Vol. 39 No. 1 (2019): Jan-Mar / 2019

Vol. 39 No. 1 (2019)

Jan-Mar / 2019
Published January 1, 2019

Vol. 39 No. 1 (2019), Jan-Mar / 2019

Are currency depreciation processes expansionary or contractionary in Brazil? An assessment of the effect of private sector foreign exchange mismatch

Francisco Eduardo Pires de Souza

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 3-22

This paper deals with the evolution of the currency mismatch in the Brazilian economy in the last two decades, with the aim of assessing the vulnerability of the economy to an exchange rate devaluation, through the balance sheet effect. We highlight the deep changes in the structure of the Brazilian external liabilities during that period. The main change was the radical fall in the net external debt, which turned from highly positive to negative. However, this reflects only the public sector position, since private external debt remained highly positive. To go further into our analysis, we subtracted the hedge operations through derivatives contracts from the primary currency mismatch. We then arrived at the conclusion that not only the effective private sector currency mismatch is quite lower than could be thought by looking only at the International Investment Position data, but also that it has diminished substantially in the last 5 years. Therefore, the risk of an important balance sheet effect as a consequence of a devaluation is lower than currently estimated.

JEL Classification: F31; F32; F34; F41.

Exchange rate policy, class conflict and economic development from Furtado’s view

Lucio Barbosa, Fabricio Missio, Frederico Jayme Jr.

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 23-38

The aim of this paper is to analyze the contributions of Celso Furtado regarding the role of exchange rate policy and its relation to social conflict in the economic growth of peripheral economies. For that, we revisit Furtado’s analyses about the Venezuelan case and in The Economic Formation of Brazil. We highlight two main conclusions from such works: i) exchange rate appreciation due to a natural resources curse harms economic growth; ii) exchange rate policy is mainly a phenomenon associated with political economy, in which social conflict emerges. Hence, we claim that Furtado’s analyses are still significant today.

JEL Classification: B1; B5.

An analysis of Brazilian Golden rule

Manoel Pires

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 39-50

Fiscal rules specify the way fiscal policy will achieve their goals. This paper explains the operation of golden rule in Brazil and evaluates whether the main goals have been achieved looking for its attributes and for the international experience.

JEL Classification: H53; H12; O11.

Reviewing perspectives on third-party impacts of mega-regional trade agreement: implications for Brazil

Niels Sondergaard

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 51-70

The present review article examines the potential impact of mega-regional trade agreements on Brazil as a third-party. The literature initially reviewed identifies the "deep regulation" proposed in mega-regional agreements as an expression of structural changes within the global trading system, which in spite of the current stagnation of these negotiations highlights the relevance of scrutinizing their potential implications for outsiders. The article subsequently examines projections made of the short- and intermediate term economic impacts of this type of trade agreement on Brazil as a third-party, and here upon engages with perspectives treating their long-term structural implications.

JEL Classification: F17.

Industrial policies and international division of labor

Carlos Aguiar de Medeiros

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 71-87

This paper examines the evolution of industrial policies, technological strategies and trade specialization in global values chains (GVC) in manufacturing production led by transnational corporations and by industrial policies. It argues that insertion in GVC does not constitute an easier technological shortcut alternative to national system of innovation and for national development strategy that historically have been the main levers for technological catch-up.

JEL Classification: O14; O19; O25; O43.

Fiscal crisis in Brazil: causes and remedy

Márcio Holland

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 88-107

From 2014 to 2017, Brazil experienced unprecedented fiscal deterioration caused by multidimensional factors. According to the economic literature, to cope with such a crisis, it is recommended to adopt a long-term spending cut-based fiscal consolidation program rather than a tax hike-based one. However, as the fiscal crisis evolved recently in Brazil, this article brings another perspective to the policy stance. It suggests a fiscal program that includes a combination of spending cuts and tax hikes. On one hand, the peculiarities of the Brazilian government expenditures demand fiscal reforms with long-lasting impacts but generally with low short-term fiscal effect. On the other hand, as short-term fiscal results anchor confidence, increases in taxes would be an important pillar of the economic policies to mitigate the fiscal deterioration in the short term. The GDP contraction is expected to more severe than a simple spending cut measure but is likely to be less prolonged.

JEL Classification: H30; H60; H12; H61.

The New Developmentalism and the challenge for 2019: to overcome the structural stagnation of the Brazilian economy

João Villaverde, José Marcio Rego

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 108-127

This paper relates the differences and the similarities between the classic developmentalism and the New Developmentalism. It discusses the next steps for the new theory to persevere in the current Brazilian context. To this end, a diagnosis of what we call "Accidental Developmentalism", initiated at the end of the 19th century in Brazil, was also made in the first part of the paper, which was sown as a basis for the classic developmentalism. Effectively put in place between 1930 and 1980, Developmentalism was later adopted again during the failed economic policy of Dilma Rousseff administration. Finally, we discuss the challenges for the New Developmentalism having the critical 2018 elections as background.

JEL Classification: A10; B1; B2; B5; B52; E60.

Lula Governments: the consumption era?

João Sicsú

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 128-151

The Lula governments (2003-2010) were labeled “the consumption era” and for excessive household indebtedness. At the least, this label is imprecise. The objective of this article is to analyse the period between 2003-2010 through objective information and supported by Post-Keynesians and Keynes’s theory. The conclusion was that consumption was only the starting point. In fact, during this period, the most important event was the growth of public and private investments. During both terms of the Lula government investments grew much more than consumption. Besides this, the level of Brazilian household debt grew rapidly, but this level cannot be considered excessive when compared with international standards. This article also shows that this indebtedness did not provoke the economic downturn in 2011.

JEL Classification: E12; E20; E32.

War and international trade: impact of trade disruption on international trade patterns and economic development

Oldrich Krpec, Vladan Hodulak

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 152-172

 The disruptions of trade flows due to military conflicts leads to changes in economic structures of countries, to the subsequent changes in trade policies, and to the changes of established trade patterns with impact on position of countries in international trade system. This paper deals with three modern time’s conflicts: Napoleonic Wars, WWI and WWII. We argue that the changes resulting from the disruption of trade flows itself, leads to changes and shifts which are relatively permanent, independent on outcomes of the conflicts for individual countries, and do significantly affect regions which did not take part in the conflict.

JEL Classification: F13; F52; N70; O14.


Analysis of the work of Ramiro Guerra: Latifundia, Slavery and Economic Dependence

Cinara Barbosa Franco de Sá, Izamara Nunes Souza

Brazilian Journal of Political Economy, Vol. 39 No. 1 (2019), Jan-Mar / 2019, Pages 173-181

This work aims to analyze the work of Ramiro Guerra (Latifundia, slavery and economic dependence), one of his main works dealing with the region of Barbados located in the Lesser Antilles in Central America. Thus, the analysis shows how Ramiro Guerra demystifies a whole theory regarding the substitution of the work of the small owner for the cheap labor of the slave. The same author emphasizes that this substitution was not due to a question of races or of climate or even of the superiority of the human will. But due to a purely social and economic cause: the destruction of small property by the sugar estates and the consequent emigration of a social class that would be expelled in a "voluntary" way due to lack of work. Thus, according to Guerra's analysis, the analysis emphasizes that it was not the Antillean climate that drove out the white servants but the capitalist sugar company that would settle in the region, annihilating the small property and eliminating the independent cultivator and converting the robust communities with their own lives in mere low-wage workshops, all for the benefit of metropolises. And also the consequences of this sugar trade in Cuba with the same consequences of the destruction of small-scale agriculture.

JEL Classification: Q1.