Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
BoliviaBolivia
Economic Growth in Latin America: Economic Growth in Latin America: What Have we Learned?What Have we Learned?IMF, November 17, 2006IMF, November 17, 2006
Sara CalvoSara CalvoThe World BankThe World Bank
Fractured growth Fractured growth (real GDP growth, %)(real GDP growth, %)
-6%
-4%
-2%
0%
2%
4%
6%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
GD
P G
row
th
Source: Hausmann, Rodrik and Velasco (2005)
Applying the Growth Diagnostics ApproachApplying the Growth Diagnostics Approach
+ limited availability of finance
????
??
Micro risksMicro risks: Poor enforcement of property : Poor enforcement of property rights and other institutional weaknessesrights and other institutional weaknesses
Macro risksMacro risks: Highly dependent on : Highly dependent on external factorsexternal factors
The early and midThe early and mid--1990s1990s•• Terms of trade of the 1990s 30 % lower than the 1980sTerms of trade of the 1990s 30 % lower than the 1980s’’•• High international liquidityHigh international liquidity•• Booms in trading partnersBooms in trading partners•• The late 1990sThe late 1990s•• Regional financial turmoil. Regional financial turmoil. •• Devaluations in Argentina, Brazil and ChileDevaluations in Argentina, Brazil and Chile•• Slowdown in trading partners. Slowdown in trading partners. •• El NiEl Niññoo——FloodsFloods•• Coca eradicationCoca eradication
The midThe mid-- and lateand late--1990s: Lower terms of trade but 1990s: Lower terms of trade but
relatively stablerelatively stable
Bolivia's Terms of trade (goods and services)
2000 = 100
80
90
100
110
120
130
140
150
160
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Source: WB LAC database
Sustained hectic K flowsSustained hectic K flows% of GDP% of GDP
-10%
-5%
0%
5%
10%
15%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
II-s
em
% d
el P
IB
Non-FDI private capital flows Errors and omissionsForeign Direct Investment Official capital flows
-10%
-5%
0%
5%
10%
15%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
II-s
em
% d
el P
IB
Non-FDI private capital flows Errors and omissionsForeign Direct Investment Official capital flows
FDI
Official K flows
Non-FDI Private K flows*
Errors & Omissions
*Includes portfolio inv.; remittances; other private K flows. Source: Central Bank of Bolivia.
Bolivia: A vulnerable economy with deep property Bolivia: A vulnerable economy with deep property rights and other institutional weaknesses*rights and other institutional weaknesses*
Where have the reforms gone?Where have the reforms gone?Significant improvement in social indicatorsSignificant improvement in social indicatorsOne of the most open economy in the regionOne of the most open economy in the regionOne of the most resilient financial sector in the One of the most resilient financial sector in the regionregionInflation: one digit in last 10 yearsInflation: one digit in last 10 years
*Bolivia*Bolivia--Country Economic Memorandum (2005). The World BankCountry Economic Memorandum (2005). The World Bank
Improvement in social indicators, Improvement in social indicators, but who benefits the most?*but who benefits the most?*
The richest in tertiary educationThe richest in tertiary educationThe richest in urban areas in electricityThe richest in urban areas in electricityThose in urban areas in water in sanitation Those in urban areas in water in sanitation
=>Unsatisfied social demands=>Unsatisfied social demands
*Bolivia*Bolivia----Public Expenditure Review (2004). The InterPublic Expenditure Review (2004). The Inter--American Development Bank and American Development Bank and The World Bank.The World Bank.
One of the most open economy in One of the most open economy in the region,the region,……
Export and imports
(% GDP)
0
10
20
30
40
50
60
70
80
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Bolivia
Argentina
Brazil
Chile
Colombia
Peru
Uruguay
Venezuela
Source: WB regional database (LAC)
Export + Imports, % of GDP
..but with a trade structure that ..but with a trade structure that makes the economy vulnerablemakes the economy vulnerable
Of total exportsOf total exports65 % are regional 65 % are regional exportsexports66% are extractive 66% are extractive industryindustry
Brazil: the largest trading Brazil: the largest trading partner:partner:
Vulnerable Vulnerable to systemic shocksto systemic shocksto nonto non--tariff barriers tariff barriers from border economiesfrom border economies
Structure of exports by destiny (2004, %)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Bolivia
Argenti
naBraz
ilChil
eEcu
ador
Peru
Urugua
yVen
ezuela
Colombia
Rest of countries
Other industrial
countries
China
EU
MERCOSUR
CAN
USA
Source: IMF
One of the most resilient financial One of the most resilient financial sector in the region, sector in the region, ……
SISTEMA BANCARIO: EVOLUCION DE LOS DEPOSITOS DEL PUBLICO (MILLONES $US)
350
380
410
440
470
500
530
560
ene
feb
mar ab
r
may ju
n jul
ago
sep
oct
Año
198
9
1,600
1,900
2,200
2,500
2,800
3,100
1989 1993 1997 2002
Bank deposits and elections
……but limited credit availabilitybut limited credit availability
0
500
1000
1500
2000
2500
3000
3500
1996
1997
1998
1999
2000
2001
2002
2003
2004
US
$ M
illio
n
0
100
200
300
400
500
600
700
800
900
1000
US
$ M
illio
n
External financing to banking sectorLoans to tradable sectors Loans to non-tradable sectors
Non-tradable loans
External loans
Tradable loans
70 % of total bank loan 70 % of total bank loan portfolio goes to 2 % of portfolio goes to 2 % of borrowers borrowers (i.e., client (i.e., client concentration).concentration).Credit to the nonCredit to the non--tradable sector associated tradable sector associated with external loans.with external loans.Banks reluctant to lend. Banks reluctant to lend. Troubled firms (the late Troubled firms (the late 1990s). 1990s).
Inflation came down, but credibility Inflation came down, but credibility problems remainedproblems remained
Annual bank runs. Closing of 12 banksAnnual bank runs. Closing of 12 banksBank Bank troublestroubles
5.65.61.81.84.54.5
Overall Overall Budget Budget DeficitDeficit(after (after grants), grants), % of % of GDPGDP
19971997--040419941994--9696
privatizationprivatization19901990--9494
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
Jan-
90Ja
n-92
Jan-
94Ja
n-96
Jan-
98Ja
n-00
Jan-
02Ja
n-04
Jan-
06
% -
Dol
lariz
atio
n
-5%
0%
5%
10%
15%
20%
25%
30%
Infla
tion
Dollarization InflationNote: Dollarization: (M3'-M3)/M3'
Dollarization
Inflation
Limited impact of reforms at micro and Limited impact of reforms at micro and institutional levels. institutional levels.
Bolivia ranks poorly (the worst among LAC Bolivia ranks poorly (the worst among LAC countries) in all categories countries) in all categories
Poor enforcement of contracts and property rightsPoor enforcement of contracts and property rightsPoor institutions. CorruptionPoor institutions. CorruptionPoor justicePoor justiceCostly entry and exit of firmsCostly entry and exit of firmsStringent labor lawsStringent labor laws
But the economy grew faster and steadily But the economy grew faster and steadily in the midin the mid--90s!90s!
Yes, the service sectors and Mercosur Yes, the service sectors and Mercosur exports (i.e., gas)exports (i.e., gas)
Growth, %
Participation, % 90-96 97-98 99-03
TOTAL 100.0 4.2 5.0 1.9 Banking and services 11.5 5.4 12.6 2.0 Transport and comm. 11.0 5.7 8.1 2.5 Construction 3.1 6.0 20.4 -6.8 Commerce 7.9 4.4 3.3 1.8 Public administration 11.5 1.9 4.2 3.0 Other 2/ 19.2 3.4 2.5 1.6 Hydrocarbons 2.6 3.0 13.5 5.5 Mining 3.9 4.2 -0.1 -1.6 Manufacture 15.2 4.8 2.3 2.3 Agriculture 14.1 4.2 0.1 3.1
=> Fractured growth=> Fractured growth
The private sector virtually never took The private sector virtually never took off other than in the privatized sectors off other than in the privatized sectors (e.g., hydrocarbons sector)(e.g., hydrocarbons sector)
?
Source: Hausmann, Rodrik and Velasco (2005
Bolivia: Growth Diagnostics Bolivia: Growth Diagnostics
+ limited availability of finance
Bolivia Bolivia
BoliviaBolivia’’s growth remains highly dependent on external s growth remains highly dependent on external factorsfactorsWe cannot reject the hypothesis that BoliviaWe cannot reject the hypothesis that Bolivia’’s binding s binding constraints are constraints are
macroeconomic risks and poor property rights fueled by macroeconomic risks and poor property rights fueled by social instability (in turn fueled by cultural traits)social instability (in turn fueled by cultural traits)Availability of credit associate with external loans, in Availability of credit associate with external loans, in particular for the nonparticular for the non--tradable sector. High concentration of tradable sector. High concentration of bank clients. Today disincentives to FDI.bank clients. Today disincentives to FDI.
We could not ascertain whether or not market failures We could not ascertain whether or not market failures are constraining growthare constraining growth
Using the Growth Diagnostic Using the Growth Diagnostic Approach Approach
BenefitsBenefitsUseful organizing approach for macroUseful organizing approach for macro--micro integrated micro integrated analysis of growth obstaclesanalysis of growth obstaclesA vehicle to give more economic content to the findings of A vehicle to give more economic content to the findings of firm surveys (i.e., Investment Climate Assessments)firm surveys (i.e., Investment Climate Assessments)Helps narrowing down the list of potential obstacles to growthHelps narrowing down the list of potential obstacles to growthUseful for policy dialogue. Appealing to policy makersUseful for policy dialogue. Appealing to policy makers
RisksRisksUsing the wrong rates of returns. Using the wrong rates of returns. Easy to pick obstacles to growth close to the analystEasy to pick obstacles to growth close to the analyst’’s s preferences preferences