The political economy of exchange rate in Brazil

This paper reviews part of the political economy literature on exchange rate policy relevant to understanding the political motivations behind the Brazilian exchange rate policy. We shall first examine the distributive role of the exchange rate, and the way it unfolds in terms of the desired political goals. We will follow by analyzing exchange policy as indicative of government effciency prior to elections. Finally, we discuss fiscal policy from the point of view of political economy, in which the exchange rate results from the macroeconomic equilibrium. Over this review, the Brazilian exchange rate policy is discussed in light of the theories presented.

Why did democracy become the preferred political regime only in the twentieth century?

A Democracia Tornou-Se a Forma Preferida de Governo Apenas no S��culo Vinte. a Busca por Motivos Racionais para Entendermos a Raz��o n��o �� Suficiente. o Autor Procura por um Fato Hist��rico Novo que Tenha Levado a Essa Mudan��a de Prefer��ncia, Baseado Sucessivamente na Revolu����o Capitalista e na Perda Gradual do Medo da Expropria����o Pela Burguesia. a Revolu����o Capitalista que Mudou o Modo de Apropria����o do Excedente, da Viol��ncia para o Mercado, �� a Primeira Condi����o Necess��ria. Representa Tamb��m a Transi����o do Estado Absoluto para o Estado Liberal. a Segunda Condi����o �� o Desaparecimento do Medo da Expropria����o, Permitindo a Transi����o do Regime Liberal para o Regime Liberal-Democr��tico. Depois de Estabelecer Estas Duas Condi����es, ou Estes Dois Fatos Hist��ricos Novos, o Regime Democr��tico Tornou-Se Rational Choice para Todas as Classes. para os Capitalistas, Democracia �� Agora a Forma de Governo que Melhor Assegura o Direito �� Propriedade e Aos Contratos. para os Trabalhadores, �� a Forma de Governo que Melhor Assegura o Aumento de Sal��rios com Lucros

The political economy of global economic disgovernance

A Desgovernan��a Econ��mica Global, Mais do que a Governan��a Caracteriza Hoje a Economia Mundial. Dois Fatos Substanciam Essa Afirmativa: a Crise Recorrente do Balan��o de Pagamentos nos Pa��ses em Desenvolvimento, e o Enorme D��ficit em Conta Corrente dos Estados Unidos. as Crises nos Mercados Emergentes s��o Essencialmente Resultantes da Estrat��gia que o Norte Prop��e para o Sul: a Estrat��gia de Crescimento com Poupan��a Externa. Dado o Fato de que a Entrada de Capital Aumenta a Taxa de Cambio, e que os Paises n��o Reconheceram as Principais Oportunidades de Investimento nos Anos 1990, Tal Estrat��gia Levou n��o ao Aumento das Taxas de Acumula����o de Capital e ao Crescimento, Mas ao Aumento do D��ficit em Conta Corrente e �� Crise do Balan��o de Pagamento (Financeiro). por Outro Lado, o D��ficit em Conta Corrente dos Estados Unidos �� um Problema S��rio. Aquele J�� �� um Pa��s Devedor, Mas os Ajustes Continuam a ser Adiados. a Probabilidade de um Soft Landing (Desfecho Satisfat��rio) �� Pequena. as Duas Fontes de Instabilidade Est��o Relacionadas Aos D��ficits em Conta Corrente e �� Moeda Sobrevalorizada. a Pol��tica Econ��mica por Tr��s tem um Nome: Taxa de C��mbio Populista, uma das Duas Formas de Populismo Econ��mico (A Outra �� o Populismo Fiscal). Isto n��o �� Surpreendente em Pa��ses em Desenvolvimento, Mas Pode ser em um Pa��s Desenvolvido, como os Estados Unidos. Ainda Assim n��o �� Surpreendente Quando se Considera a Recess��o Pol��tica e Social que a Sociedade Americana Est�� Vivendo Desde o Fim da Segunda Guerra

Political institutions as substitute for democracy: a political economy analysis of economic growth

This manuscript empirically assesses the effects of political institutions on economic growth. It analyzes how political institutions affect economic growth in different stages of democratization and economic development by means of dynamic panel estimation with interaction terms. The new empirical results obtained show that political institutions work as a substitute for democracy promoting economic growth. In other words, political institutions are important for increasing economic growth, mainly when democracy is not consolidated. Moreover, political institutions are extremely relevant to economic outcomes in periods of transition to democracy and in poor countries with high ethnical fractionalization.

Electoral rules, political competition and fiscal spending: regression discontinuity evidence from brazilian municipalities

We exploit a discontinuity in Brazilian municipal election rules to investigate whether political competition has a causal impact on policy choices. In municipalities with less than 200,000 voters mayors are elected with a plurality of the vote. In municipalities with more than 200,000 voters a run-off election takes place among the top two candidates if neither achieves a majority of the votes. At a first stage, we show that the possibility of runoff increases political competition. At a second stage, we use the discontinuity as a source of exogenous variation to infer causality from political competition to fiscal policy. Our second stage results suggest that political competition induces more investment and less current spending, particularly personnel expenses. Furthermore, the impact of political competition is larger when incumbents can run for reelection, suggesting incentives matter insofar as incumbents can themselves remain in office.

Hybrid political institutions and governability: the budgetary process in Brazil

In this paper we take a close look at some of the particular pathways by which majoritarian and consensual institutions affect governability. We demonstrate that the mix of majoritarian and consensual institutions found within a country can influence these pathways quite dramatically, such that they produce rather different consequences for governability, even when these pathways are relatively similar in nature. Particularly, we focus on the rules governing the relationship between the President and the Legislature, especially the appropriation of amendments proposed by legislators. In some presidential countries, the president possesses a partial veto (or a line-item veto) which allows him/her to approve or strike appropriations, which legislators introduce in amendments. Concentrating on the case of Brazil, we argue and demonstrate that whether or not the president can use this tool to sustain governing majorities (i.e., to increase governability) depends on the kind of amendment introduced by legislators. One kind, individual amendment, is linked to the majoritarian institution of a powerful presidency and therefore helps to increase governability. A second kind, collective amendment, is linked to consensual institutions and actually does not enhance legislative support for the Executive.

The inequality curse: constraints and political discretion

We live in an unjust world characterized by economic inequality. No liberal theory of justice is able to justify it. Inequality is not ���solved��� with equality of opportunity or meritocracy. Nor by the socialist and republican critique. The poor will have to count with them and with democracy to make social progress reality. In their political struggle, they will face one economic constraint: the expected profit rate must remain attractive to business investors. Yet, giving that technological progress in increasingly capital-saving, this economic constraint does not obstruct that wages grow above the productivity rate and inequality is reduced. What really is an obstacle to social justice in the rich countries is, on one hand, the power that capitalist rentiers retain and financists acquired, and, on the other, the competition originated in low wage countries.

The political economy of exchange rate policy in Brazil: 1964-1999

This paper was developed as part of a broader research program on the political economy of exchange rate policies in Latin America and the Caribbean. We are grateful for helpful comments and suggestions from Jeff Frieden, Ernesto Stein, Jorge Streb, Marcelo Neri and seminar participants at Getulio Vargas Foundation, PUC-Rio, IDB workshop on The Political Economy of Exchange Rate Policies in Latin America and the Caribbean, and LACEA meeting in Buenos Aires. We thank Ren�� Garcia for providing us with a Fortran program for estimating the Markov Switching Model, Ilan Goldfajn for sending us updated estimates of the real exchange rate series of Goldfajn and Vald��s (1996), Altamir Lopes and Ricardo Markwald for kindly furnishing data on Brazilian external accounts, and Carla Bernardes, Gabriela Domingues, Juliana Pessoa de Ara��jo, and, specially, Marcelo Pinheiro for excellent research assistant. Both authors thank CNPq for a research fellowship.

Determinants for political risk insurance of direct investments in emerging markets

Esta disserta����o analisa os principais determinantes para investidores contratarem seguro de prote����o de riscos pol��ticos (PRI) para seus investimentos diretos, assim com o racional de sair de um PRI n��o renovando suas pol��ticas. Esta disserta����o contribui para a literatura existente sobre PRI, investigando os principais motivadores para PRI, tais como, riscos pol��ticos, riscos econ��micos, capacidade do patrocinador, instrumento utilizado para realizar o investimento (horizonte do investimento) determina combina����es de PRI utilizando um modelo bin��rio de resposta n��o linear. Um banco de dados ��nico da Multilateral Investment Guarantee Agency (MIGA) no per��odo de 1990 at�� 2010, contendo informa����es sobre 693 investimentos incluindo sua cobertura para: seguro de risco de conversibilidade, seguro para risco de expropria����o, riscos de guerras e dist��rbios civis e riscos de quebra de contrato. Entretanto, percebemos que 47% destes seguros n��o permanecem ativos at�� o prazo originalmente contratado. Adicionalmente, institui����es financeiras como garantidoras utilizam proporcionalmente mais d��vida do que capital como instrumento de investimento e s��o largamente seguradas dentro da Uni��o Europ��ia (EU). Por outro lado, investidores nos BRICs tendem a cobrir primariamente seus investimentos em infraestrutura. Resultados emp��ricos incluem que um aumento nos riscos de quebra de contrato e guerra civil est��o totalmente correlacionados com a renova����o de contratos de seguro, assim como um aumento da percep����o de risco do pais que est�� recebendo o investimento.

State���society cycles and political pacts in a national���dependent society: Brazil

The history of independent Brazil may be divided into three major state���society cycles, and, after 1930, five political pacts or class coalitions can be identified. These pacts were nationalist; only in the 1990s did the Brazilian elites surrender to the neoliberal hegemony. Yet, since the mid-2000s they have been rediscovering the idea of the nation. The main claim of the essay is that Brazilian elites and Brazilian society are ���national���dependent���, that is, they are ambivalent and contradictory, requiring an oxymoron to define them. They are dependent because they often see themselves as ���European��� and the mass of the people as inferior. But Brazil is big enough, and there are enough common interests around its domestic market, to make the Brazilian nation less ambivalent. Today Brazil is seeking a synthesis between the last two political cycles ��� between social justice and economic development in the framework of democracy.

Is enterprise value affected by political nominations for a regulatory agency's presidency?

Economists have argued that regulation is the appropriate approach to maintain output in its economically efficient level in a natural monopoly, and that can be achieved by submitting these companies to regulatory agencies��� decisions. The autonomous agencies are, however, not free in an absolute sense, and it is important to ask what the priorities of the new administration are. One answer is that it is designed to give leeway and powers of discretion to unbiased professionals with expertise in their field. In practice, however, professional experts might often be politically motivated. The objective of this study is to investigate whether political nominations to the presidency of regulatory agencies, rather than technical appointments, affect the level of regulatory risk. In order to achieve this purpose, an event study was performed, where the regulatory risk in a political nomination will be compared to a technical nomination, in terms of abnormal return.