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1. Global and Local Challenges in Argentina and Brazil

Author:
Guillermo Calvo
Publication Date:
12-2018
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The last presidential elections in Argentina (2015) and in Brazil (2018), represent a change from populism towards more orthodox economic policies in two important countries in the region. This shift is not only economic but also reflects other fundamental changes in the electorate, in particular the growing dissatisfaction of the population with issues such as weak security and growing corruption in political institutions. In both countries, there are significant fiscal problems and adjustment is needed. But in modern democracies, the success or failure of economic policy is closely tied to political developments. Notably, both countries face their macroeconomic challenges under a parliamentary minority; a situation that is common to many countries in the region at present. Economies highly integrated into the international capital markets, with macroeconomic imbalances inherited from populist governments, face a particularly difficult challenge. On the one hand, the required fiscal tightening entails the execution of policies that may result in greater social unrest, thus encouraging a gradual approach. On the other hand, a gradual approach requires a greater funding stream of financial funds thus exposing the economy to higher financial risk. The dilemma of choosing between a shock adjustment and a gradual approach has been central to understanding what has happened in Argentina and is essential to assessing the options available to the next government in Brazil. The dilemma about the optimal speed of fiscal adjustment has been faced by other countries in the region in the past. In some successful cases of gradualism, the presence of a clear commitment mechanism over the fiscal path, including the implementation of goals agreed with the IMF, has played a decisive role in mitigating the credibility gap typically linked to gradual approaches. One question that the Committee puts forward throughout this statement is to what extent does Argentina's experience entail relevant lessons for Brazil? In order to thoroughly understand these possible lessons and the challenges that both countries face, it is important to consider the similarities and differences between Argentina and Brazil. There is no doubt that both countries are dealing with formidable fiscal challenges. In both countries, there is a primary fiscal deficit and public debt levels are high in relation to GDP. Also, both economies face low or negative growth rates, partly because of cyclical or temporary factors and partly because of low productivity levels due to complex regulatory regimes and tax systems that hinder investment. On the other hand, the realities of Argentina and Brazil are very different in some important aspects. Brazil has not had to cope with a currency crisis and external financing problems such as those of Argentina; the latter has had to reduce its hefty deficit in the current account of the balance of payments. In contrast, Brazil’s external public debt and external financing needs of the public sector are low. However, while the private sector’s foreign indebtedness is quite moderate in Argentina, it is relatively high in the case of Brazil. As regards to monetary policy and inflation, the situation in both countries is also very different. Whereas the inflation rate in Argentina has suffered a substantial increase throughout this year in the context of low credibility in its monetary policy, Brazil has kept a low and stable inflation rate and has significantly improved its central bank’s credibility. These similarities and differences require a differentiated discussion of each country, even if some challenges facing Argentina and Brazil are shared, and whether their experiences provide lessons for each other. The international context plays a fundamental role for both economies in determining the results of economic policy. Before embarking on a more detailed analysis of the challenges facing Argentina and Brazil during the next year, we will analyze how the international context has recently changed, in the next section.
Topic:
Economics, Globalization, Populism, and Local
Political Geography:
Brazil, Argentina, and South America

2. Comparing the Incidence of Taxes and Social Spending in Brazil and the United States

Author:
Nora Lustig, Timothy Smeeding, Sean Higgins, and Whitney Ruble
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We perform the first comprehensive fiscal incidence analyses in Brazil and the US, including direct cash and food transfers, targeted housing and heating subsidies, public spending on education and health, and personal income, payroll, corporate income, property, and expenditure taxes. In both countries, primary spending is close to 40 percent of GDP. The US achieves higher redistribution through direct taxes and transfers, primarily due to underutilization of the personal income tax in Brazil and the fact that Brazil's highly progressive cash and food transfer programs are small while larger transfer programs are less progressive. However, when health and non-tertiary education spending are added to income using the government cost approach, the two countries achieve similar levels of redistribution. This result may be a reflection of better-off households in Brazil opting out of public services due to quality concerns rather than a result of government effort to make spending more equitable.
Topic:
Economics, Political Economy, Monetary Policy, and Food
Political Geography:
United States and Brazil

3. The California REDD+ Experience: The Ongoing Political History of California's Initiative to Include Jurisdictional REDD+ Offsets within Its Cap-and-Trade System

Author:
Jesse Lueders, Cara Horowitz, Ann Carlson, Sean B. Hecht, and Edward A. Parson
Publication Date:
11-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
For the last several years, California has considered the idea of recognizing, within its greenhouse gas cap-and-trade program, offsets generated by foreign states and provinces through reduced tropical forest destruction and degradation and related conservation and sustainability efforts, known as REDD+. During their deliberations on the issue, state policymakers have heard arguments from stakeholders in favor of crediting REDD+ offsets, and those against. After years of planning and cooperative efforts undertaken with states in Brazil, Mexico, and elsewhere, California is still determining whether to embrace REDD+ offsets. The most salient and potentially persuasive arguments in favor stem from the opportunity to influence and reduce international forest-related emissions contributing to climate change, while simultaneously reducing the costs imposed by the state's climate change law. The state is still grappling, however, with serious questions about the effectiveness of REDD+ in addressing climate change, as well as the impacts of REDD+ on other social and environmental objectives. The suitability of the state's cap-and-trade program as a tool for reducing emissions outside the state, given the co-benefits that accrue to local communities from in-state reductions, remains another key area of debate. The outcome of this policy discussion will depend on interrelated questions of program design, future offset supply and demand, and the weight given to the importance of prioritizing in-state emissions reductions and co-benefits.
Topic:
Climate Change, Energy Policy, Environment, and Natural Resources
Political Geography:
United States, Brazil, California, and Mexico

4. How Much Will Health Coverage Cost? Future Health Spending Scenarios in Brazil, Chile, and Mexico

Author:
Amanda Glassman and Juan Ignacio Zoloa
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
As Latin American countries seek to expand the coverage and benefits provided by their health systems under a global drive for universal health coverage (UHC), decisions taken today–whether by government or individuals-will have an impact tomorrow on public spending requirements. To understand the implications of these decisions and define needed policy reforms, this paper calculates long-term projections for public spending on health in three countries, analyzing different scenarios related to population, risk factors, labor market participation, and technological growth. In addition, the paper simulates the effects of different policy options and their potential knock-on effects on health expenditure.
Topic:
Health, Governance, and Reform
Political Geography:
Brazil, Latin America, Mexico, and Chile

5. Trading Forests: Quantifying the Contribution of Global Commodity Markets to Emissions from Tropical Deforestation

Author:
Martin Persson, Sabine Henders, and Thomas Kastner
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper aims to improve our understanding of how and where global supply-chains link consumers of agricultural and forest commodities across the world to forest destruction in tropical countries. A better understanding of these linkages can help inform and support the design of demand-side interventions to reduce tropical deforestation. To that end, we map the link between deforestation for four commodities (beef, soybeans, palm oil, and wood products) in eight case countries (Argentina, Bolivia, Brazil, Paraguay, Democratic Republic of the Congo, Indonesia, Malaysia, and Papua New Guinea) to consumption, through international trade. Although few, the studied countries comprise a large share of the internationally traded volumes of the analyzed commodities: 83% of beef and 99% of soybean exports from Latin America, 97% of global palm oil exports, and roughly half of (official) tropical wood products trade. The analysis covers the period 2000-2009. We find that roughly a third of tropical deforestation and associated carbon emissions (3.9 Mha and 1.7 GtCO2) in 2009 can be attributed to our four case commodities in our eight case countries. On average a third of analyzed deforestation was embodied in agricultural exports, mainly to the EU and China. However, in all countries but Bolivia and Brazil, export markets are dominant drivers of forest clearing for our case commodities. If one excludes Brazilian beef on average 57% of deforestation attributed to our case commodities was embodied in exports. The share of emissions that was embodied in exported commodities increased between 2000 and 2009 for every country in our study except Bolivia and Malaysia.
Topic:
Energy Policy, Environment, and Natural Resources
Political Geography:
China, Europe, Malaysia, Brazil, Argentina, Latin America, and Bolivia

6. The Brazil-Norway Agreement with Performance-Based Payments for Forest Conservation: Successes, Challenges, and Lessons

Author:
Nancy Birdsall, Frances Seymour, and William Savedoff
Publication Date:
08-2014
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
In March 2004, the Brazilian government initiated a range of policies and enforcement actions (under the Action Plan for Preservation and Control of Deforestation in the Legal Amazon) that brought sharp reductions in the rate of deforestation. In 2008, Brazil signed an agreement with Norway to receive payments during a 5-year period for bringing greenhouse gas emissions from deforestation below a 10-year average (1996–2005). Norway pledged up to US$1 billion for this agreement, which stipulated that these funds would be donated to the Amazon Fund (Fundo Amazônia), managed by the Brazilian National Development Bank and invested in actions to prevent deforestation and to promote the conservation and sustainable use of the Amazon biome.
Topic:
Climate Change, Treaties and Agreements, and Natural Resources
Political Geography:
Norway and Brazil

7. Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico.

Author:
Nora Lustig, Luis F. Lopez-Calva, and Eduardo Ortiz-Juarez
Publication Date:
10-2012
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Between 2000 and 2010, the Gini coefficient declined in 13 of 17 Latin American countries. The decline was statistically significant and robust to changes in the time interval, inequality measures, and data sources. In-depth country studies for Argentina, Brazil, and Mexico suggest two main phenomena underlie this trend: a fall in the premium to skilled labor and more progressive government transfers. The fall in the premium to skills resulted from a combination of supply, demand, and institutional factors. Their relative importance depends on the country.
Topic:
Development, Economics, Emerging Markets, Globalization, International Trade and Finance, Poverty, and Social Stratification
Political Geography:
Brazil, Argentina, Latin America, and Mexico

8. The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, and Peru: A Synthesis of Results

Author:
Nora Lustig
Publication Date:
11-2012
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We apply a standard tax-and-benefit-incidence analysis to estimate the impact on inequality and poverty of direct taxes, indirect taxes and subsidies, and social spending (cash and food transfers and in-kind transfers in education and health). The extent of inequality reduction induced by direct taxes and transfers is rather small (2 percentage points on average), especially when compared with that found in Western Europe (15 percentage points on average). What prevents Argentina, Bolivia, and Brazil from achieving similar reductions in inequality is not the lack of revenues but the fact that they spend less on cash transfers—especially transfers that are progressive in absolute terms—as a share of GDP. Indirect taxes result in that net contributors to the fiscal system start at the fourth, third, and even second decile on average, depending on the country. When in-kind transfers in education and health are added, however, the bottom six deciles are net recipients. The impact of transfers on inequality and poverty reduction could be higher if spending on direct cash transfers that are progressive in absolute terms were increased, leakages to the nonpoor reduced, and coverage of the extreme poor by direct transfer programs expanded.
Topic:
Development, Economics, Education, Health, and Poverty
Political Geography:
Brazil, Argentina, Latin America, Mexico, Peru, and Bolivia

9. The Post-Washington Consensus: Development after the Crisis

Author:
Francis Fukuyama and Nancy Birdsall
Publication Date:
03-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
A clear shift in the development agenda is underway. Traditionally, an agenda generated in the developed world was implemented in—and, indeed, often imposed on—the developing world. The United States, Europe, and Japan will continue to be significant sources of economic resources and ideas, but the emerging markets will become significant players. Countries such as Brazil, China, India, and South Africa will be both donors and recipients of resources for development and of best practices for how to use them. In fact, development has never been something that the rich bestowed on the poor but rather something the poor achieved for themselves. It appears that the Western powers are finally waking up to this truth in light of a financial crisis that, for them, is by no means over.
Topic:
Development, Economics, Emerging Markets, Poverty, and Foreign Aid
Political Geography:
United States, Japan, China, Europe, India, South Africa, and Brazil

10. Criss-Crossing Globalization: Uphill Flows of Skill-Intensive Goods and Foreign Direct Investment

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper documents an unusual and possibly significant phenomenon: the export of skills, embodied in goods, services or capital from poorer to richer countries. We first present a set of stylized facts. Using a measure which combines the sophistication of a country's exports with the average income level of destination countries, we show that the performance of a number of developing countries, notably China, Mexico and South Africa, matches that of much more advanced countries, such as Japan, Spain and USA. Creating a new combined dataset on FDI (covering greenfield investment as well as mergers and acquisitions) we show that flows of FDI to OECD countries from developing countries like Brazil, India, Malaysia and South Africa as a share of their GDP, are as large as flows from countries like Japan, Korea and the US. Then, taking the work of Hausmann et al (2007) as a point of departure, we suggest that it is not just the composition of exports but their destination that matters. In both cross-sectional and panel regressions, with a range of controls, we find that a measure of uphill flows of sophisticated goods is significantly associated with better growth performance. These results suggest the need for a deeper analysis of whether development benefits might derive not from deifying comparative advantage but from defying it.
Topic:
Development, Economics, International Trade and Finance, and Foreign Direct Investment
Political Geography:
United States, Japan, Malaysia, India, South Africa, Brazil, Spain, and Korea