724.No Financas Est Ranger As Fenix

8/2/2019 724.No Financas Est Ranger As Fenix

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Luiz Carlos Bresser-Pereirawww.bresserpereira.org.br

Presentacin nel lanzamiento oficial delForo :Un Plan Fnix para Amrica del Sur.

Buenos Aires, November 10, 2011.


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Sovereigns just dont need and should notaccept finance in foreign currency

Governments should limit indebtedness oftheir nationals (families and businessenterprises) in foreign currency.

(A foreign currency is a currency that you arenot able to print)


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This was the name that Barry Einchengreengave to indebtedness in foreign currency.

It is a good name.


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a sovereign state may only borrowin its own money

This is a condition of sovereignty; In the moment that a state borrows in foreign

money it is renouncing its independence.


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1. A competitive exchange rate is required forgrowth

2. Current account deficits imply overvaluedcurrency;

3. The foreign constraint does not exist 4. Dutch disease countries are supposed to have

a current account surplus;

5. The infernal growth with foreign savings path.


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In relation to growth, the exchange rate is alight switch: it connects or disconnectscompetent firms from world demand.


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. In a market economy, the decision of

growing with foreign savings, or ofincurring in current account deficit, makes

the national currency more appreciated thanit would be in the case of balanced or zerocurrent account: makes it overappreciated.

Exception: if the country is growing fast and thecurrent account deficit is inferior to the growth ofexports.


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when the exchange rate is in equilibrium.

The foreign constraint thesis and the two gapmodel reflect the fact that in developing

countries the exchange rate is chronicallyovervalued.

The Thirwall Law is perfect, provided that wedont deduce from it the policy of recurring to

foreign savings to overcome the export growthlimitation.


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A country confronts Dutch disease when thethe industrial current account equilibrium ofthe exchange rate is more depreciated than

the current equilibrium. To neutralize the Dutch disease means to

shift from the current to the industrial eq.

This shift implies necessarily a currentaccount surplus.


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A. high rate of substitution of foreign fordomestic savings(increased indebtedness instead of increased investment);

B. foreign financial fragility(and ensuing confidence building policy);

C. currency crisis.


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Luiz Carlos Bresser-PereiraProfessor Emrito da Fundao Getlio Vargas

www.bresserpereira.org.br


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The alternative to neoclassical economics is aKeynesian-structuralist approach astructuralist development macroeconomics.

The alternative to the Washington consensuspolicies and reforms is the newdevelopmentalism a national developmentstrategy.

I confirm all this, but I will limit myself to onetopic.

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724.No Financas Est Ranger As Fenix