Latin American Economies Research Articles

How FinTech Can Help Latin America to Deal with Economic Challenges and the COVID-19 Crisis

The Latin American economy has been suffering from low economic growth and is now hit particularly hard by the COVID-19-crisis. We find that Latin America has a relatively large informal sector of which only 6.7% is able to work from home and which has on average negative (median) savings. We describe the FinTech sector of Latin America, focusing on the largest sectors of alternative finance platforms, payments and remittances and enterprise finance management. Finally, we identify ways how FinTech companies in these segments can help the workers, entrepreneurs and the economies as a whole to deal with the crisis while incentivising the informal SMEs to digitalize and formalize. The paper concludes with suggestions for future avenues for further research.

FDI productivity spillovers and absorptive capacity in Brazilian firms: A threshold regression analysis

Literature points out that foreign direct investment (FDI) brings firm-level productivity spillovers. However, few studies have been conducted in Latin-American economies. By using a unique Brazilian county-level FDI database, this paper explores whether the effect of the amount of FDI at the county level on firms’ productivity growth depends on certain minimum levels of local companies’ absorptive capacity. To do it, we use a threshold regression model, a formulation that appears to be robust to assess the specificities of developing economies. Results indicate that when FDI is set as the threshold and regime-dependent variable, Brazilian firms may suffer from negative productivity spillovers. However, local firms may collect positive spillovers if they are endowed with high absorptive capacity.

Defending Human Rights Through Social Action: The Role of the Catholic Church in Latin America in the 1960s–1980s

Since the earliest days of colonization, religion – in particular, the Roman Catholic Church – has been a driving force in the Latin American politics, economics, and society. As the region underwent frequent political instability and high levels of violence, the Church remained a steady, powerful force in society. This paper will explore the relationship between the Catholic Church and the struggle to defend human rights during the particularly oppressive era of bureaucratic-authoritarianism in Latin America throughout the 1960s–1980s. This paper seeks to demonstrate that the Church undertook the struggle to protect human rights because its modernized social mission sought to support the oppressed suffering from the political, economic, and social status quo. In challenging the legitimacy of the ruling national security ideology and illuminating the moral dimensions of violence, the Catholic Church became a crucial constructive agent in spurring social change, mitigating the effects of violence, and setting a democratic framework for the future.

ESTADO, BANCA PÚBLICA Y FINANCIAMIENTO DE LAS EXPORTACIONES: EL GRAN PRÉSTAMO ARGENTINO A LOS ALIADOS DE 1918–19

ABSTRACTThe outbreak of the First World War had a strong impact on Latin American economies, due to the sharp interruption of the influx of capital and the deep disturbances that it caused in international trade. In the Argentine case, a notable aspect was, together with the increase in the fiscal deficit, the growing trade and payment balance surplus. Public indebtedness was reoriented towards the domestic market by the means of a state bank Banco de la Nación, and this institution also granted a large loan to the governments of England and France, to finance the export of cereals to those countries. This work seeks to contribute both to the debate on the financial impact of the war and postwar conflict in Argentina, as well as to the role of public banks to mitigate the ups and downs of the external sector and mitigate its effects on local actors.

LONG RUN ECONOMIC GROWTH PERFORMANCE IN LATIN AMERICA – 1820–2016

AbstractThis paper provides an assessment of Latin America's long‐run performance from a comparative and historical perspective and concentrates on quantification of long‐run GDP growth and measurement of factor inputs and total factor productivity (TFP). Growth accounting shows the contribution of factor inputs (capital and labor) and TFP to output growth. What is new: capital and labor services are estimated for a group of nine countries, Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay, and Venezuela, and we widen the time frame of analysis to 1820–2016. This kind of exercise may serve different purposes such as explaining differences in growth rates between countries and assessing the role of technical progress. The overall GDP growth rate of the Latin American economies over the 1820–2016 period was somewhat above 3%. In the long run, the main differences in factor contributions to growth can be found in capital and, especially, in TFP. Capital contributed on average 1.45% to GDP growth over the whole period. However, the main culprit of the mediocre performance of Latin America compared to other developed and developing countries is TFP. TFP contributed over the whole period a mere 0.25% to Latin American GDP growth and was negative in several subperiods.

China’s trade policy towards Latin America: an analysis of free trade agreements policy

PurposeThe emergence of China in the international trading system has shifted its gravity center, as the country has become one of the mayor actors in international economic relations. Through the subscription of preferential agreements, China is building a network of strategic partnerships worldwide, including Latin America. The purpose of this paper is to answer the questions: Do free trade agreements (FTAs) between China and Latin American countries contribute to expand trade flows and enhance products diversification?Design/methodology/approachThree countries have an FTA with China, Chile (2005), Peru (2009) and Costa Rica (2010). Through an econometric estimation based on a gravity model, the authors expect to determine the impact of these agreements over both trade flows and products.FindingsThe study shows that FTAs have a positive impact on both bilateral trade flows and on the number of exchanged products. Nevertheless, this impact is positive but diminishes in time. The authors confirm that these agreements allowed for a substantive expansion of trade between Latin American economies and China, becoming relevant for policymakers regarding the bi-regional relation.Originality/valueThe study contributes to the understanding of the bilateral trade relations between China and Latin American countries, giving evidence of the magnitude of the impact of FTAs. Through new data, at a six-digit level of detail, this study improves current knowledge regarding bilateral economic relations.

Why People Participate in Collaborative Consumption: An Exploratory Study of Motivating Factors in a Latin American Economy

In recent decades, collaborative initiatives have become relevant in Latin America, however, the owners of these businesses still face great challenges to mobilize consumers interest. In the research field, many collaborative consumption (CC) researchers have focused on the identification of their predictors; but studies that have explored this phenomenon via motivations perspective are very limited, especially those that focus on the Latin American context. Furthermore, these studies have analyzed on particular consumption activities and consumers with previous experience, restricting the scope of its results. To close this gap, the research has as its purpose the exploration of the motivating factors that best predict the intention to participate in CC activities into one of the three countries with the greatest number of collaborative businesses in the region. The ANOVA and CHAID are applied to a sample of 2080 people. The results reveal that, although enjoyment, sustainability, reputation and economic benefits are significant factors for CC, not all are equally effective in promoting high levels of participation in Latin American context. These findings allow to achieve a better understanding of the collaborative phenomenon, and also they contribute to the development of value proposals and more focused recruitment strategies for potential consumers in the region.

Optimization of Electricity Distribution in Latin America by Using Embedded Systems

The processes regarding the generation, transmission and distribution of electricity are gaining interest at global level, due to the constant trend in increasing consumption. Because of this, significant sums are allocated for investments to improve the efficiency of these processes. However, there are a significant number of companies which, by virtue of their small scale and the problems inherent in Latin American economies, have serious difficulties in obtaining several types of equipment, necessary to improve their efficiency. In this context, this paper presents a methodology to operate optimally a small-scale electricity grid. To achieve this goal, two stages are organized; each has its own characteristics and hardware. The first is the resolution of a Master Problem, which solves the problem of committing generators and pre-dispatching loads through a PC. The second stage is the resolution of a Slave Problem, which is responsible for determining the most convenient form of transmission, advocating the maintenance of the system. In this stage the command and operation of the system are also organized; as a consequence, an Embedded System is used that allows the coordination of system actuators. In order to test the method, a system composed of 6 buses and 8 lines is resolved. The results indicate that this proposal operates in efficient times; this allows reducing investment costs due the implemented technology. The application of this methodology in small and medium networks will continue to increase, as new sources of generation increase their participation in these electrical systems.

The return of Keynes and the Phillips curve in Latin America: evidence from four countries

Robert Rowthorn, in his Godley–Tobin Lecture, suggests that Keynesian policies have again been incorporated by the mainstream of the profession, and the old Phillips relation is again relevant. In other words, there seems to be a persistent trade-off between inflation, wage inflation in particular, and unemployment rates, properly measured, which would create the space for Keynesian policies. This paper discusses the return of Keynesian economics, in particular in Latin American economies. While it is true that Keynesian economics made a comeback in terms of policy in Latin America, as in other parts of the world, in the aftermath of the global financial crisis of 2008–2009, it is also true that the Keynesian moment was relatively weak and short-lived. The evidence in Latin America for a Phillips curve is relatively weak, and suggests that inflation is often cost-push rather than demand-pull, which could be understood to suggest that there is space for expansionary fiscal policy, at least in the absence of an external constraint. The authors remain skeptical about the return of Keynesian economics at the theoretical level, and the possibilities for Keynesian policies in the region.

Impacto de exportaciones primarias en el crecimiento económico del Ecuador: análisis econométrico desde Cobb Douglas, período 2000-2017

Las exportaciones de un país representan un sinnúmero de beneficios, tales como el ingreso de divisas, creación de fuentes de empleo, la reducción de costos, participación internacional, entre otros. Para el Ecuador las exportaciones primarias constituyen la base de la economía, por lo que creímos importante realizar un análisis del período 2000-2017 en función del modelo econométrico de Cobb Douglas. 
 Las elasticidades de los tres productos principales de exportación del Ecuador señalan que el mayor aporte en expresiones elásticas en el período tomado para el análisis fue el banano (segundo rubro de mayor importancia en las exportaciones totales), el cual por cada punto porcentual generó aproximadamente un incremento de riquezas hacia el PIB de 0.16%. Se pudo conocer, además, que al medir los rendimientos de escalas de los tres productos de exportación primaria tomadas en este artículo (crudo de petróleo, banano y camarón) para el crecimiento económico del Ecuador desde la perspectiva del PIB, este resultó de acuerdo a las propiedades de la función de producción de Cobb Douglas, en una economía de escalas decreciente, debido a la baja productividad e innovación, escenario que se repite en la mayoría de economías de américa latina, cuyo enfoque de exportaciones tiene como base a los commodities.

Living Costs and Real Wages in Nineteenth Century Lima: Levels and International Comparisons

This article provides new evidence on salaries and living standards of low‐skilled workers in Lima in 1825–73. During this period, low‐skilled workers in Lima could cover their basic needs. Real salaries increased in the early‐1830s, but declined in the following decades. Real salaries declined during the Guano Era in spite of the commercial bonanza. An international comparison shows that Lima had lower living standards than Northern Europe and Australia, but higher than Asia. In most of the nineteenth century, Peru and other Latin American economies had higher welfare ratios than China, India, and Japan.

Celso Furtado, intelectual reformista a serviço da (n)ação

Celso Furtado (1920-2004) é um dos economistas e cientistas sociais latino-americanos mais influentes de todo o século XX. Já há algum tempo passou à categoria de clássico, sendo considerado um autor indispensável para compreender o Brasil e para pensar a problemática do desenvolvimento-subdesenvolvimento. Sua vasta e profícua obra, forjada ao longo de seis décadas, compreende quase quatro dezenas de livros, mais de uma centena de ensaios e artigos acadêmicos, além de folhetos, prefácios, apresentações, resenhas, entrevistas, conferências, relatórios e planos. Assim, no momento em que se comemora o centenário do nascimento deste economista político brasileiro, faz-se necessário retomar e refletir sua trajetória intelectual e política, reunindo os elementos que permitem retratá-lo como teórico independente, intelectual reformista e homem público voltado à ação e a serviço da nação. Este é exatamente o propósito deste artigo. Para alcançá-lo, recorreu-se às memórias intelectuais do autor, às entrevistas que ele concedeu a várias personalidades e aos trabalhos de inúmeros intérpretes que escreveram sobre a vida e a obra de Celso Furtado. A pesquisa permitiu concluir que a trajetória intelectual de Celso Furtado traduz o sentido que ele sempre atribuiu ao exercício da atividade intelectual, a saber, uma luta frequente em prol da (re)construção social e econômica da nação.

Debt limits and fiscal space for some Latin American economies

Abstract This paper provides evidence on the debt limits and fiscal space for some Latin American emerging economies under the fiscal fatigue approach (Ghosh et al., 2013). We propose the spline technique to estimate each government's reaction function and the sovereign risk premium endogenous to the country's indebtedness. Estimates were made with an unbalanced panel of 13 economies—six from Latin America—for the period 1980–2018. The results vary importantly across the countries. They suggest, for instance, that the Colombian public debt limit would be close to 68% of GDP and that the fiscal space—the gap between the current debt level and the estimated debt limit—would reach 16 percentage points. Among the other Latin American economies, Peru and Chile have the largest fiscal space (50% and 39%, respectively), while Ecuador has the lowest (13%). The findings for Mexico look like those of Colombia.

Determinants of Multifactor Productivity: The Cases of the Main Latin American and Successful Asian Economies (1960-2015)

The objective of this paper was to explain the greater or lesser growth rate of total factor productivity, TFP, in the main East Asian and Latin American economies between 1960 and 2015. We found econometric evidence favorable to this hypothesis: the increase in public consumption expenditures, given the evolution of other factors, reduces the TFP. Other results of the econometric exercise, those that are related to hypothetical positive effects of public investment and imports on TFP were not as robust or as reliable as we would have expected.

Economic Policy Uncertainty in Latin America: Measurement using Spanish Newspapers and Economic Spillovers

We construct Economic Policy Uncertainty (EPU) indexes for a number of Latin American (LA) economies (Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela) and the region as a whole based on the Spanish press. Our measures are comparable across countries. We study the macroeconomic effects of LA EPU shocks on the analyzed American economies and the Spanish economy. To study the international spillover effects on the Spanish economy we carry out two exercises by means of vector autoregression models. First, we estimate responses to unexpected shocks in LA EPU of the quotations of Spanish companies which are highly exposed to Latin America. Second, we study the impact of LA EPU shocks on Spanish macroeconomic aggregates. Unexpected shocks in LA EPU dampen signicantly the commercial relationship between Spain and LA countries. Spanish firms decrease their exports and foreign direct investments towards LA countries that experience negative shocks in EPU.

Regional Law on International Commercial and Investment Arbitration in Latin America and Its Impact on Economic Integration of the Region

The article examines the role of major Latin American regional organizations in promotion of commercial and investment arbitration (through regional international law) as a method of dispute resolution in the region. It also analyses whether there is a relationship between the development of regional law in the field in question and better integration of Latin American economies. Before moving on to the main analysis, the author discusses the phenomenon of regional economic integration in Latin America and considers the role that arbitration plays (or is believed to play) in the processes of liberalization of international trade and investment. The author concludes that it is rather unclear whether the regional initiatives on international arbitration in Latin America have a positive impact on economic integration and development of Latin American countries. Having found that the positive role of the discussed regional initiatives is somewhat ambiguous, the author submits that they neither hamper the economic integration processes in the region nor jeopardize the harmonization efforts in the area of international arbitration undertaken at the global level.

The Effects of Rent Control in Latin America: A Century of Regulations in Argentina

Following World War I, rent control became a standard policy response to the housing shortage and the resulting rent increases. Typically, economists blame it for creating inefficiencies in the housing market and beyond. We investigate whether rental market regulations (including rent control, protection of tenants from eviction, and housing rationing) had any effects in a middle-income Latin American economy, such as Argentina. To answer this question, we take advantage of a wide range of housing market indicators and restrictive rental regulation indices covering almost one century. Using a standard OLS model and MARS, a non-linear estimation technique, we find that rental market regulations have exerted a statistically significant negative impact on the growth rates of the real housing rents. However, they were only effective for short periods following both World Wars, when regulations were novel and particularly strong.

The Balkans as a Hierarchical Market Economy

The Balkan capitalism has been classified as: Coordinated, Liberal, Mediterranean and as a version of the region itself. Nevertheless, such classifications do not consider the hierarchical economy levels of the region, which for developing countries is a very important feature. Schneider classified the Latin American economies as hierarchical and points out such classification could be applied to middle-income economies of other regions of the world. The aim of the paper is to show that Balkan economies can be considered as hierarchical. To do that, we estimate a Hierarchical Economy index to both regions (Balkans and Latin America). Besides, we test the relationship between inequality and the hierarchical levels (suggested by Schneider). Results show Balkan economies can be classified as hierarchical, because their hierarchical economy indexes are similar to those presented by Latin American economies and there is a negative relationship between inequality and the hierarchical levels among middle-income countries.

A controvérsia estruturalista-monetarista e a interpretação de Ignácio Rangel em “A Inflação Brasileira”

A inflação das economias latino-americanas da década de 1950 fora explicada por duas vertentes teóricas; a monetarista e a estruturalista. Uma explicação alternativa à esta controvérsia é a de Ignácio Rangel no livro A Inflação brasileira de 1963. Utilizando categorias marxistas e keynesianas, tal contribuição não é largamente difundida na historiografia do pensamento econômico brasileiro. O objetivo deste texto é resgatar a interpretação rangeliana sobre a inflação brasileira frente às contribuições dominantes à época. Especificamente, procurou-se introduzir a crítica rangeliana às visões monetarista e estruturalista, tal como discutir a teoria original desenvolvida por Ignácio Rangel para explicar a inflação brasileira.

Uneven and combined globalization

The restructuring of capitalism involved profound changes in the way companies operate, in the integration of markets and in the sphere of state sovereignty. Economic globalization has intensified competition between companies, workers and nations. The hierarchical, dollar-led international monetary order has boosted uneven and combined development. The aim of this paper is to stimulate reflection on contemporary capitalism from the perspective of political economy. The dynamics of financial flows and the increase in wealth stocks have had impacts on macroeconomic management, job creation and income distribution in developed countries. The early deindustrialization of Latin American economies and the consistent industrialization of Asian economies altered the international division of labor and differentiated the capitalist periphery. The financialization of wealth and the empowerment of rentierism have constrained most governments to work towards full employment and social protection. The widespread global value chains and the redefining of the pattern of competition by large corporations have negatively affected unions and the labor market, increasing unemployment (even if in disguise) and precarious labor relations.