The Politics of Market Discipline in Latin America : Globalization and Democracy

The Politics Of Market Discipline In Latin America Uses A Multi-method Approach To Challenge The Conventional Wisdom That Financial Markets Impose Broad And Severe Constraints Over Leftist Economic Policies In Emerging Market Countries. It Shows, Rather, That In Latin America, This Influence Varies Markedly Among Countries And Over Time, Depending On Cycles Of Currency Booms And Crises Exogenous To Policy Making. Market Discipline Is Strongest During Periods Of Dollar Scarcity, Which, In Low-savings Commodity-exporting Countries, Occurs When Commodity Prices Are High And International Interest Rates Low. In Periods Of Dollar Abundance, When The Opposite Happens, The Market's Capacity To Constrain Leftist Governments Is Very Limited. Ultimately, Daniela Campello Argues That Financial Integration Should Force The Left Toward The Center In Economies Less Subject To These Cycles, But Not In Those Most Vulnerable To Them. Multi-method Approach That Includes Formal Modeling, Statistical Analyses, And In-depth Case Studies Covers Two Phenomena Closely Studied By Students Of Latin American Economics: Leftist Government's Embrace Of Neoliberal Policies In The 1990s, And The Resurgence Of A Leftist Agenda In The 2000s A Solid Text For Those Interested In The Globalization Of Finance In Emerging Markets, Understudied In Comparison With The Oecd.-- Daniela Campello. Includes Bibliographical References And Index. Cover 1 Half-title 3 Title page 5 Copyright information 6 Dedication page 7 Table of contents 9 List of illustrations 10 List of tables 12 Acknowledgments 13 1 Globalization, Democracy, and Market Discipline 17 The Politics of Financial Globalization 23 Research Project: The Politics of Market Discipline in Latin America 28 Plan of the Book 39 The Globalization of Finance in Emerging Economies 20 2 Between Votes and Capital: Redistribution and Uncertainty in Unequal Democracies 42 Capital Mobility and the Politics of Redistribution 45 Implications of the Model 47 Nature's play: Exogenous Shocks, Currency Crises, and Policy Switches 53 3 Investors' "Vote'' in Presidential Elections 61 Creditors' Response to Partisanship 61 Government Ideology and Economic Policymaking 64 Investors' Response to Government Ideology 67 Research Design 69 Dependent Variable: Sovereign Risk 70 Explanatory Variables 70 Results 73 Conclusion 77 Appendix 78 Summary Data 78 4 The Politics of Currency Booms and Crises: Explaining the Influence of Investors' "Vote'' 80 Currency Booms, Crises, and the Left 81 Political Systems and Capacity to Switch 84 Research Design and Empirical Analysis 86 Results 90 Conclusion 96 Research Design: Case Studies 96 Appendix 98 5 Currency Crisis, Policy Switch, and Ideological Convergence in Brazil 103 Background 105 The 2002 Presidential Election 108 Lula's First Presidency: No Plan B 119 Long-term Convergence: Political Discourse in 2006 and 2010 124 Conclusion 132 6 Exogenous Shocks and Investors' Political Clout in Ecuador 134 The Dollarization of the Ecuadorean Economy 136 The Election of Lucio Gutiérrez 140 The Election of Rafael Correa 145 Conclusion 150 7 One President, Different Scenarios: Crisis, Boom, and Market Discipline in Venezuela 152 Background: Neoliberalism in Venezuela 154 The 1998 Presidential Election 158 Chavez's First Presidential Term 161 First Year: Honeymoon with the Markets 161 Second Phase: Confrontation and Instability 165 Third Phase: Boom and Consolidation 166 Chavez's Reelection: Socialism in the Twenty-first Century 169 Conclusion 173 8 "Vivir con Lo Nuestro'': Default and Market Discipline in Argentina 175 Convertibility and Confidence 176 Collapse and Default 182 Room to Maneuver in the Kirchner and Fernández Years 189 Room to Maneuver and the Reintegration into International Markets Under Cristina Fernández 199 Conclusion 201 9 Who Governs? Market Discipline in the Developed World 204 Boom and Crisis in the Eurozone 207 The Confidence Game: Markets' and Governments' Responses to the Crisis 213 Conclusion 228 10 Conclusion: Markets' Vote and Democratic Politics 230 Reinstating the Argument 231 Contribution of the Book 233 Implications for Democracy 235 References 237 Index 249 The Politics of Market Discipline in Latin America uses a multi-method approach to challenge the conventional wisdom that financial markets impose broad and severe constraints over leftist economic policies in emerging market countries. It shows, rather, that in Latin America, this influence varies markedly among countries and over time, depending on cycles of currency booms and crises exogenous to policy making. Market discipline is strongest during periods of dollar scarcity, which, in low-savings commodity-exporting countries, occurs when commodity prices are high and international interest rates low. In periods of dollar abundance, when the opposite happens, the market's capacity to constrain leftist governments is very limited. Ultimately, Daniela Campello argues that financial integration should force the Left toward the center in economies less subject to these cycles, but not in those most vulnerable to them. Multi-method approach that includes formal modeling, statistical analyses, and in-depth case studies Covers two phenomena closely studied by students of Latin American economics: leftist government's embrace of neoliberal policies in the 1990s, and the resurgence of a leftist agenda in the 2000s A solid text for those interested in the globalization of finance in emerging markets, understudied in comparison with the OECD.-- Provided by publisher Daniela Campello uses a multi-method approach to challenge the notion that financial markets exert a broad influence over economic policy making in emerging economies. In Latin America, this influence varies between countries and over time, depending on cycles of currency booms and crises that are swayed by international commodity prices and US interest rates.