A sharply worded opinion piece, written by former Costa Rican President Oscar Arias, in the recent issue of Foreign Affairs magazine (find out where to read it below), puts Latin America’s lingering cultural baggage out into the open. He challenges the region to break out of its distrusting isolation, drop the excuses and go out and experience the economic liberation of globalization.
The article, which does not specifically address the thriving IT/BPO offshore services market but does talk about the essential need to attract investment, says it’s time to take a hard look some of the misguided features of its collective culture and “lose the fear of change.”
What taboo issues does Arias point to and will what he’s saying making any difference?
From the lack of support from entrepreneurs to continued over-spending on militarization, Arias broadly paints a picture of a region of the world that is content to be second best, despite major opportunities to increase development and spread wealth far more widely among its population. The hallmark of any critique of Latin America is mention of the widespread practice of protecting the privileged elite, which Arias makes sure to do. But he also shares a telling statistic about LatAm’s slow-lane approach to development: In 1820, the GDP of Latin America was 12.5% greater than the US. Today, despite having about 250 million more people, LatAm has a GDP that is just 29% of that of the US.
There is no question that many of Arias’ observations are on target. But one obvious problem is that he makes sweeping generalizations and, in so doing, neglects the tangible advancements and impressive transformations in economies like Colombia and Brazil. It’s also striking that Arias fails to distinguish between the leaders and laggards on the LatAm political playing field. That might lead us to think that the command/control model of Venezuelan and Cuban authority persists across the region. The reality, of course, is that it does not.
Hold the Applause for Entrepreneurs
The former president’s point about the absence of encouragement for entrepreneurs is, from our view, his most compelling argument:
“Latin America has vastly more controllers than entrepreneurs. The region is suspicious of new ideas and lacks effective mechanisms to support innovative projects. Someone seeking to start a new business must begin by wading through waves of bureaucracy and arbitrary requirements. Entrepreneurs get minimal praise or cultural reinforcement, little legal protection and scarce academic support.”
Is there a real recipe for change? According to Arias, universities must get away from “repeating doctrines no one believes” and give students two skills that, no surprise, are foundational tools in the global economy – technology mastery and language proficiency.
“For development to occur, this has to change. Latin American countries must begin to reward innovators and creators. Their universities must reform their academic offerings and invest in science and technology. They must reduce burdensome regulations, attract investment, and promote the transfer of knowledge.”
The message of instruction for a tech-enabled world is a theme we hear a lot about in the Latin America outsourcing marketplace, and even Arias’s successor, Laura Chinchilla, emphasized this during a Nearshore Americas video interview last year. Our own experiences in LatAm validate Arias’ views on entrepreneurs. While doing research for our ‘Red Hot Startups’ program for 2010, our editorial team found strong pockets of entrepreneurialism, especially in Argentina, but the quest for exciting stories about game-changing innovators was met with a generally lukewarm response. In fact, we sent repeated messages to country investment promotion contacts, encouraging them to point us to a few firms they thought fit the bill. The response? Overall, quite underwhelming.
Still, there are groups like Endeavor, which encourage ‘high impact’ entrepreneurs from emerging markets, and Mexico’s startup incubator TechBA. Both are notable groups devoting themselves to stimulating the innovator spirit. But is there room for more efforts like this? Of course.
In No One We Trust
“Latin Americans doubt the true intentions of all those who cross their paths. We believe that everyone has a secret agenda and that its better to not get involved in collective efforts” writes Arias. Underneath this claim is an unmistakable reality for the majority of Latin America – Since most governments have not acted in trustworthy ways, why should one expect laws, or enforcement of laws, to be done a consistent and equitable way?
The need for trust is “indispensable” in the global economy where, Arias argues, “citizens can base their actions on a reasonable expectation of how others will behave.” It is through trust that Arias holds his highest hopes for the region – that democracies will become productive and sustainable enough that turning back to familiar authoritarianism will no longer be an option. “Moving beyond political sclerosis, becoming more responsive to citizens’ demands and generating fiscal resources by taxing the wealthy are all essential steps to move toward a true culture of liberty and progress.”
The hopes Arias points to may seem high-minded, but his own track record in Costa Rica makes his vision seem more achievable. It’s not just that the country lacks an army, but there are tangible symbols that Costa Rica has calibrated its development plans for the long term. It’s no surprise that Costa Rica’s former minister of economy held up an Asian country – not a Latin American country – as a model for long term transformation in his interview with Nearshore Americas last year.
The IT/BPO offshoring industries of Latin America are, to contrast Arias’s points, some of the most progressive in terms of adapting to global trends, stimulating skilled labor pool development and, perhaps most importantly, lobbying their governments to seize new opportunities. Some nations are more ‘on the ball’ than others. Mexican leaders, for instance, are not pushing hard enough on the language proficiency/tech-enablement Arias’s talks about. Soffttek’s CEO Blanca Trevino shared similar sentiments during an interview last year.
But, more and more we see promising developments– such as Chile’s newly announced entrepreneurial program – that show Latin America is in fact shedding some of that old-world baggage. Is the region moving fast enough? And is there enough courage to apply new skills and tools to overcome its obstacles? We’ll be watching closely.
(The Arias article cited in this post can be obtained for .99-cents at Foreign Affairs.)
Where the nearshore investment/ global sourcing industry fits in to the debate. Our input:
1. Leaders Need Apply. The region needs more courageous leaders who can forcefully articulate the powerful impact of FDI and global sourcing investment into local LatAm economies. The leaders most prone to serving in these positions are the very entrepreneurs who successfully launched domestically and internationally-focused outsourcing services businesses. Will most of these leaders just look after their own interests, or will they look to the big rewards of acting collectively? (Note: Formation of a new Nearshore outsourcing professional association is underway: Check Nearshore Nexus linkedin group.)
2. Take Investment Promotion Seriously. Chronically underfunded and too often overseen at high levels by political cronies instead of well-trained professionals, the trade/investment promotion groups across Latin America are crucially important in acting on long term goals and having the autonomy and funding to put words into action. The heads of these groups should be the most knowledgeable economic ambassadors money can buy. Smart governments should pay these people for what they are really worth. Few governments in LatAm fully recognize that the faces meeting overseas investors are some of their most important public servants.
3. Hire Someone to Boast for You. Latin America, after all, does have a lot to be proud of in developing a nearshore outsourcing industry that was barely on the radar five years ago. But still there are routine signs that big parts of the Americas outsourcing industry wants to hide in the shadows, apparently believing investors will find them instead of announcing their presence. Our advice: if you don’t know how to ‘toot your own horn’ then hire marketing/PR professionals to do it for you.