A question for Latin America Juan Carlos Moreno Brid Matthew Hammill Deputy Director Economic Affairs Officer ECLAC Mexico ESCAP New Delhi IDEAS Chennai ID: 800995
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Slide1
To decouple or to couple? A question for Latin America
Juan Carlos Moreno
Brid
Matthew
Hammill
Deputy
Director
Economic
Affairs
Officer
ECLAC -
Mexico
ESCAP – New Delhi
IDEAS, Chennai,
January
2012
Slide2One lens: the BPC growth modelHarrod, Prebisch, Thirlwall, Gap models
Long
term
growth
must
not
generate
an
unsustainable
balance of
payments
(vs
Corden
at al
Does
the
Current
Account
matter
?)
BPC
Specifications
:
levels
or
ratios,
trade
and factor
payments
from
abroad
X – M = 0, (X – M) / Y ≤ k,
interests
,
remittances
Slide3Thirlwall’s model of BPC growthIncome elasticity
of
imports
External demand
Effect
of real
exchange
rate
cum price elasticities of trade
Income
elasticity
of
imports
Slide4To overcome BPC Diversify external demand,Ratio of income elasticities, internal market industrial/trade policy, induce investment
public infrastructure, income redistribution
Real exchange rate: avoid persistent appreciation
4
Watch capital flows and key stock-flow ratios: Public, Private -bank and non bank- balance sheets!
Slide5Data: Latin America’s growth linked to the US economy, 1970-055
Slide6LA ‘s recent growth … to decoupling?6
Source: ECLAC Preliminary Overview of the Economies of Latin America and the Caribbean, 2012
Slide7Some opinions… pre 2010“When the USA sneezes, Latin America catches a cold” Popular saying“What crisis? Go ask Bush?”Lula de Silva, President of Brazil, mid-Sep 2008 few weeks before stock market plunged 20%.Now the US caught the flu, Mexico a mild cold Mexico’s Central Bank late 2008
It is going to be an economic tsunami for us
Same source, some months later
7
Slide8Some aggregate data and country evidence8
Slide9LA’s exports grew faster than GDPExport-led growth 2.0?
Tasas de crecimiento anual 1990-2010
Slide10Concentrated in USA and EU10
Source: ECLAC Preliminary Overview of the Economies of Latin America and the Caribbean, 2012
Latin America: Geographical distribution of exports, 2007-2010
(Percentage of total exports)
Slide11And rising share of primary inputsFuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de datos COMTRADE de Naciones Unidas.
Slide12LA’s imports grew faster than exportsAnnual average rates of growth,1990-2010
Income
elasticity
of
imports
rose, in
some cases it doubled
Slide13The current account deficit widens (% GDP)
Slide14Investment ratio peaked in 2011, but is still low
LATIN AMERICA: GROSS FIXED CAPITAL FORMATION
(Dollars at constant 2005 prices as a percentage of GDP)
Slide15The BPC, decoupling, catching-up in 1980-2011?Some evidence for selected Latin American countries15
Slide16GDP per capita (% of USA), Mind the gap: don’t stand so close to me16
Slide17Mexico’s Trade balance and growth17
Slide18Argentina, Trade balance and economic growth 1960-2011Fuente: Elaboración con base en los indicadores del WDI.
Slide19Chile, Trade balance and growthFuente: Elaboración con base en los indicadores del WDI.
Slide20To decouple or to couple? To overcome the BPC?A Latin American answer:
Mañana
,
mañana
,
mañana
…
Slide21Thank You21Juan Carlos Moreno-Brid Matthew
Hammill
Deputy
Director
Economic
Affairs
Officer
ECLAC -
Mexico ESCAP – New DelhiIDEAS, Chennai, January 2012