The extraordinary expansion in global mining activity over the last two decades, and its increasing concentration in emerging markets, has reignited the debate over the impact of mining on local economic activity. This column analyses how the presence of nearby mines influences firms in eight countries with large manufacturing and mining sectors. Mines are found to out-compete local manufacturing firms for inputs, labour, and infrastructure. However, mining activity is found to improve the business environment on a wider geographic scale.
Ralph De Haas, Steven Poelhekke, 22 September 2016
Chad Bown, Patricia Tovar, 17 September 2016
Argentina and Brazil began to open their markets to the world significantly – but only partially – in the 1990s. Yet these countries’ efforts to liberalise beyond their Latin American trading partners have stalled since 1995. This column re-examines the 1990s MERCOSUR experience and raises questions over just how much trade policy cooperation these two countries have undertaken. This lack of coordination also has implications for the ‘building blocks’ versus ‘stumbling blocks’ debate in trade policy.
Liesel Filgueiras, 13 June 2016
Mining companies have high economic growth. In this video, Liesel Filgueiras discusses the responsibility of mining companies for the development of local municipalities. Most of the revenues go directly to federal governments, leaving little benefits to the industry for local communities. Cross-sector and local government partnerships need to de developed to ensure the investment of the revenues to build public policies. This video was recorded during the International Growth Centre’s annual conference held in London in June 2016.
Alessandro Maffioli, Carlo Pietrobelli, Rodolfo Stucchi, 14 June 2016
Cluster development programmes (CDPs) aim to support industrial clusters of agglomerated firms to achieve higher productivity and sustainable development. Such programmes have been prominent in Latin America over the past decade, but there have been few impact evaluations. This column presents the findings from an evaluation of Latin American CDPs. Various case studies show positive medium-term effects of the programmes on employment, exports, and wages. CDPs are also found to have positive spillover effects on untreated firms, and to improve the network connectivity and technology-transfer ties between firms.
Martin Koppensteiner, Marco Manacorda, 18 April 2016
Stress and violence during the nine months in utero has been widely shown to have important effects on child development. To date this research has largely focused on extreme and relatively rare events. This column uses data from Brazil to explore how exposure to day-to-day violence can affect birth weight. The birth weight of newborns whose mothers are exposed to a homicide during their first trimester is significantly lower. This effect is smaller for mothers who live in more violent neighbourhoods, consistent with the interpretation that violence is more stressful when it is rare.
Laura Alfaro, Anusha Chari, Fabio Kanczuk, 22 January 2015
Capital controls are back in fashion. This column discusses new firm-level evidence from Brazil showing that capital controls segment international financial markets, reduce external financing, and lower firm-level investment. They disproportionately affect small, non-exporting firms, especially those more dependent on external finance. This suggests that macro-finance models focusing on aggregate variables are missing an important dimension by abstracting from firm-level heterogeneity.
Otaviano Canuto, Cornelius Fleischhaker, Philip Schellekens, 11 January 2015
While Brazil has become one of the largest economies in the world, it remains among the most closed economies as measured by the share of exports and imports in GDP. This column argues that this cannot be explained simply by the size of Brazil’s economy. Rather it is due to a reliance on domestic value chain integration as opposed to participation in global production networks. Greater trade openness could produce efficiency gains and help Brazil address its productivity and competitiveness challenges.
Patricia Ellen, Jaana Remes, 12 July 2014
Brazil has grown rapidly and reduced poverty over the past decade, but it has grown more slowly than other emerging economies and its income per capita remains relatively low by global standards. This column points out that sectors of the Brazilian economy that have been opened up to international competition have outperformed those that remain heavily protected. Deeper integration into global markets and value chains could provide competitive pressures that would improve Brazil’s productivity and living standards.
André Carlos Martínez, Aldo Musacchio, Martina Viarengo, 09 July 2014
Institutions are known to play a powerful and enduring role in countries’ divergent levels of economic development. This column presents evidence that institutions matter for within-country inequality, too. In Brazil, changes in export prices and export tax revenues led to an increase in education spending in states that experienced commodity booms, which increased the number of schools and improved educational outcomes such as literacy rates. However, the effect was limited in states where slavery was predominant in colonial times.
Paolo Giordani, Michele Ruta, Hans Weisfeld, Ling Zhu, 23 June 2014
Capital controls may help countries limit large and volatile capital inflows, but they may also have spillover effects on other countries. This column discusses recent research showing that inflow restrictions have significant spillover effects as they deflect capital flows to countries with similar economic characteristics.
Nauro Campos, 13 June 2014
The 2014 FIFA World Cup is upon us. This column argues that there will be plenty of partying, but also plenty of protests fuelled by the gross mismanagement and limited economic benefits from hosting the Cup. Stadia may be ready, but much planned infrastructure has already been abandoned. Indeed, rent-seeking may be one reason nations bid for the Cup. Since the returns to transportation infrastructure are higher in poor countries, the international community should work to stamp out corruption so that poor countries can continue to host mega-events like the World Cup.
Kristin Forbes, Michael Klein, 24 December 2013
Government interventions to control capital flows and reduce exchange-rate volatility have long been controversial. The Global Financial Crisis has made the debate more urgent. This column discusses recent research that evaluates such policies against the counterfactual of no intervention. Depreciations and reserve sales can boost GDP growth during crises, but may also substantially increase inflation. Large increases in interest rates and new capital controls are associated with reductions in GDP growth, with no significant effect on inflation. When faced with sudden shifts in capital flows, policymakers must ‘pick their poison’.
Márcio Garcia, 25 September 2013
The recent reversal of capital flows to emerging markets raises the question of whether and how to intervene in currency markets. Brazil’s central bank has intervened heavily, spending more than $50 billion and promising to double that by the end of the year. However, almost all of that intervention has taken place in onshore derivative markets that settle in real. This column argues that such interventions can be effective, but that central banks must stand ready to use their foreign-exchange reserves if necessary.
Anders Åslund, 04 September 2013
Emerging markets are under pressure. This column argues that this is not a mere headwind but that the BRICs’ party is over. Their ability to get going again rests on their ability to carry through reforms in grim times for which they lacked the courage in a boom.
Nauro Campos, 23 July 2013
After decades of macroeconomic stability, structural reforms and declining inequality, mass political protests unexpectedly erupted in Brazil. This column reports new empirical evidence on protests in Brazil over the long-run to shed some light on recent events. It argues that they were driven by three main factors: corruption in public services delivery, political ineptitude in the run-off to major international events, and the political-economy effects of the electoral cycle.
Márcio Garcia, 01 March 2013
Did inward capital controls work for Brazil? This column assesses the evidence, concluding that capital controls are desirable if they help avoid excessive debt and asset price bubbles, a risk given the appetite of foreign investors towards Brazilian assets. That said, policymakers needs to complement capital controls with foreign savings in order to enable an investment rate compatible with sustaining GDP growth.
Michael Klein, 17 January 2013
Capital controls are back in vogue. This column argues that we should distinguish between episodic controls (gates) and long-standing controls (walls). Research shows that the apparent success of 'walls' in China and India tells us little about the consequences of capital controls imposed or removed in countries like Brazil and South Korea, as circumstances change. Walls and gates are fundamentally distinct, and policy debate needs to take into account these differences.
Christian Daude, 10 December 2012
Latin American central banks are facing new challenges in the form of unprecedented levels of uncertainty and exchange rate appreciation pressures. This column, focusing on Brazil, Chile, Colombia, Peru and Mexico, argues that there is an overestimation of the potential output in several Latin American economies, a lack of an explicit policy direction from central banks, and lacklustre frameworks for macroprudential policy. Although inflation targeting has served countries in Latin America well, significant risks remain.
Yothin Jinjarak, Ilan Noy, Huanhuan Zheng, 22 November 2012
Capital controls are experiencing a renaissance, due in part to the current financial crisis. But do they really have an effect? This column assesses the Brazilian experience, arguing that policies may be more politically or electorally convenient than effective in any economic sense. It seems policymakers understand capital controls’ relative economic impotence, but nevertheless feel forced to resort to adopting them.
John Williamson, Olivier Jeanne, Arvind Subramanian, 11 June 2012
Do we need international rules for capital controls? This column looks at the different regimes in countries such as Brazil and China and argues that we do.