The fairly good economic moment predicted for the coming years will not be enough to produce a deep and lasting social advance in Latin America. One example clearly illustrates this. México’s GDP per capita is currently 20 percent of the U.S.’s. Using data from the IMF, it becomes clear that the expected 3.8 percent annual economic growth rate over the next five years will not even make a slight dent on this gap. In 2019, Mexican GDP per capita will still be 20 percent that of its neighbor.
With the exception of Panamá, in five years, the gap will remain almost the same in all countries in Latin America and the Caribbean. That’s a bone-chilling story of social and economic stagnation.
GDP Growth: Percentage annual change. 2012-2013 actual.
2014-2019 forecast.
GDP Per capita gap: measures the distance to the U.S.
(U.S.’s GDP per capita = 100%)
Sources: IMF, Latin Trade
Perhaps the gap speaks for another disheartening fact: Latin America has been over-led and undermanaged. Political leaders have inspired and mobilized people towards a vision, but when it comes to management, to getting things done, numbers like these show that their contribution to the region has been much less evident. That’s a real problem. “Strong leadership with weak management is no better, and is sometimes actually worse,” said Harvard Business School’s, John P. Kotter referring to the results of years of his research on leadership.
Multilatinas and large corporations, on the other hand, have shown a dynamism that far surpasses that of their home countries. According to data from Economatica, in the past five years, the biggest 400 publicly traded companies of the region grew their revenues by 11 percent per year, close to 60 percent more than regional nominal GDP, which grew seven percent annually over the same period. Employment in Latin Trade’s biggest 100 employers in Latin America grew by 10.6 percent per year between 2009 and 2012, whereas total employment in the region increased at a sluggish 2.3 percent yearly over the period, according to ILO statistics. CEOs of these companies have led and managed their way to create two different worlds within Latin America. Need more evidence? Large mining companies have the same output per worker of their peers in the United States, while on average output per worker in Latam is 70 percent lower than that of the U.S.
The region needs more of those who are equally proficient in leadership and management. Governments should focus their direct action on the poor and the vulnerable, and should help – not just applaud or control- large, modern, efficient firms that know how to escape the gravity pull of backwardness. The strategy should be cooperation in making large efficient firms more productive. The rest are just good intentions that will not bridge the GDP gap.
A dull organization
Early next year, the Organization of American States (OAS) will hold elections to find a successor to Secretary General José Miguel Insulza. It does not promise to be a major event. As it is now, the office is not important enough to have the United States, Brazil and México disputing the post; not strong enough to foster the needed changes in human rights, economic development, security and democracy in the region; not efficient enough to become a principal actor in the creation of commerce, in curbing drug trafficking, in adopting new migratory policies, in reducing discrimination, or in almost any of the countless mandates this organization has. The OAS has few resources, and too many, too unimportant tasks. Just as Insulza himself has said, “at $50,000 per topic, we will not do anything important.” The situation has been made worse because countries like the U.S. lost interest in the platform since Venezuela gained control through the garnering of the votes of Caribbean nations. Short of financial resources and completely lost in the sea of irrelevance, much like competing Unasur, the OAS could surely profit from a deep reform. Why not try to do it this time around?
Santiago Gutiérrez,
Executive Editor
sgutierrez@latintrade.com