Vol. 11 No. 1 (1991): Jan-Mar / 1991

Vol. 11 No. 1 (1991)

Jan-Mar / 1991
Published January 1, 1991


Chronic dollarization: Argentina and Brazil
Luiz Carlos Bresser-Pereira, Aldo Ferrer
Brazilian Journal of Political Economy

Dollarization is usually an acute monetary phenomenon. It accompanies shortlived
inflationary processes. In Latin America, it is usual to hear of a threat of dollarization,
but effective dollarization only takes place with hyperinflation. An exception is Argentina,
where there is a historically new phenomenon: a chronic, long-lived dollarization. If chronic
(inertial) inflation is particularly difficult to control, chronic dollarization is still more difficult.

JEL Classification: F31; E31.

Stabilization strategies: Peru
Rudiger Dornbusch
Brazilian Journal of Political Economy

Written just before the new president of Peru, Alberto Fujimori, takes the position,
this article incorporates the necessity of banish the populism and take emergencial
measures together with long-run measures in order to obtain an effective stabilization of the
economy. It emphasizes what could be considered consensus among the economists from
countries that have experienced chronic inflation: equilibrium of budget deficit, shock therapy,
necessity of income policy. It is concluded that in spite of the costs of an adjustment to be
done, the less privileged classes will suffer much less than in continuous inflationary context.

JEL Classification: O43; E60; E31.

Considerations on developing countries’ external indebtedness
José W. Rossi
Brazilian Journal of Political Economy

In this study we briefly summarize the difficulties faced by the developing countries
concerning their foreign debt. We also discuss the factors which stand behind the ratios
of indebtedness most commonly used. Finally, we present a summary of the main proposals
which have been advanced to reduce the foreign debt of the developing countries.

JEL Classification: F34.

Dynamics of introducing innovations in agriculture: a critique of the neoclassical approachna agricultura: uma crítica a abordagem neo-clássica
Ademar Ribeiro Romeiro
Brazilian Journal of Political Economy

This paper presents the theoretical foundations of the induced innovation model.
We try to show its inadequacy to explain the rise of a new technological paradigm. The
validity of the model is restricted by its central hypothesis as to the economic rationality
of productive agents that are induced to introduce innovations to save the more expensive
production factor. Supply-side constraints on innovations are neglected, but they are very
important to explain the technical and scientific characteristics that define a new technological
pattern; so, the factor-saving bias is the only thing the model can say about a new
technological paradigm to be generated.

JEL Classification: Q16; Q18; O33

Debt, seigniorage and inflation in a Brazilian economy
Alain Lipietz
Brazilian Journal of Political Economy

New industrialized countries presented some similarities in its inflation dynamics,
particularly with strong monopolization and wage policy. Another feature is the manipulation
of the exchange rate to attend specific targets, not considering the dangers of inflation.
This paper aims to understand this process, especially how local currencies started to loss
their role as reserve of value, the dollarization present in such economies and how foreign
debt is an issue.

JEL Classification: E31; E51.

Financial Housing System: The FCVS imbalance issue
Clovis de Faro
Brazilian Journal of Political Economy

The Brazilian Financial Housing System is on the verge of virtual insolvency. The conti-nued presence of inflation, coupled with an inconsistent system of debt indexation (the so-cal-led monetary correction), further aggravated both by a plethora of concessions given to the borrowers and by some ill-conceived procedures that were imposed by a sequence of stabiliza-tion plans (Cruzado, Summer and Collor) has resulted in a potential imbalance of USS 20 bil-lions for the Fundo de Compensação de Variações Saláriais — FVCS (Compensation Fund of Wage Variations). Discussing the basic inconsistency of the debt indexation scheme that is still being used, the paper points out the origin of the problem and offers some suggestions on how it could be reduced.

JEL Classification: L74; L78; E31.

In memory of Raúl Prebisch (1901-1986)
Steffen Flechsig
Brazilian Journal of Political Economy

Starting from Raúl Prebisch’s personal and intellectual trajectory — from an young neoclassi-cal at service of Argentinean oligarchy to a critical of Latin-American development — this pa-per provides a de tailed analysis and a critical appraisal of his ultimate contribution on peripherical capitalism. In conclusion, it is intended to claim that his search for an alternative appro-ach to Latin-American capitalism has not succeeded in breaking up the boundaries of bourge-ois political economy.

JEL Classification: B22; B31.

Currency endogeneity, instability and monetary policy
Luiz Afonso Simoens da Silva
Brazilian Journal of Political Economy

This paper tries to analyze the scope of a monetary policy in the context of
endogenous money, instability, and capital mobility. It starts with the post Keynesian critique
to the mainstream and concludes with the impotence of the central bank to reach the
stability of prices in Brazil through the use of the classical instruments on monetary policy.

JEL Classification: E31; E51; E52.


Some principles for the reform of the national financial system
Edmar L. Bacha
Brazilian Journal of Political Economy

Six possible reasons for government intervention in financial markets are evaluated:
control of the money supply, avoidance of financial crises, credit targeting, contention
of the bank oligopoly, restrictions to foreign capital, and use of exclusive financial agents for
public sector loans and deposits. This evaluation is based on the Brazilian experience, as well
as that of some other countries. A discussion is also included of the controversial question of
the Constitutional limits on interest rates.

JEL Classification: G38

Challenges of union centralization: an agenda for the 1990s
Edward J. Amadeo, José Márcio Camargo
Brazilian Journal of Political Economy

This paper examines the macroeconomic effects, in particular those associated
with inflation and stabilization, of the recent trend towards the centralization of the union
movement in Brazil. Its central argument is that despite the Labor Code there has been a tendency
towards the centralization of the movement which, together with the decentralization
of the wage negotiations, is an important aspect of the current Brazilian stabilization crisis.

JEL Classification: J51; J52

The controversy over the geographical deconcentration of industry in the 1970s
Carlos Maurício de Carvalho Ferreira
Brazilian Journal of Political Economy

This paper examines the effects of the segmentation of the labour and goods
markets over the dispersion of relative prices and wages in the Brazilian economy. The
theoretical argument is based on the behaviour of firms in the oligopolist and competitive
sectors of the economy, on the one hand, and the behaviour of organized and non-organized
labour, on the other. We suggest that the negotiations between oligopolist firms and organized
labour can be seen as a positive-sum game; whereas a zero-sum game characterizes the
distribution of income in the economy as a whole. Hence, we conclude that there has been
a redistribution of income in favour of profits and wages of those agents operating in the
oligopolist sectors, in detriment of the other agents in the economy.

JEL Classification: R12; R11.

‘Cruzeiros’ auctions and discount rate for ‘new cruzeiros’
Fábio Giambiagi
Brazilian Journal of Political Economy

This paper is an attempt to calculate which should be the discount of NCZ$
if the Brazilian Central Bank did auctions to convert them into Cr$. Using some simple
formulae of financial mathematics, it is shown that discount is a direct function of expected
market rate of interest and an inverted one of term up to the conversion from NCZ$ into
Cr$. Based on it, a matrix of results is made, which could be useful to isolate the discount
due exclusively to distrust from the whole discount. The most outstanding conclusion is that
discount could be high even within a context of full confidence, just because the expected
market rate of interest is high too.

JEL Classification: E31; E51.