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Nuffield College, Oxford University Oxford  4 May 2006

Ulysses, the Sirens and the art of Navigation: Political and Technical Rationality in Latin America. Javier Santiso Chief Economist & Deputy Director OECD Develoment Centre. Nuffield College, Oxford University Oxford  4 May 2006. Emerging Democracies in Latin America: Trends and issues.

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Nuffield College, Oxford University Oxford  4 May 2006

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  1. Ulysses, the Sirens and the art of Navigation:Political and Technical Rationality in Latin America Javier Santiso Chief Economist & Deputy Director OECD Develoment Centre Nuffield College, Oxford University Oxford  4 May 2006

  2. Emerging Democracies in Latin America: Trends and issues Average Source: Javier Santiso, “Latin America’s Political Economy of the Possible: Beyond Good Revolutionaries and Free Marketeers”. MIT Press. Cambridge, Massachusetts, 2006 Based on the Inter-American Development Bank

  3. Emerging democracies in Latin America: The need for further consolidation (2005) Source: IADB Politics of Policies Report, 2006

  4. Institutions are decisive for the quality of democratic policies Source: IADB Politics of Policies Report, 2006 and UNDP, 2005

  5. How are political and technical rationality articulated in Latin America? • Key question: how to explain the success and failure of economic policies in Latin America emergi9ng democracies? • Key issue: raising the level of decisional responsibility and institutional transparency. • We need to reinforce the production base and the spread of existing knowledge in open societies • We need to articulate the shared knowledge network between the State and the knowledge production centers. • This articulation is key to the perspective of democratic governance. It is even more relevant in emerging democracies.

  6. How are political and technical rationality articulated in Latin America? • Technopols as “cognitive institutions”. • i.e. institutions that articulate proposals of acceptable economic policies which are both adoptable by and adaptable to their respective democracies • Our objective: elaborate a cognitive map of the specialized institutions dedicated to the creation and application of knowledge. • Our objective: analyze the process of the incorporation of this knowledge into the political and administrative institutions and, above all, in the political process.

  7. How are political and technical rationality articulated in Latin America? • Working hypotheses: the quality of the economic policies will depend on the level on which the expert knowledge would be institutionalized in the policy-making-process (PMP). • This would depend on two main factors: firstly, the existence of a critical mass of knowledge through the cognitive with capacity to generate and spread expert knowledge. Secondly, it is essential that this knowledge be filtered in an effective manner in the PMP by an interaction between political and technical rationality.

  8. Technopols as institutional masts “In dealing with the multiple and complex problems of development, we have learnt that we must be deaf, like Ulysses, to the seductive chant of the unique paradigm”. Albert Hirschman

  9. Technopols in Emerging Democracies What is the cognitive map in Latin America for applied knowledge in economic policies? • There are no in-depth studies that measure the institutional density of production centers and the diffusion of applied knowledge in economic policies. • A strong institutional presence of this kind does not guarantee an adequate articulation between technical and political rationality. • Some examples exist where a high cognitive institutional presence has coincided with an overflow of economic policies due to political rationality (or formulated in weberian terms, an overflow of the ethics of conviction).

  10. Technopols as trespassers • The presence of these institutions contributes to the democratic governance promoting higher deliberative quality in public space. • This is a necessary condition (although not sufficient) for an adequate articulation between technical rationality and political rationality. • If the key institutions for development are those that promote governance accountability and provide information over government actions authorizing citizens to sanction behavior that limits the capturing of rent (Benhabib and Przeworski, 2004), technopols carry out a central role.

  11. Technopols as trespassers • The cognitive institutions operate in this sense as traders. • or, to use Hirschman terminology, trespassers of knowledge between technical rationality and the political rationality. • This aspect is important: Many of the reformist impulses that are merely adopted from other national or regional contexts without being adapted, fail because of the lack of the trespassing process. • Hence the Przeworski description, “the cemetery of institutional reforms must be enormous”.

  12. Mapping Technopols The first aim of this study will be to establish the cognitive map in applied knowledge in economic policies in the different countries of the region. Cognitive institutions can be national or foreign; public or private; For this mapping we will take into account institutions of knowledge such as analysis units of international organizations or government agencies, private consultants or research departments of banks; academic research centers. The study will have to incorporate evidence from several countries. Examples will be taken from the largest possible number of countries, considering in the first place the following eight: Argentina, Brazil, Chile, Colombia, Mexico, Peru, Uruguay and Venezuela.

  13. Mapping Technopols • The following points of analysis are contemplated in this sense: • What is the inherent capacity of cognitive institutions? What are their human and financial resources? • How many think-tanks and/or university centers contribute to the formulation of policy debate? • What is the contribution of the consultants and the research departments to this formulation? Here we particularly think of the private banks analysis units and the private consultants. • What is the contribution of public entities (Central Bank, Ministry of Economy and or Planning; public agencies etc.)? • What is the inherent technical capacity in the Legislative institutions in terms of economic policies? • What is the role of international institutions (BID, CAF, WB, CEPAL, etc.) in the process of designing economic policies?

  14. Types of Cognitive Institutions Banks Government Agencies IO Policies Think-Tanks Academics

  15. 1 A Mapping of Latin American Cognitive Institutions 2 Enter the Matrix: The case of Peru 3 Conclusions: The emergence of possibilism

  16. Banks: Latin Finance Research Olympics Research Olympics 2004 The Annual ranking of economists and analysts of the sell-side industry. Every year, Latin Finance asks institutional investors, the principal consumers of Wall Street research, to rank the best analysts and economists covering the region.

  17. Banks: Latin Finance Research Olympics • LatinFinance sent questionnaires to top portfolio managers and institutional investors in Latin American debt and equity instruments. • A total of 63 responses were received from investors with a combined $33 billion under management. • Votes were weighted in proportion to the assets invested by each firm in Latin America. Latin Finance Research Olympics 2004 Overakk Rank Bank 1 CSFB 2 JP Morgan 3 Bear Stearns 4 UBS 5 SCH 6 Itaú 7 Citigroup 8 Merrill Lynch 9 BCP 10 Goldman Sachs 11 Morgan Stanley 12 Deutsche Bank 13 ING

  18. Banks as Technopols: Research Departments Number of Latin American Research Analysts in 2005 90 80 70 60 50 40 30 20 10 0 ING Itaú UBS SCH CSFB BBVA HSBC West LB Dresdner Bradesco JP Morgan Caja Madrid BNP Paribas Bear Stearns Merrill Lynch Deutsche Bank Goldman Sachs Barclays Capital Banco Votorantim Standard Chartered

  19. Banks as Technopols: Research Departments Number of Latin American Research Analysts based in Latam in 2005 60 50 40 30 20 10 0 Itaú ING UBS SCH BBVA HSBC Dresdner Bradesco JP Morgan Caja Madrid Merrill Lynch BNP Paribas Bear Stearns Deutsche Bank Goldman Sachs Barclays Capital Banco Votorantim Standard Chartered

  20. Banks as Technopols: Research Departments

  21. Banks: Wall Street is Watching You … But Not Everybody Country coverage in 2005 (% of research teams covering the country - sample: 17) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Perú Chile Brasil México Panama Uruguay Ecuador Jamaica Colombia Argentina Venezuela Rep. Dom. Costa Rica Guatemala El Salvador

  22. Banks as Technopols: Research Departments

  23. Public Actors: Government and National Technopols • The research departments of government institutions (Central Bank, Ministry of Economy and all types of public national organisms) that process, produce and spread expert knowledge on economic policies • Samples will also have to include government agencies like Superintendence of AFP in Chile, the BNDES or IPEA in Brazil, DANE in Colombia, etc.

  24. Congress as Technopols: A Policy issue in Latin America

  25. Congress as Technopols: A Policy Issue in Latin America

  26. International Organizations as Technopols Technopols on Latin America: Multilaterals Argentina: INTAL-IADB http://www.iadb.org/intal/ Chile: ECLAC http://www.eclac.org/ Costa Rica: FLACSO http://www.flacso.org/ México: CEMLA http://www.cemla.org/ Venezuela: CAF http://www.caf.com/ Venezuela: SELA http://www.sela.org/ Venezuela: CLAD http://www.clad.org.ve/ United States: IADB http://www.iadb.org/ United States: The World Bank http://www.worldbank.org/ United States: IMF http://www.imf.org/

  27. Think-Tanks in Latin America Sample Argentina: FIEL http://www.fiel.org/ Argentina: Fundación Mediterránea http://www.ieral.org/ Argentina: CIPPIEC http://www.cippec.org/ Argentina: CEDI http://www.fgys.org/ Argentina: CADAL http://www.cadal.org/ Argentina: CEI /Torcuato http://www.utdt.edu/cei/ Argentina: IADE http://www.iade.org.ar/ Argentina: CENIT http://www.fund-cenit.org.ar/ Argentina: CEMA http://www.cema.edu.ar/ Argentina: Estudio Broda http://www.estudiobroda.com.ar/ Argentina: Fundación Capital http://www.fcapital.com.ar/ Argentina: Ecolatina http://www.ecolatina.com/ Brazil: CEBRAP http://www.cebrap.org.br/ Brazil: AC Pastore http://www.acpastore.com/ Brazil: MBAssociados http://mbassociados.com.br/ Brazil: Tendencias http://ww2.tendencias.inf.br/ Brazil: Fernand Braudel Institute http://www.braudel.org.br/ Brazil: FIPE http://www.fipe.com.br/ Brazil: IBRE / FGV http://www.ibre.fgv.br/

  28. Think-Tanks in Latin America Colombia: Fedesarrollo http://www.fedesarrollo.org/ Colombia: CEDE http://www.uniandes.edu.co/ Chile: CIEPLAN http://www.cieplan.cl/ Chile: Instituto Libertad y Desarrollo http://www.lyd.cl/ Chile: CEP http://www.cepchile.cl/ Chile: ILADES http://www.ilades.cl/ Perú: IPE http://www.ipeportal.org/ Perú: CIUP http://www.up.edu.pe/ciup/ Perú: IPE http://www.iep.org.pe/ Perú: Apoyo http://www.apoyo.com/ Perú: GRADE http://www.grade.org.pe/ México: CIDAC http://www.cidac.org/ México: CIDE http://www.cide.edu/ México: CIE / ITAM http://cie.itam.mx/ Uruguay: CERES http://www.ceres-uy.org/ Uruguay: CLAEH http://www.claeh.org.uy/

  29. Think-Tanks on Latin America Outside the Region FOCAL (CANADA): Based in Ottawa and founded in 1990. http://www.focal.ca/ Fosters informed analysis and debate on North and South American social, political and economic issues. It has a full time staff of approximately 15. THE INTER-AMERICAN DIALOGUE (USA): Based in Washington and founded in 1983. Engages public and private leaders throughout North and South America in an effort to discuss key hemispheric problems and opportunities. It has a full time staff of approximately 29.

  30. Think-Tanks on Latin America Outside the Region Council on Foreign Affairs – Latin American Studies Program: Based in New York; 1 analyst on Latam; http://www.cfr.org/latinamerica/ The Heritage Foundation: Based in Washington; founded in 1973; 3 analysts on Latam. http://www.heritage.org/ American Enterprise Institute: Based in Washington; founded in 1943; 1 analyst on Latam; http://www.aei.org/ Americas Society: Based in New York and Washington; founded in 1965 by David Rockefeller; 2 experts on Latin America; http://www.americas-society.org/ The Brookings Institution: Based in Washington; founded in 1916; 5 experts on Latam; http://www.brook.edu/ The Institute for International Economics: Based in Washington; founded in 1981; 3 experts on Latam; http://www.iie.com/ Rand - Latin American Policy Research Program: Based in Santa Monica; founded in 1946; 11 experts Latam, http://www.rand.org/nsrd/latinamerica/staff.html Cato Institute: Based in Washington; founded in 1977; 3 experts on Latam ; http://www.cato.org/ Center for Strategic and International Studies (CSIS) Based in Washington; founded in 1965; 7 experts on Latam; http://www.csis.org/ Hoover Institution: Based in Stanford; foudned in 1959; 6 experts on Latam; http://www.hoover.org/ CIPE Based in Washington; founded in 1983, 2 experst on Latam; http://www.cipe.org/ Carnegie Endowment for Peace: Based in Washington; founded in 1910; 5 experts Latam; http://www.carnegieendowment.org/

  31. Think-Tanks on Latin America Outside the Region Royal Institute for International Affairs: Based in London; founded in 1920; 5 experts on Latam; http://www.chathamhouse.org.uk/ Oxford Latin American Centre Based in Oxford; founded in ; 13 experts on Latin America; http://www.lac.ox.ac.uk/ Canning House: Based in London; founded in 1943; http://www.canninghouse.com/ Real Instituto Elcano: Based in Madrid; founded in 2003; 2 experts on Latam; http://www.realinstitutoelcano.org/

  32. 1 A Mapping of Latin American Cognitive Institutions 2 Enter the Matrix: The case of Peru 3 Conclusions: The emergence of possibilism

  33. Public Technopols: The Example of Peru • There are, basically, three government institutions that take economic policy decisions in Peru: • The Ministry of Economy and Finance, • The Central Bank (BCR); and • The Congress.

  34. The Ministry of Economy and Finance • The Ministry of Economy and Finance • It is the institution that leads economic policy. • The function of formulating economic policies formally lies with the Viceminister of Economy who makes economic policy proposals, with the support of four of his Offices (Economic and Social Affairs; International Economy, Competition and Private Investment; Public Revenue Policies; and Multiannual Planning of the Public Sector). • In practice, the formulation of policies, is coordinated through an informal committee, comprising the Minister of Economy, the Vice minister of Treasury, the Head of the Advisors Staff and the Economic Studies Manager of the Central Bank. • The Viceministry of Economy works with approximately 40 employees, distributed in the abovementioned departments.

  35. The Central Bank The Central Bank Notwithstanding its responsibility in monetary issues the Central Bank also actively participates in the design of other economic policies (fiscal policy) through its participation in the aforementioned committees of the Ministry of Economy. In these policy decisions, the Central Bank usually has considerable influence, as a consequence of its relatively high institutional development, and the tradition of having a high technical level “army” of analysts, statistics, economic models, etc; something that the Ministry of Economy (and the public sector in general) has not adequately developed.

  36. The Central Bank The Economic Studies Department The Economic Studies Department is responsible for the implementation of monetary policy. It has 120 employees, 80 of them economists. The Department has an administrative structure influenced by the financial programming schemes of the International Monetary Fund. It is organized in five departments: global analysis sector, external sector, monetary sector, fiscal sector, and real estate sector.

  37. The Central Bank Economic Research

  38. The Congress: The Lack of an Economic Technopol. • The Congress • The Congress has 120 congressmen. • They all take part in various Committees where proposals are discussed. Once these proposals have been approved at Committee level they go on to the Congress General Assembly (Pleno del Congreso) for final approval. • The Congress has 24 ordinary committees and congressmen can participate in as many as 3 different committees. • The technical capacity of the Congress is extremely low as its staff do not have the sufficient preparation. • In 2002, the Congress created the Parliamentary Investigation Center (CIP), with the aim to bring technical support, but in actual fact, its support has been incipient, because the congressmen receive support from private advisors that are paid through the national budget.

  39. The Congress: The Lack of an Economic Technopol. • The Congress • Each congressman hires, on average, two private advisors, who specialize in different fields (usually, lawyers, economists and financial experts) who provide expert advice on legislative duties. • However the employment of these advisors does not necessarily assure quality in the formulation of economic policies. • Congress has 2.072 internal employees. Of these, 565 are professionals who carry out executive responsibilities and participate in the various committees. • The technical capacity of the Congress is, however, very weak: 4 analysts in total for Congress. They are appointed by the President of the Congress and, in practice, do not give a professional service to congressists.

  40. Think-Tanks in Peru Think-Tanks The three most important in Peru are: Apoyo Macroconsult; Grade and IPE. These institutions influence economic policy agendas through periodical publications, research, press appearance, or by giving direct or indirect advice to the government.

  41. Think-Tanks in Peru: An International Comparison

  42. Think-Tanks in Peru Apoyo Consulting • Apoyo Consulting is one of the firms belonging to The Apoyo Group. Created in 1977. It has 150 firms in its portfolio, including the most important Peruvian and international firms in Peru. • With a working team of more than 250, APOYO has had an average income growth of 25 per cent per year since 1977. Its billing reaches US$200 per every million dollars of Peruvian GDP. • It affects economic policy through the advice that it gives to its clients, and the confidential documents that Apoyo prepares exclusively for them. http://www.apoyo.com/english/eco_studies/

  43. Think-Tanks in Peru Instituto Peruano de Economía (IPE) The Peruvian Institute of Economics (IPE), was created in 1995 as an initiative of 31 Peruvian firms. It was originally supported by the World Bank, receiving contributions from the World Bank Institutional Development Fund. IPE is a private civil association and its aim is to promote the sustainable development of market economy in Peru, through research, analysis and other activities. Since 1999, IPE gets its funding from member contributions and from its investigations. During Fujimori´s government, most of its members had a direct participation, exercising different positions in the Ministry of Economy and Finance. http://www.ipeportal.org/

  44. Think-Tanks in Peru Grade The Analysis Group for Development (GRADE); non governmental organization. Carries out investigations on public policy. Set up in 1980. The results of its investigations are made known through different resources, such as publications, a web page and the press, amongst others. GRADE is directed by an Associated Assembly and most of the principal researchers take an active part. This Assembly determines the topics and directions for research as well as defining the development strategies that guarantee GRADE´s independence. GRADE participates in policy debate at a very high and technical level, and it does not usually participate in public debate. http://www.grade.org.pe/

  45. Think-Tanks in Peru Academics: There are two universities with research centers contributing to economic publications. One is the Research Center at “Universidad del Pacifico” (CIUP), and the other is the Center of Sociology, Economics, Politics and Anthropology, belonging to the “Universidad Catolica”(CISEPA). However, their contribution to the economic policy debate is marginal. “Centro Universitario Universidad del Pacífico” (CIUP): It was created in 1972 and is financed with public university funds and specific financial programs from international and multilateral organizations. http://www.up.edu.pe/ciup/

  46. International Organizations Based in Peru International Organizations In Peru there are two main international organizations: IDB and CAF. IDB mainly develops operational labor such as checking the advance of financial programs to the government. CAF, although it has an economist, makes a marginal contribution to domestic economic policy debate. However, the headquarters of IDB and CAF, as well as IMF, could accomplish an important role by conditioning domestic economic policies. Acting as cognitive assets for reformers.

  47. Banks Based in Peru Banks Three important banking institutions with economic departments participating in the economic policy debate through their publications or press commentaries. These institutions are: BBVA Banco Continental, Banco de Credito and Banco Wiese Sudameris. These institutions contribute in a similar way to economic debate, basically through publications, articles, press appearances, seminars, conferences and interviews.

  48. 1 A Mapping ofLatin American Cognitive Institutions 2 Enter the Matrix: The case of Peru 3 Conclusions: The emergence of possibilism

  49. The Emergence of The Political Economy of the Possible: Chile • The key is probably in the cognitive policy making style that has been developed in Chile throughout the past decades, precisely in the equilibrium reach between technical and political rationalities. • If one gets recent decades into perspective, what really stands out are the profound transformations which give rise to a “bias for hope” as Albert Hirschman would say, rather than “fracasomanía” (failure syndrome). • What most draws one’s attention is that, for the last quarter of a century, Chile has been searching for ways to grow through pragmatic economic policies. • It has been inventing and creating institutional masts, looking for monetary and fiscal anchors, and more importantly it has been doing all of this outside the predetermined paths of any rigid ideological model.

  50. Not surprisingly Chile is the country in with the highest stability policy score Average Source: IADB Politics of Policies Report, 2006

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