Latin America's Unrest Is Nothing New, Because Its Economies Are Pathetically Old
I recently spent a day with 20 Venezuelan immigrant women who’ve got heads for business.
They’re in a Miami-Dade College program that teaches them entrepreneurial skills. We take access to those small business tools for granted in the U.S. But many of the venezolanas reminded me it’s still difficult to put them to use in Latin America – where coddled and connected economic elites often regard small- and medium-size startups as a threat to their cozy status quo.
Granted, the country these aspiring empresarias are fleeing is socialist-run Venezuela, the world’s worst economic basket case today. But the obstacles they’re escaping, from a dearth of fair rules to a deluge of red tape, linger almost everywhere in Latin America and the Caribbean. Some of the women are surprised to find they can secure a business bank loan in the U.S., which is a rare dream back home; others are impressed that U.S. police can secure your business from criminal gangs – which are a quotidian nightmare in cities like Caracas.
“In Latin America,” a woman who wants to open a bakery in Aventura told me, “business ambition is a dirty word. In gringo culture, it's a virture. It’s encouraged.”
That’s one key way of understanding why so much of Latin America and the Caribbean has erupted in protest this month, on streets and at ballot boxes. The recent Molotov-cocktail unrest is nothing new; it’s part of the region’s chronic cycle of boom and bust, contentment and chaos. We saw it most recently less than a decade ago, when some of the same countries experiencing angry street demonstrations now – including Chile, Latin America’s development front-runner – were convulsed by the same grievances.
And the core grievance is this: Latin America is a shameless economic anachronism.
In many ways, Latin America’s economic model has yet to leave the 19th century, let alone the 20th. It still relies on commodities – raw materials like soybeans, oil and ore that are extraordinarily vulnerable to global price volatility.
The core grievance is this: Latin America is a shameless economic anachronism – and times like these simply lay bare how far behind the 21st century it truly is.
When commodity prices are high, as they were in the 2000s, the windfall can help raise Latin Americans’ living standards. But when they inevitably crash, as they have in the past decade, it lays bare just how far behind the 21st-century information economy Latin America truly is.
It highlights the fact that Latin America and the Caribbean, according to the U.N., account for a measly 3 percent of the world’s research-and-development investment projects – while China alone accounts for 34 percent. Latin America may grow and pump and mine valuable stuff, but it doesn’t really make much of anything the rest of the world wants.
When you’re stuck in that kind of economic dark age, a commodities downturn and the economic anemia that comes with it – the IMF says Latin America will only grow just a half percentage point this year – expose how empty and even feudal your system is. It reminds Latin Americans how suffocating things can be for anyone who wants and deserves to get ahead.
It brings to light corruption horrors like the ongoing, multi-billion-dollar Odebrecht scandal, which has touched just about every country on the continent. Named after the Brazilian mega-corporation at the heart of the graft, the affair has confirmed that the business-government relationship in Latin America is a Dantean bribe orgy – and that there is really no rule-of-law order in place yet that entrepreneurs can count on to make the playing field level.
It reveals how rusted the region’s economic infrastructure is, from education to roads, from tax structures to hopelessly bloated civil servant bureaucracies – which seem to take pride in the fact that while it takes four days to get a business registered and running in the U.S., it requires four months in many Latin American countries.
Most of all, it drives home how inegalitarian the whole miserable set-up is. About half of the world’s countries with the worst economic inequality are in Latin America and the Caribbean, even after the most recent commodities bonanza. And a lot of that is due to the fact that most Latin Americans are employed not by the region’s notorious monopolies and oligopolies, but by small- and medium-size businesses – the very companies Latin American governments and financial systems do their utmost to ignore.
It only takes a spark – like, say, this month’s unpopular subway fare increase in Chile – to ignite the resentful tinderbox created by all that backward neglect. Meanwhile, I know 20 Venezuelan women who are now poised to fire up cash registers instead of Molotov cocktails.