nep-lam New Economics Papers
on Central and South America
Issue of 2016‒09‒11
six papers chosen by

  1. Where are natural gas prices heading, and which are the environmental consequences for Latin America? By Arturo Leonardo Vásquez Cordano; Abdel M. Zellou
  2. Banking Competition and Firm-Level Financial Constraints in Latin America By Roberto Álvarez; Mauricio Jara
  3. Chile en la Economía Internacional: Trayectoria reciente y desafíos By Ricardo Ffrench-Davis
  4. The Impact of R&D and ICT Investment on Innovation and Productivity in Chilean Firms By Roberto Álvarez
  5. Brazil : self-inflicted pain By Terra, Cristina
  6. Informal Labor and the Efficiency Cost of Social Programs: Evidence from the Brazilian Unemployment Insurance Program By Gerard, Francois; Gonzaga, Gustavo

  1. By: Arturo Leonardo Vásquez Cordano (Chief Economist and Manager of the Bureau of Regulatory Policy and Economic Analysis at Osinergmin, Vice-President of the Commission of Free Competition at the Peruvian Antitrust and Consumer Protection Authority (Indecopi), as well as Professor at GERENS Graduate School of Business in Lima, Peru.); Abdel M. Zellou (currently co-founder and partner at Clear Future Consulting, U.S.A. Was Market Development Director of Gathering and Midstream Gas at T.D. Williamson, U.S.A.)
    Abstract: There was an upward trend in energy commodity prices since 2000, but with the surge in supply coming from unconventional oil and gas resources in North and South America, the trend in natural gas prices has become downward in recent years. However, the exploitation of these resources is generating public concerns due to the possible adverse environmental impacts of using hydraulic fracturing and other techniques on underground water. The purpose of this paper is to address the following questions: are there super cycles in natural gas prices? What are the environmental consequences in Latin America of the exploitation of unconventional gas given the cyclical behavior of gas prices and how can governments implement environmental policies to regulate unconventional gas extraction? Three super cycles in natural gas prices are identified with the last peak occurring in 2006. Our analysis indicates that the instable political situation and institutional weakness, the governmental intervention through asset nationalization and state-owned oil companies, the lack of transparent investment rules, high capital expenditures to develop LNG export projects and the exploration of shale resources, as well as the pre-salt discoveries in Brazil make uncertain that the shale gas boom achieve a large impact in Latin American during the current gas price super cycle.
    JEL: E32 L71 Q41 E37 L51 Q48 Q58
    Date: 2016–05
  2. By: Roberto Álvarez; Mauricio Jara
    Abstract: Prior literature argues that, given the existence of information asymmetries and agency costs, higher competition may increase financial constraints by reducing banks’ incentives to build lending relationships. Using a sample of listed firms for six Latin American countries, we analyze the relation between banking competition and financial constraints. We find evidence in line with prior research that banking competition increases financial constraints. This result is robust and heterogeneous. We include other country-specific variables and check the robustness of our findings; the main results hold. Our results show that the effect of competition differs across firms and industries. Specifically, consistent with the information hypothesis, the negative impact of competition is higher for small quoted firms and for lowassets tangibility industries. Also, as expected, we find evidence that firms are more affected by financial constraints during the last crisis. This negative effect is larger for firms in more competitive banking industries.
    Date: 2016–08
  3. By: Ricardo Ffrench-Davis
    Date: 2016–09
  4. By: Roberto Álvarez
    Abstract: This paper examines the impact of information and communication technology (ICT) and research and development (R&D) investment on innovation and productivity in Chilean firms, in particular those in the services industry. It provides new evidence on this topic for a developing country and also for firms in the services sector, areas in which existing evidence is limited. The findings for services industries are relevant because this sector in Latin America has a large productivity gap when compared to the sector in developed countries. The results show that ICT contributes positively to innovation and productivity in both the total sample and the services industry. They also confirm that ICT investment increases productivity directly and not only through innovation, suggesting that this investment would have additional effects on productivity.
    Date: 2016–09
  5. By: Terra, Cristina (Essec Business School)
    Abstract: The Brazilian economy grew 7.5% in 2010, when Mr. Lula finished his second mandate as president with a popularity rate of 85%. Six years later, his successor, Ms. Rousseff, is suspended from the presidency under an impeachment trial, while the economy endures a recession of 3.8% of the GDP for the second consecutive year. In this article I argue that the current economic crisis is the result of ill-advised economic policies. Ms. Rousseff’s government altered each one of the tripod of policies implemented by Mr. Cardoso in the 1990s, which had been successful in maintaining macroeconomic stability (namely, the inflation targeting regime, the floating exchange rate and the fiscal austerity). Also, Ms. Rousseff’s government greatly expanded the improperly designed industrial policies that were reintroduced in Brazil during the second mandate of Mr. Lula, which created distortions in the economy and a large fiscal burden for the government. The acting president, Mr. Temer faces great difficulties to put the economy back in order, since unpopular measures are required that are very hard to be implemented in the midst of the current political turmoil.
    Keywords: Brazil
    JEL: O11 O23 O54
    Date: 2016–07
  6. By: Gerard, Francois; Gonzaga, Gustavo
    Abstract: It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs -- transfer and social insurance programs -- in developing countries. We evaluate such claims for policies that have been heavily studied in countries with low informality -- increases in unemployment insurance (UI) benefits. We introduce informal work opportunities into a canonical model of optimal UI that specifies the typical tradeoff between workers' need for insurance and the efficiency cost from distorting their incentives to return to a formal job. We then combine the model with evidence drawn from comprehensive administrative data to quantify the efficiency cost of increases in potential UI duration in Brazil. We find evidence of behavioral responses to UI incentives, including informality responses. However, because reemployment rates in the formal sector are low to begin with, most beneficiaries would draw the UI benefits absent behavioral responses, and only a fraction of the cost of (longer) UI benefits is due to perverse incentive effects. As a result, the efficiency cost is relatively low, and in fact lower than comparable estimates for the US. We reinforce this finding by showing that the efficiency cost is also lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are even lower in those labor markets absent behavioral responses. In sum, the results go against the conventional wisdom, and indicate that efficiency concerns may even become more relevant as an economy formalizes.
    Keywords: Informality; Unemployment insurance
    JEL: H00 J65
    Date: 2016–09

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