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2. Scarcity without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War
- Author:
- Juan Camilo Castillo, Daniel Mejia, and Pascual Restrepo
- Publication Date:
- 02-2014
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- Using the case of the cocaine trade in Mexico as a relevant and salient example, this paper shows that scarcity leads to violence in markets without third party enforcement. We construct a model in which supply shortages increase total revenue when demand is inelastic. If property rights over revenues are not well defined because of the lack of reliable third party enforcement, the incentives to prey on others and avoid predation by exercising violence increase with scarcity, thus increasing violence. We test our model and the proposed channel using data for the cocaine trade in Mexico. We found that exogenous supply shocks originated in changes in the amount of cocaine seized in Colombia (Mexico's main cocaine supplier) create scarcity and increase drug-related violence in Mexico.
- Topic:
- Crime, Economics, War on Drugs, Narcotics Trafficking, and Law Enforcement
- Political Geography:
- Colombia, Latin America, and Mexico
3. From Maize to Haze: Agricultural Shocks and the Growth of the Mexican Drug Sector
- Author:
- Oeindrila Dube, Omar Garcia-Ponce, and Kevin Thom
- Publication Date:
- 02-2014
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- We examine how commodity price shocks experienced by rural producers affect the drug trade in Mexico. Our analysis exploits exogenous movements in the Mexican maize price stemming from weather conditions in U.S. maize-growing regions, as well as export flows of other major maize producers. Using data on over 2,200 municipios spanning 1990-2010, we show that lower prices differentially increased the cultivation of both marijuana and opium poppies in municipios more climatically suited to growing maize. This increase was accompanied by differentially lower rural wages, suggesting that households planted more drug crops in response to the decreased income generating potential of maize farming.
- Topic:
- Agriculture, Economics, Poverty, War on Drugs, and Narcotics Trafficking
- Political Geography:
- Latin America and Mexico
4. Understanding Latin America's Financial Inclusion Gap
- Author:
- Liliana Rojas-Suarez and Maria Alejandra Amado
- Publication Date:
- 05-2014
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- This paper analyzes Latin America's Financial Inclusion Gap, the difference between the average financial inclusion for Latin America and the corresponding average for a set of comparator countries. At the country level, we assess four types of obstacles to financial inclusion: macroeconomic weaknesses, income inequality, institutional deficiencies and financial sector inefficiencies. A key finding of this paper is that although the four types of obstacles explain the absolute level of financial inclusion, institutional deficiencies and income inequality are the most important obstacles behind the Latin America's financial inclusion gap. From our analysis at the individual level, we find that there is a Latin America-specific effect of education and income. The results suggest that the effect of attaining secondary education on the probability of being financially included is significantly higher in Latin America than in its comparators. Furthermore, the difference in the probability of being financially included between the richest and the poorest individuals is significantly higher in Latin America than in comparator countries.
- Topic:
- Economics, Education, Human Rights, and Poverty
- Political Geography:
- Latin America
5. Is Anyone Listening? Does US Foreign Assistance Target People's Top Priorities?
- Author:
- Benjamin Leo
- Publication Date:
- 12-2013
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- The United States government has made repeated declarations over the last decade to align its assistance programs behind developing countries' priorities. By utilizing public attitude surveys for 42 African and Latin American countries, this paper examines how well the US has implemented this guiding principle. Building upon the Quality of Official Development Assistance Assessment (QuODA) approach, I identify what people cite most frequently as the 'most pressing problems' facing their nations and then measure the percentage of US assistance commitments that are directed towards addressing them. By focusing on public surveys over time, this analysis attempts to provide a more nuanced and targeted examination of whether US portfolios are addressing what people care the most about. As reference points, I compare US alignment trends with the two regional multilateral development banks (MDBs) – the African Development Bank and the Inter-American Development Bank. Overall, this analysis suggests that US assistance may be only modestly aligned with what people in Sub-Saharan Africa and Latin America cite as their nation's most pressing problems. By comparison, the African Development Bank – which is majority-led by regional member nations – performs significantly better than the United States. Like the United States, however, the Inter-American Development Bank demonstrates a low relative level of support for people's top concerns.
- Topic:
- Security, Crime, Development, Economics, and Foreign Aid
- Political Geography:
- Africa, United States, America, and Latin America
6. Credit at Times of Stress: Latin American Lessons from the Global Financial Crisis
- Author:
- Liliana Rojas-Suarez and Carlos Montoro
- Publication Date:
- 02-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- The financial systems in emerging market economies during the 2008–09 global financial crisis performed much better than in previous crisis episodes, albeit with significant differences across regions. For example, real credit growth in Asia and Latin America was less affected than in Central and Eastern Europe. This paper identifies the factors at both the country and the bank levels that contributed to the behavior of real credit growth in Latin America during the global financial crisis. The resilience of real credit during the crisis was highly related to policies, measures and reforms implemented in the pre-crisis period. In particular, we find that the best explanatory variables were those that gauged the economy's capacity to withstand an external financial shock. Key were balance sheet measures such as the economy's overall currency mismatches and external debt ratios (measuring either total debt or short-term debt). The quality of pre-crisis credit growth mattered as much as its rate of expansion. Credit expansions that preserved healthy balance sheet measures (the “quality” dimension) proved to be more sustainable. Variables signalling the capacity to set countercyclical monetary and fiscal policies during the crisis were also important determinants. Moreover, financial soundness characteristics of Latin American banks, such as capitalization, liquidity and bank efficiency, also played a role in explaining the dynamics of real credit during the crisis. We also found that foreign banks and banks which had expanded credit growth more before the crisis were also those that cut credit most. The methodology used in this paper includes the construction of indicators of resilience of real credit growth to adverse external shocks in a large number of emerging markets, not just in Latin America. As additional data become available, these indicators could be part of a set of analytical tools to assess how emerging market economies are preparing themselves to cope with the adverse effects of global financial turbulence on real credit growth.
- Topic:
- Debt, Economics, Emerging Markets, Globalization, and Financial Crisis
- Political Geography:
- Europe, Asia, and Latin America
7. Is There Such a Thing As Middle Class Values?
- Author:
- Florencia Torche, Luis F. Lopez-Calva, and Jamele Rigolini
- Publication Date:
- 02-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- Middle class values have long been perceived as drivers of social cohesion and growth. In this paper we investigate the relation between class (measured by the position in the income distribution), values, and political orientations using comparable values surveys for six Latin American countries. We find that both a continuous measure of income and categorical measures of income-based class are robustly associated with values. Both income and class tend to display a similar association to values and political orientations as education, although differences persist in some important dimensions. Overall, we do not find strong evidence of any “middle class particularism”: values appear to gradually shift with income, and middle class values lay between the ones of poorer and richer classes. If any, the only peculiarity of middle class values is moderation. We also find changes in values across countries to be of much larger magnitude than the ones dictated by income, education and individual characteristics, suggesting that individual values vary primarily within bounds dictated by each society.
- Topic:
- Economics, Political Economy, Social Stratification, and Culture
- Political Geography:
- Latin America
8. Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico.
- Author:
- Nora Lustig, Luis F. Lopez-Calva, and Eduardo Ortiz-Juarez
- Publication Date:
- 10-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- Between 2000 and 2010, the Gini coefficient declined in 13 of 17 Latin American countries. The decline was statistically significant and robust to changes in the time interval, inequality measures, and data sources. In-depth country studies for Argentina, Brazil, and Mexico suggest two main phenomena underlie this trend: a fall in the premium to skilled labor and more progressive government transfers. The fall in the premium to skills resulted from a combination of supply, demand, and institutional factors. Their relative importance depends on the country.
- Topic:
- Development, Economics, Emerging Markets, Globalization, International Trade and Finance, Poverty, and Social Stratification
- Political Geography:
- Brazil, Argentina, Latin America, and Mexico
9. The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, and Peru: A Synthesis of Results
- Author:
- Nora Lustig
- Publication Date:
- 11-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- We apply a standard tax-and-benefit-incidence analysis to estimate the impact on inequality and poverty of direct taxes, indirect taxes and subsidies, and social spending (cash and food transfers and in-kind transfers in education and health). The extent of inequality reduction induced by direct taxes and transfers is rather small (2 percentage points on average), especially when compared with that found in Western Europe (15 percentage points on average). What prevents Argentina, Bolivia, and Brazil from achieving similar reductions in inequality is not the lack of revenues but the fact that they spend less on cash transfers—especially transfers that are progressive in absolute terms—as a share of GDP. Indirect taxes result in that net contributors to the fiscal system start at the fourth, third, and even second decile on average, depending on the country. When in-kind transfers in education and health are added, however, the bottom six deciles are net recipients. The impact of transfers on inequality and poverty reduction could be higher if spending on direct cash transfers that are progressive in absolute terms were increased, leakages to the nonpoor reduced, and coverage of the extreme poor by direct transfer programs expanded.
- Topic:
- Development, Economics, Education, Health, and Poverty
- Political Geography:
- Brazil, Argentina, Latin America, Mexico, Peru, and Bolivia
10. Capital Requirements under Basel III in Latin America: The Cases of Bolivia, Colombia, Ecuador and Peru
- Author:
- Liliana Rojas-Suarez, Arturo J. Galindo, and Marielle del Valle
- Publication Date:
- 05-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- A number of banks in developed countries argue that the new capital requirements under Basel III are too stringent and that implementing the proposed regulation would require raising large amounts of capital, with adverse consequences on credit and the cost of finance. In contrast, many emerging market economies claim that their systems are adequately capitalized and that they have no problems with implementing the new capital requirements. This paper conducts a detailed calculation of capital held by the banks in four Latin American countries—known as the Andean countries: Bolivia, Colombia, Ecuador and Peru—and assesses the potential effects of full compliance with the capital requirements under Basel III. The conclusions are positive and show that while capital would decline somewhat in these countries after they make adjustments to comply with the new definition of capital under Basel III, they would still meet the Basel III recommendations on capital requirements. More importantly, these countries would hold Tier capital to risk-weighted-asset ratios significantly above the 8.5 percent requirement under Basel III. That is, not only the quantity, but also the quality of capital is adequate in the countries under study. While encouraging, these results should not be taken as a panacea since the new regulations are only effective if coupled with appropriate risk management and supervision mechanisms to control the build-up of excessive risk-taking by banks. Further research into these areas is needed for a complete assessment of the strength of banks in the Andean countries.
- Topic:
- Debt, Economics, International Trade and Finance, and Monetary Policy
- Political Geography:
- Colombia, Latin America, Peru, Ecuador, and Bolivia
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