1. LAC-EU ECONOMIC FORUM 2013 Globalization, International Trade and the Welfare State at Crossroads: Converging Views in European and Latam countries? Session 2 Real imbalances: trade, industrial development and environmental issues Esther Dweck Chief Economist, Ministry of Planning and Professor of Economics, Universidade Federal do Rio de Janeiro SANTIAGO, 21 – 22 DE ENERO DE 2013

2. Fiscal Problem might be a Crisis Problem International Monetary Fund, World Economic Outlook Database, October 2012

3. From Private to Public Debt The Economist, ???

4. New Monetary Standard: Dollar Standard Source: BEA

5. Global Imbalances

6. Important argument in UNCTAD TDR 2012 (ch. 4): There was an important change in strategy chosen by developed country enterprises : – During the 1990s: productivity growth and output expansion through investment in innovation – During the 2000: greater emphasis on becoming more competitive internationally through wage restraints and reduced employment opportunities, combined with attempts to boost profits through financial investments This strategy was facilitated by the deregulation of financial markets and greater flexibility of the labour market

7. Global Imbalances International Monetary Fund, World Economic Outlook Database, October 2012

8. Global Imbalances Source: Un Statistics

9. Global Imbalances

10. Some authors (e.g. Bibow, 2008 and Blecker, 2011) argument: Economic conditions and policies in the surplus makes some sense if interpreted as reflecting “deficient demand” in the global economy The real issue is why consumption and investment have been systematically depressed in the surplus countries, relative to their national incomes. The core reason why consumption is repressed in most of the surplus countries is the phenomenon of wages lagging behind productivity (von Arnim, 2010; Cripps et al., 2011)

11. Global Imbalances Source: IMF

12. Global Imbalances Source: IMF

13. Global Imbalances Source: Blecker, 2011

14. Global Imbalances “the object of the new system must be to require the chief initiative from the creditors countries” “nothing is more certain than that he movement of capital funds must be regulated; - which in itself will involve far-reaching departures from laissez faire arrangements”

15. New Monetary Standard: Dollar Standard Source: BEA

16. Exchange Rate Mismatch Source: Un Statistics

17. Convergence? International Monetary Fund, World Economic Outlook Database, October 2012

18. Convergence among advanced economies International Monetary Fund, World Economic Outlook Database, October 2012

19. Divergence among developing economies International Monetary Fund, World Economic Outlook Database, October 2012

20. China is the main new player Source: World Bank Share in Wolrd Industrial Production (US$ ppp)

21. China is the main new player Source: UN Statistics

22. Main Drivers of Growth Source: Un Statistics

23. Main Drivers of Growth Source: Un Statistics

24. Brazil – leakage of Domestic Demand Source: IBGE

25. 25 Brazil – Worsening Trade Balance Imports and Exports Volume Index and Real Effective Exchange Rate

26. 26 Brazil – Worsening Trade Balance

27. 27 Brazil: capital control measures

28. 28 Brazil –capital control measures

29. Brazil – leakage of Domestic Demand

31. Brazil – New Macroeconomic Setting? Source: IBGE

32. Brazil – Import Coefficient and Exchange rate Fonte: Marconi e Rocha (2012). Exchange Rate Low and Median-Low Technology Manufacturing High and Median-High Technology

33. Brazil – New Macroeconomic Setting? Source: IBGE Share of Imported Vehicules in new liscensing

34. Brazil – Industrial Policy Exchange Rate Policy Tax Measures – Payroll Tax, IPI and Infraestructure Public Procurement Measures Funding for International Trade Trade Defence Mechanisms Incentives to ICT sector – Broad Band Plan and Semiconductors (PADIS) Funding for the private sector investment (BNDES) – More credit, Lowering interest rates and Longer Term Vehicles Regime

35. 35 Brazil – Lower External Vulnerability

36. Regional Integration Source: Un Statistics

37. 37 Brazil – Worsening Trade Balance

38. 38 Brazil – Worsening Trade Balance