Thursday , October 29 2020
Home / Monica de Bolle
Monica de Bolle

Monica de Bolle

Senior Fellow | Peterson Institute for International Economics, Professor SAIS | JHU. Posts in English, Portuguese, and Portuñol.

Articles by Monica de Bolle

Argentina: Back to the Brink

May 9, 2018

In a largely unexpected move, Argentina has abruptly called on the International Monetary Fund (IMF) for financial help to shore up its reserves and stave off currency pressures. The action by the government of President Mauricio Macri is hard to square with the fact that a little over a year ago, the country was the darling of the financial markets, having pulled off the sale of a 100-year bond, the so-called “century bond,” taking advantage of the low interest rate environment and investors’ appetite for emerging-market assets. In hindsight, the then much criticized move by the Macri government now looks like a stroke of genius.
How did long-troubled Argentina go from its relatively secure status to a country yet again on the brink of a financial meltdown in such a short period of time?

Read More »

Should the United States Sanction Venezuelan Oil?

February 12, 2018

Peterson Institute For International Economics
The Peterson Institute for International Economics is a private nonpartisan nonprofit institution for rigorous, intellectually open, and indepth study and discussion of international economic policy.

Headquarters
1750 Massachusetts Avenue, NWWashington, DC 20036

Read More »

How Maduro’s Venezuela Playbook Borrows from Mugabe in Zimbabwe

December 1, 2017

Almost since the day he came into power following Hugo Chávez’s death in 2013, President Nicolas Maduro of Venezuela has confronted predictions of his imminent downfall. Despite his gross economic mismanagement, squandering of oil revenues, threats of a debt default[1] and rising poverty, he has held on. In fact he has recently worked to consolidate power by calling for a new Constitution while persecuting political opponents.
The story of an authoritarian leader actually leveraging the disastrous consequences of his policies to stay in power is not new. Maduro’s playbook resembles that of another dictator—Robert Mugabe, ousted earlier this month as president of Zimbabwe after 37 years in power. Mugabe’s fate was a long time in coming, indicating perhaps that Maduro may not last forever.

Read More »

Stumbling Blocks for Brazil’s Economic Recovery as Election Looms

October 6, 2017

Against all odds, the Brazilian economy is gradually recovering. Despite the country’s hapless regime, the enormous corruption scandal, and the substantial fiscal challenges ahead, Brazil has emerged from its worst-ever economic recession, responsible for a GDP per capita drop of more than 10 percent. Authorities and markets have been celebrating these recent trends, as they expect greater economic traction into 2018 will help elect a reformist president next October. The recent recovery and the auspicious tale for next year’s presidential elections should, however, be viewed with caution.
Following two consecutive quarters of positive growth, Brazil has technically exited recession. While such news is welcome, the uptick in GDP was largely driven by factors that are not

Read More »

Lesson Learned (Again) from Macroeconomic Populism in Venezuela

April 5, 2017

The Venezuelan debacle presents too many lessons to distill, and the consequences of the sovereign default that will inevitably follow the regime’s complete implosion are uncertain. Nonetheless, what Venezuela’s plight does not leave in doubt is that macroeconomic populism—a set of unsustainable policies to boost growth, employment, and promote income redistribution—sows the seed of its ultimate demise, both economically and politically. May that lesson be heeded across the globe.
After nearly two decades of “Chavismo”—the populist policies followed by Hugo Chávez, who came to power in 1999 and died in 2013 leaving Venezuela to his successor, Nicolas Maduro—Venezuela is crumbling under the weight of its own macroeconomic imprudence. Chavismo rode the oil boom of the 2000s, building up ever

Read More »

A Nod to NAFTA

March 31, 2017

After months of charged rhetoric on the North American Free Trade Agreement (NAFTA), a draft letter to Congress from the Trump administration appears to signal a willingness for constructive engagement in renegotiating the agreement. Recognition of NAFTA’s importance for the US economy, and for North America more broadly, suggests that the Trump team has moved away from campaign talk and is seeking to improve the 23-year old arrangement rather than scrap it.
That said, there are some areas for concern on broad principles, and Sean Spicer, the White House press secretary, has said the document does not necessarily reflect the administration’s final position on the matter. The letter underscores the importance of Mexico and Canada for the US economy and for the broader region, emphasizing

Read More »

Trump's NAFTA Approach Could Worsen US-Mexico Trade Deficit

March 10, 2017

In a recent Bloomberg interview, Secretary of Commerce Wilbur Ross stated clearly the Trump administration’s concerns over the US trade deficit with Mexico, underscoring that the key objective of renegotiating the North American Free Trade Agreement (NAFTA) will be to reduce or even eliminate the bilateral deficit. Leaving aside the fallacy of focusing solely on the trade deficit as the basis for a trade negotiation, there may be other problems in the US stance towards Mexico. Notably, if NAFTA ultimately unravels because Mexico and the United States are unable to find common ground, the peso will likely devalue substantially. A permanently weaker peso relative to the dollar would eventually widen the bilateral current account deficit even further, contrary to what the US administration

Read More »

Brazilian Misery: A Cautionary Tale for the US?

February 21, 2017

Former President Luiz Inácio Lula da Silva of Brazil has been rising steadily in the polls for Brazil’s 2018 presidential elections, despite facing several corruption charges. Why? Because some Brazilians perceive increasingly that he can make Brazil great again. After all, it was under his stewardship that Brazil experienced the rise of the middle class, falling inequality, substantial job creation, and the shrinkage of the informal economy between 2003 and 2010. Of course, Lula’s record of success was helped by external factors, such as rising commodity prices, and a significant inflow of foreign investments—trends that have more recently reversed. Many Brazilian economists fear that a new Lula government in 2018 will aggravate Brazil’s economic problems rather than turn them around. In

Read More »

The Truth about Mexico

February 7, 2017

As depicted by the Trump administration, the Mexican economy has flourished under the North American Free Trade Agreement (NAFTA) at the expense of its neighbors, particularly the United States. The trade deficit between the United States and Mexico is often cited by President Donald Trump and his economic advisers as the reason why “jobs have been destroyed” and “factories have been stolen.” Economists generally argue that trade deficits alone do not spur or impede a country’s economic growth—and they do not support the notion that Mexico has benefitted while the United States has languished.
But leaving that point aside, a larger issue looms: Relative to its neighbors, Mexican economic performance over the past 25 years is anything but spectacular. The idea that the country has surged at

Read More »

Trumped Up? The Mexican Economy in 2017 and Beyond

February 2, 2017

A little more than a year ago, the economic outlook for Mexico was looking up. In October 2015, economists at the International Monetary Fund (IMF) projected growth as likely to improve in 2017, following three years of subpar performance. The Fund’s World Economic Outlook flagship report estimated that average growth of 2 percent in 2013–15 would surge to 3 percent by the end of 2016. The IMF estimated that from 2017 to 2020 Mexican GDP would increase at an average pace of 3.2 percent per year while inflation would remain anchored around the central bank’s target of 3 percent.  
Today the optimism over Mexico’s economy has evaporated and given way to uncertainty aggravated by tensions with the United States over trade, immigration, and the Trump administration’s confrontational approach.

Read More »

Is the Brazilian Central Bank Coming to Grips with the Country’s Balance Sheet Recession?

January 13, 2017
Is the Brazilian Central Bank Coming to Grips with the Country’s Balance Sheet Recession?

After months of waiting for the Brazilian Central Bank to move more aggressively on interest rates as the country’s historic recession continued unabated, the monetary authority has finally cut the reference rate (Selic) by 75 basis points and signaled that it is ready to move at this pace over the next few months. Although the monetary policy committee has yet to state its views on the economy and on the drivers for the latest decision, a substantial drop in inflation at the end of 2016 and the possibility that Brazil is mired in a balance sheet recession may have weighed on the verdict to cut more aggressively. While a more intense easing cycle should certainly be helpful, balance sheet recessions are complex and require a lengthy process of deleveraging that hampers a rapid recovery in

Read More »

The Trump Drag on Mexico’s Currency, Politics

January 11, 2017

Peterson Institute For International Economics
The Peterson Institute for International Economics is a private nonpartisan nonprofit institution for rigorous, intellectually open, and indepth study and discussion of international economic policy.

Headquarters
1750 Massachusetts Avenue, NWWashington, DC 20036

Read More »

Why Remittance Taxes to Finance a Border Wall are a Bad Idea … for the US

January 10, 2017
Why Remittance Taxes to Finance a Border Wall are a Bad Idea … for the US

President-elect Donald Trump has adjusted his campaign pledge to make Mexico pay for building a border wall and now plans to ask Congress for funds to build the wall first—and then get Mexico to reimburse the cost. Mr. Trump claims that he can force Mexico to reimburse the United States by “blocking transfers and remittances.” There has been little detail about how this might be achieved, but attempting such a gambit would almost certainly backfire on the United States as well as Mexico.
One possibility for Trump is that the United States would tax remittances from Mexican workers directly. But such a plan, even if it were feasible, could ultimately hurt the US economy in a number of ways, including through a direct impact on US exports to Mexico.
Remittances typically take the form of

Read More »

NAFTA and Trump: Precursors to a Mexican Populist Wave?

January 5, 2017
NAFTA and Trump: Precursors to a Mexican Populist Wave?

President-elect Donald Trump’s crusade against the North American Free Trade Agreement, or NAFTA, is producing a backlash in Mexico, lifting prospects for the opposition in the 2018 presidential elections. Andrés Manuel López Obrador (or AMLO, as he’s popularly known), a leftist firebrand who formed his own party, MORENA, in 2010, now appears to have a decent shot at the presidency next year. Rising nationalism and disenchantment with NAFTA may also be helping AMLO, although he has not openly come out against NAFTA. Nevertheless, in view of Trump’s stance on trade agreements and rising discontent in Mexico, prospects for NAFTA being renegotiated are doubtful at best.
"2017 will be the year when people unite to peacefully beat the mafia in power and promote a rebirth," tweeted AMLO on

Read More »

More Lessons from Brazil’s Boom-Bust: The “Populist Paradigm” Revisited

December 14, 2016

The current discussion over the rise of “economic populism” in advanced economies could benefit from a look at a Latin American classic, The Macroeconomics of Populism in Latin America, edited by Rudiger Dornbusch and Sebastian Edwards. Published in 1991, the book still offers many compelling insights into the workings of so-called “populist” macroeconomic policies. An analysis of Brazil’s recent experience, and the origins of its current deep economic crisis, provides useful lessons on what could be dubbed a modernized version of Dornbusch and Edwards’ “populist paradigm.”
As laid out by the authors 25 years ago, the “populist paradigm” can be summarized by a series of features and characteristic phases. Below is a modified, modernized version of the original paradigm, based on the

Read More »

Carried Away? The Art of the Deal, Brazil-Style

December 5, 2016

Over the past week, President-elect Donald Trump grabbed headlines with a deal he struck with Carrier to induce the company to keep about half of the 2,000 jobs it had announced were moving to Mexico. In exchange, the company received some $7 million in tax breaks from the federal government. The president-elect’s particular style of industrial policy might seem novel to Americans, but it was tried just recently in Latin America’s largest economy. Former president Dilma Rousseff, impeached earlier this year, is no Donald Trump—and Brazil is certainly no United States. However, during her first term in office, the government’s attempts at salvaging manufacturing jobs looked much like the recent pact with Carrier.
In 2012, Brazil’s growth was faltering. Manufacturing as a share of GDP, which

Read More »

Gordian Knot: Why Brazil’s Recession Could Last Until 2018

November 30, 2016

Bankrupt states, fiscal crises at all levels of government, rampant corruption scandals, a reform effort that has no immediate effect on Brazil’s fiscal woes, and a resurgence of political turmoil. Six months into the Michel Temer administration, Brazil’s Gordian Knot seems to only get worse, as argued in previous posts. While markets rallied and euphoria soared some months ago, there were clear signs that the political crisis would rear its head once again and that the economy was far from staging the expected recovery. This prognosis has now come to pass, with a remarkable twist: Rather than providing support, Brazil’s central bank is actually making a bad situation worse.
Brazilian states are gripped by a mounting fiscal crisis that looks unsolvable in the short term. A toxic

Read More »

Lesson from Brazil’s Populist Bust

November 11, 2016

Now that the American presidential election has produced a result that seemed impossible to many experts, driven by a campaign termed “populist” by the media, what is the likely economic fallout for the rest of the world?
A puzzling aspect of the US election aftermath is that stock markets have cheered the victory of Donald J. Trump, sending the Dow Jones industrial average to a new record high, despite earlier predictions (and claims that his economic program might produce a recession).
The world has seen “populist” candidates and policies in many countries produce roller coaster results over many years. The Brazilian political experience of the last decade, which despite very different circumstances echoes much of Trump’s brand of populism to date, is a case in point. So it is worth

Read More »