A new Pink Tide in Latin America?

 

Episode 52 of the Podcast Missão Desenvolvimento with Paulo Gala and Eduardo Crespo discussing the possible new Pink Tide in Latin America (in Portuguese).

South-South technological dependency

The increase in South-South trade noted here before is not necessarily symmetrical and there are winners and losers too with this type of integration.

When speaking of Argentina’s economic, cultural or technological dependency, it is usually seen as a matter of north-south relationships. Now then, are there south-south dependencies? In the field of industry and technology, the answer seems to be affirmative. 

Historically, Argentina has heavily depended on Brazil’s manufacturing development. “Argentina is a country characterized by an important level of technological dependence which in the last 10 years, far from reverting, deepened,” states Martín Schorr, researcher from CONICET in the Facultad Latinoamericana de Ciencias Sociales (FLACSO). “The trade surplus is kept basically by the agricultural sector, some agro-industries, and the mining sector. The rest of the industrial network produces losses.” 

Of the total of Argentina’s export to Brazil in 2011, products with industrial origin represented 67 percent. At first sight, that’s not bad. However, of those industrial products, only 6.7 percent are machinery and electrical appliances; that is, goods of higher technological development. On the other hand, that same year Argentina imported from Brazil 87 percent of products with industrial origin, of which 18.5 percent was machinery and electrical appliances. 

Thus, even though Brazil’s situation is not the best either, in both cases the balance is unfavorable towards Argentina. “Brazil is losing space in the rest of the world in matters of export of technological goods, but it compensated this with exports to Mercosur. In fact, the main destination of this type of exports is Argentina,” states Eduardo Crespo, economist and researcher from Universidade Federal do Rio de Janeiro (UFRJ).

Read the whole thing here.

The paradox of Brazil

By Eduardo Crespo

Brazil has all the conditions to become a regional power able to push the entire region on the path of progress.

Beyond having a large domestic market, there is no reasonable expectation of an external constraint in the near future. Brazil has 380 billion dollars in reserves, its foreign debt is negligible, the impact of the international crisis was irrelevant and it can even borrow in its own currency in international markets. It has large and efficient state organizations such as Petrobras, Embrapa and BNDES. It was particularly favored by the commodity boom and exports increased with the agricultural boom. For the first time in history a tropical country became a major food exporter. And if that weren't enough, large oil reserves were discovered.

And yet, despite all these promising signs, the economic performance of Brazil has been disappointing. In 2011 and 2012 growth rates were 2.4% and 0.8% respectively. The early 2013 data also suggest a poor performance. The Brazilian economy grows less than the world average and has among the lowest rates in South America. What's wrong with Brazil? The explanation is not in the economy. It is in politics. Leaders and business elites have a marked distrust of the social effects of growth. The rise in real wages and the gradual advancement of the popular sectors creates cracks in the traditional mechanisms for social control. The reaction, almost instinctive, imposed by Dilma Rousseff, was to apply the self inflicted stagnation therapy, based on fiscal adjustment, wage stagnation* freezes and pro-business measures such as tax cuts and exchange rate devaluation."

Read the rest (in Spanish) here (h/t Marcia Pressentin for link and translation).

* Note of the editor: Average wages have not grown much, while the minimum wage has increased significantly in the last decade.

PS: One clarification. Objectively the protests in Brazil started with a demand for reduction in the cost of public transportation, which could be seen as a demand for more public spending in transport infrastructure. But that has sort of morphed into something else. The suggestion, not from Eduardo, but from this blogger is that the paradoxical lack of growth in Brazil might have something to do with what is going on.

Eduardo Crespo on Latin American development

Eduardo Crespo, from the Universidade Federal do Rio de Janeiro (UFRJ), at the ESHET conference.

And the rest below, which deals with the contractionary and inflationary effects of exchange rate devaluations.

On economic development in Latin America

Roundtable remarks at the ESHET conference in Buenos Aires, with Eduardo Crespo and Franklin Serrano (h/t Alejandro Fiorito and Revista Circus). The very last remarks are in the additional video below.