Fin del populismo en Argentina… (por ahora)


(Cristina Kirchner, presidente de Argentina en el Encuentro de los Jefes de Estado de Mercosur, Brasilia, Brasil. Diciembre, 2012. Foto: Eduardo Aigner.)

Fin del populismo en Argentina… (por ahora)
Por Roberto Guareschi

La Argentina llega boqueando a las elecciones presidenciales de octubre. Cristina Fernández de Kirchner deja un país en recesión económica, con instituciones debilitadas y una sociedad crispada y polarizada por su estilo confrontativo. El saldo de 12 años de gobierno (Cristina se alternó con su esposo, el fallecido Néstor) es negativo.

Néstor Kirchner llegó a la presidencia con viento de cola gracias a la suba espectacular del precio de la soja, casi un monocultivo en Argentina. En 2010, el mejor año, el Banco Central llegó a acumular reservas internacionales por 52 mil millones de dólares. Pero hoy las reservas suman 33 mil millones de dólares. Una caída vertiginosa cercana al 35% en apenas cuatro años.

Durante los años de crecimiento a tasas chinas, a los Kirchner no le importó la caída de la industria y el déficit energético que obligó a importar combustibles. La pareja gobernante desaprovechó la bonanza económica en subsidios, excesivo gasto público, y también por mera ineficiencia. Y hoy, cuando el precio de la soja se viene abajo y se termina el “dinero fácil,” Argentina sigue siendo, sobre todo, un productor de materias primas.

También en el plano político hay graves problemas.

  • Cristina se atribuyó la potestad de modificar el presupuesto a su antojo.
  • Tomó “préstamos” del Banco Central para enfrentar el desequilibrio fiscal.
  • Frenó investigaciones por corrupción.
  • Confrontó a los medios opositores y a la Corte Suprema con un estilo que no se veía en democracia desde mitad del siglo pasado, en el primer gobierno de Perón.

Peor aún, encontró un atajo que le permitió compartir la presidencia con su esposo sin violar la ley en lo formal. La Constitución permite una sola reelección y ellos se alternaron cada cuatro años hasta que murió Néstor.

Cristina no quiere un sucesor. Apoya tibiamente a Daniel Scioli, peronista pragmático y ex corredor de lanchas, que hoy tiene la mayor intención de voto. Su carisma está construido sobre un accidente que le costó un brazo, y no por su gestión deslucida como gobernador de la provincia de Buenos Aires.

El otro candidato con posibilidades es Mauricio Macri, jefe de gobierno de la Ciudad de Buenos Aires, donde la gente le reconoce eficiencia. Tiene un perfil neoconservador.

Ambos están casados con ex modelos. También comparten un extremo sometimiento al marketing: recientemente se prestaron a hacer el ridículo en un reality show, el programa de televisión más visto del país. Finalmente, comparten los mismos desafíos:

  • Domar el segundo porcentaje de inflación del mundo.
  • Reducir un gasto público sideral: aumentó 2.675% desde que asumieron los Kirchner.
  • Revertir el descrédito de la política: en 2003 Cristina declaró una fortuna personal de dos millones de pesos; hoy tiene 55 millones (además, su vicepresidente está procesado por aprovechar su cargo para hacer negocios).
  • Atraer inversiones extranjeras y créditos, algo hasta hoy impensable.

Macri y Scioli son ortodoxos en economía. ¿Pero podrá el que triunfe aplicar los remedios dolorosos que eso implica para los sectores más necesitados? ¿Podrá resistir las presiones de los poderosos sindicatos peronistas?

Cristina no puede ser reelecta más de una vez. Por eso tendrá que esperar cuatro años, por lo menos. En caso de que gane Scioli, piensa conducirlo desde el llano y así ser un árbitro de la política argentina. ¿Podrá? Su alto índice de popularidad –aproximadamente 40%-, su audacia y su energía en un país sin líderes quizás la ayuden.

DSC_0021.JPGEl populismo se va hoy como ocurre cada vez que termina la expansión económica. Pero un mito dice que cada diez años hay una crisis seria en Argentina. Si se cumple la profecía, es posible que vuelva el populismo. Pero en todo caso faltan unos cuantos años.

Roberto Guareschi fue durante 13 años secretario de redacción del diario Clarín en Buenos Aires. Es actualmente escritor y profesor universitario.

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Argentina Past and Future


(Cristina Kirchner, president of Argentina at the Meeting of Mercosur heads of state, Brasilia, Brazil. December, 2012. Photo: Eduardo Aigner)

Argentina Past and Future
By Roberto Guareschi

Argentina is approaching its October presidential elections gasping for air. Cristina Fernández de Kirchner is leaving behind a country in economic recession, with weakened institutions and a tense and polarized society as a result of her confrontational style. The balance of 12 years in power (Cristina alternated power with her husband, the deceased Néstor) is negative.

Néstor Kirchner started his presidency with a tailwind thanks to the spectacular increase in the price of soy, the main crop grown in Argentina. In 2010, the best year, the Central Bank was able to accumulate $52 billion US dollars in international reserves. But today reserves total $33 billion US dollars- a dramatic decline of almost 35% in merely four years.

During the years of growth at Chinese rates, the Kirchners did not mind the industrial decline or the energy deficit that forced them to import fuel. The governing couple squandered the economic bonanza in subsidies, excessive public spending, and also because of simple inefficiency. And today, when the price of soy is down and the times of “easy money” are over, Argentina continues to be, mostly, a producer of raw materials.

There are also serious problems in the political arena:

  • Cristina claimed the power to modify the budget as she pleases.
  • She took “loans” from the Central Bank to face the fiscal imbalance.
  • She stopped investigations on corruption cases.
  • She confronted the opposition media and the Supreme Court with a style that had not been observed in democracy since the mid-twentieth century, during Perón’s first administration.

Even worse, she found a loophole that allowed her to share the presidency with her husband without formally breaking the law. The Constitution allows one re-election and they alternated in power every four years until Néstor’s death.

Cristina does not want a successor. She tepidly supports Daniel Scioli, a pragmatic peronist and ex-powerboat racer, who is currently the highest polling candidate. His charisma is built on an accident which cost him one arm, and not on his lackluster administration as governor of Buenos Aires province.

Another candidate who has chances to win is Mauricio Macri, governor of the City of Buenos Aires, where people acknowledge he has been efficient. He has a neoconservative profile.

Both are married to former models. They also share an extreme submission to marketing: they both recently agreed to make fools of themselves on a reality show, the most viewed show in the country. Finally, they face the same challenges:

  • Taming the second highest inflation rate in the world.
  • Decreasing the currently astronomical public spending: it increased 2,675% since the Kirchners took power.
  • Undoing the discredit of politics: in 2003 Cristina declared a personal worth of two million pesos; today she has 55 million (and her vice-president is being prosecuted for taking advantage of his position to carry out business deals).
  • Attracting foreign investment and credit, something inconceivable today.

Macri and Scioli are economically orthodox. But will the winner be able to apply the painful remedies that this implies for the most vulnerable sectors? Will he be able to resist the pressure of the powerful peronist unions?

Cristina cannot be reelected more than once. In the case that Scioli wins, she plans to manage him behind the scenes and in this way be a referee of Argentine politics. Will she be able to? Her high popularity rate- approximately 40%, her boldness and her energy in a country that lacks leaders might help her.

PDSC_0021.JPGopulism is coming to an end today, the way it happens every time the economic expansion is over. But a myth says that every ten years there is a serious crisis in Argentina. If the prophecy is fulfilled, it is possible that populism will return. But in any case this possibility is several years away.

Roberto Guareschi was for 13 years the managing editor for the newspaper Clarín in Buenos Aires. He is currently a writer and university lecturer.

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On the Ground During the 2014 Brazilian Presidential Election

By Robert Snyder

Campaign car.

One of many campaign cars for a Workers’ Party city council candidate in Niterói, near Rio de Janeiro.

Last fall’s Brazilian presidential election exposed deep rifts in the country’s political and social landscape. The animosity demonstrated by the candidates — who included the incumbent, Dilma Rousseff of the Worker’s Party (PT), and Aecio Neves of the Brazilian Social Democracy Party — in nationally televised debates was mirrored by ordinary citizens on the street. The country is clearly suffering from dramatic socioeconomic inequalities and widespread public discontent. Almost 10 percent of its 200 million residents live in urban slums wracked by violence and infectious disease. In 2013, the country was brought to a standstill by protesters incensed by crumbling infrastructure, corrupt politicians, and disreputable public security forces. Further, Dilma’s first term was marked by economic stagnation. The recent bankruptcy of construction magnate Eike Batista, who at one point was the eighth wealthiest person in the world, is emblematic of the country’s economic struggles. The ruling party has also been implicated in vote buying and corruption scandals that have seen indictments but no jail time. The combination of social unrest, inequality, and economic woes led to an extremely interesting and competitive election cycle.

I arrived in Rio de Janeiro in early September, just as the campaigns were reaching their peak. In Brazil, voting is compulsory, and it seemed as though everyone was willing to voice his or her opinion. Every day, the city’s iconic beaches were lined with supporters waving oversized, brightly colored flags (blue for Aecio, red for Dilma) and handing out campaign paraphernalia. A steady stream of inane campaign promises and obnoxious jingles blared from loudspeaker-mounted cars, overwhelming the normal urban symphony. These sounds were mixed with those of angry motorists as they honked and demonstrated their displeasure with the traffic.

Many of my professional colleagues — members of the “old left,” who contributed to the fall of the military dictatorship in 1985 — dreaded the possibility of Neves’ election.  They claimed that Neves would repeal the conditional cash transfer programs that have been vital to the emergent middle class. On the other side, Neves’ supporters argued that these programs were a form of vote buying, which created a needy welfare state. As the runoff election approached, even The Economist weighed in, arguing for Neves’ election, claiming that it would improve Brazil’s tanking economy. Walking down the street without being handed pamphlets for both candidates became nearly impossible.

Reading the candidate’s policies as an outsider, I could barely perceive an ideological difference. Neither described any plans to repeal or augment cash-transfer programs, and neither had laid out any policies to address the drivers of last year’s protests. Worse, they both planned to continue denuding the world’s largest carbon sink, the Amazon rainforest, whose disappearance has been linked to the crippling drought in São Paulo, the continent’s largest city and home to 20 million people.

Robert Snyder

Robert Snyder in Niterói, Rio de Janeiro state.

Ultimately, Dilma won by a margin of less than 4 percent. Some of her opponents reacted to her reelection with derision or derogatory and racially motivated comments about her Northeastern power-base. Despite a new presidential term and promises to renew the economy, recent news has focused on the discovery of a “super-bacteria” in Rio’s fetid Bay of Guanabara or on widespread corruption and participation by the country’s police in the booming drug trade. If Dilma is to secure her legacy and cement Brazil’s role as a strategically important trading partner for other members of the G-20, her regime and the Brazilian ruling class must address the issues underlying the country’s economic, social, and political divides.

Robert Snyder is a Ph.D. candidate in Epidemiology at UC Berkeley.

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Regime Change From Roosevelt to Rousseff

By Carola Binder

FDR.

Eleanor and Franklin Delano Roosevelt. (Photo courtesy of the FDR Presidential Library & Museum.)

President Franklin Delano Roosevelt was elected in October 1932, in the midst of the Great Depression. High unemployment, severely depressed spending, and double-digit deflation plagued the economy. Shortly after his inauguration in March 1933, a dramatic turnaround occurred. Positive inflation was restored, and 1933 to 1937 was the fastest four-year period of output growth in peacetime in United States history.

How did such a transformation occur? Economists Peter Temin and Barrie Wigmore attribute the recovery to a “regime change.” In the economics literature, regime change refers to the idea that a set of new policies can have major effects by rapidly and sharply changing expectations. A regime change can occur when a policymaker credibly commits to a new set of policies and goals. Gauti Eggertsson, who also analyzes the regime change under Roosevelt, explains:

“On the monetary policy side, FDR abolished the gold standard and — even more importantly — announced an explicit policy objective of inflating the price level to pre-depression levels. On the fiscal policy side, FDR expanded government real and deficit spending (i.e. government credit expansion) which made his policy objective credible. The key to the recovery was the successful management of expectations about future policy

Coordinated monetary and fiscal policy ended the Great Depression by engineering a shift in expectations from “contractionary,” i.e. the private sector expected future economic contraction and deflation, to “expansionary,” i.e. the public expected future economic expansion and inflation. The expectation of higher future inflation lowered the real rate of interest, thus stimulating demand, while the expectation of higher future income stimulated demand by raising permanent income.”

In short, Roosevelt stated and proved that he was willing to do whatever it would take to end deflation and restore economic growth. As Roosevelt proclaimed on October 22, 1933: “If we cannot do this one way, we will do it another. Do it, we will.”

Dilma Rousseff

Dilma Rousseff celebrates Brazilian Independence Day, 2014. (Photo by Roberto Stuckert/PR.)

Almost all politicians promise change but few manage such drastic transformation. In Brazil’s closely contested presidential election this October, incumbent President Dilma Rousseff won reelection with a three-point margin over centrist candidate Aecio Neves. Rouseff told supporters, “I know that I am being sent back to the presidency to make the big changes that Brazilian society demands. I want to be a much better president than I have been until now.”

Rousseff’s rhetoric of “big changes” refers in large part to the Brazilian economy, which is plagued with stagnant growth, high inflation, and a strained federal budget. Brazil’s currency, the real, hit a nine-year low following Rousseff’s victory, and the stock market also tumbled. This market tumult reflects investors’ doubts about the Rousseff administration’s intention and ability to enact effective reforms. Investors viewed Neves as the pro-business, anti-interventionist candidate and are unconvinced that Rousseff will act decisively to restore fiscal discipline and rein in inflation. In other words, Rousseff’s talk of change is not fully credible in the way that Roosevelt’s was.

Dilma Rousseff and then-Finance Minister Guido Mantega.

Dilma Rousseff and then-Finance Minister Guido Mantega. (Roberto Stuckert/PR.)

Since winning reelection, Rousseff has begun to implement some of the same policy reforms that Neves proposed. For instance, fuel prices were allowed to rise, as a step toward ending fuel price controls. Rousseff has also begun to reduce state bank subsidized lending. The central bank, which lacks complete autonomy from the government, finally raised its benchmark interest rate by 25 basis points in response to above-target inflation and has signaled that further rate hikes could ensue.

Though Rousseff is taking some actions to improve business conditions, restore fiscal discipline, and reduce inflation, the problem is that they are being enacted quietly and reluctantly rather than being trumpeted as part of a broader vision of reform. The key to regime change is that the effects of policy changes depend crucially on how the changes are presented and perceived. Economic policies work not only through direct channels but also through signaling and expectations. For example, a small rise in fuel prices and a reduction in state bank subsidized lending may have small direct effects, but if they are viewed as signals that the president is wholeheartedly embracing market-friendly reforms, the effects will be much greater. So far, despite Rousseff’s campaign slogan — “new government, new ideas” — she hasn’t credibly committed to a new regime.

Joaquim Levy at the World Economic Forum on Latin America.

Joaquim Levy at the World Economic Forum on Latin America. (Photo courtesy of the World Economic Forum/Photo by Alexandre Campbell.)

One way she might attempt to signal real commitment to regime change is through the appointment of new members to her administration. Upon resignation, Marta Suplicy, Rousseff’s culture minister since 2012, urged President Rousseff to set up “an independent economic team, with proven experience, to rescue the credibility of [her] government.” Most notably, Rousseff will be replacing Finance Minister Guido Mantega. She is expected to choose banker and University of Chicago-trained economist Joaquim Levy as Mantega’s replacement. As Brazil’s treasury chief from 2003 to 2006, Levy proved himself a fiscal hawk and helped Brazil restore its investment grade rating.

Levy’s fiscal conservatism and economic orthodoxy appeals to investors; markets rose at the news of his probable appointment. However, members of President Rousseff’s Workers’ Party, and Rousseff herself, are likely to oppose aspects of his approach. Rousseff received her strongest electoral support from the poorest parts of the country. In the short run at least, her pledges to fight poverty and inequality will be in tension with tighter fiscal and monetary policy. Unless Levy’s economic reforms can preserve popular anti-poverty programs, Rousseff is unlikely to follow through. So far, Rousseff’s “new government, new ideas” has not translated into a new regime.

Carola Binder.

Carola Binder.

Carola Binder is a Ph.D. candidate in the Department of Economics at UC Berkeley.

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Mercosur: The Need for Reforms

By Luis Ferreira Alvarez

The Mercusur Building, Montevideo, Uruguay.

The Mercusur Building, Montevideo, Uruguay. (Photo by Jimmy Baikovicius)

As Brazil and Argentina continue in recession, the Southern Common Market (Mercosur/Mercosul) provides them with a regional mechanism to restore economic growth. However, Mercosur has abandoned its free trade vision, instead becoming a protectionist organization. Reforming Mercosur would provide momentum for economic recovery. However, two fundamental changes must occur: Mercosur’s common policy of trade negotiations needs to be eliminated, and the organization’s Secretariat needs more independence. Changing these two components would allow Mercosur to return to its original mission of promoting free trade and create a stronger body, capable of finding consensus within the member states.

Mercosur — a free trade and custom union formed in 1991 between Argentina, Brazil, Paraguay, and Uruguay (and later joined by Venezuela) — promotes the free movement of goods and people across the zone. Mercosur’s members have benefited from having integrated markets that expand their commerce. Argentina’s 2013 exports to Mercosur represented 26 percent of the country’s total exports, compared to 2.2 percent in 1991, while Argentine exports to the rest of Latin America (through the Latin American Integration Association, or Aladi) came a close second, representing 15 percent in 2013 (Fig 1). These figures show that Argentina’s trade is highly integrated with that of its neighbors, and closer cooperation between Mercosur and the rest of Latin America (especially the Pacific Alliance), is critical for Buenos Aires’ commerce.

Brazilian exports to Mercosur represented 11 percent of total exports, from 10 percent in 1991. When added with the rest of Latin America, Brazilian exports to the region reach 21 percent. However, Brazilian exports are more diverse than Argentina’s, with the European Union and China representing the largest shares of its exports, 20 percent and 19 percent respectively (Fig 2). Thus, while Brazil exports a tremendous amount to its Latin American neighbors, its largest markets are outside the region.

Figure 1: Argentine Exports 2009 to 2013 (Percentage of Participation)

Figure 1: Argentine Exports 2009 to 2013 (Percentage of Participation)

Source: National Institute of Statistics and Census (INDEC)

 Figure 2: Brazilian Exports 2009 to 2013 (Percentage of Participation)

Figure 2: Brazilian Exports 2009 to 2013 (Percentage of Participation)

Source: Ministry of Development, Industry, and Trade (MDIC)

However, further integration would expand growth by creating integrated value-added chains, making Mercosur goods more valuable. Examples of these chains can be seen in goods manufactured within the North American Free Trade Agreement (Nafta) zone, where American workers produce 40 percent of U.S. imports from Mexico and 25 percent of imports from Canada. Creating such value-added chains in Mercosur would push Brazilian and Argentine manufacturers to become more efficient as well as create jobs on both sides. Furthermore, these valued-added chains could expand to other sectors, such as energy. However, accomplishing this task would mean reforming Mercosur by ending the common trade policy and de-politicizing the organization through a more independent Secretariat.

Ending the common trade policy would allow members to negotiate their own bilateral trade agreements while maintaining Mercosur. While having a single trade policy works for likeminded countries, Mercosur member states are ideologically divided between free traders and protectionists. This in turn delays trade negotiations when member states are unable to find consensus. The Mercosur-European Union trade agreement, which has been in negotiations since 1999, illustrates this divide. Finally, ending the common trade policy could help end the statist tendencies in some member states. Nafta provides another example of this: although domestic players pushed Mexico’s economic liberalization, the country’s integration with Canada and the U.S. made a return to protectionism very costly.

Finally, Mercosur’s Secretariat needs complete independence to ensure that all members benefit from the organization. Domestic politics has paralyzed Mercosur, creating obstacles for the organization’s effectiveness. To ensure that the aforementioned reform creates results, the organization’s Secretariat needs to make decisions without interference from members. Mercosur’s High Representative (the equivalent of the president of the European Council) needs independence to enforce organizational decisions. By creating a more independent Secretariat, Mercosur can promote intra-organizational standards and expand trade.

Reforming Mercosur should be one of the priorities of its members. By modifying its trade policy and giving more independence to its Secretariat, Mercosur could better serve the interests of all members. A reformed Mercosur could become an effective institution for internal and external investment. Lastly, reforms would provide members with more flexibility, allowing them to advance their own interests while maintaining Mercosur. Argentina and Brazil, the organization’s founding members and its largest economies, should lead the charge for reform or risk seeing it become just another South American political club.

Luis FerreiraLuis Ferreira Alvarez is a research analyst for an energy consulting firm and a UC Berkeley alum.

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The Brazilian Election and Central Bank Independence

By Carola Binder

The headquarters of the Banco Central do Brasil in Brasília.

The headquarters of the Banco Central do Brasil in Brasília. (Image courtesy of the Banco Central do Brasil.)

Brazilians will head to the polls on October 5 to vote in a tight presidential race. President Dilma Rousseff’s leading challenger is Socialist Party candidate Marina Silva. A key component of Silva’s economic platform is her support for a more independent central bank. Central bank independence, long a topic of interest to economists, is now capturing wide public attention — and for good reason.

Central banks across the world face different sets of laws regarding their governance structures, their autonomy, and the scope of their powers and responsibilities. In the last two decades, many countries have passed laws granting their central banks legal independence from government. Without central bank independence, inflation can be undesirably high for two main reasons. First, a government-controlled central bank might use monetary expansion to inflate away nominal liabilities such as government debt. Second, monetary expansion may be used to boost short-run growth for the sake of political popularity prior to elections. Central bank independence laws are intended to allow central bankers to focus on objectives like price stability without interference or pressure from the government.

Currently, Brazil’s central bank is not legally independent. The central bank president has no fixed term length and can be fired by the Brazilian president. President Rousseff and Silva debated the issue of central bank independence on September 1. Silva proposes increasing the central bank’s independence, for example by giving the central bank president a fixed term as a form of insulation from political pressure.

What could a more independent central bank mean for the Brazilian economy? Brazil’s central bank practices inflation targeting, a monetary policy framework that was adopted by many countries in the 1990s in an effort to bring down high inflation. An inflation targeting central bank announces a specific quantitative goal for inflation and uses monetary policy to keep inflation near the target. In Brazil, the inflation target is 4.5 percent, with a 2 percent window on either side. Thus the bank’s goal is to keep inflation between 2.5 and 6.5 percent.

Inflation in Brazil has hovered around 6.5 percent since 2008. A legally independent central bank would likely have pursued tighter monetary policy — namely, higher interest rates — to keep inflation nearer to the 4.5 percent target. Economic growth in Brazil has been fairly slow for the past decade, especially since 2011. Growth in the gross domestic product (GDP) was negative in the first and second quarters of 2014. Tighter monetary policy would further slow GDP growth, the last thing an incumbent wants near an election. Without legal independence, the bank has faced pressure not to raise interest rates as high as they otherwise might have.

Carola Binder.

Carola Binder.

Tighter monetary policy would, temporarily, be bad for the Brazilian economy. But a central bank with the independence to pursue the inflation target without interference could help in the long run. Monetary policy can help smooth fluctuations in the business cycle, but it is not the solution to low growth that arises for structural reasons. Allowing inflation to reach the upper limit of the bank’s tolerance interval for a short period to avoid a recession is perfectly suitable, but Brazilian economic growth has been weak, and inflation has been near the top of the tolerance interval for many years now. Such long-term stagnation needs to be addressed with deeper economic reforms, not with monetary policy. But reform is hard, and when policymakers hold sway over the central bank, they will naturally want to use it as a short-run solution to long-run problems.

President Rousseff argues that granting more independence to the central bank would pose a threat to financial stability. I don’t think that is the case. The biggest threats to Brazil’s financial stability arise from the same structural problems that result in its stagnant growth. As Professor João Saboia discussed at a CLAS seminar on September 10, economic reforms to improve labor productivity, such as improvements to the education system, are crucial for Brazil’s longer run macroeconomic prospects.

According to economists N. Nergiz Dincer and Barry Eichengreen, who have constructed indices of central bank independence for 89 countries, Chile has the most independent central bank in Latin America. Legislation granting independence to the Chilean Central Bank was passed in 1989. The Central Bank of Chile, like that of Brazil, is an inflation targeting central bank. Chile’s inflation target is 3 percent with a 1 percent tolerance window on either side. Chile has both a legally independent central bank and one of the most stable economies in the region and has maintained higher growth, lower inflation, and lower interest rates than Brazil in recent years. Clearly, central bank independence needn’t threaten financial stability or macroeconomic performance, provided an appropriate set of economic and political institutions are in place.

While President Rousseff and Ms. Silva differ in opinion on central bank independence, there is one aspect of Brazilian economic policy that both support — Bolsa Familia. Bolsa Familia is an anti-poverty program that provides cash transfers to a quarter of the Brazilian population. To receive these payments, families must keep their children in school and vaccinated. The program, launched by former President Luiz Inacio Lula da Silva in 2003, is widely acclaimed for its cost-effectiveness and for keeping more children in school instead of at work. Bolsa Familia seems very likely to remain in place, but other components of Brazilian economic policy will depend critically on the outcome of the election.

Carola Binder is a Ph.D. candidate in the Department of Economics at UC Berkeley.

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The Underside of Futbol

By Diego Ponce de Leon

Just a week ago I sat near Kenya’s Lake Naivasha watching the Brazil vs. Chile game. Chile was the underdog, and after having easily walked over Spain, they were the clear favorites inside the bar. In fact, every Kenyan I met that day was cheering for “red hot Chile.” I was amazed how well they knew the Chilean and Brazilian players (beyond Alexis Sánchez and Neymar) and found myself to be the only one cheering when Gonzalo Jara hit the bar and lost the game. The mood was incredible: halfway across the world, I was sitting at a table with Egyptian, German, American, and Kenyan friends watching a futbol game in peace. After leaving my home country of Mexico more than a decade ago, I am equally proud to be Latin American as to cheer for Giovanni Dos Santos’ goals. Although that night I was proud to see everyone cheer for Latin America — I haven’t seen anyone here cheer for Europe, it’s Latin America all the way — I was equally aware of how the World Cup has eclipsed glaring social inequities in our side of the world.

Photo1

Chilean fans celebrate their nation’s 2-0 defeat of Spain in the World Cup in Rio de Janeiro, Brazil, June 18, 2014. (Australfoto/Douglas Engle) © Douglas Engle 2014

Don’t get me wrong — I love futbol, and the World Cup is even more amazing. Watching the sport in itself is incredible, but watching an emerging economy take on a historical empire and take it out of the World Cup is inspiring. This year in particular, the underdogs have put up an incredible fight. Costa Rica, Colombia, and Mexico, who all played their hearts out, arguably deserved to win their knockout matches. Many across the continent and throughout the rest of the world share this fervor for underdogs.

This sentiment is not shared, however, when evaluating social inequities in the region. FIFA and the mainstream media have ignored protests against the World Cup in Brazil, while some governments (including Mexico) have used the event’s popularity to surreptitiously contrive and implement widely unpopular political reforms. Even my own friends who are attending the World Cup, members of Latin America’s well-educated middle class, take only glossy photos of their trip, avoiding situations and images that could potentially spoil their experience. Despite the goals and some comradery, this failure to note social tensions in the host country has left a sour taste. With Brazil’s devastating loss against Germany in the semifinals, there will be no comfort — nor justification — for the thousands of Brazilians who were displaced to make way for tourists in major cities.

Photo2

Churrasco, a beer, and a card game in the Mangueira favela during Brazil’s second World Cup 2014 match, June 17, 2014. Brazil tied with Mexico 0-0. (Australfoto/Douglas Engle) © Douglas Engle 2014

This World Cup has also highlighted yet again the pervasive discrimination that exists throughout Latin America. Mexican fans partook in deep ignorance cheering “P***” in unison at referees and team opponents throughout their games, arguing that the latter was not a homophobic remark but merely a colloquialism contextualized by situation. FIFA, in one of its most remarkable moments of utter absurdity, was tempted to sanction Mexico for discriminatory remarks — an unbelievable statement, given that the organization will host the next World Cups in Qatar and Russia, countries where it’s borderline illegal to be gay. Juan Camilo Zuñiga, the Colombian player who fractured Neymar’s vertebra has been receiving racist death threats, and a Brazilian candidate for congress went as far as suggesting that he should be assassinated.

In Brazil, a country where 60 percent of the population is either mixed or black, their absence is glaringly omitted from stadium stands (while some of the Brazil players dye their hair blonde and the black and mixed population sells beer and souvenirs to people on the street).About $US 4.2 billion have been spent on stadiums as well as on urban tourist infrastructure (airports, roads, renovated stadiums, athlete villages, and telecommunications), but little has been spent to improve basic services such as access to quality healthcare, education, and public transportation. Surveys around Brazil before and during the World Cup suggested that more than 60 percent of Brazilians think that the World Cup will not help the country.This imposition of mega-events without public consultation is the epitome of how politics is done in Latin America – and futbol is no exception. Traditionally the people’s game, the sport has long transformed itself through FIFA into a smoke screen and favorite tool for corruption, gentrification, and political obfuscation.

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World Cup 2014 opening match in Mangueira Favela in central Rio de Janeiro. (Australfoto/Douglas Engle) © Douglas Engle 2014

When Argentina wins the World Cup this Sunday, let’s remember those players who have used futbol to stand for something bigger than shoes, t-shirts, and cars. Let’s remember Socrates (Brazil, Corinthians), Caszely (Chile), Predrag Pasic (former Yugoslavia), Mekhloufi (Algeria), and Didier Drogba (Ivory Coast). In the words of Pablo Gentili, an Argentine academic and education reformer who has spent the last 20 years in Rio de Janeiro:

Understanding football is a way of understanding popular culture. There is an oppressive football that aims to colonize the hearts and minds of the poorest people, and sometimes it succeeds. But there is also a liberating football that, like emancipating dynamite, shudders the popular soul, filling it with affirmation and pride.

Lets hope Brazil can recover from this event, and that the 2014 World Cup wasn’t just an excuse for white elephants and the tearing away of social fabric. If Argentina doesn’t win, let’s just forget this World Cup ever happened. If Argentina does win, let’s hope that Messi and company have the class to party with Brazil and the rest of Latin America in this historical triumph.

Diego Ponce de Leon is a Ph.D. student in the Energy and Resources group who is working on smart urban energy infrastructure in Nicaragua. He is also a National Geographic Energy Challenge Grant Fellow, you can follow him on Instagram. Site: dleonb.com

Douglas Engle is a freelance still and video photographer based in Rio de Janeiro.

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