Latin America is a diverse region and it is not surprising that individual countries want to promote their unique advantages. However, there is a risk that, should infighting diverge from a message that promotes the area’s overall strength, the damage might filter down to local jurisdictions. That’s why transnational organizations like the Inter-American Development Bank (IDB) take a two-pronged approach, promoting individual strengths within an overall message that lets the region shine.
“I have good news for people looking at Latin America,” says Fabrizio Opertti, Chief of Trade and Investment at the IDB, during a interesting, intense and sometimes heated panel debate at Nexus 2014. (Click here for video). “It is what demographers and sociologists call the demographic bonus, or dividend. It happens every century or two – it means that for a sustained period of time we have people of working age population.”
Opertti, speaking alongside business and technology leaders from Latin America as part of a Nexus 2014 panel discussion (earlier this year), says that the same observation cannot be made in areas with aging populations, such as Japan, Europe, or even the United States. By contrast, countries with a younger population can distinguish themselves by committing to training their young workforce to develop human capital in the context of the global services sector.
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“At the IDB we are funding many programs in Latin America and the Caribbean,” says Opertti. “If you are thinking provincially, of competing countries, then that is a problem. However, if you combine the demographic bonus with the fact that the region is getting its act together – then it is the place to be.”
But simply saying that Latin America is the “place to be” misses a more sensitive question regarding the distinct advantages of specific nations. Here, local players can be quite vocal when singing the praises of their home countries.
“The changes that have been happening in Colombia are going to put us above both Uruguay and Argentina in a matter of years,” says Jonathan Tarud, CEO of Colombia’s Koombea.com, which develops mobile applications. “Our population is now larger, our internal market is larger, and I would argue that we are smarter.”
Those kinds of statements, perhaps understandably, raise the hackles of people like Opertti, who are hoping for a view of Latin America in which the region as a whole benefits from many strong players, and not from infighting. Opertti would rather stick to his dual task: promoting the region, and defending individual players.
“The IDB focusses on human capital, and when you see that, in fact, Uruguay exports seven times more software than Colombia, it is because they jumped in very early to develop talent,” he says. “But there is also money right now for training in Colombia, specifically in Cali, Medellin, and Bogota – so, Colombia is also doing very well.”
As is Mexico, which has its own unique advantages, while also benefiting from larger trends within the region.
“I don’t think all these different countries are the same,” says Gustavo Parés, CEO of Mexico City-headquartered Financetech. “The most mature market is Mexico. It is the largest economy. It has universities like UNAM with 173,000 students and the National Polytechnic Institute with another 110,000. If we are talking about hubs, at some point size matters.”
The facts certainly support Parés’ view. Mexico is the United States’ third largest trading partner, and benefits from its geographic proximity and from being a part of NAFTA. Well before India took the world by surprise with BPO, Mexico was already on the map as a manufacturing outsourcer. However, Parés supports the general view that Mexico both benefits from, and is challenged by, the demographic demands of growth.
“We need to create value-added jobs in Mexico,” he says. “We don’t want to compete with India or China in terms of who gets paid less, or who gets more tax credits. We want to develop a really strong talent pool that makes a difference in our country.”
For Parés and Financetech, that means creating opportunity at home in Mexico to stem the drain brain abroad. It also means that, though Mexico still wants to be on a competitive footing with regard to its neighbours in LatAm, it ideally wants its internal resources to be more collaborative – and to serve the greater region.
“Instead of competing, we need to all get together,” he says. “In Mexico we need to take advantage of Guadalajara, Querétaro – all these cities that have strong universities. I would like to see people from Colombia and Argentina take advantage of Mexico.”
There is also the view that all of this internal competition is a good thing: it means that countries in Latin America are not taking a passive view, and that they are keen to distinguish themselves from simple arguments promoting labor arbitrage and time zones.
“The future of Latin America is not outsourcing,” says Tarud from Koombea.com. “We can compete on the same level as the United States. They have customers and insight – but we can get to the same level.”
That observation isn’t lost on people like Opertti, who take a larger view that the Spanish speaking market in the Americas is gigantic, and doesn’t exclude the United States.
“The United States is the second largest Spanish speaking country in the world, and by 2015 it is expected to be the largest,” he says. “By next year the Spanish speaking economy in the United States will be the ninth largest economy globally, and you have the region – right here – that feeds the services for that.”