Wednesday, November 3, 2010

self reference criteria

Today I had a hard time understanding something in class.

My Mercados de Latinoamerica class is probably one of the most interesting, and naturally one of my favorite classes this semester. My school in Boston is so caught up in Europe's (to me, kind of boring) economy when there is a clear need to study Latin America's growing market.

To get to what I was confused about, we were discussing Peru today and the reasons why the country did not suffer quite as much as other countries during the economic crisis. (Bolivia is another country that was seemingly unscathed.) The government focused on saving to augment their reserves, cut down on public spending, and applied counter-cyclical policies in their economy (lower interest rates & increment in taxes) while the president's levels of popularity continued to grow, and the Peruvians still pretty much had the same purchasing power. Can you see where I'm going with this? The estadounidense in me couldn't understand how a cut in public spending and increase in taxes could possibly result in higher approval ratings of the president and an overall content general public. That's like, one of the worst things Washington D.C. can do (OK there are far worse things but you get my point...). I still can't completely grasp it (it's an ongoing discussion in class) but I believe it's a result of a decade of somewhat conservative fiscal policies that work when a country has a smaller economy in relation to the countries that actually caused this economic crisis. Poverty still prevails in Peru and taxes are paid by a minority of people, but the estimated 7.7% growth in real GDP this year really can't be ignored.

I must think about this further.