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The Economies of Argentina and Brazil

The Economies of Argentina and Brazil

A Comparative Perspective

Edited by Werner Baer and David Fleischer

This book compares the successes and failures of the development and growth processes of Argentina and Brazil. It provides important insights into the different performances of these economies through a series of comparative essays written by Argentinian and Brazilian economists.

Chapter 21: Comments on Part VII

Daniel G. Arce M.

Subjects: development studies, development economics, economics and finance, development economics


Daniel G. Arce M. The chapters by Heymann et al. and Fonseca are not what pass as traditional macroeconomics these days.1 This means that they are data-driven policy-based and focused on economic aggregates, rather than on presenting precise results from complex models that are sensitive to potato chip elasticities and the like. In other words, the chapters are a pleasure to read and I learned something about the real world! Moreover, their judicious coverage of the ‘lost decade’ in Argentina and Brazil was well worth reading even though the facts are now well known. As such, my focus will be on what these chapters have to say about the Argentine and Brazilian economies of the Noughties (2000–09) and the lessons they provide for US policy during the aftermath of the financial crisis. Both chapters are quick to point out that the improvement in each country’s primary surplus (central government budget excluding debt payments) may not be what it seems. Fonseca documents the perpetual lack of fiscal correction in Brazil. Furthermore, aggressive tax increases to finance debt payments represent a transfer of income to domestic and international debt holders. In Argentina there has been an increase in domestic tax revenues as well. Again, the tax revenue increase has been accompanied by an increase in government expenditure. On the plus side, Argentina has had (until recently) an increasing trade surplus owing to favorable world prices. I would like to know to what extent international trade is in Argentina a function of...

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