Economy and society
Sergio Mota
Potentials and limitations
The participation in the Latin American space of globalized companies is due to the lower costs of labor. For these companies, having a competitive micro-economy means industrial complementarities in value chains.
It is evident that Latin America has natural resources that could be the basis of economic and social development.
Its potential is marked by attributes such as the following: 1) it contains 40% of the world’s biodiversity, 2) it has 30% of the global freshwater reserves, and 3) it has 25% of the forest mass. Due to these characteristics, among others, it should be given more attention in multilateral policies.
The problem of Latin America’s backwardness is insufficient investment (gross capital formation) to meet population growth and social demands. Although private investment has taken on greater importance than public investment, especially after the era of the debt crisis and privatizations, it is not enough. It is far from having investment levels such as China, which is 40% of its GDP, or Singapore with 38%, as well as South Korea with 28% of its GDP. Mexico, for example, for 50 years its investment has not exceeded 20% of its GDP.
Foreign Direct Investment has complemented investment needs, becoming an important source of foreign currency and job creation.
The participation in the Latin American space of globalized companies is due to the lower costs of labor.
For these companies, having a competitive micro-economy means industrial complementarities in value chains. In Mexico, it has been the development of industrial auto parts plants in the center and north of the country, which since the FTA and now the T-MEC have had an extraordinary development. The same has happened in China, Singapore, Brazil and Hong Kong, which absorb more than 80% of global Foreign Direct Investment.
The quality of the institutional organization of the Latin American countries is observed when we stop to look at the low position that they have in the Rule of Law. Says Elizabeth Andersen, Executive Director of the World Justice Project (WJP): “At its heart, the rule of law is about fairness, that is, accountability, equal rights and justice for all. And a less equitable world is destined to be a more unstable world”.
In Latin America, 32 countries were analyzed by the WJP. Mexico was located in 2022 in 27th place, only above Venezuela, Haiti, Nicaragua, Bolivia and Honduras and below Ecuador, Paraguay and Guatemala.
Norberto Bobbio, an illustrious teacher in political science, of Italian origin, warned a long time ago: “Law and power are two sides of the same coin: only power can create Law and only Law can limit power.”
Like the rule of law, social policy needs to be consolidated and expanded. For it:
1Reduce inequality through essential social services. This means more quality and coverage in education, health, housing, drinking water, drainage, electricity, green areas, and security. Likewise, make solid social programs of national coverage with the adaptations of the municipalities, which is where the local identities are.
2A policy of economic growth based on transformations of the productive model that, supported by important investments in infrastructure and technological development, raises productivity that has been very low for decades. It is only half of what South Korea, Turkey and Poland get.
3 Develop the use of renewable energies that produce less environmental deterioration and combat climate change.
