ESIC

Some important factors that affect the competitiveness and its application to Latin America

10/12/2015

Towards the end of 2015, many economists have identified new tendencies in the World's economy and its impact in the future:

  1. First of all, productivity and future global economic growth will not meet the expected optimistic forecasts. This is because of three main reasons. The world's population is ageing, the amount of technological development and innovation is decreasing and because of insufficient investment in infrastructure.
  2. The second tendency is that in the future, unemployment will be very low for the well-educated, and will probably be higher for those without higher education.
  3. Another important conclusion is that countries that fail do not do so because of their culture, geographical situation or climate, but because of the lack of solid democratic institutions (read “Why countries fail” by two gigantic economists, Daron Acemoglu and James Robinson. It's prologue includes the writings of nine Economics Nobel prize winners.
  4. Having the courage and strength to take on economic reforms and structural changes that integrate a country's economy to the rest of the world is fundamental. Compare for example the positive reforms that India, Singapore or Finland have taken, in contrast to the lack of reforms in several Latam countries.
These conclusions raise several very relevant implications for Latin America:
  1. It is evident that the economic and social aspects have improved greatly in the last 10 years, especially in Mexico, Brazil (even with the actual crisis), Chile, Panama, Colombia and Peru.
  2. The countries in the Pacific basin are the ones with better forecasts.
  3. However, a lot of attention should be placed on the following items:
- The prices of raw materials that these countries exports will not increase in a significant manner in the future. - Interest rates will rise in the USA, causing investors and their capital to flee from Latam. - The democratic processes that have strengthened in the last few years should be bolstered, combating corruption and giving the judicial system independence. - These countries should bet strongly on education and technology. - Be very vigilant of fiscal deficits and of the foreign market, increasing the efficiency of the public sector. - One of the most important problems of this region is the lack of a good infrastructure grid. Public and private investment is needed to solve this. - Spain is a world leader in businesses that deal with infrastructure, engineering, high speed trains, bridges, highways. Cooperation with Latam is therefore guaranteed. In conclusion, Latin America has improved greatly in the last few years, but it is necessary to understand all these new items that affect competitively in order to bolster improvements in these countries. Mario Weitz, professor at ESIC and Consultant for the World Bank.

Publicado por:

Campus de ESIC en Madrid

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