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Otaviano Canuto

Otaviano Canuto

Otaviano Canuto s the executive director at the Board of the International Monetary Fund (IMF) for Brazil, Cabo Verde, Dominican Republic, Ecuador, Guyana, Haiti, Nicaragua, Panama, Suriname, Timor Leste and Trinidad and Tobago. Mr. Canuto has previously served as vice president, executive director and senior adviser on BRICS economies at the World Bank, as well as vice president at the Inter-American Development BankViews expressed here are his own and do not necessarily reflect those of the IMF or any of the governments he represents.

Articles by Otaviano Canuto

Mr. Trump: Can You Deliver it?

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.
Shock waves hit international financial markets leading to a rotation into equities and away from bonds. While global equities gained about U$ 1 trillion, global bonds lost close to U$ 1.2 trillion – according to Bloomberg. However, emerging markets have suffered from capital outflows, currency depreciations and losses in both equity and

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The Global Economy Remains Unbalanced

November 3, 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.
Are global imbalances rising again?
For five years now, the International Monetary Fund (IMF) has produced an annual report on the evolution of global external imbalances – current account surpluses and deficits – and the external positions – stocks of foreign assets

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Protectionist Creeps

October 20, 2016

WASHINGTON, DC – Prospects for growth in global trade in 2016 and 2017 have been downgraded again. The World Trade Organization (WTO) now expects that trade this year will increase at its slowest pace since the post-2008 global recession. What is going on? This is not purely a function of an anemic global economic recovery. After all, trade growth has typically outpaced GDP growth; in the years before the 2008 global financial crisis, the average increase was double that of output. But the ratio of trade growth to GDP growth has been falling since 2012, a trend that will culminate this year, with GDP growth outpacing trade growth for the first time in 15 years. This reversal is driven partly by structural factors, including a plateau in the expansion of global value

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A Straitjacket to Help Brazil Fight Fiscal Obesity

October 12, 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.
Toward fiscal obesity
As we discussed in our previous piece, Brazil has featured anemic productivity increases in the last decades (Canuto, 2016c). And those have taken place while a political

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Brazil Needs an Honest Waste Loss

October 3, 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.
Brazil’s recent social and

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Brazil’s Way Out

September 5, 2016

WASHINGTON, DC – Now that impeached Brazilian President Dilma Rousseff is out of office, it is up to the newly empowered administration of President Michel Temer to clean up Brazil’s macroeconomic mess. Can Temer’s government save Brazil’s crumbling economy?

The situation is certainly dire. In fact, Brazil has lately been experiencing the most powerful economic contraction in its recent history. Its per capita GDP will be more than 10% smaller this year than it was in 2013. And unemployment has soared to more than 11%, up four percentage points from January 2015.
Brazil has no easy route to recovery for a simple reason: the current rout derives from the intensification in recent years of long-standing economic vulnerabilities – in particular, fiscal profligacy and anemic

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Tales of Emerging Markets

August 8, 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, w…

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Suriname: Facing the Storm with a Correction of Course

June 22, 2016

photo: Nicolas Raymond Suriname is facing twin – external and fiscal – deficits that originated in the commodity price slump of recent years. In response, the Surinamese government started a four-pronged adjustment program in August 2015 to adapt to …

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China’s Spillovers on Latin America and the Caribbean

May 10, 2016

photo: AK Rockefeller The Chinese economy is rebalancing while softening its growth pace. China’s spillovers on the global economy have operated through trade, commodity prices, and financial channels. The global reach of the effects from China’s tra…

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Brazil at the Crossroads

April 28, 2016

With the impeachment of President Dilma Roussseff being sent to the Senate on April 17, Brazil continues a period of turmoil that has lasted for more than a year now. With images of protests, counter-protests and the minutia of the country’s legal pr…

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TTIP & TPP – A Threat to Latin America?

March 21, 2016

For centuries, Latin America’s economies have revolved around exporting commodities – be it digging up minerals and hydrocarbons, planting soya or coffee, or taking advantage of what animals leave behind, the region has historically relied on shippin…

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Capital Flows and Deleveraging in Emerging Markets

February 26, 2016

Capital outflows from emerging market economies have substantially accelerated since last year. The cycle of intense debt leveraging that took place in those economies after the 2008 global financial crisis has also started to reverse. Furthermore, 2…

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What’s Ailing Brazil?

February 15, 2016

WASHINGTON, DC – After decades of rapid economic growth and per capita income gains, Brazil is struggling. According to the International Monetary Fund, the country’s GDP is poised to contract by more than 7% in 2015-2016. No single factor explains t…

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Has the Global Trade-Development Link Peaked?

January 26, 2016

Trade has been a key driver of global growth, income convergence, and poverty reduction. Both developing countries and emerging market economies have benefited from opportunities to transfer technology from abroad and to undergo domestic structural t…

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Whither Emerging Markets Foreign Exchange Reserves

December 15, 2015

After a exponential rise in foreign exchange reserves accumulation by emerging markets from 2000 onwards, the tide seems to have turned south since mid-2014. Changes in capital flows and commodity prices have been major factors behind the inflection,…

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A New Day in Colombia

December 4, 2015

Given Colombia’s recent economic success during years of war, what it could achieve in years of peace? Colombia’s inherited reputation for cocaine, drug-trafficking and conflict may not be entirely undeserved. But in recent years, a new reputation ha…

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Trade Facilitation: Diplomacy May Be Catching Up

December 2, 2015

In September 2003, one of us was among the delegations of trade representatives from around the world that gathered in Cancun, Mexico, for one of the first Doha rounds of the World Trade Organization (WTO) negotiations. The goal was ambitious: work t…

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Shadow Banking in China: A Morphing Target

November 19, 2015

China’s shadow banking system thrived in the years after the global financial crisis, until reined in by regulators since 2013. Nevertheless, new forms of shadow banking are emerging. China’s style of shadow banking

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Nicaragua: A Success Story in the Making

November 10, 2015

Nicaragua is far more than just the newest and swankiest destination for world travelers.  It is -and mark our words – on its way to becoming the latest success story in the western hemisphere. Let us just tell you why.

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Small Is Beautiful… but Vulnerable!

August 21, 2015

Many small states are known for their pristine natural environments and are either tourism or commodity based. However, despite numerous challenges emanating from their specific vulnerabilities and small size, the issues faced by these countries ha…

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