Eugenio Diaz Bonilla, Executive Director for Argentina and Haiti, Inter-American Development Bank 14th October 2008, International Food Policy Research Institute, Washington D.C.

1. Comments on “Fift Years
C t “Fifty Y
of Distortions in World
Food Markets”
Eugenio Diaz Bonilla
Executive Director for Argentina and Haiti
g
Inter-American Development Bank

2. Overview
Congratulations
Methodology
Applications
Only economists care about
“distortions”...?
distortions ?
…. or some random thoughts about
communicating with interested
audiences…

3. Methodology
Partial equilibrium versus general
equilibrium of distortions
Sherman Robinson et al (1998 and 2002)
TMD publications 25 and 105
Criticized Krueger, Schiff, and Valdés, 1988;
Schiff and Valdés 1992; Bautista and
Valdés,
Valdés, 1993
Issues: exchange rates, inputs, tradability,
g , p , y,
marketing margins, among others
Anderson et al (
d l (WBWP 4612, April 2008)
il )
correct approach in ER, tradability; the
other issues more difficult to deal in
partial equilibrium measures

4. Applications
CGE simulations
i l ti
Can be utilized in welfare simulations…
…but careful with the ER component of the
b t f l ith th t f th
distortion measures (they are not being
negotiated in the WTO, even though there
are IMF and WTO links; more on this
below)
Econometric analysis of growth and
trade
Cross-section and panel regressions
…controlling for macroeconomic and
developmental policies, and other factors

5. NRA and Growth for Africa
5
y = 0 2133 + 4 5326
0,2133x 4,5326
R2 = 0,4568 4,5
4
3,5
3
2,5
2
1,5
1
0,5
0
-16 -14 -12 -10 -8 -6 -4 -2 0
Africa Growth Linear (Africa Growth)

6. LAC: Growth, NRA and RRA
1960/70s 1980/2000s
LAC
Agricultural
Growth 3.1 2.9
NRA -13.5 -1.8
RRA -33.8 -13.6

7. NRA and Agricultural Growth
in Developing Countries
6
y = 0.0144x + 3.21
5
R2 = 0.0273
4
3
2
1
0
-30 -25 -20 -15 -10 -5 0 5 10 15
Series1 Linear (Series1)

8. RRA and Agricultural Growth
in Developing Countries
6
y = 0,0029x + 3 1457
0 0029x 3,1457
R2 = 0,0028
5
4
3
2
1
0
-70 -60 -50 -40 -30 -20 -10 0 10
Series1 Linear (Series1)

10. 0
5000000
10000000
15000000
20000000
25000000
30000000
19
7
19 3
7
19 4
7
19 5
7
19 6
7
19 7
7
19 8
7
19 9
8
19 0
8
19 1
8
19 2
8
19 3
8
19 4
8
19 5
8
19 6
8
19 7
8
19 8
8
19 9
9
Net Agricultural Trade
19 0
9
19 1
9
19 2
9
19 3
US: REER and Net Agricultural Trade
9
US REER
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
04
50
60
70
80
90
100
110
120
130

11. Indicators of Production and Trade
12.00% 66.00%
64.00%
10.00%
62.00%
8.00%
60.00%
6.00% 58.00%
56.00%
4.00%
54.00%
2.00%
52.00%
0.00% 50.00%
Average 1990s Average 2003-2007 Last campaign 2006/7
Production Argentina/World Exports Argentina/World Exports/Production Argentina

12. 19
60
0
20000
40000
60000
80000
100000
120000
/1
96
19 1
62
/1
96
19 3
64
/1
96
19 5
66
/1
96
19 7
68
/1
96
19 9
70
/1
97
19 1
72
/1
97
19 3
74
/1
97
19 5
76
/1
97
19 7
78
/1
97
19 9
80
/1
98
19 1
82
/1
98
GRAINS+OILSEEDS
19 3
84
/1
(000 MT)
Argentina:
98
19 5
86
/1
98
19 7
88
/1
Production Grains and Oilseeds
98
19 9
90
/1
99
19 1
92
/1
99
3
Expon. (GRAINS+OILSEEDS)
19
94
/1
99
19 5
96
/1
99
19 7
98
/1
99
20 9
00
/2
00
20 1
02
/2
00
20 3
04
/2
00
20 5
06
/2
00
7

13. Indices of world prices, REER and Domestic Relative Prices (2001 Q1=1)
3
2.5
2
1.5
1
0.5
0
6
7
8
9
0
1
2
3
4
5
6
7
8
96
97
98
99
00
01
02
03
04
05
06
07
I9
I9
I9
I9
I0
I0
I0
I0
I0
I0
I0
I0
I0
III
III
III
III
III
III
III
III
III
III
III
III
REER index (CPI based; against US$) Relative prices agriculture/non agriculture
World Agricultural Prices (Real; deflated by CPI-US)

14. Legal Issues in ER Policies
GATT se e al references to IMF and exchange rates.
several efe ences e change ates
Particularly, Article XV. Exchange Arrangements. “4.
Contracting parties shall not, by exchange action,
frustrate the intent of the provisions of this Agreement,
f t t th i t t f th i i f thi A t
nor, by trade action, the intent of the provisions of the
Articles of Agreement of the International Monetary
Fund.”
F d”
IMF: Article IV of the IMF's Articles of Agreement
IMF s
“Obligations Regarding Exchange Arrangements.” The
Decision on Bilateral Surveillance, approved by IMF
Board June 15, 2007, which complements the IMF s
IMF's
multilateral surveillance. Replaces the 1977 Decision.
(only covered surveillance over exchange rate policies;
the new Decision is broader).
Calculations of fundamental misalignment

15. Communication
W economists tend to talk in terms of
We i t t d t t lk i t f
distortions and gains in welfare…
Losses are b tt attention getter
L better tt ti tt
“Tell me where it hurts” paper
Need t d b t th
N d to debate the same “values”
“ l ”
Food security (paper with cluster
analysis)
Poverty (microsimulations; careful with
labor market modeling)
Multifunctionality (“That was then and
this is now” paper)
Livelihood or survival strategies
(“Thinking Inside the Boxes” paper)

16. Conclusions
G tj b t t ti f l
Great job at constructing useful
indicators with large coverage (time,
country, products)
Need to better understand links to
agricultural growth and trade…
Consider price effects but also income
effects; broader framework with other
macroeconomic and growth policies…
policies
For trade negotiations, ER issues are
separate (although they may eventually
converge…)
As economists our research program and
communication efforts must also consider
ff
“values” being debated…

17. Thanks....

18. 0
50
100
150
200
250
300
350
M1 1960
M2 1961
M3 1962
M4 1963
M5 1964
M6 1965
M7 1966
M8 1967
M9 1968
M 10 1969
M 11 1970
M 12 1971
M1 1973
M2 1974
M3 1975
M4 1976
M5 1977
M6 1978
M7 1979
M8 1980
M9 1981
Real Agricultural Prices
M 10 1982
M 11 1983
M 12 1984
Metals
M1 1986
M2 1987
M3 1988
M4 1989
Crude Oil
M5 1990
M6 1991
M7 1992
M8 1993
M9 1994
M 10 1995
M 11 1996
M 12 1997
M1 1999
M2 2000
M3 2001
M4 2002
M5 2003
M6 2004
M7 2005
0
20
40
60
80
100
120
140
160
180
200

19. AFRICA: Agricultural Growth and NRA
0 5
1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
4.5
-2
4
-4
3.5
-6
3
-8 2.5
2
-10
1.5
15
-12
1
-14
0.5
-16 0
Africa NRA Africa Growth

20. LAC: Agricultural Growth and NRA
10 3.6
3.4
5
3.2
0
1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
3
-5
2.8
-10
2.6
-15
2.4
-20
2.2
-25 2
LAC NRA LAC Growth

21. ASIA: Agricultural Growth and NRA
15 5.5
10
5
5
4.5
0
1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
4
-5
-10
3.5
35
-15
3
-20
20
2.5
-25
-30
30 2
Asia NRA Asia Growth

22. -1
0
1
2
3
4
5
6
19
7
19 0
7
19 1
7
19 2
7
19 3
7
19 4
7
19 5
7
19 6
7
19 7
7
19 8
7
19 9
8
19 0
8
19 1
8
19 2
8
19 3
8
19 4
8
19 5
8
19 6
8
19 7
Aggregate Net Resources (% GDP)
8
19 8
8
19 9
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
Aggregate Net Resources and Transfers (% GDP)
19 5
9
19 6
9
19 7
9
Aggregate Net Transfers (% GDP)
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
05

23. -1
0
1
2
3
4
5
6
7
8
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
East Asia & Pacific
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
Latin America & Caribbean
87
19
88
19
89
Net Private Capital Flows
19
90
19
91
19
92
19
93
South Asia
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
Sub-Saharan Africa
02

25. 60
70
80
90
100
110
120
130
140
J a n -7 3
J a n -7 4
J a n -7 5
J a n -7 6
J a n -7 7
J a n -7 8
J a n -7 9
J a n -8 0
J a n -8 1
J a n -8 2
J a n -8 3
J a n -8 4
J a n -8 5
J a n -8 6
J a n -8 7
J a n -8 8
J a n -8 9
J a n -9 0
J a n -9 1
REER US Dollar (FedRes)
J a n -9 2
REER US Dollar (FedRes)
J a n -9 3
J a n -9 4
J a n -9 5
J a n -9 6
J a n -9 7
J a n -9 8
J a n -9 9
J a n -0 0
J a n -0 1
J a n -0 2
J a n -0 3
J a n -0 4
J a n -0 5
J a n -0 6

26. Tema 2: Sobreinversión
Exceso de liquidez mundial generó sobre
sobre-
inversión en casas y propiedad inmueble en
EEUU y otros países
p
Altos precios generaron efecto riqueza entre
las familias norteamericanas (y otros países)
y han permitido tomar prestado contra
inmuebles, manteniendo el consumo
Caída actual de propiedades impacta al revés:
efecto “pobreza”, no ingreso disponible y
efecto multiplicador negativo de la caída de la
inversión inmobiliaria
i ió i bili i
Posible impacto sobre el sistema financiero
norteamericano (similaridades con crisis de
fines de 1980s)

28. Food Prices and World Growth
30
25
20
15
10
5
0
0 1 2 3 4 5 6
-5
-10
-15
-20
20
-25
Series1 Linear (Series1)

29. Metal Prices and World Growth
60
50
40
30
20
10
0
0 1 2 3 4 5 6 7 8
-10
-20
-30
Series1 Linear (Series1)

30. Oil Prices and World Growth
80
60
40
20
0
0 1 2 3 4 5 6 7 8
-20
-40
-60
Series1 Linear (Series1)

31. Change in NRA and Agricultural Growth
in Developing Countries
6
y = 0.0368x + 2.9904
2
R = 0.0525
5
4
3
2
1
0
-20 -15 -10 -5 0 5 10 15 20
change NRA and growth Linear (change NRA and growth)

32. World and US Growth
8
7
6
5
4
3
2
1
0
-4 -2 0 2 4 6 8
World and US growth Linear (World and US growth)

33. -6
-4
-2
0
2
4
6
8
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
Real Interest Rate
89
19
Real Interest Rate
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05

34. ¿Posibles contrapesos (2) ?
Pueden China o Japón mantener
crecimiento mundial? No...
Porcentaje del PBI Mundial
P j d l M di l
0,35
0,3
03
0,25
0,2
0,15
0,1
0,05
0
China Japan European Union United States
PBI en dolares PPP PBI en dolares corrientes