Given these last developments in the world economy and also previously since the "miracle" of the Asian tigers, a lot of people has been questioning themselves if this "miracle" could be replicated on other parts of the world.
Moreover, besides some impressive examples in the Arab Peninsula a lot of people want to know if Latin America has any potential to be the "new miracle"; a lot of analysts praise the BRICs and some others want to hit the jackpot by discovering the best new thing.
On the lines below, with the help of some basic data I tend to analyze the differences and similarities (if any) between Latam and Asia to start the discussion if Latam could also be a heir of the future as most of people think that Asia is now.
Is the key competitiviness?
The literature and ongoing policy debates suggest that there are four main narratives that attempt to explain why Latin America is losing global competitiveness, specially against Asia: (I will elaborate on the four points on different posts due to time constraints)
- The unfinished transition story
- Endowments and geography
- Institutions and FDI
- Social cohesion and inequalities
The region’s problems can be traced to the incomplete transition to market-oriented openness. There are still several reforms to be fully implemented in many countries (e.g. trade and investment liberalization, further privatization) and other yet to be launched (e.g. labor market, intellectual property rights, antitrust and fiscal reforms). From this perspective, this unfinished transition, coupled with low levels of education, constitute the main drag to the region’s competitiveness and growth.
Critique of this story: it is very difficult, from this perspective, to explain how East and Southeast Asia were able to build up their competitiveness so dramatically while liberalizing much less than Latin America. Also, although substantial reforms have been implemented over the last decade, their impact on the region’s competitive stance has so far been mixed. Even in countries like Chile and Mexico where higher productivity did translate into higher output and higher world market shares abroad, there remain doubts about the strength of their technological capabilities and so about the sustainability of their competitive gains.
I will continue with the second narrative "Endowments and geography" in a future post, hopefully next week