1 oecd paris - october 12th 2006 javier santiso chief economist & deputy director oecd...

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OECD Paris - October 12th 2006

Javier SantisoChief Economist & Deputy Director

OECD Development Centre

LATIN AMERICA’S POLITICAL LATIN AMERICA’S POLITICAL ECONOMY OF THE POSSIBLE:ECONOMY OF THE POSSIBLE:Beyond Good Revolutionaries and Free MarketeersBeyond Good Revolutionaries and Free Marketeers

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LATIN AMERICA: IN THE GARDEN OF LATIN AMERICA: IN THE GARDEN OF DELIGHTS?DELIGHTS?

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Utopia in Latin America: from a spacial search to a temporal search.

A search which has impregnated the history of Latin American political economy: from structuralism to monetarism, from Marxism to Liberalism.

In the 20th Century the whole Continent was dancing a waltz of paradigms.

THE FLOOD OF PARADIGMS IN LATIN AMERICATHE FLOOD OF PARADIGMS IN LATIN AMERICA

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The transformations of the Latin American continent are now obvious.

In the region as a whole, the conceptual and practical framework of political economies have been transformed.

Democracy and the Market have taken over from Revolution and the State on the altar of references.

To sum up, a complete vocabulary and grammar have disappeared from the political and economic repertoire allowing a new ideology to emerge.

DEMOCRACY AND THE MARKET: DEMOCRACY AND THE MARKET: THE NEW ALPHABETTHE NEW ALPHABET

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THE POLITICAL ECONOMY OF THE POSSIBLE:THE POLITICAL ECONOMY OF THE POSSIBLE:THE SILENT TRANSFORMATIONTHE SILENT TRANSFORMATION

Javier Santiso, Latin America's Political Economy of the PossibleBeyond Good Revolutionaries and Free-Marketeers, Cambridge, Mass., MIT Press, 2006.

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THE GREAT TRANSFORMATION: THE MONETARY MAST

0

50

100

150

200

250

Latin America Total Emerging Markets

Inflation (%)

Source: Based on IMF

7

*Central Government

By Country (2005)

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

-3.0*%

+0.3%

-4% -2% 0% 2% 4% 6%

Brasil

Colombia

Peru*

México

Venezuela*

Argentina*

Chile*

LAC-7: FISCAL BALANCE(SPNF, in % of GDP)

THE GREAT TRANSFORMATION: THE FISCAL ANCHOR

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THE GREAT TRANSFORMATION: THE EXTERNAL ANCHOR

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

(e)

Trade openness in Latin America

Source: Based on BBVA

0% 10% 20% 30% 40% 50% 60% 70%

Mexico

Chile

Venezuela

Uruguay

Argentina

Colombia

Peru

Brazil

Trade openness in 2005

Source: OECD Development Centre

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Evolution of the Pension System in Latin America (in % of GDP)

0%

5%

10%

15%

20%

25%

30%

1 2 3 4 5 6 7 8 9 1 11

Num. periods

ARGENTINA BOLIVIA COLOMBIACOSTA RICA CHILE EL SALVADORMEXICO PERU URUGUAY

Return of Democracy

GRADUALISM AND CONTINUISM: GRADUALISM AND CONTINUISM: PENSIONS REFORMSPENSIONS REFORMS

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0%

10%

20%

30%

40%

50%

60%

70%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Num. periods

ARGENTINA BOLIVIA COLOMBIA COSTA RICA CHILE

EL SALVADOR MEXICO PERU URUGUAY

Retorno a democrácia

Evolution of Pension Funds in Latin America (in % of GDP)

GRADUALISM AND CONTINUISM: GRADUALISM AND CONTINUISM:

PENSIONS REFORMSPENSIONS REFORMS

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CHILE: A MAJOR PERFORMER IN LATIN CHILE: A MAJOR PERFORMER IN LATIN AMERICA IN TERMS OF POLICY STABILITYAMERICA IN TERMS OF POLICY STABILITY

Source: IADB Politics of Policies Report, 2006Source: IADB Politics of Policies Report, 2006

Policy Stability Index (2005)

0 0.5 1 1.5 2 2.5 3 3.5 4

Venezuela

Argentina

Peru

Mexico

Colombia

Brazil

Chile

Stability Index (1-4 scale)

AverageAverage

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VENEZUELA

ECUADOR

PERÚ

PARAGUAY

ARGENTINA

URUGUAY

MÉXICO

BRAZIL

COLOMBIA

CHILE

EL SALVADOR

NICARAGUA

HONDURAS

COSTA RICA

GUATEMALA

PANAMÁ

REPÚBLICA DOMINICANA

BOLIVIA

Next presidential elections

2007 - 200920062004 - 2005

Latin America 2006: The political cycle is Latin America 2006: The political cycle is backback

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Emerging Democracies in Latin AmericaEmerging Democracies in Latin America

AverageAverage

Source: Javier Santiso, “Latin America’s Political Economy of the Possible: Beyond Good Revolutionaries and Free Marketeers”.

MIT Press. Cambridge, Massachusetts, 2006

Based on the Inter-American Development Bank

Democratic regimes in Latin America since transition (1978-2005)

0

5

10

15

20

25

30

35

40

Colombia Venezuela Peru Mexico Argentina Brazil Chile

Yea

rs

14

Latin America: The pending challengesLatin America: The pending challenges

Fuente: The World Bank

Gini – Market Income Gini – Disposable Income

Note: Gini coefficiente calculated before and after taxes, social security and transfers.

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

Latin America European Union USA Spain

Gin

i

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

Latin America European Union USA SpainG

ini

15

Social Pacts and Fiscal PactsSocial Pacts and Fiscal Pacts

Fuente: The World Bank

Gini – Market Income Gini – Disposable Income

Note: Gini coefficient calculated before and after taxes, social security and transfers.

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

Brazil Colombia Mexico Argentina Peru Chile

Gin

i

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

Brazil Colombia Mexico Argentina Peru Chile

Gin

i