Pinera's approval rating now 54%

Chile's Center for the Study of Contemporary Reality (CERC, for it's spanish initials) today released the results of it's new public opinion poll. It shows Piñera's approval rating at a solid 54%. Though not directly comparable, this is one point higher than the Adimark poll released last month.

Not surprisingly, Piñera's approval rating is significantly lower in the areas most affected by last February's earthquake, coming in at 48%.

On an interesting side note, the CERC poll also shows that while Piñera's approval is high, 68% still want Bachelet to be president again. This is the bizarre state of affairs of Chilean politics today. One of the most successful political coalitions in the history of Latin America is voted out of office and replaced by a centrist conservative pledging change...who then proceeds to behave exactly like the coalition he replaced while his predecessor remains as popular as ever.

The impact of large natural disasters on economic growth

In the aftermath of the earthquakes in Haiti and Chile it is natural to wonder what impact these two terrible events will have on these countries' future economic growth. Will the damage permanently lower output and burden future generations with the reconstruction bills? Or will the post-disaster construction boom and opportunity for structural change act as an economic stimulus, ushering in a new period of rapid growth?

Well, the folks over at the Inter-American Development Bank have clearly pondered these two questions more than I have. And their results are not exactly what one would expect.

Using a large comparative sample of severe natural disasters, the authors take advantage of the fact that natural disasters are a random event to tease out their causal effects on growth. In other words, the paper attempts to approximate a laboratory setting by also putting together a "synthetic" counterfactual of what would have happened in disaster countries if the natural disaster had never happened (they do this by grabbing a bunch of similar countries and weighting them to approximate the initial conditions of the disaster countries).

The results can basically be summarized with the graph below. It shows the path of real GDP per capita in actual disaster cases and in the counterfactual cases. Real GDP per capita is set to zero on the year of the crisis.

So what does this tell us? Well, disasters appear to have no effect on per capita income. In fact, the path of real GDP per capita following disasters perfectly mirrors the counterfactual index.

There were, however, two exceptions to the rule:

"Contrary to previous work, we find that natural disasters, even when we focus only on the effects of the largest events, do not have any significant effect on subsequent economic growth. Indeed, the only two cases where we found that truly large natural disasters were followed by an important decline in GDP per capita were cases where the natural disaster was followed, though in one case not immediately, by radical political revolution, which severely affected the institutional organization of society. Thus, we conclude that unless a natural disaster triggers a radical political revolution, it is unlikely to affect economic growth."

So there you have it. From the perspective of GDP per capita, a profoundly flawed but nevertheless indispensable measure of economic welfare, even the most severe natural disasters do not have an effect. So what's the moral of the story here? Is this a tale about human resilience in the face of calamity? Or is it another sobering lesson in the perils of statistical abstraction?

Chávez serenades Hilldog...sorta

Translates roughly to:

"I'm unloved...
by Hillary Clintooooooooon.
I don't like her eitheeeer....
dahdahdaaaah."

Weekend Update

In the woods and out of touch, but never too far away for a 'lil weekend update. This weeks theme, must read blogs.

• But before we get to that, in case anybody missed it, Santos will be Colombia's next president. According to the LA Times, "With 99% of votes counted, Santos had garnered 69% of the votes in the runoff election to his challenger's 27%." So maybe the polling companies aren't quite as bad as we had thought....
  
  
• But wait, thanks to a diligent Huff Post investigation, it seems Colombia's new president isn't any stranger to controversy....I guess he should fit in fine in the Casa Narino. The whole article is a must read, but here is the intro to give you a taste: "The man most likely to become Colombia's next president this Sunday has played a previously undisclosed role as a corporate officer of the company hired to run the nation's elections over the last decade, while he was a political leader, business records obtained by the Huffington Post Investigative Fund show."
  
  
• Now to our week's theme. We start with a blog I've been meaning to introduce for a long time, Gerardo Esquivel's El Placer de Disentir. He's a Mexican economist who knows his shit. Yeah, it's in Spanish, but if that's in the cards then definitely go check it out. His latest post is a rundown on the electoral scene in the DF, but make sure to check out some of his previous posts as well, especially the ones on inequality.
  
  
• Keeping with Spanish language blogs, check out Politica y Economia, economics and politics from a heterodox perspective. The most recent post takes a detailed look at Ecuador.
  
  
• Next, on to Triple Crisis, not exactly Latin America oriented, but well worth your time. Its run by a host of well known and distinguished academic types, including my personal favorite Kevin Gallagher, whose breakdowns of everything NAFTA are simply the best. This week, one of the contributors of Triple Crisis, Martin Kohr, has a nice article via the South Center on the Bolivia climate summit.
  
  
• Finally, another link to FiveThirtyEight, they simply do numbers better than anyone and we should all be encouraging them to do more and more about Latin America. This week they look at the World Cup as South America continues to rip through the field. I can't say I agree with everything in their analysis, but this is pretty interesting, "The five teams this year are from the continent's five southernmost countries, which, incidentally, are among its richest and (excluding Paraguay) rank highest on the human development index."
  
  
• Onto some actual news; Brazil has suspended their WTO retaliation against the US. FT got the story, "The deal will extend until 2012 a holding arrangement in which the US pays Brazilian farmers $147.3m a year and promises to cut subsidies in future. In return, Brazil will hold off imposing blocks on imports or ignoring patents and copyrights, which it is entitled to do after a World Trade Organisation panel declared the US cotton support programme illegal."
  
  
• Staying with the WTO, and keeping with this weeks theme of plugging blogs, Timothy Wise at Triple Crisis has a real great breakdown of the hypocrisy of developed countries in trade negotiations...and surprise, the criticism isn't just directed at the US: "But what about middle-income hypocrisy? Isn’t Brazil one of the world’s largest agro-export powers with a well-cultivated reputation for defending the interests of other countries’ small-scale farmers? Isn’t Brazil also guilty of hypocrisy? Absolutely. In fact, as part of its side agreement on cotton with the United States, Brazil got a multi-million dollar fund for investment in its cotton sector. Talk about hypocrisy: Africa’s Cotton 4 will now have to compete in global markets not only with subsidized U.S. cotton but with Brazilian cotton subsidized by the United States!"
  
  
• Via Just the Facts blog, a new paper released last week takes a look at the ongoing DAS scandal in Colombia. Check out the linky to read more, but the title says it all...."Far Worse than Watergate"...How Uribe has managed to stay in the presidency with such a high approval rating is beyond me...Tricky Dick must be mad jealous.
  
  
• Ricky Singh in the Jamaica Observer, writes on the hypocrisy of the US' extradition policies. Singh compares the US' requests for Christopher "Dudus" Coke from Jamaica, to their systematic denial of Venezuela's requests for Luis Posada Carriles. "Posada and Bosch have long been identified as the chief plotters of the bombing of the Cubana aircraft on October 6, 1976 when all 73 people on board -- 57 Cubans; 11 Guyanese and 5 North Koreans -- died. Instead of facilitating their extradition as fugitive terrorists from justice, then President Bush, in response to urgings from the anti-Fidel Castro lobby in Miami and Washington as well as from his son Jebb Bush, then governor of Florida, granted a Presidential Pardon to Bosch." Hopey and Changey hasn't sung a different tune either, for the record. Singh makes the case for CARICOM taking a leading role in all this...very compelling.
  
  
• Finally, for some entertainment, check out these two videos from the Larry King Show. Oliver Stone is joined by Jessie "The Body" Ventura and Florida Republican and all around douche-bag Connie Mack. The real purpose was to discuss Stone's new movie South of the Border, but it quickly becomes a hilarious shouting match between Ventura and Mack. I mean, it takes a hell of a panel to make Stone look like the level-headed guy in the room. So go check it out.

Be back in a few days, until then enjoy Maladjusted's better half.

Chile's new ambassador to Argentina

Last week maladusted brought you the controversy surrounding the idiotic and neanderthal comments made by Chile's now former ambassador to Argentina. Long story short, Mr. Otero told people the Pinochet dictatorship wasn't a big deal or anything, cuz, you know, "most chileans didn't feel its impact."

Piñera proceeded to fire his ass and now hired a new guy named Adolfo Zaldívar. Well, courtesy of the always irreverent The Clinic, here's what Zaldívar had to say about his new boss late last year:

"Sebastian Piñera is the purest expression of the concentration of wealth and speculative capital that rules the world. He is not in a position to guarantee a behavior in line with what Chile needs from its head of state."

Awkward. Awkward indeed.

The Count

8...

...is the number of years it takes workers to reallocate into new industries after a 30% drop in manufacturing tariffs. Or at least according to simulations ran by researchers at the World Bank, the University of Virginia and Koç University in Istanbul.

Ok, perhaps we should back up for a second. Everyone knows that freer international trade is good cuz of stuff and junk. And by stuff I mean lower prices for consumers and by junk I mean efficiency gains from exposing domestic firms to international competition. The aptly named "gains from trade" can be bountiful, economists say, but reaping it's benefits involves adjustment costs as the less productive firms that can't compete "exit" the market (this is a euphemism for going out of business and firing workers) and the newly freed up resources (read: the newly unemployed) are reallocated.

Trade liberalization, in other words, produces both winners and losers, and the overall gains, proponents of free trade hold, outweigh the costs incurred by displaced workers.

But did you know that while every economist and their semi-literate grandmothers have attempted to estimate the value of the gains from trade, virtually no one has set out to comprehensively estimate the associated costs?

Well, Bernard Hoekman and Guido Porto, from the World Bank and the University of La Plata, respectively, have a nice summary of the most recent research on the subject. While the gains from trade can be huge, their collection of recent research shows that in practice workers displaced by liberalization often find it extremely hard to resettle into new and more productive work.

And this takes us to today's count. One of the studies cited by Hoekman and Porto, using data from the U.S., sets out to simulate the impact of a 30% reduction of manufacturing tariffs on labor adjustment costs. They find that the costs of moving between industries are very large, often several times a worker's average annual income. Perhaps more importantly, after liberalization it takes up to 8 years for 95% of the displaced workers to settle into a new line of work. This dramatic and lengthy period of adjustment implies sudden and large movements in wages, with displaced workers experiencing lower wages in both the short and long-run.

Colombia, Venezuela and Exports: Biggest Loser Edition

A Bloomberg article today touches on how the diplomatic dispute with Venezuela is affecting Colombia’s economy, as it has resulted in plummeting trade with their second most important trading partner. Maladjusted wrote awhile back about how a Mockus presidency could be good for business if it means a reopening of trade between Venezuela and Colombia. Well, it doesn’t look like Mockus has a snowball’s chance in hell to actually win this thing, but as updated numbers are out from Colombia’s DANE, it’s worth taking a look to see how continued diplomatic problems (almost assured with Santos) will continue to weigh on the economy. Already, as Bloomberg points out, Colombia has the second lowest growth forecast in the region, and the collapse in trade is at least part of the problem. So, lets run some numbers through Maladjusted Charts and see what we can find out, has Colombia found new markets for these goods? What sectors are the worst hit?

First off, lets get the basics down, just how much has trade with Venezuela collapsed, and who has picked up the slack?



Before the drop off from Venezuela, the US was still Colombia’s largest trading partner, but was followed by Venezuela (all alone in second place), Ecuador and of all places, Switzerland. But through the first 5 months of this year, the US has remained its dominant position, while China has catapulted from obscurity to accounting for nearly 8% of total exports, about double that of Venezuela or Ecuador, as the chart below shows.



So from the above, it does seem that Colombia has fared pretty well finding alternative markets for their exports to Venezuela, indeed total exports increased over the same period last year. Unfortunately for some, looking at the breakdown of goods reveals a slightly different picture. Some 23% of exports with Venezuela during the period of Jan.-April 2009 were animals and animal products, a sector that accounted for around 5% of Colombia’s total exports. This year, however, Venezuela has stopped buying these products, and the sector has taken an extreme hit, making up less than 1% of total exports so far this year. The chart below shows how while exports to the US have skyrocketed, none of it has come from animals and animal products.



So what has accounted for the rapid rise in exports to the US? Well, simply, oil. Colombia has increased their oil production this year, and coupled with a rise in prices from last year, exports of combustibles accounts for nearly the entire rise in total exports, with most of the surplus going to the US.



Another sector that seems to have taken a hit from the Venezuela dispute is textiles. Overall, despite being a smaller component of total exports, textiles accounted for the second largest drop from last year to this year after animals and animal products. Exports to Venezuela of textiles dropped by $125 million, while overall exports of textiles fell by $105 million. As the chart below clearly shows Colombia has been unable to replace the Venezuela market for textiles.



In the end, what this means is summed up nicely in a quote from the Bloomberg article referenced earlier, “Colombia is selling more oil to the U.S.,” said Sandy [an economist with Credit Suisse Group AG]. “For the industrial sector and food producers, more sales to the U.S. don’t do anything.”

So while total exports have increased over 2009, it’s really not saying much as 2009 was clearly not the best year. And although trade has increased greatly with China and with the US, there have been sectoral shifts more so than straight replacement. I would say that the increased trade with China is definitely a good thing for Colombia, since before the recent increase Colombia exported less to China as a percent of total exports than just about every other country in South America. On the other hand, increasing dependence on the US may not be the most desirable outcome here. I’m sure the US will be happy to buy up Colombian oil…especially over Venezuelan oil, but look at Mexico…do you really want to be that tied to the US economy? Not to say that being tied to Venezuela’s economy right now sounds very good either, but looking at the next few years up north is not very promising. The UCLA Anderson Forecast was just released and projects growth for the next three years below the 3% long-term nominal growth rate. And yes, unemployment is expected to still be over 8.5% by 2013. Not exactly a booming export market.

But more importantly, and certainly more importantly for those most affected in Colombia by the trade fall off, are the sectoral shifts that will occur over the medium term if exports to Venezuela don’t return, or if new markets for those products can’t be found. While the overall export picture doesn’t seem dire, the industries that have been most affected, animal farmers and textile producers have been severely hit. Farmers, while they account for a smaller percent of GDP, make up nearly 20% of the workforce and have been the worst hit by the dispute with Venezuela.

Well, I’m sure this is WAY more than you ever wanted to know about trade between Venezuela and Colombia, I think it may be more than I wanted to know, but there ya have it. Next time maybe we can see if Venezuela has found new markets to import all that food that they no longer get from Colombia….then again, it’s probably just rotting in a container somewhere anyhow…