The new economy in Latin America

The economist Yanis Varoufakis allowed himself to suggest to the President-elect of Chile, Gabriel Boric, the increase of resources available to the people through the banking system. Varoufakis considered that Chile should increase the percentage of indebtedness by resorting to issuance to meet the expectations created during the electoral campaign and that these funds could only be used through transfers to avoid being channeled to the acquisition of foreign currency. The proposal is similar to the “corralito” devised by Domingo Cavallo during the 2000/2001 crisis, which envisaged the massive use of posnet so that money would circulate only between bank accounts and would not cause the banks to bankrupt.

When he was in office, the former Greek Finance Minister tried to create a parallel payment system with the use of tax codes. Varoufakis’ initiative caused panic because it was feared that the real objective was to force the exchange of the euro for the drachma to free Greece from the lock of European creditors. Varoufakis sought to prevent capital flight that had undercapitalized Greek banks that could not respond to the rush to withdraw deposits and avoid the eventual loss of value of savings. President Tsipras ended up asking him to resign due to the failure of all his efforts.

Varoufakis integrates the list of European and North American economists such as Joseph Stigliz, Jeffrey Sachs, Mariana Mazzucato and Thomas Piketty critical of the functioning of the capitalist system because it would have accentuated the inequality of the distribution of income in the last thirty years. All of them are linked to the Pontifical Academy from which studies and statements arise lamenting poverty and the dismissal of workers; They share the opinion of increasing the role and expenditures of the State to guide the economy by financing it with resource transfers via new taxes on the private sector. The picture is completed by blaming the capitalist regime for the crisis of climate change for its predatory desire for nature and its infinite greed for profit regardless of the consequences on the environment.

This group of economists found in Latin America the fertile field to promote their ideas. The main political leaders keep repeating that Latin America has the worst income distribution and unsustainable levels of poverty in its different facets. The COVID pandemic helped to strengthen these positions by unevenly affecting countries that did not have the resources to sustain the economy and face the crisis in the health system. ECLAC provided statistical support and became a spokesperson, vehemently reiterating the seriousness of poverty and income distribution despite the undoubted progress of the last thirty years.

The ready ears in Latin America contrast with the little impact that this same group has in Europe, with the exception of Spain, and Asia. Varoufakis is in charge of destroying the policies of the European Commission and the ECB, whom he accuses of distributing resources among large companies, abandoning citizens. Stiglitz and Sachs do not stop criticizing the FED and the ECB while Mazzucato and Piketty speak of a state that would now be efficient and new taxes. The Asian countries seem to go the opposite way to that undertaken by Latin America. The simple walk through the speeches of Xi Jinping and the policies of Narendra Modi show the interest in promoting investment to reduce poverty. Southeast Asia, Korea, and Taiwan have similar policies. None of these countries are trying to reverse the economic equation because they bet on development, education and job creation. Xi Jinping has reiterated the importance of the market to allocate resources and also promised to deepen reforms.

The application of experimental theories generates the risk that the results are not as expected. In a globalized context, Latin America could be left behind again while Asia will continue to advance with its policies of absorbing investments that contribute to modernizing its productive and technological structure.

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