“Happiness is not the absence of
problems; it's the ability to deal with them.”
Steve
Maraboli
Latin
America
Latin America has been a region
which has suffered throughout history, political instability that has led to
deterioration in the quality of life. Latin America has always been looked at
as an undeveloped region with lots of promises for the future but many
obstacles in order to deliver.
Which is the true legacy that the
current generation is providing to the young? Is our way of doing business,
educating our people and taking care of health sustainable? Could we restrict
the dilemma to a matter of political visions (capitalism/socialism)?
To analyze the governability of
the region and propose solutions it is useful to start with a broad perspective
of what is going on regarding leadership and the way of embracing the 21st
Century.
There is a clear division between
the countries facing the Atlantic Ocean (Brazil, Argentina, Venezuela) and the
countries facing the Pacific Ocean (Mexico, Peru, Chile, Colombia). While the
first group has shown irresponsible policies like exaggerated protectionism
that has undermined the innovation and competitiveness of their industries, the
second group has adopted open economies with free trade agreements which are
more likely to attract investment.[1][1]
The most critical case in the
Atlantic Block is Venezuela who closed 2013 with inflation over 50 %.
Venezuela’s economic distress is so acute that the central bank stopped
releasing regular statistics for the first time ever, threatening to increase
borrowing costs further as the nation faces $10 billion of financing needs.[2][2]
Even though some of these
economies are able to stay afloat given the high amounts of natural resources
they have (Venezuelan oil, Argentine soy and Brazilian iron ore), the prices
volatility don´t represent a sustainable model for the region.
To the contrary, nations facing
the Pacific Ocean have focused on adding value and attracting investment to
their territories. The U.S. Department of Treasury affirms: These Latin Tigers (Colombia, Peru and Chile)
are some of the world’s most open economies. The Tiger economies are leading
the way for smaller countries in the region, such as Panama and Uruguay, and
serving as examples for others countries that remain stumped by political
agendas, despite their wealth in natural resources.[3][3]
The Costa
Rican Case
Even though Costa Rica is a small
Latin American economy it has been exposed to many of the obstacles that have
kept the entire area undeveloped.
Costa Rica has the most ancient
democracy in Latin America, which has allowed the country to build its society
in a different way than other countries in the region. Back in the early 20th
Century the country faced many inequality problems and riots when the working
society arisen, supported by socialist ideas coming from the Russian
Revolution. These battles ended with a resolution in the administration of Dr.
Rafael Ángel Calderón Guaridia (1940-1944) with a pact between the Government,
Communist Party and the Catholic Church to guarantee a strong labor
legislation, and Social Guarantees (Health Care).
Even though this was a huge win
for the communist group and represented the solidification of a base to build
up a strong middle class in Costa Rica, the country didn´t took a communist or
authoritarian path and instead strengthen its democracy.
This democratic middle class
creation strongly contradicts what Robert D. Kaplan proposes in his essay
"Was Democracy Just a Moment?" Mr. Kaplan believes that democracy and
undeveloped countries are not compatible. He assures that the only way for
developing countries to reach social stability is to be under an “efficient”
authoritarian regime. He refers to cases like Chile, Singapore and Peru in
order to support his thesis. [4][4]
But why if this were to be true
are there countries like Cuba, Argentina, Mexico, Bolivia or Venezuela? Why
Costa Rica was able to build a solid middle class without authoritarism and
where is currently losing the trail? Which country are the young leaders
inheriting?
According to the “Economic
Mobility and the Rise of the Latin American Middle Class” report elaborated by
the World Bank[5][5], Costa
Rica managed to be the country of the region where the middle class grew the
most in the last decade, nevertheless there is also an increase in the
inequality.[6][6]
Costa Rica is also the country
with a higher public spending in Central America. According to the Instituto
Centroamericano de Estudios Fiscales the country spends 26 % of its GDP in this
subject. [7][7]
A dilemma rises in this topic as
8 % of the GDP is spent in state payroll.[8][8] Is Costa
Rica managing to keep its middle class with a strong intervention from the
State in order to reduce unemployment making the State bigger? Wouldn´t this
growth of the State bring more bureaucracy, inefficiency and be an obstacle for
innovation, investment attraction and competitiveness? A quick solution would
be to reduce the size of the State. But to what extent this would impact the
Costa Rican model?
This controversy isn´t only a
Costa Rican reality. In Latin America this same issues are being manifested and
they are opening the gates to populists that promise a better reality to the
people. These populists enchant the masses that don´t realize that by moving to
a protectionist State the stagnation that will come as a consequence will be
fatal in a globalized reality while other countries and regions aren´t losing
time.
Latin Americans should
interiorize what Václav Havel, last president of Czechoslovakia (1989–1992) and
the first president of the Czech Republic (1993–2003), very wisely affirmed:
“Though my heart may be left of centre, I have always known that the only
economic system that works is a market economy. This is the only natural
economy, the only kind that makes sense, the only one that leads to prosperity,
because it is the only one that reflects the nature of life itself”.
What Can
Be Done?
So what is the exact measure to
avoid falling into the frightening populism and still guarantee a prosperous
society? The answer might come from the implementation of several plans sparse
throughout different latitudes.
An interesting “cluster” to
analyze is the Nordic Countries. They have the world’s highest rates of social
mobility according to Jo Blanden, Paul Gregg and Stephen Machin, of the London
School of Economics.[9][9]
The Nordics also manage to
dominate indices of competitiveness as well as of well-being, and pride
themselves on the generosity of their welfare states. How do they do it?
About 30% of their labor force
works in the public sector, twice the average in the Organization for Economic
Development and Co-operation. [10][10] Isn´t this a contradiction? Before I mentioned how having a big State
could generate gridlocks but the Nordic Countries show different results.
The situation in both regions is
very different. It begins with fiscal responsibility: all four Nordic countries
have AAA ratings and debt loads significantly below the euro-zone average. It
begins with choice and competition rather than paternalism and planning.[11][11]
Even though the size of the State
is somewhat bigger than what many liberals would expect the system has shown
great results because the essence of the State is extremely different than the
ones in Latin America.
In Latin America a bigger State
means to have a fertile land for corruption. This corruption at the same time
cause an exile of investments, increasing the poverty and the intervention of a
paternalist State which provides the perfect scenario for the populist
politicians to emerge.
According to the Corruption
Perceptions Index 2013[12][12] the top three countries in the region are Uruguay (19), Chile (22) and
Costa Rica (49). This index helps to explain why having a bigger State in the
region brings more complexity and possible problems than having this kind of
system in a Nordic country.
Nevertheless, the public spending
in Health and Education have allowed a country like Costa Rica to have the 21st
best education worldwide (higher in Latin America) according to The Global
Competitiveness Report 2012-2013 from WEF[13][13] and to be a leader in the region regarding to public health[14][14] spending 10.9 % of its GDP.[15][15]
Regarding these subjects Costa
Rica has been able to execute policies similar to the ones of the Nordic
countries which have shown interesting results. Still there is a problem not
only for Costa Rica but for the region concerning the high levels of
corruption. How can this be diminished?
Now it is time to turn our eyes
to the small Country of Singapore. Besides having high scores in many
international rankings, this country should call our attention given the fact
that being in a region where corruption is common (similar to Latin America)
currently Singapore appears as the fifth less corrupt country in the world.[16][16]
How were the Singaporeans able to
affront an Odyssey of such dimensions and still be triumphant? First they
decided to fight corruption by establishing the Corrupt Practices Investigation
Bureau in 1952 in order to attract foreign businesses to invest in their land.[17][17]
They showed a long-term mentality
and 62 years later they escalated in the corruption perception index and
brought business opportunities to the country generating a GDP per capita of $60.799[18][18].
Also, Singapore Ministry of
Foreign Affairs believes that small states share specific concerns and common
interests, such as environmental and economic vulnerabilities. These
similarities allow small states to discuss and foster common positions on
issues of mutual concern, thereby giving them a bigger voice in the UN.[19][19]
Additionally, the Singaporeans
have kept the salaries of politicians and civil servants high in order to
repress economic incentive to engage in corrupt activity.
Even though this alternative might
represent a high spending in the public service, in theory by reducing the
corruption in the country there would be more investment which would generate
better business opportunities for the people and would diminish the paternalist
role of the State leaving space to take care of Health, Education and
Infrastructure as its main tasks.
This would cause in the
population more willingness to pay their taxes since there would be tangible
improvements in their life quality and at the same time the environment free of
corruption would allow a better collection of taxes with lower evasion.
Given this scenario there are two
topics that need to be addressed: Education and entrepreneurship. In order to
establish a long-term goal of competitiveness for the region first the
education needs to be improved. At this point we need to return to our Nordic
pool of success and direct our eyes to Finland.
Here prospective teachers are
competitively selected from the pool of college graduates—only 15 percent of
those who apply are admitted—and receive a three-year graduate-level teacher
preparation program, entirely free of charge and with a living stipend.[20][20]
In Finland contrary to the Latin
America reality being a professor is well respected. These people don´t deal
with delays on their salary as many Latin Americans[21][21][22][22][23][23].
It is mandatory for the region to
increase the quality of the professors in order to assure future
competitiveness and provide a brighter future to the generations to come. This
leads to the last topic that I want to address which is entrepreneurship. Once
having the conditions mentioned above a new class of entrepreneurs could
arise.
Esteban Brenes and Jerry Haar
affirm that: “The decision to become an entrepreneur is affected by values,
beliefs, and social institutions”.[24][24]
According to them some societies
consider entrepreneurs undesirable and people are discouraged from following
this path. Given the new rising “Atlantic Bloc” in Latin America it is
important to remember that in former Soviet countries, schools and universities
trained people to become bureaucrats so that even today, it is hard for young
people to become entrepreneurs.
In other countries, business
people are not respected because they have shown improper behavior in that
society in the past. Countries with a clear view of importance of
entrepreneurship for growth and success should work at changing the attitude of
their population, and encourage them to accept entrepreneurs, and even consider
them as heroes”.[25][25]
Coming back to the question of
what legacy are the young generations receiving, Latin American leaders have to
revise and work together with new leaders to overcome the current obstacles by
opening their minds in a globalized world and realizing that in many other
regions there are people with similar difficulties working together for a
better future.
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