Reduced Inequalities

This article analyses the present situation and future prospects of Brazil in the light of the globalization process. In the author’s view, the market only generates globally coherent decisions in countries with a high degree of social homogeneity. Thus, the greater the social heterogeneity of a country, the greater the need for a national development policy. Such a policy should link up the concepts of globalization and social profitability on the economic and political level. Globalization furthers the destructuring of production systems in favour of companies that plan their investments on an international scale and promotes the concentration of political power, widening of the productivity gap, and the destructuring of cultures. Social profitability, on the other hand, has to do with the priorities of economic decision-making in national political systems and allows the values of the community as a whole to be taken into account. In a country of continental size, with great population mobility, the danger of disintegration of the national production system makes it hard to subordinate the channeling of investments to the rationale of the transnational corporations. If globalization is an unavoidable technological imperative, then the country has little room for taking its own decisions. The author concludes that in these circumstances countries like Brazil, with great natural resources and marked social disparities, may disintegrate or slither in the direction of fascist-type authoritarian regimes in response to the growing social tensions. In order to escape from this prospect it is necessary to return to the idea of a national project and make the domestic market once again the dynamic centre of the economy. The greatest difficulty is in reversing the tendency towards income concentration, which can only be done through a great social mobilization process.

In the present essay the author propounds his answer to one of the problems with which he has been most deeply concerned throughout his long life as an economist. Beginning as a firm upholder of neoclassical theories, he was convinced by the world depression of the nineteen-thirties and the Second World War that neither in theoretical nor in practical terms can the problems of our peripheral situation be resolved through economic ideas worked out in the centres; and this conviction was the starting-point of a long process of self-criticism and reformulation of theories.

Over the last few decades, Latin American societies have undergone structural and secular reforms that have caused far-reaching social fragmentation extending over many spheres of social life. It is therefore pertinent to ask whether this has affected the socially shared notions that define a common sense of belonging. What has happened to such sentiments and how have they changed in the heat of the changes that have taken place in the region? This article analyses the weakening of two institutions capable of engaging individuals and generating shared perceptions, wishes and values, which had become key mechanisms of integration and social cohesion in the past: namely school and work. In this context, the article reviews the experiences and meaning of school and work for young people from the most disadvantaged sectors of the population, and the emergence of new competing institutions that display increasing capacity to engage and give meaning.

This study analyses the effects of residential segregation in Montevideo on the learning differences of students and examines the efficacy of the educational system’s responses seeking to deal with the inequities generated by those processes. After describing the effects of the family, the school and the neighbourhood on learning, it presents hierarchical linear models which seek to isolate the effects of each of these contexts. It summarizes the challenges raised by the results to Uruguayan education’s efforts to dissociate learning achievements from social origin and examines the responses of the authorities of the sector to those challenges. Finally, it reviews policy options for strengthening the role of education as the principal means for integrating new generations in the light of new problems in relation to urban segregation.

One of the drivers of economic growth is innovation, which raises productivity by creating new production methods, technologies, products and firms. This article examines an instrument that supports this process, venture capital, and highlights the need for a financing system covering each phase of innovation. It starts by illustrating Latin America’s innovation deficit. It then proceeds to a general analysis of the difficulties affecting the financing of innovation and the provision of venture capital to overcome these. It goes on to examine the form taken by these obstacles in the region and, considering the experience of Brazil and Chile, the methods used to deal with them. In relation to a number of the subjects addressed, the article discusses issues connected with major problems of financial system development.

Concessions for public works projects have enabled Chile to modernize its infrastructure; however, these arrangements have also raised certain issues that make it necessary to change the rules governing the system. The main problem has been the addition of numerous supplementary agreements to the original contracts. Under the present system, renegotiations are not conducted according to criteria of economic efficiency, and they can therefore affect public finance and lead to opportunistic behaviour, affecting the efficacy of the bidding process. A regulatory system allowing for compensation of investors when it is not feasible to put out a new tender is more consistent with economic theory and provides a better way to assess the economic value of a project that has been changed. Bidding does not replace regulation: rather, because contracts are bound to be incomplete, the two methods complement each other as mechanisms for including private investment in public projects.

Since monetary stabilization in 1994, bank consolidation has been gathering pace in Brazil as part of a global concentration trend following bank deregulation processes. This article analyses the effect of bank concentration on lending in Brazil in the period 1995-2004, distinguishing two stages and estimating panel data for Brazil’s 27 federative units. The results support the hypothesis that the process of consolidation in the Brazilian banking sector has an adverse effect on lending, which mainly harms the less developed regions of the country.

The banking system has played a key role in balance-of-payments crises in a number of emerging countries. This article reviews three types of models which analyse the different factors involved in recent foreign-exchange crises. These usually stem at least partly from balance-of-payments problems; financial vulnerability causes the currency to collapse and undermines the banking system, thus generating a vicious circle. This paper shows that financial stability is by no means guaranteed, particularly in a globalized financial system. Emerging countries have to strike a balance between economic and financial stabilization, while maintaining their share of new capital flows. Although a difficult task, this is essential for avoiding a repeat of past crisis episodes, the threat of which apparently cannot be ruled out.

The corporate world has changed remarkably in the past 10 years. New multinationals are appearing in countries with emerging markets such as Brazil, India, China, South Africa and Mexico, which are not only top recipients of foreign capital, but have fast become major investors themselves. An important part of the remarkable story of emerging multinationals has been the eruption of world-class Latin multinationals (or multilatinas) from Mexico and Brazil, in particular, following the path taken by their Spanish counterparts in the 1990s. In all these cases, classical push and pull factors have been driving their emergence. But a decisive helping hand for these multilatinas over the past decade has been the declining cost of capital. This financial dimension is driving the leap from overseas sales to overseas acquisitions, a phenomenon that will be explored in this article.

The purpose of this study is to examine gender wage gaps in Chile using a new database, the Social Protection Survey (eps) 2002-2006, which makes it possible to control for actual work experience and its timing. Potential work experience variables do not reflect the intermittent and discontinuous participation of women in the Chilean labour market. Corrections are also introduced for occupational selection, and two key variables are instrumented: education and work experience. Although there are still wage differences between men and women, the introduction of controls for actual work experience and the instrumentation of this work experience and education bring the hourly wage gap down to some 11% to 18%, figures much lower than those reported in earlier studies for Chile. Contrary to expectations, this gap has widened in recent years.

Existing oil fields in Ecuador are approaching the end of their economic life, and permits to exploit new fields in the Amazon region are being granted. The possibility that deforestation may occur in some areas of high ecological value, as has happened in the past as a result of induced migration, justifies posing a simple question: would it be reasonable to exploit these new fields without causing deforestation? This paper does not claim to give an exhaustive answer to this question but, based on previous research, presents a simulation exercise in which the economic value of four tropical forest services are introduced, in order to evaluate the economic loss that deforestation would entail. It is further argued that the environmental impact appraisal should take into account the corresponding premium accorded to investment. In addition, the use of a hyperbolic discount factor is recommended.

The recent socio-economic development of Latin America presents a puzzle. This is that while economic growth in the region in the past 25 years has been very slow, falling behind past performance and behind most of the rest of the world, poverty rates have continued to fall significantly and soginicial indicators have continued to improve. This paper assesses the role of various factors —income distribution, social spending and demographic changes— in explaining the paradox. The main finding, rather disturbingly, is that with few exceptions (Chile in particular) the major factor contributing to the reduction of poverty has been the demographic dividend brought about by the demographic transition that the region recorded over the period.

This article examines a number of ideas about local innovation systems, how best they can be studied and what needs to be done to develop them further. It is based on experiences in Latin America generally and Argentina in particular. The first part briefly reviews the literature on local production and innovation systems. Following this, 10 hypotheses about the workings of innovation systems are presented, together with the same number of approaches to studying the characteristics and potential of any specific existing system. The third part sets out a number of measures that could be applied to improve local innovation systems in a given country or region. This paper argues that it is both possible and necessary to build bridges between analysis and action, theory and practice.

The analysis of the financial crisis that broke out in the United States in mid-2008 gave rise to a vigorous debate about the role of financial regulation and oversight. The present article briefly analyses the crisis with a particular emphasis on these subjects, with the goal of suggesting some lessons that can be drawn from it for Latin America and the Caribbean. Accordingly, it describes the economic conditions and major changes that occurred in the financial system of the United States during the 1990s and the current decade, identifying the contribution of these factors to the crisis. The initial lessons drawn from this analysis are the need to: (i) consider macroprudential risk in the regulatory framework, (ii) reduce the procyclical bias of the system, (iii) widen the scope of regulation and (iv) deal with the conflicts of interest that prevent prompt and reliable disclosure of the risk taken on by financial institutions.

This paper investigates the factors determining the extent of the problem of child stunting and its socio-economic distribution in eight countries of Latin America and the Caribbean. It does so using a methodology that allows a socio-economic inequality index (the concentration index) to be decomposed by the factors affecting it. In the countries analysed, household “wealth” (measured by an indicator of material well-being) and maternal education are the most important determinants in the distribution of child stunting. The biomedical factors considered may be important in explaining the level of stunting, but their contribution to explaining inequality is relatively small. Geographical, cultural, ethnic and idiosyncratic factors also play a limited explanatory role, one that apparently depends on their relationship to the distribution of the socio-economic variables mentioned.

The prime importance given in the 1980s to analysis of the economic depression, external imbalances and inflation in Latin America has left in the background the profound economic, institutional and social changes which took place in this period. Under the inspiration of neoliberal ideas, the institutional and macroeconomic reforms served both to dismantle the previous form of development and to try to establish a new one. There were transfers of wealth and alterations in the structure of production, income distribution, the relation between capital and labour, public and private functions, and the place of the region in the international economy. Some of these changes look place in connection with anti-inflationary or external debt service policies.

The purpose of this paper is to contribute to the debate on stabilization policies in conditions of high inflation in the light of the experience of Brazil and some other countries, especially the European monetary crises of the 1920s and the stabilization of the Argentine currency in 1991/1992. The paper begins with some comments on certain special features of situations of high inflation, with emphasis on the unfeasibility of following the sequence of measures recommended for dealing with only moderate imbalances.

Mexican agriculture, which bad deteriorated as a result of the global adjustment process, only began to recover as from 1989. If the recovery of the national economy which began in 1987 becomes even more marked, it is possible that agriculture may not be able to respond with increased production.

This article sums up the benefits and costs of Central American economic integration. Increased economic growth, industrialization based on intra-industry trade, and greater competition in a broader subregional market represent significant benefits for the Central American countries, although for the most part these benefits are concentrated in the more developed countries. The costs of integration stem from the inter-country monetary flows occasioned by currency arbitrage, currency substitution, and the high transaction costs associated with inconvertibility. The elimination of these costs would have other costs, however, in the form of the reduction of national autonomy with regard to macroeconomic policy as a consequence of multilateral coordination and monitoring.

This paper revisits Raúl Prebisch’s views on an issue that has become central to trade and development policy in the 1990s: The relationship between industrialization, regional economic integration and outward-oriented growth. The author argues that, whereas these elements have been interpreted as relatively separate components of Raul Prebisch’s thinking, they are in fact organically related in the dynamic sequence of development policies formulated by Prebisch.

There is growing consensus that although a solid, balanced macroeconomic base is a necessary condition for development, it is not of itself enough to ensure that development is actually achieved or that its fruits will be enjoyed by the population as a whole. In a series of documents, ECIAC has been defining a coherent agenda of public policy reforms designed to ensure a change in production patterns accompanied by greater social equity.

The impact of the structural adjustment process on the level of poverty has been a highly controversial issue in recent years. In this article, a macroeconomic approach is used to analyse the adjustment’s short-term effects on income levels, especially among the poor. Income has been chosen as the chief determinant of poverty levels because, in a market economy, income and related inflows are what determine how much control individuals have over the main factors influencing their living conditions. This variable is also quite elastic in respect of macroeconomic conditions and therefore reflects short-term effects.

This essay identifies the main points in the natural resources debate. After highlighting the issues of sovereignty, distribution of benefits, deterioration in the terms of trade, and the institutional structure of world markets, which have been particularly important over the last forty years, it suggests that the debate should now get away from demands and counter-claims and concentrate instead on questions of sustainability and competitiveness. In conclusion, it proposes a regional initiative to strengthen the capacity to manage the natural heritage and resources and promote the wider spread and incorporation of technical progress.

In the author’s view, an important result of the economic reforms begun in Mexico in 1983, especially in the period after 1987, is that national private groups have assumed a leading place in the new economic model. These are not only traditional groups which were restructured in the course of those reforms, but also new groups which were formed or developed in that period and which have come to have decisive weight in the national economy.