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Related blogs to Otaviano Canuto

Colombia: Getting Peace, Getting Growth

Otaviano Canuto | Posted : March 23, 2017

Colombia is a country of incredible contrast: known to be one of the places on earth where people feel happiest, it is also one of the most unequal and for many decades, a country immersed in a protracted conflict. Despite the latter - and here is the starkest contrast - Colombia has recently succeeded in reducing poverty and building the foundations for sustainable growth and prosperity.

The Santos administration has delivered on two of its main promises: sign a peace agreement with the FARC guerrilla and get approved a significant structural tax reform. We approach here why both are expected to become strong pillars to help keep the growth-cum-poverty-reduction momentum of the last decades. 

The Brazilian Debt Hangover

Otaviano Canuto | Posted : January 25, 2017

In previous pieces, we have analyzed the run up to the still-ongoing Brazilian recession as a combination of factors. Given an “anemia” of productivity increases, an appetite for public spending without prioritization led to a condition of fiscal “obesity”. The external factors that provided for a boom in the new millennium, notwithstanding underlying vulnerabilities, have dissipated. The economic policy adopted as a response to the growth decline aggravated those vulnerabilities. On top of those, a disruption of existing large domestic corporate structures followed broad corruption investigations (Canuto, 2016a) (Canuto, 2016b) (Canuto, 2016c)

Mr. Trump: Can You Deliver it?

Otaviano Canuto | Posted : November 15, 2016

U.S. assets reacted in a see-saw fashion to Donald Trump’s victory. Stock futures first dove deeply before climbing up to strong gains as investors developed a view on what kind of economic policy president-elect Trump is likely to pursue. They seem to be pricing in an expectation of higher growth and inflation, as well as an earlier Federal Reserve exit from ultra-low interest rates and from holding U$ 4.45 trillion of Treasury bonds.

The Global Economy Remains Unbalanced

Otaviano Canuto | Posted : November 04, 2016

Discussions around large current account imbalances among systemically relevant economies as a threat to the stability of the global economy faded out in the aftermath of the global financial crisis. More recently, some signs of a possible resurgence of rising imbalances have brought back attention to the issue. We argue here that, while not a threat to global financial stability, the resurgence of these imbalances reveals a sub-par performance of the global economy in terms of foregone product and employment.

A Straitjacket to Help Brazil Fight Fiscal Obesity

Otaviano Canuto | Posted : October 14, 2016

Brazil’s GDP contraction since mid-2014 has multiple non-fiscal roots - Canuto (2016a; 2014) – but it has morphed into an unsustainable fiscal trajectory (Canuto, 2016b). Dealing with the latter has become a precondition for full economic recovery and the Brazilian government has submitted to Congress a constitutional amendment bill mandating a public spending cap for the next 20 years. This piece considers how the Brazilian landscape evolved toward such a precipice and why additional reforms – particularly on pensions - will have to be implemented to make the spending cap feasible.

Brazil Needs an Honest Waste Loss

Otaviano Canuto | Posted : October 04, 2016

Brazil has been suffering from anemic productivity growth. This is a major challenge because in the long run, sustained productivity increases are necessary to underpin inclusive economic growth. Without them, increases in real labor earnings tend to conflict with global competitiveness; collecting taxes in order to fund government expenditures on infrastructure and social policies becomes a heavy burden; returns to private investment becomes harder to achieve; and ultimately citizens will have less access to high-quality goods and services at affordable prices. The focus on urgent fiscal reforms adopted by the new government– public spending cap, social security reform (Canuto, 2016) – must be accompanied by action on the productivity front.

Turkey’s Economy at the Crossroads

Otaviano Canuto and Samuel George | Posted : September 27, 2016

On July 15, Turkey’s tumultuous 2016 took a shocking twist as elements within the country’s military attempted a coup against the government of President Recep Tayyip Erdogan. The putsch rapidly snapped at the seams, and a night that began with soldiers blocking bridges yielded a morning with those same soldiers flogged by civilians in the street.

Tales of Emerging Markets

Otaviano Canuto and Aleksandr V. Gevorkyan | Posted : August 15, 2016

Emerging market economies (EM) as a special class of financial assets have recently been subject to two competing tales. On the one hand, there is evidence of continued financial deepening and further integration within the global financial system, while the offer of higher yields remains hard to find elsewhere. On the other hand, there are frequent bouts of fear of systemic unwinding of positions triggered by investors “exiting” EM that exhibit signs of weak or unclear macroeconomic foundations.

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