Sunday, December 27, 2015
In the latest years, Chile has become a darker if not a falling star, and it seems that its path to be the first developed country among its peers, has melted away. There is not a single field, which Chile has not deteriorated its performance: competitiveness, corruption level, business social responsibility, political institutions, ethic rules on civil servants, public policies focus, Governance standard. Such a negative scenario , has a lot of explanations and it may be the usual blame each other game. While Government claims that inequality was a moral shame, and it was not possible to delay reforms, the opposition claims that those reforms were technically wrong designed such that spoiled economic growth, business expectations, and investment. However, to be fair neither side of the political spectrum can walk away from explanations to the current citizens. Oligopoly, in the Chilean economy did not fall from the sky. Besides, quite on the contrary to the usual view, the Chilean economic model foundation was far enough, to be labeled as a neoliberal one, because there was not neither really effective (sufficient) political, nor economic freedom, nor efficient institutions, to make possible economic democracy. The usual comparison, with others Latin American economies was somehow misleading. In fact, concerning freedom limitations, Neoliberals may say “We told you so”. Let take a brief review to support this approach. The cost of oligopoly (competition among a few), is very well known in basic economic. Besides, if it is coupled with a political oligopoly, both become complementary, and the risk of collusion between business and politics increase, and with it corruption is inevitable. Thus, the premise of self regulation did not apply, and efficient institutions become a “must”. But, as long as few politicians were the guardian of the “economic Model”, they delay any change either to open politics to a keener scrutiny and competition, or to improve the quality of regulation to take care of the welfare losses arising from oligopoly , or to make more efficient the financial support for entrepreneurs and small firms, and the protection to consumers. At the same time, some of them had financial support from private firms to constraint their ability to work on improving laws. Chilean economy has become a case study, of an Oligopoly failure. But it is not only about oligopoly by itself, it is also about weak ethics rules to design the boundaries of doing social responsible business. Some Chilean firms ( a few important ones), went far beyond what it was expected from them, which is basically to create wealth for the benefit of its owners, the stake holders, and the shareholders, but not for expropriate it from others either directly or indirectly. At the end of the year, it looks like many Chilean leaders lacked the character to change course for the benefit of the ones who trusted them. This has nothing to do with neoliberals proposals.-
Sunday, November 29, 2015
It is usual to make balances when the end of the year is coming closer. 2015 is not different, expect for the fact that it means half of the second decade of this XXI century.So it represents what make trends for the remaining of the decade. 2015 will be remenbered as the year of anguish and horror, from the refugees crisis, the terror threath in any place in the world, the painful consequences of those more vulnerable to Climate change, and the narrower boundaries to have a stable peace. It looks like war it is just around the corner. In fact, the world has begun a war against who do not consider other values than those they believe in, such as to get to the extreme to make them possible. Nobody knows what this war will look like in 2020, but it is a fact that the world is less safer than it was at the begining of this century.- The global economy, is still strugling to improve its performance.What it gains some where (USA and Europe), it lose it elsewhere (Japan, China).It was expected that the USA economy, would be the first to be on the track of economic growth, after the financial crisis of 2008.However, It was no expected the rise and fall ,so to speak of emerging economies, from being the engine leading the recovery, to become the last wagon.A lot of question arise about whether these economies are really out of the growth path either as a permanent situation, or a transitory one.I do believe it is a transitory stage.The traction of global growth will soon work to get on board, those economy which still keep its core fundamentals of good economic policies. In Latin America, there are not too many economies whithin the fundamentals: Inflation has been rising, output growth has been declining, fiscal deficit has been on the rise and the majority of these economies face the problem of lower prices for its main exporting products.However, some of these economies, specially those focused on the pacific grim seem to be in a better shape, to overcome what some analist have called the "Perfect storm".- Voters in Latin America are exhausted with the proposal which they have to decide. When the economies goes up it is easier to settle down, what it fits with every one expectations, but when the economy is on the down side of the growth path, the options are narrower, and the decision for the voter become thougher and the chance of mistakes higher.Perhaps an example of that in 2015, was Brazil, and on the contrary side was Argentina.It is not easy for voters to make the right decisions , it requires not only good information, but also good faith of the candidates they vote for to tell them what it closer to reality instead of illusions.- The expectations at the year end, and the regional-global mood , are not optimistic on every field of public affairs.Climate change, global and regional economy, world peace and stability , all looks like we end this year with an huge cloud above us, which only coordinated leaderships can overcome.
Wednesday, October 21, 2015
Sunday, September 27, 2015
Tuesday, September 15, 2015
Sunday, September 06, 2015
Friday, August 07, 2015
Tuesday, June 23, 2015
Because of the debt negotiations between the EU, IMF and Greece, it seems the chance of EU project breaking apart goes higher than the expected. The discussion of the EU model ability to address the challenges arising from within and from outside its borders, should take into account how strong has been the influence of this integration project around the world. It is not just the survival of the EU what it counts, but the fact that in many places in the world, especially in Latin America, the EU model ,is a path to follow for future trade flows and economic growth to become stronger, cultural ties to become part of common history, and social constraint such unemployment , poverty, and inequality to be properly solved . Integration has long been a complex process in Latin America countries full of expectations, but short of solutions. The experience in the sixties (Ecuador, Peru Chile, Colombia), did not get what it was expected, because it was wrapped by the rhetoric related to the confrontation North - South , and the argument of countries in the periphery lacking development because of industrialized economies from the north, exploit its raw material endowment at low cost . Thus, the orientation of such a process, on the one side, had a bias toward foreign investment, free markets policies, and on the other the conviction that a Strong state was part of the solution, to take the lead of economic development and social improvements. The outcome, was less promising, the external debt crisis of the eighties make it all a huge failure, with inflation, poverty and inequality worse than at the beginning of the experience. Those years, between 1980 and 1990, were considered the “lost decade”. But the “lost decade” concept real meaning and implications, was deeper for the integration dream. Tough questions arose at that time about the next step to confront the unsolved issues of inequality, poverty low rates of economic progress, and lack of institutional framework to deal with the dynamic of development. The EU integration path under way at that time,was the benchmark to follow. So, it came about different initiatives based upon the premise that trade and investment flows, work better through economic integration.
Sunday, May 24, 2015
In january this year, the Chinese Government announced an investment plan for USD 250.000 millions, to be implemented in the next ten years in Latin America. Most of these investments, deal with infrastructure projects which would allow a better trade flow between China and its counterparts in Latin America. Last year, China start off a Global Bank,specially designed for infrastrucute projects to be implemented in many economies in the world. Actually ,this trade flow is slower than desirable, imposing higher transaction cost affecting the eficiency gains of such trade for everyone. Just to give an idea, while a trip for a cargo ships by the pacific, takes 12 to 15 days, the same trip by the atlantic ocean ,requires 23 or so, days. So ,it is obvious that there is a necessity for Chinese Government and its partners to improve the logistics of its trade chanels. Quite different to other countries with the same requirement, China does have the capacity to look for these changes within its partners borders, instead of waiting for free trade agrement alone, to be fully in place .These treaties need complementary investment, so they finance them. This week , China made official its partnership with Brazil, for implementing investments in railroads projects and others projects, from 2015 up to 2021 for USD 53.000 millons. So, it is doing a similar project with Argentina and Colombia, to improve railroad networks to get a faster speed toward the pacific ports.Raw material better disposal, is also a justification for these invesment flows. What are the gains for Latin America?. a.-It does not have the resources to implement such investement on its own,and a lot of research done by the international organisms ,call the atention on the weak instructure in Latin American economies as a restriction for growth. b.- It will improve Latin America capabilities, to engage in deeper integration with global markets.- c.- It will support economic growth potential, which it will have a lasting effect on the quality of living of its citizen, whether this growth is complemented with better public policies. A sensitive issue is about the influence China is getting in the region,and its consequences for the strategic equilibrium between global partners. Concerning this influence ,it is hard to argue that it is decisive for its policy decisions, and commercial ties within each country, or with other economic blocs such as the European Union. The issue rather is, that Latin American economies have a new commercial ally , for its integration into the global economy , to get fully the advantages from it. A stronger Latin America, is also a good condition for better trade flows , with this traditional partners . However, from the political and geostrategic point of view, it is for sure that it will arise a scenario with a different setting for diplomacy.-
Sunday, May 03, 2015
Sunday, March 29, 2015
Commodities prices has been declining.This means that those economies whose public budget depend upon commodities prices , will have troubles to make the balance whether public expedenditures keep the pace without adjustment. But ,the implications of this situation go even further : a.- According to the Interamerican Development Bank, there is a reasonable probability for latin american economcies to have a lower rate of economic growth, in case that Europe, China and Japan have also lower economic growth than expected.The decrease in the rate of economic growth though ,is different within different groups of economcies, such as those oil exporter. metal exporter and so on.The estimated average economic growth for South America is 3,8%( (2015-2017), in the best scenario,and 2,9% in the weaker scenario.- b.- If the USA economy keep the pace even with higher interest rate, economic growth for South America would be 3% instead of 2,9% according to the EDB.(source : www.latercera.com).- c.- Foreign investment could be affected in commodities sector, because of commodities prices volatility.So, even it is not that much relevant its share in these countries ´s GDP, the ECB suggest better policies to manage prices uncertainty.- d.- The more complex problem for those econimies more vulnerable to commodities prices fluctuations, is to adjust expenditures, and the path they will follow to implement it, unless the get external financial resources , but sooner or later expenditures will have to be revisited.This will put more pressure on economic growth, to the downward side specially if affects consumption. The positive side of the story is that global economy seems to have found the track of economy growth back from the financial crisis of 2008.In Europe, Germany and Spain are in the position to lead the recovery to a more sustainable level, and lower prices of oil will push that performance further.-
Sunday, March 08, 2015
How come that it is not usual in Latin America presidential elections, for free market ideas, to take control of government policies?. What make free markets ideas weaker , such that it does not get good voters approval? These two questions arises, because of the recent presidential elections in Latin America, none were for candidates who believe in free markets ideas. Instead, in all cases a stronger role of the State prevailed. The empirical evidence available, shows that as far as the outcome is concern, free markets proposals ,overcome those arising from more an active state in the economy. The explanation for it, goes on the line of which of the two proposal, has the ability to provide better chances for steady economic progress and wealth accumulation: a.-Given an institutional framework, free markets work, on the basis of self coordinated actions and decisions made by individuals, with no other purpose than to increase the outcome they get, which otherwise would not be possible to get it alone. The key for such outcome ,is to have an institutional framework effective enough, to guarantee that the decisions process goes smoothly toward its wealth objective, which as a by product can generate value and innovation.- b.-On the other side, the State is vulnerable to be captured either by politicians , bureaucrats, or special interest groups, which change the path of public policies to their own purposes instead of the whole community. Besides the risk of corruptions, make it more difficult for the State to keep close to its promise of well being for everyone. By its nature, the State must keep distance from those risks of being captured, limiting itself to fulfill the effective conditions. This means, to do what it have to do, with a sense of Social responsibility. After all, markets need the State to do the complementary task of correcting its failures. If the State fail because it has been captured, the whole society have a welfare loss. However, the outcomes of recent elections in Latin America, seem to suggest that voters prefer to stay away from policies dealing with free markets proposals. But does this means that they really prefer more State?. Given the performance of markets and the State, the only explanation for this adverse selection, is that voters look for some kind of protection. If voters do prefer protection over well being, it means that they get the wrong message about free markets ,which based on freedom suggest that it assumes everyone is in the same possibility to take advantage of their freedom. Some people obviously are better off regarding freedom, because they have better education, good quality social networks , accumulated wealth and so forth. Those who do not, because of poverty, hunger, mal nutrition and the like, will stay behind, depending upon some one to give them, what they can not get by themselves. They do not know what freedom is about. They live on their fears, instead of the their freedom.- Thus, what matters most for voters are not the appealing of free markets outcome elsewhere, but how these ideas and policies , may give them better protection than the one arising from the State promises, which as it has been demonstrated by past experience, most ot the time are just that, promises.-
Sunday, February 15, 2015
Cultural values have always been within the main core of capitalism. Of course, what kind of cultural values, make the difference between inclusive capitalism, or any other form of savage capitalism. Savage capitalism, deals with profit maximization, selfishness behavior, but also with rules, in particular the rule of law. These values, do not solve inequality, but they are the drivers of innovation, wealth creation, and economic growth. However, when there are flaws in the legal system, its laws or the regulatory procedures, the outcome become quite harmful.- On the other side, the Society as a whole, also has its own values. Most of the time, they do not fit with those of capitalism. Society cares about the common welfare, which means to support values such as solidarity, dignity ,respect to basic rights, no matter the backgrounds of any individual are.The recent experience of a South Korea Air Lines executive, who was punished with one yeas in jail because of breaking the rule of safety flights, show how strong certain values (prudence) are for a society. Sure, values are not away from ethics standards.In the South Korean case, everyone face the law no matter their economic or social position.- The financial crisis of 2008, was a tough example, of the risks concerning capitalism behavior , with no clear sense of where the limits are. It became clear that capitalism also have its limitations, In fact, limitations so risky ,that many of the most prominent leaders and economist around the world ,asked for more regulations and prudential economic policies, such as to "guide" the markets , instead of leaving them to solve on its own and by itself, the difficulties of uncertainty.- Aside from its values, capitalism, also has the advantage of adapt itself to new conditions. Let mention the case of State capitalism, or Mixed market economy, which works on the basis of the State and the market, working together in a complementary fashion. In some cases, this mix is more political than others and the level of state intervention becomes higher. This is the case, of Chinese model, the opposite of the Spain, German or the USA Model.- So, inclusive capitalism seems to be the reaction to the collapse of 2008.What is the meaning of inclusiveness?. Basically, to care about others. This means to take into account people´s preferences beyond those related exclusively to profit maximization on its own. Thus, firms apply social responsibility, they engage with local governments to solve community needs, they improve the ethical standard of management practices, they become involved in seeking international goals, related to poverty, health diseases, nutrition deficiencies and the like. Government and firms, working closely are at the core of inclusive capitalism. The world, need this more flexible approach to create wealth .- .
Sunday, January 18, 2015
It is the only way to sustain political campaigns, to pay for advertasing and mobilizing people all over the places where voters are.No doubt about it.Money in politics, is the "cash card" any politician can live without. But there are some considerations,about money in politics : a.- It has to be legal b.- It has to be for good purposes But this is different to say that only reach people can do politics. After all, elections winning is also a matter of good candidates, and good candidates arise when they fit well with the times and mood of voters to fullfill their expectations.The right time ,the right man or woman,say it clear. So, money has a specific function which fall well behind that one of politics.Money can not solve, what good politics does.Money has limitations in politics,as it does not in business. Therefore good laws are necessary to set the boundaries of money, concerning its relationships with politics.- The institutional frameqork must be strong enough, to make clear the different field of politics and money .Politics deals with dreams,social achievements,government outcomes. While money is exclusive, politics is inclusive.While money has no principles,politics does or at least it seem it has. In Chile, the most pressing issue these days , deals with the irregular financial source some politicians used in past elections (2013).Current laws in Chile ,allow firms to give money for candidates, while they are participating in elections, but this does not mean that these donations can be used to by pass tax laws. Thus, like in many fields, after the worst happened, it create the condiitons to make corrections, to improve the quality of the regulatory board,and the penalties for those who cross the line. Those who believed that politics is the short way to make a fortune,are in trouble twice: a.- They are under investigation for fraud suspicious b.- They betrayed their voters.Whom they really represent to ,when it comes to approve a law? It is out of any decent consideration, to think that democracy has its price.