1. International Development Economics Associates (IDEAs) I NTERNATIONAL C ONFERENCE ON F INANCIAL I NSTABILITY AND I NEQUALITY IN AN E CONOMICALLY I NTEGRATED W ORLD Andrés Lazzarini UFRJ (Brazil) – UNSAM (Argentina) alazzarini@gmail.com Tsinghua Sanya International Mathematics Forum (TSIMF) 22-24 February 2016

2. Some Notes on Economic Growth, Macroeconomic Policies and in Income Distribution in Argentina and Brazil, 2003-2015

3. Outline  Intro & theoretical premises  Effective demand principle (Kalecki, Keynes)  External constraints (Structuralist approach)  Political limits (Kalecki 1943)  Period 2003-2015  Accelerated growth  Argentina: 2003-2008  Brazil: 2006-2010  Deceleration  Argentina: 2012-2015  Brazil: 2011-2015  Perspectives

4. Effective demand principle: Kalecki and Keynes Investment creates savings (and not the other way round) Demand as engine of growth: consumption, public spending, public and private investment, exports Limits: 1.Structural limits (supply conditions): in particular in non industrialized countries (periphery) problems of external constraints 2.Political limits: more general nature, Kalecki: check on workers’ real income at the expense of lower employment and even lower profit margins

5. 2000s Context Better terms of trade for the periphery Rise in international reserves Low interest rates in international capital markets Remarkable increase in South-South trade Decoupling (at least until a very few years ago..)

6. Better external conditions for countries exporting commodities (developing countries)… That improvement in part explains the very good performance of some Latin American economies

7. Tasas promedio de crecimiento del PBI per cápita a dólares constantes del 2005 por regiones DECOUPLING S OURCE World Bank

8. Terms of trade for Latin America, China and India S OURCE World Bank

9. International reserves (as a % of GDP) SOURCE : World Bank data base 1994-19981999-20032004-20082009-2013 Angola5.0%7.4%15.7%25.2% Sudáfrica3.0%5.9%9.8%13.1% India6.7%11.3%19.4%17.3% Indonesia11.3%17.3%12.3%12.6% China13.0%18.3%39.3%45.2% Rusia3.9%12.2%27.7%28.9% Argentina5.9%7.4%12.2%8.9% Brasil6.4%6.8%9.4%15.0% Chile21.8%20.3%12.9%14.9% Colombia9.5%10.3%10.2%10.3% Perú18.7%17.8%22.2%30.3%

10. South-South trade Brazil: total exports and exports to China. Chinese share on total Brazilian exports. 1970-2010. Source: COMTRADE data base Exportaciones Brasil TotalesChina 19702.738.712.8321.327.122(0,00) 19758.669.454.33667.357.912(0,01) 198020.132.055.04072.225.672(1,06) 198525.638.731.776817.582.208(3,50) 199031.396.964.352381.792.448(0,91) 199546.145.355.7761.203.741.184(0,78) 200054.743.553.2261.085.301.597(2,19) 2005118.069.804.9766.834.996.980(7,28) 2010195.546.557.87830.752.355.631(14,15)

11. Source: COMTRADE data base. Exportaciones Argentina TotalesChinaBrasil 19701.773.170.4322.516.097(0,14)138.561.088(7,81) 19752.961.259.77621.448.888(0,72)213.480.560(7,21) 19808.019.175.936188.788.736(2,35)764.968.256(9,54) 19858.395.986.432311.004.064(3,70)496.293.408(5,91) 199012.351.521.792240.968.608(1,95)1.422.653.184(11,52) 199520.962.545.664285.730.784(1,36)5.484.101.120(26,16) 200026.244.851.702796.927.268(3,04)6.990.801.568(26,64) 200539.963.954.0093.154.288.661(7,89)6.328.294.321(15,84) 201066.174.370.2915.798.633.567(8,76)14.424.597.623(21,80) Argentina: total exports and exports to China and Brazil. Chinese and Brazilian shares on total Argentinean exports. 1970-2010.

12. GROWTH RATE

13. EXPORTS GROWTH RATE

16. Were external conditions alone the main responsible that help boos the Latin American economies, such as Argentina and Brazil? One of the debates (at least involving Argentina and Brazil discussion in policy and academic circles) has been around the question of whether it is advisable to promote and keep “competitive” exchange rate policies But again is exchange rate the most importan variable for growth?

17. Nominal Exchange rate (Reais-USD)

19. Job creation in formal sectors

20. HOUSEHOLDS SPENDING GROWTH RATE

23. Wage share and Gini coefficient

26. Unit wage costs (blue) and output per worker (red) in manufacturing sector

27. Gross capital formation and apparent machinery consumption: GROWTH RATE

28. Public expenditure growth rate

29. BRAZIL Key variables ： growth rate

30. Brazil ： Public sector Balance

33. BRAZIL GDP growth rate

34. Argentina

35. ARGENTINA ： growth rate

36. ARGENTINA ： GDP & Investment growth rates

37. ARGENTINA ： Durable equipment Investment growth rate

38. ARGENTINA ： Private consumption growth rate

39. ARGENTINA ： Fiscal policy impact on GDP growth

40. ARGENTINA ： Real wage growth rate

41. ARGENTINA ： Wage share （％ of GDP ）

42. ARGENTINA ： Minimum wage and pensions

43. ARGENTINA ： Nominal wages （ growth rate ） and inflation

44. ARGENTINA ： Real wage growth rate

45. ARGENTINA ： Social transfers （ total and ％ growth rate ）

46. Deceleration 2012- 2015

47. Latam countries ： GDP growth rates

49. ARGENTINA ： non － financial private sector foreign assets demand （ millions USD ）

50. ARGENTINA ： Interest rates differential （ domestic vs foreign ）

51. ARGENTINA ： International reserves （ millions USD ）

52. ARGENTINA ： current account ， capital flows & international reserves （ millions USD ）

53. Deceleration 2012- 2015 Argentina: external constraint... Brazil: political causes....limits to full employment strategies (Kalecki 1943)

58. Perspectives Argentina: external constraint is the limit to growth so deepening industrial policies （ which were lacking broadly speaking ） But…recent shift in political orientation as of dec. 2015 is likely to drive the economy to a further crisis with all the already-known consequences

59. Brazil: complex scenario Int’l reserves amount to 370 billions USD, so external conditions seem not to be the problem... However, by carrying out fiscal adjustments and depreciation policies (50% in 2015): fiscal deficit will increase along with the inflation rate, and inequality (due to fall in real wages and GDP fall) At risk: many of the achievements over the last decade A plausible explanation of this remarkable slowdonw has to be sought in the political nature of the recent changes in economic policy economy.

60. Thanks! alazzarini@gmail.com