It’s physical: that’s the way to integrate in South America

About ten years ago, before the Euro was inaugurated, I attended an academic debate about the future of the new currency between two economists, one coming from a US academic institution and another from an Italian university. The former argued that the experience was doomed to fail, given the absence of those prerequisites for an […]

Whither Debt-to-GDP in Brazil

Brazil’s external-account indicators currently locate it among investment grade countries. Nonetheless, despite the fact that its fiscal behavior in terms of primary surpluses and public debt trajectory since the 2002 confidence crisis has surprised many skeptical analysts along the way, Brazil’s public debt-to-GDP level is still high as compared to peers. Therefore, the government’s defeat […]

Capital Flows to Brazil as a Moving Contradiction

Decoupling or recoupling? Contagion or resilience? If you want a stage where to observe those opposite trends at play in Latin America, the evolution of capital flows to Brazil might serve. First, look at the recent short-term capital flow moves as the global financial crisis went through a second wave in November. The new round […]

The Base of the Latin American Pyramid

Thomas Trebat was right when he remarked here yesterday “an enormous share of the Latin American wealth generated in recent years has piled up in the hands of a privileged few that may or may not be playing a useful role in turning the present boom into self-sustained economic growth”. Ultimately, the current cyclical upswing […]

Energy hedging is a must in Brazil… as elsewhere in the region

On last Tuesday, Petrobras announced that it would reduce its supply of natural gas to distributors in Rio de Janeiro and São Paulo, apparently limiting volumes to those levels agreed in the prevailing contracts with the latter. That decision came against a backdrop of gas consumption by residential and industrial users in recent months well […]

Latin America and the Global Financial Turmoil

“Will the global financial turmoil hit emerging markets and Latin America? Or will the region decouple from this turmoil and from the US economic slowdown? Is China more important than the US for the economic fortunes of the region? How much of the recent economic success of Latin America is due to good policies or […]

Securitization in Latin America: advantages of latecomers

It may seem odd that a relatively upbeat assessment of the prospects for securitization in Latin America (by Michela Scatigna and Camilo Tovar) has been released this month in the BIS Quarterly Report, while securitizing loans and creating derivative products are being blamed as main culprits for the current financial mess in advanced economies. But […]

Repricing of Latin American Risks

As global financial markets undergo a new phase of repricing risks and normalization of global asset prices, after the peak of a Minsky credit cycle, the current (long or short) period of turbulence in Latin American financial markets is also bound to continue. Whether or not the benevolent credit squeeze becomes a deadly credit crunch […]

Electricity and macroeconomics in Brazil: the end of the golden age

The fourth new energy auction in Brazil took place last Wednesday (July 26), with contracts for delivery starting in 2010. Its results (Table 1) displayed some features that deserve attention:              (i)    There was no submission of bids by hydro plants, even though two large hydro plants and one PCH had pre-qualified to participate; (ii)    The thermo […]

The Misery of the “Dutch Disease and Deindustrialization” Argument

High commodity prices, abundance of liquidity, and sustained growth in Asia: all factors of good luck in the current foreign environment of Latin America, right? Not quite, according to frequent references to “deindustrialization” and “resource curse” afflicting the region as features of the international labor division that has been consolidating along the current world economic […]