Latin America’s Potential Is Unparalleled, What Is Holding It Back?

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The Dream Of Bolivar

In 1825, after liberating South America from Spain, General Simon Bolivar conceived a beautiful dream.

Bolivar envisioned a Latin America whose territories were devoid of boundaries, and their populations were free, educated and prosperous. This Great Latin American Union would be self-sufficient, productive and capable of sharing their natural resources. Foreseeing how powerful the United States would become, Bolivar sought to emulate them. Bolivar idealized this project in a monumental light: “When I contemplate this immense reunited country, my soul mounts to that height demanded by the colossal perspective of a picture so wonderful.”

When I contemplate this immense reunited country, my soul mounts to that height demanded by the colossal perspective of a picture so wonderful.”- Simon Bolivar

Bolivar’s vision could have changed the destiny of the region. But there was one insurmountable obstacle that kept this dream on hold: Latin American populations lacked Bolivar’s vision. Several political interests in all jurisdictions rejected the compromises. Pettiness, selfishness and lowly ambitions, disguised as “liberty” and “independence”, prevailed in the end. Unparalleled dissensions spread in the region and Bolivar’s beautiful dream vanished.

Bolivar
Image Source: andreagaddini

Although accused of being a false liberator, Bolivar was well ahead of his time. His project for Latin America embodied the highest ideal any world population could nurture. A Latin America Union could have been greater than all former colonial and current superpowers. Human capital and abundant natural resources were tangible. But something else was required to boost the region towards its path of development. The dream of a great Latin American Union still has not materialized.

Latin America should not dwell in the reasons for their underdevelopment: colonialism, exploitation, dictatorships, Cold war, etc. Instead, the region must focus in achieving the goals that have remained utopic since Bolivar’s times.

Latin American Natural Resources

When South America liberated itself, natural resources had not been fully exploited. Leftists and nationalists propagated the myth that foreign powers plundered all their wealth and resources. This fabrication provoked a boundless damage in Latin American consciousness. The fact is that the region still possesses a vast array of natural resources. But most of that potential wealth remains unextracted. After reviewing their unmatched resources, it is safe to assert that Latin America has been a beggar seated on a throne of gold.

Brazil

Brazil has been the unmatched bastion of development in the region. Due to corruption and reckless spending, Brazil is facing a temporary storm. But a great array of resource extraction is still in the initial stages.

The Libra field, for example, located in the Santos Basin, is one of the biggest oil fields ever found in the Americas. A consortium composed by Petrobras, the Royal Dutch Shell and the French Total S. A have their hands in the project. Libra contains an estimated of 8 to 12 billion barrels of crude oil. It also demands dangerous operations for the environment. But an investment in modern infrastructure may reduce the risks. A total investment of 200 billion dollars was required for the next 35 years. The drilling has already started.

Argentina 

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Image Source: Ypf

Argentina has also plenty of resources. The shale oil reservoir of Vaca Muerta is the fourth largest in the world and the second largest in the Americas. The YPF, the state oil giant, estimates that 200 billion dollars was needed for the next ten years.

Unfortunately for Argentina, their backward policies and expropriations pushed potential investors away. Yet, Argentina issued new legislation loosening their restrictions, in order to attract new investors. Chevron, Exxon and the Russian Gazprom already signed a concession agreement. In spite of Argentina’s government, these investors are willing to take the risk. Why? Because, in measuring shale oil resources, Argentina ranks an unbeatable fourth place in the world.

Related Content: Argentina Might Be In A Downwards Spiral, But Their Shale Gas Boom Is Just Starting

Colombia

Colombia’s growth has made headlines for the past two years. Its economy has climbed at an impressive rate. Despite the prolonged FARC conflict, Colombia managed to pull this growth. If the peace talks continue to progress as of now, the nation will acquire a faster development. What about their natural resources? Colombia does not have oil in great amounts (still, it is Latin America’s third biggest producer), but it has other resources. One of them is coal. Wall Street Journal reports that Colombia has a reserve of 184 million tons of coal. The country annually exports 9 billion dollars worth of coal. Colombian coal reserves have recently been sold to the U.S Murray Corporation.

Another great resource is emerald, one of the most prized jewels in history. Colombia is the world’s biggest producer of emerald and supplies to over 90% of the world market.

Related Content: A Look At Colombia’s Natural Resources: Will It Drive The Country To Success?

Venezuela

The case of Venezuela is dramatic. Venezuelan oil resources surpass those of major Middle Eastern producers. The OPEC reports that Venezuela’s Orinoco Belt alone contains around 297,740 million oil barrels, making it the largest oil reserve in the world. Saudi Arabia comes in behind with 268,350 million barrels. The United States Geological Survey gives even higher numbers. The institution calculates the Orinoco Belt has a potential of producing approximate 652 billion barrels of oil.

Venezuela has also huge reserves of Coltan, a mineral needed to produce most electronic devices and military weapons. Coltan is called “blue gold”, as its global demand has increased for years. Venezuela’s Amazon rainforest has around 100 billion dollars worth of coltan reserves. There were several mafias extracting Coltan illegally, and spoiling the environment. The government captured the illegal miners and forbid coltan extraction since then. This was a bad decision. A well planned extraction of Coltan, following all environmental regulations, would have ameliorated Venezuela’s crisis.

Related Content: 5 Signs Venezuela’s Economy Could Rebound

Peru And Chile

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Image Source: Ibtimes

Latin America has noteworthy reserves of iron ore, tin, sulphur and zinc. It has actually been that way since colonial times. Also, Peru alone ranks amongst the first five world producers of gold. In relation to copper, Chile, China and Peru are the three highest world producers. And Peru, along with China, remain in two of the first three spots for the world production of silver.

It is surprising that developing nations like Peru and Chile are able to compete with a superpower like China. It gives us a glimpse that, providing the right investment and policies, the region can reach a greater mark.

According to BNamericas, a mining intelligence service, Chile and Peru are the best places to invest in Latin America. Both countries have enhanced investment climate, simplifying permits and concessions. There are still problems, though. For the past two years, Peru has witnessed a soar in labor rallies in some mining towns. The Financial Times reported these rallies have placed mining projects on hold. These projects were invested in studying the region resources, but neglected the population opinion. Gross mistake. “It is not only a matter of money. Every bit as important as having good geologists is having good anthropologists” a Peruvian consultant said.

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Human Capital

Human capital is the greatest resource of all. What’s the use in having the world’s greatest resources and lacking qualified employees?

The World Bank is right by asserting that public insecurity is one of the region’s most pressing foes. Currently, central America is smothered by gang violence, Peru by robbery and kidnapping, and Colombia is negotiating to end the terror of the FARC. Once these issues are erradicated, investments will flourish in the region. The poorest will stop living in fear and enjoy the freedom to access education, develop their capabilities, and thus work more efficiently.

Working power is a treasure, and Latin America has it abundantly. A research by Cepal reveals that future regional demographic dynamics will work as assets. Life expectancy, growing urbanization and female access to the labor force will enlarge the (WAP) working age population. Considering those factors, it is estimated that the WAP will increase by about five million per year.  At this rate, the region’s WAP will average 377 million persons by 2030.

But these numbers, although impressive, would be useless if drastic policies are not applied. Government’s reduction on crime, building schools, increase in women’s rights and easy investment access for small businesses are essential for change.

Informal Economy: Wealth In A Vast Scale

Economist Hernando de Soto says that Latin America does not lack entrepreneurs. But the majority are informal, function in the shadows, and are illiterate in financial and market techniques. Thus, without a legal or financial backing, these businesses remain in an archaic state. Unable to surpass the stage of a food or sale stand, businesses do not make an effect in society: they neither grow nor create more jobs. De Soto said: “the entrepreneurial spirit of the poor could create wealth in a vast scale” The problem is that the economical, legal and social structures force the poor to remain in the shadows.

The entrepreneurial spirit of the poor could create wealth in a vast scale” -Hernando de Soto

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“The entrepreneurial spirit of the poor could create wealth in a vast scale”-Image Source: Todanoticia

In summary, business ideas, potential entrepreneurs and market prospects are wasted by a negligent government, lack of policies and distrust. Encouraging the dreams of the lowest strata can improve the wellbeing of the region. Pretty often lasting change works from the bottom to the top.

In addition, a lack of education cripples the WAP. Some values can only be encouraged since childhood: hard work, efficiency and thriftiness. The protestant values of capitalism have many flaws. However, given good management and fair incentives, they undoubtedly provide great long term results.

Strong work ethics can also be reinforced. Latin American culture is different from the American one, though. The prestigious Wharton school claims that work culture in Latin America is both “collectivistic and paternalistic.” Wharton school suggests using these traits for the advantage of business.

Latin Americans are family centered. For efficiency purposes, Wharton experts suggest “putting workers and families at the center of any additional benefits the company provides.” They also encouraged to “try to satisfy workers’ basic needs, to assure their success” In this point, experts hit the head on the nail. Once companies assure basic needs are covered, they reduce the chances of labor protests and strikes. In fact, the workers will feel grateful and work harder for the company.

For Latinos, work and family are considered important, and transferring those cooperative values to business would be ideal. Above all, a business culture must keep efficiency as a priority. As the Economist suggests “performance-related pay and promotion” are not optional but mandatory. They reward ambition, and ambition is one of the drivers of business growth.

Trade and Its Relation To the United States 

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Image Source: Lanacion

An open trade agreement, with the proper regulations, could also be beneficial. Mercosur is the regional trade bloc of South America composed by Argentina, Venezuela, Bolivia, Brazil, Paraguay, Uruguay, Venezuela, Ecuador, Chile and Peru. The agreement was signed in 1991, but so far it has not brought visible results. This is obvious: trading between underdeveloped nations only breeds underdevelopment. Latin America should seek to engage in trading with first world nations instead.

Critics have said that Mercosur “does not exist”. One of the problems is infrastructure. The members of Mercosur do not possess infrastructure, efficiency or knowledge: there is a lack of professionals, lack of investment, education, and reliable transportation. Paul Riezler, an Uruguayan expert, said that Mercosur is an empty agreement: “Theoretically, there is free movement of goods and people. Does that exist? No. So this is Mercosur. There must be not only the free movement of goods and services, but also the infrastructure that enable such freedom of movement.”

A worse sign is that members such as Venezuela, Argentina, Ecuador, Bolivia and (Brazil, for a while) sought to distance themselves from the United States. These countries delivered an aggressive and anti-imperialistic message that may affect future trade relations with America.

Latin America can achieve a faster development. But only if they adapt realistic policy changes and enforce fair trade agreements with foreign powers.

When NAFTA was approved, the majority hoped it would produce improvements. The fact was that it ruined the lives of thousands of peasants, who relied on their products to survive. Mexico, formerly self-dependent in the production of corn and meat, now import those products from the United States. NAFTA also affected working class Americans, since more than a million jobs were lost to Mexico. NAFTA supporters assured that poverty was going to be reduced. Twenty years later, the number of poor Mexican remains the same. But the trade was not all that bad. NAFTA produced an improvement in Mexico’s middle class. Mexican auto industry has taken off, and manufacturing and worker skills have also improved.

Related Content:21 Years of NAFTA: 5 Painful Lessons Learned

NAFTA created bad repercussions. Future trade agreements, such as the Trans-Pacific Partnership (TPP), were received with distrust and harshly rejected. The blame goes to those who promoted NAFTA without an honest investigation of the repercussions.

The challenge is finding a trade agreement that will be beneficial for both Latin America and America. Such balance will be hard to achieve, since countries subscribing to trade mainly seek their own benefit. But establishing better foreign relations is the first step in providing a fair trade for both Latin America and the US. Brazil is finally understanding this.

The Dependence Mindset: The Main Latin America Obstacle

Venezuela US Tensions_Garc (2)
Image Source: Foxnews

Latin America has a problem. The most harmful myth prevailing in the region is that poor nations are so because colonial powers left them in a state of subjection. The academic “Dependence Theory” even holds that poor countries are so because capitalist countries still exploit them. Populist parties promote this view, reminding us the sad history of exploitation of Latin America by colonial powers.

Although the history is true, the dependence theory is no longer valid. In our modern times, countries with the proper policies and resources can actually develop. A set of measures open to the world market may work wonders (see the case of Brazil). If development is possible, then why do resource rich nations as Venezuela and Argentina are in chaos? The answer is evident. Nowadays, some Latin nations are poor because they choose to be.

If Europe actually ruined Latin America, it was in something more primordial than natural resources. It wrecked their conscience, generating a provincialist mindset that, sadly, some populations have dragged all along. But there is nothing worse than blaming someone else for our issues. It is true: colonial powers kept Latin America enchained for centuries. But now those chains are perpetuated by populist politicians repeating the backward rhetoric of three centuries ago. Some nations, instead of reviewing history for their own advantage, have used it to justify their mediocrity.

What should Latin America do? Brazil is an example to follow. In 1995, President Fernando Henrique Cardoso adopted neoliberal reforms that turned Brazil into an economic powerhouse. The benefits acquired helped to reduce poverty and inequality in a dramatic scale. In the present, Brazil is cutting costs due to its former reckless spending and corruption. But they are struggling to keep their path: making sacrifices to keep foreign investment alive, and improving its relations with the United States.

In 2006, President Fernando Henrique Cardoso said: “The problem faced by Latin America was political in nature rather than economic. Our backwardness was our own fault, not anybody else’s.” Nine years later, this statement remains valid. Latin America is in control of their destiny. But the region must understand something first. Change does not consist in blaming other nations, but in analyzing their own faults and correct them. True change always comes from within. Once Latin America understand this, Bolivar’s dreams will gradually materialize.


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