Stability and growth in Brazil

Since the end of the 1990s, Brazil has succeeded in implementing and developing an economic model based on an inflation target model to keep domestic prices under control, a flexible exchange rate and a commitment to ensuring the solvency of the public sector. This model was initially adopted during Fernando Henrique Cardoso’s second term as president, and subsequently maintained and refined during Luis Inácio Lula da Silva’s two terms. Its development will certainly continue under the presidency of Dilma Rousseff. The consensus on this economic model and the relative dissociation of political and economic cycles have facilitated the stabilisation of the domestic environment and the acceleration of economic growth

Brazil on the global finance map: an analysis of the development of the Brazilian capital market

Latin America is enjoying a period of extensive growth. If this trend is to continue into the coming years, the key insufficiencies that could limit total factor productivity will have to be dealt with in order to prevent bottlenecks. One of these insufficiencies is the infrastructure gap. The sources of finance required for infrastructure projects could include a more intensive use of the major resources accumulated by private pension funds. These funds have already been participating in a number of ways in financing projects of this kind through a variety of financial vehicles. Giving more scope to this source of finance means ensuring an appropriate framework, which includes: making substantial changes in the process of socioeconomic cost-benefit analysis; transparent, effective and efficient auctions; a more effective bureaucracy; laws and regulatory processes that ensure appropriate management of the risks of the project at all its stages; and regulation that adapts to the pension funds\' investment regime, which as a strict fiduciary role in favor of the savings of the pension savers who will receive pensions in their old age. This is the only way of ensuring a virtuous circle between infrastructure investment by pension funds and economic growth, which will lead to greater benefits for the country involved.infrastructure, private pensions, Pensions Funds

On the job search and regional economics

Labor markets are largely and persistently unequal across regions in the U.S. An extensive empirical literature has documented this fact and has shown that inequalities are important in at least three dimensions: wages, unemployment, and market size. In this dissertation I acknowledge the fact that wages, unemployment, and the number of workers and firms in each market are intrinsically related and propose a search-theoretic general equilibrium model in which these variables are explicitly determined. To develop my framework I extend Burdett and Mortensen\u27s (1998) on-the-job search model to introduce multiple markets and, therefore, workers and firms\u27 location decisions. An important feature of my model is that the job arrival rates are not exogenously fixed as in Burdett and Mortensen. Rather, they are derived from an endogenous meeting technology. The model can be used to characterize the interactions between the regional wages, unemployment rates, and number of workers and firms. I apply it to analyze three different cases. First, when the main source of inequality across two markets is differences in regional productivities, workers and firms cluster in the region with higher productivity, and, as a consequence, this region displays higher wages and lower unemployment rates in equilibrium. This negative relationship between wages and unemployment is consistent with the empirical literature. Further, an increase in the national unemployment insurance in this case exacerbates regional inequalities: the region with higher productivity attracts even more workers and more firms, and displays even higher wages and lower unemployment. Second, I analyze the impart of regional amenities on labor market outcomes and find that if amenities have an impact on productivities (positive or negative), then workers and firms agglomerate in a way such that wages and unemployment are once more found to be negatively correlated. If amenities don\u27t affect regional productivities, then wages and unemployment are identical across regions. Finally, I show that even when the regions are completely identical ex-ante, and workers and firms are equally productive, equilibria in which workers are paid different wages and face different unemployment rates can arise in the case of increasing returns to scale

The impact of the emergence of China on Brazilian international trade.

We take advantage of a novel dataset that incorporates both the technological content of each product as well as its quality to unveil some new features of Brazil-China’s trade flows and to challenge the view that the emergence of China would imply the deindustrialization of Brazilian exports. The trade between the two countries builds on exports of commodity goods from Brazil to China and of manufactured products from China to Brazil. Looking at the technological dimension of the dataset we show that Brazil (increasingly) exports to China products with lower technological content and (increasingly) imports products with higher technological content. The quality dimension of the dataset reveals that both countries export to each other basically low-quality goods (i.e. products whose unitvalue are in the lower range of world’s distribution of unit-values for the product). We then show that the overlapping between Brazilian and Chinese total exports is limited and that the degree of competition between the two countries is relatively small. We also show that the number of products in which the two countries have comparative advantage declined in the last years and that in the last years both countries increased their advantage in the products in which they already had advantage in 1994 and lost advantage in the sectors in which they had small advantage in producing in 1994. Available data analyzed in this paper evidences that in the last years Brazilian exports of commodity products increased significantly due to the emergence of China and other Asian countries. We show, however, that Brazilian exports of high technological content and high quality increased more than the average and more than low technological and low quality exports in the last years. Overall, the emergence of China has been supporting a displacement of Brazilian exports not only towards naturalbased products but also to goods with higher quality and higher technological content.

Do as I Do, and Also as I Say: Monetary Policy Impact on Brazil's Financial Markets

International audienceWe analyze how Brazilian financial markets, in particular interest rate futures, react to monetary policy in terms of both deeds (that is, changes in the policy rate) and words (that is, central bank communication). Using daily data from 2005 to 2014, we find that interest futures rates react in the expected direction to both the central bank’s actions and its words: futures rates rise (fall) after both an increase (decrease) in the reference interest rate and a hawkish (dovish) communication by the Central Bank of Brazil. We also find that the Central Bank’s words create noise, since they increase the volatility of futures rates. Our analysis further reveals that the effectiveness of monetary policy communication increased after the 2008 international crisis, as measured by its larger impact on future rates and reduced volatility. At the same time, deeds became less relevant: the effect of changes in the Central Bank’s policy rate on futures rates declined

Una revision de los avances en la inversion en infraestructura en Latinoamerica y el papel de los fondos de pensiones privados

Latinoamerica viene experimentando un periodo amplio de crecimiento. Para que esta tendencia logre expandirse en los proximos años, se requiere cerrar brechas claves que puedan limitar la productividad total de los factores y asi evitar cuellos de botella. Una de esas brechas es la de infraestructuras. Una fuente de financiamiento de estos proyectos puede provenir de un uso mas intensivo de los importantes recursos acumulados por los fondos de pensiones privados. Estos ya han venido participando de diferentes maneras en el financiamiento de este tipo de proyectos a traves de diferentes vehículos financieros. Incorporar mayor dinamismo a este tipo de financiamiento requiere realizar cambios sustanciales en los procesos de analisis socioeconomico del costo-beneficio; licitaciones transparentes, efectivas y eficientes; menor burocracia; legislaciones y procesos de regulacion que aseguren una adecuada gestion de los riesgos del proyecto en todas sus etapas; y, una regulacion que se adapte al regimen de inversion de los fondos de pensiones, que finalmente cumple un estricto rol fiduciario a favor de los ahorros de los afiliados y futuros perceptores de pension durante la vejez. Solo asi podria conseguirse un circulo virtuoso entre inversion en infraestructura de los fondos de pensiones y crecimiento economico, lo que redundaria en mayores beneficios para el pais.infraestructura, pensiones privadas, Fondos de Pensiones

Integration & Trade Journal: Volume 16 : No. 35 : July-December, 2012

The last decade has seen a significant increase in the exports of several Latin American and Caribbean countries to destinations within and beyond the region. The increase in trade links has not, however, been accompanied by a proportional increase in reciprocal investments among the trading partners. This precludes making the most of clear advantages, including the possibility of diversifying and upgrading trade links by overcoming trade barriers imposed by distance and cultural differences, and by the greater availability of capital and knowledge flowing to recipient countries. In these countries, there is the additional creation of new jobs and the mitigation of the social costs generated by mismatches in labor markets that are the result of trade and integration among sometimes widely differing trading partners.

Revista Integración & Comercio N° 35: Año 16: Julio-diciembre, 2012

En el último decenio se verifica un significativo incremento de las exportaciones de varios países de América Latina y el Caribe, hacia destinos dentro y fuera de la región. Dicho incremento de los vínculos comerciales no ha estado acompañado, sin embargo, de un aumento proporcional en las inversiones recíprocas entre los socios comerciales. Este hecho impide aprovechar indudables ventajas, entre las que vale destacar la posibilidad de diversificar y escalar la calidad (upgrade) de los vínculos comerciales mediante la superación de las barreras al comercio impuestas por la distancia y las diferencias culturales, así como por la mayor disponibilidad de capital y conocimiento que fluye hacia los países receptores. A esto se agrega, en ellos, la creación de nuevos empleos y la mitigación de los costos sociales generados por los desajustes en los mercados de trabajo que son producto del intercambio y la integración entre socios comerciales a veces muy distintos.