The Political Economy of Emerging Markets: Actors, Institutions and Crisis in Latin America

268 Pages·2003·1.07 MB·English

by  Javier Santiso

The Political Economy of
Emerging Markets
Actors, Institutions and Financial Crises in
Latin America
Javier Santiso
The Political Economy of Emerging Markets
The CERI Series in International Relations and
Political Economy
Series Editors, Christophe Jaffrelot and Christian Lequesne
This series consists of works emanating from the foremost French research center in
international studies,the Paris-based Centre d’Etudes et de Recherches Internationales
(CERI),part of Sciences Po and associated with the CNRS (Centre National de la
Recherche Scientifique).
Founded in 1952,CERI has about sixty fellows drawn from different disciplines who
conduct research on comparative political analysis,international relations,regionalism,
transnational flows,political sociology,political economy,and on individual states.
This series focuses on the transformations of the international arena,in a world where
the state,though its sovereignty is questioned,reinvents itself.The series explores the
effects on international relations and the world economy of regionalization,globaliza-
tion (not only of trade and finance),and transnational flows at large.This evolution in
world affairs sustains a variety of networks from the ideological to the criminal or ter-
rorist.Besides the geopolitical transformations of the globalized planet,the new political
economy of the world has a decided impact on its destiny as well,and this series hopes
to uncover what that is.
Published by Palgrave Macmillan:
Politics in China:Moving Frontiers
edited by Françoise Mengin and Jean-Louis Rocca
Tropical Forests,International Jungle:The Underside of Global Ecopolitics
by Marie-Claude Smouts,translated by Cynthia Schoch
The Political Economy of Emerging Markets:Actors,Institutions and Financial Crises in
Latin America
by Javier Santiso
The Political Economy of
Emerging Markets
Actors, Institutions and Financial Crises in
Latin America
Javier Santiso
THEPOLITICALECONOMYOFEMERGINGMARKETS
© Javier Santiso,2003
All rights reserved.No part of this book may be used or reproduced in any
manner whatsoever without written permission except in the case of brief
quotations embodied in critical articles or reviews.
First published 2003 by
PALGRAVE MACMILLAN™
175 Fifth Avenue,New York,N.Y.10010 and
Houndmills,Basingstoke,Hampshire,England RG21 6XS.
Companies and representatives throughout the world
PALGRAVE MACMILLAN is the global academic imprint of the
Palgrave Macmillan division of St.Martin’s Press,LLC and of
Palgrave Macmillan Ltd.Macmillan® is a registered trademark in the
United States,United Kingdom and other countries.Palgrave
is a registered trademark in the European Union and other countries.
ISBN 1–4039–6232–4 hardback
Library of Congress Cataloging-in-Publication Data
Santiso,Javier.
The political economy of emerging markets:actors,institutions and
financial crises in Latin America/by Javier Santiso.
p.cm.
Includes bibliographical references.
ISBN 1–4039–6232–4
1.Capital market—Latin America.2.Stock exchanges—Latin America.
3.Financial crises—Latin America.I.Title.
HG5160.5.A3S26 2003
332’.098—dc21 2002044716
A catalogue record for this book is available from the British Library.
Design by Newgen Imaging Systems (P) Ltd.,Chennai,India.
First edition:August,2003
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
...y el director del banco observaba el manómetro
que mide el cruel silencio de la moneda...
Federico Garcia Lorca
Poeta en Nueva York
Pour Suzanne
This page intentionally left blank
C O N T E N T S
List of Tables,Charts and Graphs viii
The Author xi
Chapter One Introduction:Inside the Black Box.A Journey
Toward Emerging Markets 1
Chapter Two The Confidence Game:Exit,Voice and Loyalty
in Financial Markets 17
Chapter Three Capital Flows to Emerging Markets:
Goodbye the Golden 1990s? 46
Chapter Four The Usual Suspects:Timescales,Strategies and
Constraints of Emerging Market Asset Managers 71
Chapter Five A Small Embedded World:Technopols,
Arenas and Trespassers 113
Chapter Six The Timing Game:Wall Street,Mexico and
Argentina.A Temporal Analysis 146
Chapter Seven Conclusion:Financial Markets and the
Memory of the Future 187
Notes 204
Index 251
L I S T O F T A B L E S , C H A R T S A N D
G R A P H S
Tables
2.1 Timetable of pension reforms around the world 30
2.2 Argentina’s political speed:ministerial changes between
1983 and 2001 40
3.1 Frequency of crises in emerging markets 1880–1997 49
3.2 European investments in emerging countries before
World War I 50
4.1 Effects in terms of fund flows of free float adjustments
(% weight change) 81
4.2 Emerging market equity funds in 2000 85
4.3 Latin American emerging market equity funds,July 2000 87
4.4 Global emerging market equity funds,sample of
interviews,July 2000 90
4.5 Herfindahl–Hirschman concentration index of
emerging market equity funds:money managers ranked
by total net assets,July 2000 94
4.6 100 largest emerging market equity funds concentration
index,July 2000 97
4.7 Emerging market equity funds ranked by assets and
websites,July 2000 101
4.8 Frequency of the evaluation of fund managers’
performance 105
4.9 Fund managerial replacement,1976–1996 106
4.10 Salaries and bonuses in fund management and investment
banks,London (in pounds per 1000) 108
4.11 Salaries and bonuses in the United States 109
LIST OFTABLES,CHARTSAND GRAPHS ix
4.12 Timing of bonus negotiation and payment (in % of
total sample:145) 112
5.1 Top and medium economic policy-making positions in
Mexico,October 1994 115
5.2 World confidence game arenas,annual meetings in 2000 123
5.3 JP Morgan Chase program speakers during the IADB 2001
annual meetings,Santiago de Chile,March 17–20,2001 126
5.4 (a) Speakers at the IADB 2001 investor forums,
number of speakers by country 127
(b) Speakers at the IADB 2001 investor forums,
number of speakers by profession 127
5.5 The Financial Times confidence game arena 134
5.6 The trespassing game:the example of New York-based
Deutsche Bank securities 138
5.7 A circular game:analysts’views in Latin American national
investment agency reports 141
6.1 IMF global standard efforts since Mexico:an empirical
evaluation by fund managers (n(cid:2)61) 170
6.2 Mexico investment grade:falling correlations between
Mexico and other Latin American emerging markets (%) 173
7.1 The power game:distribution of voting rights in the IMF
by groups of countries 202
Charts
2.1 Change of governors and terms of office 33
2.2 IMF facilities:shortening temporal horizons of
the confidence game 41
Graphs
2.1 Latin American 1988–1997 privatization revenues/
1997 GDP (%) 28
2.2 Diffusion of pension reforms around the world,1980–2000 29
2.3 Number of central banks,1900–2000 33
3.1 Crisis frequency in emerging markets
(percent probability per year) 48
3.2 Foreign direct investments in Latin America,1900–2000
(in % of GDP) 51
3.3 Net capital flows to emerging markets by region (US$ bn.) 53