Desarrollo energético en América Latina y la economía mundial

William Loehr I POST 1973 ADJUSTMENT PROBLEMS OF OIL-IMPORTING... Negative movements in the current account can usuaI1y be offset by devaluations in the exchange rateo Unfortunately, devaluatÍon is not likely to be of the major importimce in adjusting current account defidts due to oil price increases that it is with almost a11 other causes. In the short run, the price elastici ty of demand for petroleum is notoriously low, devaluation which increases the cost of oil in domestie terms will most likely simply add to domestic inflatÍon (Cohen 1978). While flexible exchange rates are of sorne help (i.e. they are better than fixed rates) they are not a sufficient condition for adjusting this particular balance of payments disequilibrium. . Let us enumerate, in general terms, the kinds of adjustment that couId take place to offset the negative impaet of oil price increase. 1. The economy eouId contrast. Since the problem is one of im– ports (one of which is oil) exceeding exports, a contraetÍon of non– oil imports eouId correct the imbalance. Imports are generally a fune– tion of the level of economic aetivity; a reduction in which wouId bring about the required adjustment. (See Bird 1978). 2. Borrowing can offset the negative impaet of oil price inereases. From a balance of payments point of view each positive or negative figure need not be offset by an opposite figure in ·the same aecount -in faet this never happens. Thus, when there is a negative movement in current account Ít can be offset by a posÍtive movement elsewhere; if borrowing oeeurs the positive figure oeeurs in the capital aceount. 3.. Exports can be inereased, direetly offsetting the increase in the value of imports. 4. Dependency upon imported oil ean be redueed. 5. Import barriers could be raised, directly reducing non-oil im. ports. In whát follows we will not refer to this possibility until we reaeh the last section oí this paper. Trade restrictions for purpose ol balance of pa'yments adjustment are explicitly prohibited by the Ge· neral Agreement on Tariffs and Trade (GATT) to which most countries belong and, in any event, generalized trade restrictions are similar in effect to a' reduction in economic activity as mentioned in number one aboye. Probably the main problem with adjustment vía contraction, fi– nance, export expansion or reduced oil imports is that each requires a different time frame to carry out. In the very short run, the deve– lopment of a balance of payments deficÍt sets in motÍon a simulta. neous tendency for economic contractíon. If no poliey mea\Sures are taken to effect another form of adjustment, it will automatieaIly occur 217