Vol. 13 No. 3 (1993): Jul-Sep / 1993

Vol. 13 No. 3 (1993)

Jul-Sep / 1993
Published July 1, 1993


Dollarization, exchange-rate anchor and international reserves
Paulo Nogueira Batista Jr.
Brazilian Journal of Political Economy

Technical discussions of stabilization alternatives for Brazil have recently focused
on the utilization of the exchange-rate as a nominal anchor and measures that involve
a degree of dollarization of the economy. The latter would imply official sanction for the increasing
substitution of foreign for national currency, a kind of decision that the experience
of several Latin American countries has shown to be extremely difficult to reverse. Moreover,
exchange-rate based stabilizations have often unleashed balance of payments crises. This
paper reviews Argentina’s recent stabilization program and some of the lessons it may hold
for Brazil. It argues that the Argentinian approach, as well as some of its variations, cannot
be applied successfully in Brazil.

JEL Classification: E31; F31.

Financial reform – general aspects and analysis of the complementary law
Rubens Penha Cysne
Brazilian Journal of Political Economy

The Brazilian Constitution enacted in 1988 demands a complementary law to
regulate the financial system in Brazil. This paper analyses the existing official project focusing
on macroeconomic stabilization and independence of the Central Bank.

JEL Classification: E58; G00; E51.

Privatization of highways in Brazil: comment on the financial viability
Jorge Ernesto Sánchez Ruiz
Brazilian Journal of Political Economy

In this article the author discusses financial questions deemed as key issues, and
that should be carefully analyzed in highway privatization projects within the Brazilian reality.
Expected returns, compared tariffs, costs, demand and capital structure are the core
on this work. The author performs a simulation exercise based on one of the cases most
frequently remembered as a candidate to privatization in the State of São Paulo: the system
comprising the Anchieta and the Imigrantes Highways, which make a connection between
the City of São Paulo and the City of Santos, on the coast. The author’s conclusion indicate
that it is a feasible undertaking, provided that some restrictions/innovations are included in
its design.

JEL Classification: L33; L92.

Value and currency in Marx: critique of critique
Maria de Lourdes Rollemberg Mollo
Brazilian Journal of Political Economy

This article analyzes the critical statements of French authors like Carlo Benetti
and Jean Cartelier on Marxist theory of value and money. It consists of a critical research
of the standpoints presented to deny the commodity character of the labor force and of the
money, as well as the positive proposal presented by them.

JEL Classification: B51; D46.

Canje de deuda por naturaleza: la necesidad de una nueva agenda
Robert Devlin
Brazilian Journal of Political Economy

Debt for nature swaps generally involve significant fiscal costs. As for the benefits
for the developing country and its government, they are potentially ambiguous. The
projects financed by the swaps typically involve the protection of exotic flora and fauna in
which a considerable part of the social returns is externalized to the rest of the world. This,
coupled with high social rates of discount in crisis-ridden developing countries, could mean
that the benefits accrued to the international community actually end up exceeding those
perceived by the population at large in debtor country. Hence the need to reorient the international
agenda for swaps so that the environmental projects financed by them have a more
direct impact on local population, e.g., control of urban air pollution and sewerage and
industrial contamination of rivers and seas. Meanwhile, in view of the great international externalities involved, the protection of exotic flora and fauna could be financed through
straight donations that do not involve fiscal costs for the debtor country.

JEL Classification: H63; Q50.

Determining factors of Brazilian exports to the European Community
Winston Fritsch, João Roberto Teixeira
Brazilian Journal of Political Economy

The article discusses the impacts the unification of EC markets from 1993 may
have upon Brazilian manufactured exports. Although the focus falls on the impact of Europe-
92, the analysis also encompasses the effects of the broader process of expansion of
the European economic space, with the formation of the European Economic Zone (EEZ),
between the EC and EFTA, as well as EC’s inevitable integration with Eastern Europe. The
main finding is that the reduction of NBTs stemming both from Europe-92 and the formation
of the EEZ will have a net positive effect on Brazilian manufactured exports. However,
it is also argued that Brazil is threatened both by indirect effects derived from some aspects
of policy harmonization, as well as by the possibility of being discriminated against by more
favoured EC partners of the ACP and the periphery of Europe.

JEL Classification: F15; F14.

The scope for industrial policy in a free trade environment
José Tavares de Araujo Jr.
Brazilian Journal of Political Economy

The article discusses the contemporary dilemma of industrial policy, which consists
of defining national growth strategies consistent with the dynamics of a globalized
economy. The argument consists of three parts. The first suggests that the concept of firm
proposed by Coase in 1937 is a fundamental instrument for analyzing the changes that occurred
in the 1980s in international competition standards. The second describes the domestic
dimension of the industrial policy dilemma, showing the macroeconomic restrictions and
the role of the institutions that regulate economic power. The third considers the international
dimension, highlighting the importance of GATT as a forum for negotiating conflicts
between domestic policies and international interests.

JEL classification: F13; F68.


On the endogeneity of Money supply: replica to Professor Nogueira da Costa
Fernando Cardim de Carvalho
Brazilian Journal of Political Economy

This paper contains a critical examination of the concept of endogenous money
proposed by Kaldor and Moore, and defended by Nogueira da Costa, sustaining the
“horizontalist” approach to the determination of money supply. An alternative approach is
outlined, built upon Keynes’ views on money, emphasizing the nature of money as an asset
in a monetary production economy and acknowledging some initiative on monetary matters
on the part of the central bank.

JEL Classification: E51; E12; B22.

Search and inflation
Marco Antonio Bonomo
Brazilian Journal of Political Economy

To understand the macroeconomic aspects of inflation, it is necessary to investigate
what happens ai the microeconomic level. Inflation affects microeconomic interaction
between firms and consumers in a substantial way. Firms choose pricing rules that affect
consumer’s search. The search is realized across firms and through time. The theory does
not provide a clear answer to the effect of inflation on welfare. On one hand, because of
adjustment costs, a higher inflation is associated with a higher dispersion of prices, making
search more attractive. On the other hand, it deteriorates the information content of prices,
reducing the ability of consumers of taking advantage of search. This article surveys the very
recent contributions to this field. It argues that although we can get important insights from
those articles, none of them provide a satisfactory answer to the question that has puzzled
macroeconomists for more than two decades: how to explain the social costs of inflation?

JEL Classification: D49; E31.

Indexation and dispersion of relative prices: analysis of the Brazilian case (1975-1991)
Edward Amadeo, Elena Landau
Brazilian Journal of Political Economy

In this paper we attempt to show that the gradual process of indexation which
results from inflationary processes may be responsible for the reduction in the dispersion of
relative prices. We develop a model relating the length of adjustment periods, indexation and
the dispersion of relative prices. Next, we look at the evidences on the behavior of relative
wages in Brazil. We conclude with a discussion of the efficiency of price freezes as a stabilization

JEL Classification: E31; E37.

Reflections on A Crise do Estado
Leonel Mazzali
Brazilian Journal of Political Economy

Fiscal crisis and cyclical character of state intervention are the two pillars of
Bresser-Pereira’s diagnosis about the current crisis. The state’s immobilization and the recovery
of its power of intervention are in the center of the discussion. The solution depends on,
on one hand, the overcome of fiscal crisis simultaneously with a price stabilization program.
On the other hand, to redefine the goals and roles, which bring forward the state’s contraction,
but not its elimination. Finally, the economic populism and nationalism aren’t the root,
but are barriers to overcome the crisis.

JEL Classification: Y30; E62; O23.

Thirty years of A Inflação Brasileira, by Ignácio Rangel
José Maria Pereira
Brazilian Journal of Political Economy

This paper analyses the main themes approached in the book The Brazilian
Inflation on the eve of the 30th anniversary of its publication. We start by presenting Rangel’s
critiques to the Monetarist and Structuralist Schools followed by the author’s own interpretation
of the causes of the Brazilian inflation. Suggestions of policy to face this problem
are presented and, as a conclusion, the paper shows that the book reached the status of a
classical work on the subject.

JEL Classification: Y30; B24; B31; E31.