How the full opening of the capital account to highly liquid financial markets led Latin America to two and a half cycles of ‘mania, panic and crash’

Latin America has recently experienced three cycles of capital inflows, the first two ending in major financial crises. The first took place between 1973 and the 1982 ‘debt-crisis’. The second took place between the 1989 ‘Brady bonds’ agreement (and the beginning of the economic reforms and financial liberalisation that followed) and the Argentinian 2001/2002 crisis, and ended up with four major crises (as well as the 1997 one in East Asia) — Mexico (1994), Brazil (1999), and two in Argentina (1995 and 2001/2). Finally, the third inflow-cycle began in 2003 as soon as international financial markets felt reassured by the surprisingly neo-liberal orientation of President Lula’s government; this cycle intensified in 2004 with the beginning of a (purely speculative) commodity price-boom, and actually strengthened after a brief interlude following the 2008 global financial crash — and at the time of writing (mid-2011) this cycle is still unfolding, although already showing considerable signs of distress. The main aim of this paper is to analyse the financial crises resulting from this second cycle (both in LA and in East Asia) from the perspective of Keynesian/ Minskyian/ Kindlebergian financial economics. I will attempt to show that no matter how diversely these newly financially liberalised Developing Countries tried to deal with the absorption problem created by the subsequent surges of inflow (and they did follow different routes), they invariably ended up in a major crisis. As a result (and despite the insistence of mainstream analysis), these financial crises took place mostly due to factors that were intrinsic (or inherent) to the workings of over-liquid and under-regulated financial markets — and as such, they were both fully deserved and fairly predictable. Furthermore, these crises point not just to major market failures, but to a systemic market failure: evidence suggests that these crises were the spontaneous outcome of actions by utility-maximising agents, freely operating in friendly (‘light-touch’) regulated, over-liquid financial markets. That is, these crises are clear examples that financial markets can be driven by buyers who take little notice of underlying values — i.e., by investors who have incentives to interpret information in a biased fashion in a systematic way. Thus, ‘fat tails’ also occurred because under these circumstances there is a high likelihood of self-made disastrous events. In other words, markets are not always right — indeed, in the case of financial markets they can be seriously wrong as a whole. Also, as the recent collapse of ‘MF Global’ indicates, the capacity of ‘utility-maximising’ agents operating in (excessively) ‘friendly-regulated’ and over-liquid financial market to learn from previous mistakes seems rather limited.

The 1999 Brazilian financial crisis: how to create a financial crisis by trying to avoid one

This paper attempts to understand the Brazilian financial crisis mainly from an ‘endogenous-failure’ perspective. It argues that the general mechanisms that led to this financial crisis were in essence endogenous to the workings of an economy facing a sudden liberalisation, a surge in capital inflows, ineffective regulation and weak governance. This paper will also argue that within this general framework, there is a very specific ‘Minskyian’ feature to the Brazilian crisis, which made it different from other financial crises both in Latin America and in East Asia: how a particularly radical monetary policy led to a major financial fragility in the financial sector and State finances, and to an unmanageable Ponzi finance in the accounts of the Federal Government.

How the full opening of the capital account to highly liquid financial markets led Latin America to two and a half cycles of ‘mania, panic and crash’

Latin America has recently experienced three cycles of capital inflows, the first two ending in major financial crises. The first took place between 1973 and the 1982 ‘debt-crisis’. The second took place between the 1989 ‘Brady bonds’ agreement (and the beginning of the economic reforms and financial liberalisation that followed) and the Argentinian 2001/2002 crisis, and ended up with four major crises (as well as the 1997 one in East Asia) — Mexico (1994), Brazil (1999), and two in Argentina (1995 and 2001/2). Finally, the third inflow-cycle began in 2003 as soon as international financial markets felt reassured by the surprisingly neo-liberal orientation of President Lula’s government; this cycle intensified in 2004 with the beginning of a (purely speculative) commodity price-boom, and actually strengthened after a brief interlude following the 2008 global financial crash — and at the time of writing (mid-2011) this cycle is still unfolding, although already showing considerable signs of distress. The main aim of this paper is to analyse the financial crises resulting from this second cycle (both in LA and in East Asia) from the perspective of Keynesian/ Minskyian/ Kindlebergian financial economics. I will attempt to show that no matter how diversely these newly financially liberalised Developing Countries tried to deal with the absorption problem created by the subsequent surges of inflow (and they did follow different routes), they invariably ended up in a major crisis. As a result (and despite the insistence of mainstream analysis), these financial crises took place mostly due to factors that were intrinsic (or inherent) to the workings of over-liquid and under-regulated financial markets — and as such, they were both fully deserved and fairly predictable. Furthermore, these crises point not just to major market failures, but to a systemic market failure: evidence suggests that these crises were the spontaneous outcome of actions by utility-maximising agents, freely operating in friendly (light-touched) regulated, over-liquid financial markets. That is, these crises are clear examples that financial markets can be driven by buyers who take little notice of underlying values — investors have incentives to interpret information in a biased fashion in a systematic way. ‘Fat tails’ also occurred because under these circumstances there is a high likelihood of self-made disastrous events. In other words, markets are not always right — indeed, in the case of financial markets they can be seriously wrong as a whole. Also, as the recent collapse of ‘MF Global’ indicates, the capacity of ‘utility-maximising’ agents operating in unregulated and over-liquid financial market to learn from previous mistakes seems rather limited.

Seeking growth under financial volatility

Includes bibliography

Regional financial cooperation

Includes bibliography

Las tecnologías de la información en la facilitación del comercio y su aplicación por las PYMES

La presente edición del Boletín se basa en el material presentado en el seminario Information Technology for Development of Small-and Medium-sized Exporters in East Asia and Latin America (Tecnología de la información para el desarrollo de exportadores medianos y pequeños en Asia Oriental y América Latina), que se realizó entre el 23 y el 24 de noviembre de 2004, en la sede de la CEPAL, en Santiago de Chile. Este evento formó parte del proyecto Comparative Study on East Asian and Latin American IT Industry, financiado por el fondo temático para las Tecnologías de Información y las Comunicaciones (TIC) para el Desarrollo en el Programa de las Naciones Unidas para el Desarrollo (PNUD) y ha sido desarrollado en estrecha colaboración con el Institute of Developing Economies (IDE), organismo que pertenece al Japan External Trade Organization (JETRO). En esta oportunidad, se abordan los conceptos, definiciones y estándares asociados al comercio electrónico; las oportunidades y los desafíos a superar para que las PYMES puedan incrementar sus negocios electrónicos.

La crisis restructral del capitalismo y sus repercusiones

This article analyzes the structural crisis of capitalism that began when the speculative home mortgage bubble burst in the United States in 2007, and the repercussions of that phenome- non. The current crisis is the outcome of a series of processes unleashed as a result of the crisis of overaccumulation of capital in the 1970s, which generated, on the one hand, the conditions for financial capital’s dominance and, on the other, a new frontier for the accumulation of cap- ital in East Asia, especially in China. The crisis calls into question the centrality of the North American economy, but that does not necessarily mean the shift of capitalism’s hegemonic cen- ter to Asia. Here we will argue that we are headed toward a multipolar world.

Análise da formação de Complexos Regionais de Segurança (CRS): um estudo comparativo entre a América do Sul e o leste asiático

Pós-graduação em Relações Internacionais (UNESP - UNICAMP - PUC-SP) - FFC

Tracking eolian dust with helium and thorium: Impacts of grain size and provenance

Reconstructions of the deposition rate of windblown mineral dust in ocean sediments offer an important means of tracking past climate changes and of assessing the radiative and biogeochemical impacts of dust in past climates. Dust flux estimates in ocean sediments have commonly been based on the operationally defined lithogenic fraction of sediment samples. More recently, dust fluxes have been estimated from measurements of helium and thorium, as rare isotopes of these elements (He-3 and Th-230) allow estimates of sediment flux, and the dominant isotopes (He-4 and Th-232) are uniquely associated with the lithogenic fraction of marine sediments. In order to improve the fidelity of dust flux reconstructions based on He and Th, we present a survey of He and Th concentrations in sediments from dust source areas in East Asia, Australia and South America. Our data show systematic relationships between He and Th concentrations and grain size, with He concentrations decreasing and Th concentrations increasing with decreasing grain size. We find consistent He and Th concentrations in the fine fraction (<5 μm) of samples from East Asia, Australia and Central South America (Puna-Central West Argentina), with Th concentrations averaging 14 μg/g and He concentrations averaging 2 μcc STP/g. We recommend use of these values for estimating dust fluxes in sediments where dust is dominantly fine-grained, and suggest that previous studies may have systematically overestimated Th-based dust fluxes by 30%. Source areas in Patagonia appear to have lower He and Th contents than other regions, as fine fraction concentrations average 0.8 μcc STP/g and 9 μg/g for 4He and 232Th, respectively. The impact of grain size on lithogenic He and Th concentrations should be taken into account in sediments proximal to dust sources where dust grain size may vary considerably. Our data also have important implications for the hosts of He in long-traveled dust and for the 3He/4He ratio used for terrigenous He in studies of extraterrestrial He in sediments and ice. We also investigate the use of He/Th ratios as a provenance tracer. Our results suggest differences in fine fraction He/Th ratios between East Asia, Australia, central South America and Patagonia, with ratios showing a positive relationship with the geological age of source rocks. He/Th ratios may thus provide useful provenance information, for example allowing separation of Patagonian sources from Puna-Central West Argentina or Australian dust sources. He/Th ratios in open-ocean marine sediments are similar to ratios in the fine fraction of upwind dust source areas. He/Th ratios in mid-latitude South Atlantic sediments suggest that dust in this region primarily derives from the Puna-Central West Argentina region (23–32°S) rather than Patagonia (>38°S). In the equatorial Pacific, He/Th ratios are much lower than in extratropical Pacific sediments or potential source areas measured as a part of this study (East Asia, South America, Australia) for reasons that are at present unclear, complicating their use as provenance tracers in this region.

Contents and isotopic composition of black carbon from ODP Sites 184-1147 and 184-1148

A 30 m.y. stable isotopic record of marine-deposited black carbon from regional terrestrial biomass burning from the northern South China Sea reveals photosynthetic pathway evolution for terrestrial ecosystems in the late Cenozoic. This record indicates that C3 plants negatively adjusted their isotopic discrimination and C4 plants appeared gradually as a component of land vegetation in East Asia since the early Miocene, a long time before sudden C4 expansion occurred during the late Miocene to the Pliocene. The changes in terrestrial ecosystems with time can be reasonably related to the evolution of East Asian monsoons, which are thought to have been induced by several intricate mechanisms during the late Cenozoic and could contribute significantly to the post-Miocene marine carbonate isotope decline.