Vol. 13 No. 2 (1993): Apr-Jun / 1993

Vol. 13 No. 2 (1993)

Apr-Jun / 1993
Published April 1, 1993


Domestic public bond’s debt: an alternative
Fabio Giamiagi, Álvaro Antônio Zini Jr.
Brazilian Journal of Political Economy

This article develops arguments in favor of recomposing the time to maturity
of the domestic public bond’s debt and present calculations on the amount of tax required by different terms of payment of that debt, assuming that it is rescheduled. Two alternatives
are presented and evaluated. Alternative one offers a collateral for the principal owed and
calculates the flow of interest in relation to GDP during the repayment period, Alternative
two is based on making gradual and small down-payments to repay the old debt within a
new institutional framework. The interest rate in the two cases would fluctuate and be readjusted
each semester. Both alternatives yield a substantial alleviation of the interest burden
compared to the present policy. The main conclusion is that with a dollar long-term interest
rate similar to the ones observed in the international markets (about 8% a year) plus 2% of
country risk and a 3% a year GDP growth rate, the domestic public debt could be paid in 20
years if a yearly provision of only 0.7% of GDP is allocated to its payment. The calculations
also show that the required primary budget surplus would decrease to the range of 2.l% to
2.7% of GDP, facilitating the balancing of the budget.

JEL Classification: H63; E31.

Alternatives to stabilization: gradualismo, dollarization, and populism
Gustavo H. B. Franco
Brazilian Journal of Political Economy

The paper discusses the issues involved in three different varieties of stabilization
plans: gradualism, dollarization, and social pacts. It is argued that the efficiency of each
alternative depends upon special conditions pertaining, by and large to the dynamics of
price fixing in the Brazilian economy. Shock alternatives in particular, namely, price freezes
or pre-fixing schemes, are said to have their usefulness attached to “backwards looking”
price fixing behavior. Gradual strategies, on the other hand, especially when unambiguously
orthodox, are said to be more efficient when “forward looking” behavior is adopted by price
setters. The paper also discusses the conditions for the application of an Argentinean type
dollarization in Brazil and also institutional peculiarities affecting the feasibility of “social
pacts” in Brazil.

JEL Classification: E31; F31.

Notes on the Brazilian inflationary process: 1986-1991
Carlos Antonio Luque
Brazilian Journal of Political Economy

The aim of this essay is to examine the 1986-91 Brazilian inflationary process.
This essay will take the broadest analytical line, considering the inflationary process resulting
from the evolutionary dynamics of the elements that affect the aggregate supply and
demand. Regarding the aggregate demand shifts we emphasize the relationships between
fiscal and monetary policies. We stressed that the impact of public sector deficit has been
seen much more as a financing problem rather than the result of its levels. Regarding costs
we emphasize the role of the relative price of competitive sectors that are more important in
determining real wages and those of the oligopolistic sector. Our study seems to suggest that
the causes of Brazilian inflationary process are many and complex and their solution do not
depend solely upon the squeeze of the public sector deficit.

JEL Classification: E31.

Currency (im)properties
Fernando Nogueira da Costa
Brazilian Journal of Political Economy

Keynes assumed inelasticity of supply (or inelasticity of production) with respect
to demand as a necessary attribute of money. But the post-Keynesian theory of money
suggests that the money supply function should be viewed as horizontal, at a level of interest
rates established by the central bank in setting the supply price of reserves. Interest rates
rather than the money supply are the central bank’s true exogenous control variable. The
money supply is endogenous, credit-driven and demand-determined. This paper examines
why the later theory surpass Keynes’s theory of money.

JEL Classification: E52; E12.

Income distribution in Brazil: evaluation of the long-term tendencies and changes in inequality since mid-1970s
Régis Bonelli, Lauro Ramos
Brazilian Journal of Political Economy

The paper analyses the Brazilian size distribution of income with the objective of identifying to what extent economic policies, macroeconomic performance and changes in the structure of the labor force are related to inequality. There is evidence of long term increases in inequality, especially between 1960 and 1970. Long term trends do not seem to be affected by economic performance, although the stagnation of the 1980s has led to absolute income losses for all individuals except those in the top percentile. Short term behavior, on the other hand, seems to have been influenced by economic performance: there is evidence that growth enhances equity, whereas high inflation has the opposite effect. A decomposition analysis highlights the importance of education in explaining inequality, but points to changes in the structure of the labor force as the major factor in accounting for changes in inequality since the mid-1970s.

JEL Classification: O15.


A master of the Brazilian economy: Ignácio Rangel
Luiz Carlos Bresser-Pereira, José Marcio Rêgo
Brazilian Journal of Political Economy

Ignácio Rangel may be the more original analyst of the Brazilian economic development.
His contribution was made particularly in the 1950s and 1960s. Influenced by
Keynes and Marx, he adopts a historical and dialectical method. He was the first Brazilian
economist to introduce the Kondratieff’ long cycles in the analysis of the Brazilian economy.
ln his analysis of Brazil, he always stressed its dual and dynamic character, where the long
cycles and changing process of leading social classes presides the process of accumulation
in new sectors of the economy, transferring resources from the sector with idle capacity. His
major contribution, however, was in inflation theory. He criticized the monetarist and the
structuralist views of inflation and showed the endogenous character of the money supply in
a pioneering way. As early as 1978 he realized the financial crisis of the state and, in spite of
his left leaning position, proposed the privatization of public utilities.

JEL Classification: B22; B24; B31.

Notes on the French School of Regulation
Elimar Pinheiro do Nascimento
Brazilian Journal of Political Economy

This paper reviews the contributions of the Regulation School. From the seminal
works of Michel Aglietta, the paper discusses the innovations of this approach and the
responses that this school gives for the following topics: the passage from growth to stagnation;
the difference in prosperity in different countries on the same historical moment; the
ever-changing characteristics of crisis. The concepts of regulation and crisis themselves are
analyzed and some critics are also made.

JEL Classification: B24.


The expectation system and the wage policy: indexation x prefixing
César Costa Alves de Mattos
Brazilian Journal of Political Economy

This article intends to compare wage policies based upon conventional indexation
on past inflation schemes versus pre-fixation ones. The structure of responses of the
economic agents to wage policy will be significantly different in each other of these two
approaches, and it will be crucial to determine the possibilities of the success of that strategy
as an anti-inflationary one. Otherwise, the principal focus of that work will be the wage pre-
-fixation scheme and its relationship with the expectations of economic agents. The crucial
issue to be analyzed will be the credibility of the government with respect the workers and
their unions in general. ln some contexts, the lack of credibility of the government will lead
the wage policy to be almost irrelevant in the effective wage fixing of economy. Toe principal
conclusion will be that pre-fixation will be a risky alternative but may be the most attractive
way of fighting inflation in countries with chronic inflationary situations like Brazil.

JEL Classification: E31; J31; J33.

On fiscal reform
Carlos Henrique Rocha
Brazilian Journal of Political Economy

To stabilize the domestic prices, the government is proposing a fiscal reform. But
this reform must not violate the Ricardian equivalence so that the burden of the debt does
not fall entirely on those who do not possess debt but pays for the increase in taxes.

JEL Classification: H50; E31.

Tin cartel: the two faces of the process
Antonio Mitre
Brazilian Journal of Political Economy

The first part deals with the concentration and integration processes that took
place in the tin mining industry during the 1920’s. It is argued that the articulation of the
extractive and metallurgical sectors, although allowing for a better grip of world tin supply,
turned the industry as a whole less capable of adjusting itself to market conditions. The
second part shows the adverse effects of the policies implemented by the International Tin
Committee. Finally, the path that led to the nationalization of the industry in the producing
countries and the ways through which the reins of the market passed to the consumption
side are also considered.

JEL Classification: L72; N60; L12.