Vol. 34 No. 3 (2014): Jul-Sep / 2014

Vol. 34 No. 3 (2014)

Jul-Sep / 2014
Published July 1, 2014


Effects of overvaluation and exchange rate volatility over industrial investment: empirical evidence and economic policy proposals for Brazil
José Luís Oreiro, Flavio A. C. Basilio, Gustavo J. G. Souza
Brazilian Journal of Political Economy

The present article aims to analyze the recent behavior of real exchange rate in Brazil and its effects over investment per worker in Brazilian manufacturing and extractive industry. Preliminary estimates presented in the article shows an over-valuation of 48% of real exchange rate in Brazil. The reaction between the level (and volatility) of real exchange rate and investment (per worker) in Brazil is analyzed by means of a panel data econometric model for 30 sectors of Brazilian manufacturing and extractive industry. The empirical results show that the level and volatility of real exchange rate has a strong effect over investment per worker in Brazilian industry. Finally, we conclude the article presenting a proposal for a new macroeconomic regime that aims to produce an acceleration of economic growth of Brazilian economy and, by that, a catching-up process with developed countries. 

JEL Classification: L5; O11; F41.

Trade rules and exchange rate misalignments: in search for a WTO solution
Vera Thorstensen, Emerson Marçal, Lucas Ferraz
Brazilian Journal of Political Economy

 The debate on the link between trade rules and rules on exchange rates is raising the attention of experts on international trade law and economics. The main purpose of this paper is to analyze the impacts of exchange rate misalignments on tariffs as applied by the WTO – World Trade Organization. It is divided into five sections: the first one explains the methodology used to determine exchange rate misalignments and also presents its results for Brazil, US and China; the second summarizes the methodology applied to calculate the impacts of exchange rate misalignments on the level of tariff protection through an exercise of “misalignment tariffication”; the third examines the effects of exchange rate variations on tariffs and their consequences for the multilateral trading system; the fourth one creates a methodology to estimate exchange rates against a currency of the World and a proposal to deal with persistent and significant misalignments related to trade rules. The conclusions are present in the last section.  

JEL Classification: F10; F13; F31.

Revelations of the crisis: fiat currency and the Treasury/Central Bank relations
Maryse Farhi
Brazilian Journal of Political Economy

Revelations of the crisis: fiat currency and the Treasury/Central Bank relations. The current crisis shed a new light on issues that, previously, were not perceived as serious or important. It highlighted the close ties between fiat currency and government bonds denominated in it or, in other words, the relationship between Treasury and Central Bank. Two ill-conceived views of the “new consensus” on money that had turned into taboos were put in evidence. The first, derived from the quantitative theory, concerns the rejection of unsterilized monetary expansion; the second, directly related to the neoliberal ideology, prohibits or imposes strict limits on the role of central banks in the financing of public debts. 

JEL Classification: E580.

A regional arrangement proposal for the UNASUR
Fernando Ferrari Filho
Brazilian Journal of Political Economy

The article analyses the current process of economic integration in South America. Thus, concentrating our attention on the UNASUR regional integration process, two questions arise: First, is UNASUR the most viable institution to achieve a consistent economic integration process in South America? Second, what model of economic integration should be adopted in the case of UNASUR, which would ensure macroeconomic stability and avoid financial and exchange rate crises in the South America? To answer these questions, the article proposes, based on the Keynes (1944/1980)’s revolutionary analysis presented in his International Clearing Union, during the Bretton Woods Conference in 1944, a regional arrangement to UNASUR.

JEL Classification: F5; F55.

The crisis of the contemporary global financial system
Ernani Teixeira Torres Filho
Brazilian Journal of Political Economy

 The paper analyses the development of the contemporary global financial system as a consequence of markets as well as States strategies. This global financial system based on the flexible dollar has generated many financial bubbles since it started in the 80´s, of which the 2008 crisis is the latest and the largest, particularly because it affected the main banks in the core market of the system, the US. On the last decades, banks had changed their business strategies from traditional lending activities towards more speculative investments, similar to what hedge funds do.

JEL Classification: E44; F65; G15; N20.

Financialization and financial profit
Arturo Guillén
Brazilian Journal of Political Economy

This article starts from the critical review of the concept of financial capital. I consider it is necessary not to confuse this category with of financialization, which has acquired a certificate of naturalization from the rise of neoliberalism. Although financial monopoly-financial capital is the hegemonic segment of the bourgeoisie in the major capitalist countries, their dominance does not imply, a fortiori, financialization of economic activity, since it depends of the conditions of the process reproduction of capital. The emergence of joint stock companies modified the formation of the average rate of profit. The "promoter profit" becomes one of the main forms of income of monopoly-financial capital. It is postulated that financial profit is a kind of "extraordinary surplus-value" which is appropriated by monopoly-financial capital by means of the monopolistic control it exerts on the issue and circulation of fictitious capital. 

JEL Classification: E44.

External vulnerability and composition of the international investment position: Brazil 2001-2010
Paulo Van Noije
Brazilian Journal of Political Economy

External vulnerability and composition of the Brazilian International Investment Position: 2001-2010. The aim of this paper is to indicate that there was a significant change in the composition of the Brazilian International Investment Position in the period 2001-2010: international reserves became higher than the external debt and decreased the share of foreign liabilities denominated in foreign currency, getting smaller that the participation of the external liabilities denominated in domestic currency. These tend to suffer a double devaluation (prices and exchange rates) in times of crisis, thus characterizing the reduction of the external vulnerability in the financial sphere as evidenced in the global crisis hatched in 2008. 

JEL Classification: E00; F21; F34; H12.

Industry and economic growth: evidences for developed and developing countries
Flavio Vilela Vieira, Ana Paula Avellar, Michele Polline Veríssimo
Brazilian Journal of Political Economy

The work develops an empirical investigation on the relevance of industry / GDP, manufacture / GDP and industrial employment / total employment on long run growth using panel data. The results indicate the existence of a direct and significant relation for industry (manufacture) share to GDP and industrial employment for long run growth. The annual impact on growth of a 10% increase, over a five year period, in the industry share to GDP (manufacture share to GDP) ranges from 0.19% to 0.32% (0.2% to 0.4%) and for the industrial employment / total employment it varies from 0.3% to 0.5%.

JEL Classification: O40; L16; C23.

State elites and industrialization: comparison between Brazil, Argentina and Mexico (1920-1970
Renato Perissinotto, Paulo Roberto Neves Costa, Wellington Nunes, Angela Ilha
Brazilian Journal of Political Economy

The purpose of this article is to stress on the importance of the sociology of state elites to fully understand developmental processes. With that purpose in mind, we comparatively analyze the industrialization process in Argentina, Brazil and Mexico from 1920 to 1970. Our analysis shows that although Argentina was in a much better condition to initiate its industrialization process in the early thirties, it was overtaken by Brazil and Mexico already in the late fifties. The article suggests that this took place because Brazil and Mexico, among other things, had a state elite willing to take development seriously, whereas Argentina lacked it.

JEL Classification: Z13.