Transcript Power point presentation

Who benefits from free trade in
Latin America?
Export promotion, poverty and inequality
Enrique
Ganuza
Context
 Structural reforms carried out in the region during
the 90s
 Expectations:
• Growth: The region’s economies would recover and
become more dynamic after the lost decade of the
eighties
• Exports would be the main driver of growth
• Diversification: Comparative advantages would lead to
export diversification (unskilled workers?)
• Poverty would be reduced
Growth?
 … that strategy seemed to be working,
but its success did not last.
GDP GROWTH,
annual average
1950-60
1960-70
1970-80
1980-90
1990-00
1990-97
1997-02
5.1
5.6
5.5
1.1
3.2
3.7
1.2
2001
2002
2003
HALF A DECADE LOST
MEDIA DECADA PERDIDA
0.4
-0.6
1.5
Growth slowed down in the 90s
Two sides of growth in the 1990s
8%
per capita GDP growth 1995-2000
6%
DOM
4%
MEX
GYA
2%
-6%
-4%
GUA
BRA
BOL
HON
0%
HT I
CHI
CRI
NIC
-2%
0%
-2%
2%
P AN
URU
ESV
P ER
COL 4%
JAM VEN
ECU
P RY
-4%
-6%
pe r capita GDP growth 1990-95
ARG
6%
8%
Did exports diversify?
Non-traditional
manufactures
LAC
Natural resource
intensive manufactures
Traditional
manufactures, incl.
maquila
Primary exports
0
10
20
30
Share of total exports (%)
40
5
Is growth driven mainly by
exports?
 YES, exports did turn into a growth engine
•
•
•
•
1985-89: in 9 out of 18 countries
1990-94: in 13 out of 18 countries
1995-00: in 14 out of 18 countries
2000-01: in 16 out of 18 countries
 BUT:
• The growth rate became steadily lower, and the fall of
exports was an important recession factor in 13 out of
18 countries during 2000-01
• Latin American exports achieved lower penetration on
world markets
Poverty
POVERTY
EXTREME
POVERTY
Mill.
%
Mill.
%
1980
136
40.5
62
18.6
1990
200
48.3
93
22.5
1997
204
43.5
89
19.0
2002
221
44.0
99
20.0
2003
225
44.0
100
19.4
INEQUALITY
ALMOST WITHOUT CHANGE AT VERY HIGH
LEVELS
1990-99:
Gini increased
10 countries
Gini without change 5 countries
Gini decreased
3 countries
1999-02:
Gini decreased
1 country
(out of 11)
Are these results due to
the reforms?
 Not necessarily: validation by means of
contrafactic simulation is also needed
 Generated by means of a CGE (Computable
General Equilibrium) model
 10 macrosimulations: raise and lower tariffs,
increase import and export prices, devaluate,
increase external savings, subsidize exports,
increase productivity, FTAA, WTO
UNDP Project
Model the effects of export-driven
growth on poverty and inequality
 16 countries in the region (MEX, HON,
ELS, COS, COL)
 16 CGE models
 16 applications of the microsimulation
method
 Are a stronger export orientation and
trade liberalization beneficial?
What has been the impact of
trade liberalization in Latin
America?
Unilateral
liberalization
FTAA
WTO
↑
↑
↑
↑
↑
↑
↑
↑
↑
↓/0
↓/0
↓/0
GDP
Employment
Labour
inequality
Poverty
Impact on poverty
reduction
 Generally positive, but..
• Mostly small
• Real wages are the main transmission
mechanism
• In some cases increased job and wages
inequality nullifies the poverty reduction
effect.
• Other effects (unemployment, employment
adjustment by line of activity) reduce the
final impact on poverty
A few conclusions
 The reforms have not fulfilled their promises
 However, we should NOT attribute poor performance
as such to trade reforms
 Trade liberalization, FTAA, WTO do produce a
positive impact—albeit a very modest one—on
growth and employment.
 ... However, they also produce greater labour
inequality. As a result their impact in terms of poverty
reduction is extremely limited.
 Macro restrictions are critical to define the magnitude
of these effects. Results can improve in the presence
of sufficient access to external savings.
A few conclusiones
(cont.)
 Growth versus inequality:
• Trade liberalization makes for greater inequality.
This reduces the positive impact on poverty
reduction
 “Productivity, productivity and productivity”
• Invest more in education in order to make better
use of the opportunities of globalization
• Invest in infrastructure and other productivity
enhancing measures.