Shannon K. O'Neil

Latin America's Moment

O'Neil analyzes developments in Latin America and U.S. relations in the region.

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Latin America Becomes More Competitive

by Shannon K. O'Neil
September 20, 2012

Brazilian children Alexandre da Costa (L) and Augusto Ribeiro use a computer at Mare slum in Rio de Janeiro (Sergio Moraes/Courtesy Reuters). Brazilian children Alexandre da Costa (L) and Augusto Ribeiro use a computer at Mare slum in Rio de Janeiro (Sergio Moraes/Courtesy Reuters).

The Global Competitiveness Index for 2012-2013 came out this month, ranking 144 countries from around the world on twelve “pillars of competitiveness” (ranging from “basic requirements” such as institutions and infrastructure to more advanced categories such as innovation and business sophistication). In its rankings, Latin America’s countries fell pretty much right in the list’s center, with three countries (Chile, Panama, and Brazil) ranking in the top third, six countries falling in the bottom third (El Salvador, Bolivia, the Dominican Republic, Nicaragua, Paraguay, and Venezuela), and the rest spread throughout the middle.

As usual, Chile took the Latin American lead (in the thirty-third spot) and received high marks for its macroeconomic environment and its institutions (and quite interestingly ranked above the United States, Norway, and Germany in the transparency of its government’s policymaking). Panama, Latin America’s fastest growing economy, came in second place at number forty and ranked in the top five globally for its accessible financial services and its widespread technology transfers. And Brazil (in the forty-eighth spot) got the bronze, with good scores for its domestic market and its business sophistication (defined as “the quality of a country’s overall business networks and … of individual firms’ operations and strategies”).

By contrast, most of the Bolivarian Alliance for the Americas (ALBA) members didn’t fare so well. In particular, Venezuela was ranked not only as the least competitive in the region, but also as one of the least competitive countries in the world. The country earned the last place position globally in areas such as property rights, judicial independence, hiring and firing practices, agricultural policy costs, inflation, and the effectiveness of anti-monopoly policy. Venezuela does, however, lead the region (and much of the world) in one area: tertiary education enrollment (at 78 percent). But it is unclear how many of these educated students remain in their home country, as the Competitiveness Index also ranked Venezuela’s brain-drain as being extremely high.

Where the entire region faltered was in providing quality education to its citizens. And while Chile’s education system (ranked ninety-first) has been in the news due to widespread student protests, almost all Latin American schooling garnered lackluster rankings. Perhaps even more worrisome was the incredibly low ranking of the region’s math and science education. Brazil, which just launched its Science Without Borders program (to train one hundred thousand Brazilian scientists abroad), ranked 132 in this category—below Haiti and Algeria and just besting Sierra Leone and Libya. Even further behind were El Salvador, Guatemala, Honduras, Paraguay, Peru, and the Dominican Republic.

Overall, most countries in Latin America are moving, some quicker than others, in the right direction (Venezuela and Argentina are among the exceptions). Ecuador, Peru, and Mexico have been some of the region’s “most improved,” moving up a combined thirty-four spots over the past two years. Much of this rising competitiveness reflects strong economic growth, but it is also a measure of the positive social and business-related policies adopted by many Latin American governments. The report shows that while the region still faces many real challenges (including security, corruption, and infrastructure), Latin America’s steps forward have been promising, as many countries have found a way to promote inclusive economic growth while enhancing global competitiveness.

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