Argentina + Brazil Social and Economic Development Part I Where are they coming from? Where are they going? Part I

Developmentalism Growth Argentina’s Story Developmentalism Growth Oil Crisis Coup d’état Neoliberal Reforms The Falling Peso

Reducing the debt burden Brazil’s Story ISI policies Rapid economic growth Oil Shocks The Lost Decade Reducing the debt burden

Argentina

The 1998-2002 Recession Worst recession in 1998: Pegged Exchange Rate Public Debt Banking Difficulties Debt Default in 2001: $93 Billion Dollars Bank Run Decreased Confidence in Economy in 2002

GDP in Argentina earthtrends.wri.org/pdf_library/country_profiles/eco_cou_076.pdf earthtrends.wri.org/country_profiles/fetch_profile.php?theme=5&filename=eco_cou_032.PDF

Annual Growth Indicators in Argentina

Crisis Recovery Economic Policies Recovery in mid-2002 Expansionary Fiscal Policy Interventionist Government Policy “shunned the IMF and shafted private bondholders; kicked out foreign companies and set up new state-owned ones; imposed price controls; and even doctored the inflation figure.” The Result Strong External Sector Growing faster than any other big economy except China, at an average rate of 9% annually for the five years subsequent to the economic crisis of 2002

Argentina: Balance of Payments

Argentina

The Problem of Inflation Government has sacrificed sustainability for growth Aggregate demand not met by sufficient supply Inaccurate reporting of official inflation

Annual Inflation

The Forecast for the Argentine Economy Inflationary problems still persist. Recession in the US in 2008-09 will cause GDP growth to slow to a medium-term rate of below 4.5% Political difficulties

The Economy in the Global Recession For your viewing pleasure!

Brazil

GDP in Brazil

Ingredients for Economic Success Economy- agricultural, mining, manufacturing and service sectors. 2001-2003- financial problems 2008: more capital inflow, appreciation of the “Real” (as a result exports slowed) Growth- employment and real wage Brazilian resilience: ingredients: 1) Commodity-driven current account surpluses 2) Great macroeconomic policies Economic strengths come from: 1)floating exchange rate 2) regime targeting inflation 3) tight fiscal policy Floating exchange rate 2003 to 2007: trade surpluses and current account surpluses Jump in exports why? 2006- Brazil improved debt profile Economic reforms, tax reductions and infrastructure investment increases.

Ingredients for Economic success cont’d 2008- Brazil got the rating conducive to foreign investment. Problems: growth + reducing debt= some inflation For the most of 2008- the Central bank tried to control the restrictive monetary policy. Since the Global crisis in September- their currency and stock market have lost value, “Bovespa” down -41%. They had another current account deficit resulting from reduced commodity prices at the end of 2008

Inequalities Colonial structure of exclusion and inequality always existed 1950’s: Military Government : sustained economic growth and industrial expansion through ISI Negative effects: massive urban migration without proper infrastructure development and social programs Result : rapid growth of “favelas” Rich got Richer, Poor got poorer

Foreign aid Long-term aid Retired debt to IMF 2005 Why? growing INTL reserves and higher commodity prices Brazil’s ratio of international reserves to external debt went from 12.7% to 44.2% in 2006. Surpassed budget surplus targets in recent years- fiscal austerity measures. Does not have balance- of-payments issues Growing Brazilian government surplus in millions of Reals as a percentage of GDP High surpluses: domestic reinvestment, saving for a rainy day Macroeconomic: accumulation of INTL reserves Investment in human capital and infrastructure development.

Brazil: Balance of Payments

Brazil

LULA Elected in 2003 (first time) Strong welfare agenda to attain MDG goals Focus: ending hunger and poverty among other social programs Democratic well-established institutions, gains in prosperity and improvements in macroeconomic stability

Troubleshooting Difficulty with coordination Brazil is a federation consisting of 27 states and 5,562 municipalities.

Solutions 2003- UNDP and the Brazilian government adopted a campaign to promote the MDGs Brazilianize? What does it mean? Focused: localized attention + civil society organizations + private organizations__ successful partnership

Macroeconomic stability Improving macroeconomic stability used to suffer from chronic inflation Plano Real - mid 1990s Currency: Brazilian Real; independently floating. Brazil is classified as an open economy. A member of the MERCOSUR Customs Union: Common external tariff that ranges from 0% to 20% depending on the import. Top foreign direct investors in 2008 are: the Netherlands, the United States, Luxembourg, Spain and Germany. Brazil is an appealing market for FDI It is important to note Brazil’s recent and important role as a source of FDI abroad. Brazil’s outward FDI flows exceeded inward flows in 2006: it is now the 2nd largest source of FDI among developing countries after China.

The Divide Northeast- Southeast Division Favelas: Inner City Poverty

Brazilian Economy Roars Another video for your pleasure!

Inflation

External Debt

Total GDP

Argentina Brazil

Median Household Income