back to 2000 levels. The productivity-boosting agenda includes not only the implementation of a full range of structural reforms, but also recovering and upgrading the national infrastructure and other long-term investments. Given that fiscal consolidation has already been leading to less transfer of funds—in fact, the reversal—from the Treasury to the National Economic and Social Development Bank (BNDES) and a consequent downsizing of the latter’s operations, pursuing the double objective of raising productivity and adjusting fiscal accounts will require an expansion of alternative sources of long-term asset finance.
- Brazil’s Pension Reform Proposal is Necessary and Socially Balanced Huffington Post, April 17
Last week the World Bank released a Staff Note analyzing the pension reform proposal sent last December by Brazil’s Federal Government to Congress. It concludes that:
“… the proposed pension reform in Brazil is necessary, urgent if Brazil is to meet its spending rule, and socially balanced in that the proposal mostly eliminates subsidies received under the current rules by formal sector workers and civil servants who belong to the top 60 percent of households by income distribution.”
With the help of some charts extracted from the note, we summarize here some of the reasons for such a statement.
- The Brazilian debt hangoverHuffington Post, January 22
With the help of five charts, we approach the Brazilian credit cycle, the downward phase of which helps understand why the post-crisis recovery has been so hard to obtain. In our view, the profile of such a credit cycle in effect points to it as a special chapter of our previously approached determinants of the Brazilian economic crisis.
- The Brazilian productivity anemiaColumbia Global Centers – Rio de Janeiro
Brazil has been suffering from “anemic productivity growth”. This is a major challenge because in the long run, sustained productivity increases are necessary to underpin inclusive economic growth. Without them, increases in real labor earnings tend to conflict with global competitiveness; collecting taxes in order to fund government expenditures on infrastructure and social policies becomes a heavy burden; returns to private investment becomes harder to achieve; and ultimately citizens will have less access to high-quality goods and services at affordable prices. The focus on urgent fiscal reforms adopted by the new government– public spending cap, social security reform – must be accompanied by action on the productivity front.
Emerging Markets
- Beyond the Ballot: Turkey’s Economy at the Crossroads Huffington Post, March 26 (w/ Sam George)
In the current environment, Erdogan is no longer striving to prove Turkey is ready for the EU and many believe that this course has rendered Turkish accession extremely unlikely, at least in the near term. From a purely economic standpoint, a political falling out would be a shame. The European Union is the most important trading partner for Turkey, and 40 percent of Turkey’s exports are destined for European countries. Turkey has increasingly become a part of European production chains for manufacturing as well. If political ties are not deepened, these economic links may not reach their full potential.
In the meantime Turkey’s economy continues to grow, and the country maintains its momentum. But as Turks prepare to take to the polls to address a political crossroads, they must not lose track of the economic crossroads bearing down on them from beyond the bend.
- Colombia: getting growth, getting peaceHuffington Post, March 3 (w/ Diana Quintero)
The Santos administration has delivered on two of its main promises: sign a peace agreement with the FARC guerrilla and get approved a significant structural tax reform. We approach here why both are expected to become strong pillars to help keep the growth-cum-poverty-reduction momentum of the last decades.
