In a videoconference between the Virtual Institute (Vi) and its Brazilian core member, the University of Campinas (UNICAMP), on 12 November, UNCTAD's Alfredo Calcagno presented the findings of the Trade and Development Report (TDR) 2009 to an interested audience of professors and students.
Calcagno, Senior Economic Affairs Officer at UNCTAD's Division of Globalization and Development Strategies, elaborated on the channels through which the crisis has spread from developed to developing economies, the short-term policy responses taken by governments, and the demand for fundamental reforms at the national and international levels. He also stressed the need for effective climate change mitigation, and emphasized the development and growth opportunities for emerging countries related to greening the economy.
The videoconference, moderated by Vi's Piergiuseppe Fortunato, Vi member coordinator Antonio Carlos Macedo e Silva, and UNICAMP professor Ricardo Carneiro, created vast interest and raised a number of questions related to the implications of the current financial and economic crisis for Latin Americas largest economy Brazil.
During his presentation Calcagno emphasized that income distribution inequalities, false incentives and a lack of regulation have been the main causes of the crisis that now affects developed and developing countries alike.
The commercial channel has been crucial in its transmission, as the volume and value of global trade have decreased substantially during the last month, he said. Moreover, banks have tightened the conditions for trade financing to exporters from developing countries, affecting those who are not accountable for the crisis.
Calcagno acknowledged that the policy responses of the major Latin American economies (Brazil, Argentina, and Chile) have been much more flexible than in former crises. He emphasized that governments should strengthen the regulation of national and international financial activities. To that effect, fundamental reforms of the global financial system regarding exchange rate management, capital account management, and special drawing rights with the International Monetary Fund (IMF), are demanded.
With respect to climate change mitigation, Calcagno said that the current economic slowdown and the call for counter-cyclical fiscal policies offer a chance for a structural reform of production and consumption modes with a view to greening the economy and taking advantage of new development opportunities. Governments should support these activities by facilitating investments in this area and creating a regulatory framework that foster these efforts.
The presentation led to a number of questions that focused on the implications of the current crisis for Brazil's emerging economy.
Calcagno stated that emphasis should be placed on revitalizing the internal market, strengthening domestic demand through fiscal rather than monetary policy measures, and reducing inequalities in income distribution. In order to stabilize the international financial system a truly international currency would be desirable but this first best solution is politically difficult to achieve.
Calcagno also proposed to strengthen regional agreements that aim at stabilizing currencies and preventing speculative activities that challenge the exchange rate stability. However, the actual outcomes of an international financial reform will largely depend upon whether the governments of developed countries will be able to put their words into action, considering the adverse opinions of some developed country societies.
Further questions from the Brazilian audience related to the transmission of the crisis which, in the case of Brazil, has passed directly through the financial channel. Calcagno acknowledged that, although the commercial channel has been the most contagious in most developing countries, a strict separation of economic channels would be artificial.
With respect to the growing bilateral trade between Brazil and China, he said that the Chinese internal market still offers growth perspectives, through both private and public consumption (including, among the latter, expenditure in social services). The Chinese economy is also benefitting from the policy responses taken by the government in order to tackle the crisis.
The videoconference ended with Calcagno and Fortunato thanking UNICAMP for their interest and the Brazilian audience thanking the Virtual Institute and the presenter for conducting the conference and expressing their interest in further discussions on the topic.
For more information:
♦ Presentation by Alfredo Calcagno (in Spanish and Portuguese)