Vol. 21 No. 4 (2001): Oct-Dec / 2001

Vol. 21 No. 4 (2001)

Oct-Dec / 2001
Published October 1, 2001


Strategic decisions and overlapping consensus in Latin America
Luiz Carlos Bresser-Pereira
Brazilian Journal of Political Economy

The paper, first, summarizes Latin American structuralism, and offers reasons why it was so influential and durable in the region, as it attended to real demands, and was part of 1950s’ mainstream economics. Second, says why, with 1980s’ Great Crisis, structuralism eventually ended itself into crisis, as it was unable to keep pace with historical new facts, particularly with the industrial revolution or take-off, that made Latin American economies intermediary, still developing, but fully capitalist. Third, it lists the quasi-consensus or overlapping consensus that today exists on economic development. Fourth, opposes “official orthodoxy” to “developmental populism”, the former deriving from neoclassical economics, the later from structuralism, and offers, in relation to six strategic issues, a development alternative.

JEL Classification: B1; B5.

Latin American integration in the first decade of the millennium
José Tavares de Araújo Jr.
Brazilian Journal of Political Economy

This paper analyzes the outlook for Latin American economic integration at three interrelated levels: multilateral, hemispheric and sub-regional. At the multilateral level, it argues that the WTO is not prepared to regulate the competition patterns engendered by the information revolution, and this implies an interim role for regional institutions. At the hemispheric level, it shows that the FTAA will not provoke immediate threats to sub-regional agreements such as Mercosur, Andean Community and CARICOM. Consequently, the main challenge to be faced by Latin American governments in the near future is to manage the interplay between domestic policies and their sub-regional agreements. 

JEL Classification: F15; O10.

Fiscal policy of Real Plan and the fiscal adjustment for 1999/2001
Ana Paula Ramos
Brazilian Journal of Political Economy

The main purpose of this article is to analyze the results of fiscal policy management in Brazil during the period between 1994 and 1999. The central idea of the text is that there was no significant change in the fiscal management during the period, even considering the fiscal adjustment program under the IMF arrangement. The policy’s emphasis has been the short run approach, based on the raising of the fiscal revenues as a way to avoid primary deficits deterioration. In contrast, the structural reforms necessary to support the fiscal adjustment have been continuously postponed.

JEL Classification: E31; E62.

The Economics of the “Third Way”
Philip Arestis, Malcolm Sawyer
Brazilian Journal of Political Economy

This paper seeks to outline the type of economic analysis which we perceive to be involved in the ideas on the ‘third way’. In the UK, the emergence and then election of “new Labour” has been closely associated with the development of the notion of the “third way”. We sketch out what we see as the analysis of a market economy which underpins the ideas of the “third way”, which is followed by some remarks on the role of the State which is also involved. We seek to illustrate our analysis by reference to the policy statements of the new Labour government in the UK. 

JEL Classification: D72; P16.

The Quest for Gold: Monetary Debates in Nineteenth-century Brazil
André Villela
Brazilian Journal of Political Economy

The paper examines some aspects of the monetary controversies which took place in several countries during the nineteenth century. In Brazil advocates of the gold standard and monetary restraint, known as metalistas, prevailed over papelistas, whose major desire was monetary expansion and credit creation. It will be argued that previous treatments of monetary debates in nineteenth-century Brazil have overlooked a crucial point, namely, the defence (or otherwise) of convertibility of the mil-re?is. This has led to erroneous interpretations of the ideology underlying monetary management in the period.

JEL Classification: N16; E51.

Inflation target, interests and prices Brazilian retail industry
Fernando Nogueira da Costa, Simone Silva de Deos, José Valney de Brito
Brazilian Journal of Political Economy

In this paper we analyze inflation targeting, focusing on the interest – price transmission mechanism. Its theoretical foundations are analized based on conventional and alternative literature. We discuss the recent performance of the retail industry in Brazil, highlighting how monetary policy affects prices, both directly and indirectly. We conclude evaluating inflation targeting in a critical way. Our key hypothesis is that interest rates must be seen not only as an instrument to control the general price level and the level of activity, by indirectly regulating aggregate demand. It must also be seen as a fundamental and direct component of the prices formed in the Brazilian retail industry. The big risk of inflation targeting, on the one side, is to increase deflation and, on the other, to create stagflation – unemployment and inflation.

JEL Classification: E31; E52; L81.

PROCERA: Institutionality, subsidy and effectiveness
Gervásio Castro de Rezende
Brazilian Journal of Political Economy

This paper presents the results of a research on the efficacy of the Special Program of Credit for Agrarian Reform (PROCERA). It begins by showing the recent evolution of disbursements within the Program, the sources of funds and the subsidy rate. It then proceeds by discussing the objectives of the Program and proposing a measure of its efficacy. In addition to that, it is argued that, due to the high subsidy rate and the Program’s institutional framework, that generates the belief on the part of the borrower that the loan is not to be paid, the Program’s efficacy must be very low. This means that most credit is used to buy consumer goods or to increase production for self-consumption, instead of increasing production geared to the market. Some empirical evidence in favor of this hypothesis is also presented.

JEL Classification: Q18; O13; Q15.

Silicon Valley in the South
Mitsuhiro Kagami, Akifumi Kuchiki
Brazilian Journal of Political Economy

New trends are now taking place within manufacturing industries led by multinational corporations (MNCs). Globalization and liberalization together with the information technology (IT) revolution has accelerated “fables” industry in the network economy, i.e. outsourcing production processes and global parts procurement by MNCs. As a consequence of this, the primary function of the MNC has changed from that of manufacturer to ‘service’ provider by outsourcing production processes to foreign contract manufacturers (CMs). NAFTA in fact mutated Mexico into a production platform toward the US and Canada as well as Latin American countries. We can observe these dramatic changes, for instance, in Guadalajara in Mexico, now called the “Silicon Valley in the South”. Since MNCs use their brand names to sell products, their business function becomes close to that of the fashion industry. They market their products in the same way as Gucci and Chanel sell products of original design carrying their brand names. Therefore, product design and marketing become highly important for MNCs to achieve success in business while domestic providers have been left behind for their parts and components supply in this new global supply chain.

JEL Classification: L60; L11.

Industrial policy: a systemic and structural New-Shumpeterian vision
Carlos Augusto Grabois Gadelha
Brazilian Journal of Political Economy

This article develops a neo-Schumpeterian vision of industrial policy, trying to overcome the focuses worked by the conventional economic theory. It shows the inadequacy of the distinction suggested by the approaches that privilege the horizontal dimension and the ones that plead a selective conception of the industrial politics. The state intervention in the innovations dynamics of the industry should be, simultaneously, systemic and structural, privileging the state action in the systemic interdependences that are specific in relation to the different industries. Like this being, the systemic industrial policy involves options, whose definition depends on the peculiar requirements of competitiveness of the effective and desired industrial structure.

JEL Classification: L52; B52.

From financial repression to microcredit
Manfred Nitsch, Carlos A. Santos
Brazilian Journal of Political Economy

Liberalization turned out to be not enough to ensure the provision of financial services to the poor, especially small and micro businesses. Special institutions such as Grameen Bank in Bangladesh experimented successfully with credit technologies and governance structures which showed the viability of institutions that are at the same time commercially sustainable and target-group oriented. Recent strategies center on upgrading rotating funds of NGOs, downscaling commercial and development banks and starting from scratch with specialized institutions.

JEL Classification: D14; G21; O15; O16.