Abigail Keene-Babcock

Conference Report: The Private Sector’s Role in Latin America

gOn Tuesday, I went to Georgetown University to attend a high-profile panel on “The Role of the Private Sector in the Competitiveness of the Latin American Region.” The line-up of panelists included three former presidents (Vicente Fox – Mexico, Alejandro Toledo–Peru, Jose Maria Aznar–Spain), one former prime minister (Roberto Danino–Peru) and three prominent businessmen from Latin America and Spain (Stanley Motta–President of Motta International, Marcelo Claure–Founder of the Brightstar Corp., and Gustavo Cisneros, Chairman of the Cisneros Group of Companies). Quite the assembly of lauded economic reformers and successful business leaders.

The event was paired with the launch of a new online journal, Globalization, Competitiveness, and Governability (GCG), a joint project between Georgetown and Universia, an online space for university education resources across Latin America, founded and supported by Banco Santander.GCG promises to be a rigorous source of ideas and advanced discussion on issues of business and governance in Latin America, and we?ll definitely be following it in the future on NextBillion for particularly good pieces related to business and poverty reduction strategies in that region.

Going in, I hoped to find some golden nuggets in the high-rollers? comments–specifically referencing the BoP and the role of private enterprise in opening markets and opportunities to the poor, as both producers and consumers. I wasn?t disappointed, although the breadth of the topic covered meant that no issues were pushed into specifics and vagueness tended to prevail (aside from the very strong remarks of support for the Colombian free trade agreement currently pending before Congress, made directly to the VIP seating section).

Most of the panelists? comments focused on the broad issues of trade liberalization, institution-building, economic/legal stability, education, health, and infrastructure. However, some remarks indicated that a few of the speakers had clearly latched on to market inclusion and engagement of the BoP as both an economic and social necessity.

Vicente Fox highlighted the need to recognize and support the two thirds of Mexico’s population that works either in the informal sector or for small family-run businesses (i.e., everyone not employed by large corporations): “This marvelous world of the small economy, of the changarros? of Muhammed Yunus,” he said, “this is what supports the economy and brings business to the larger corporations? we must ensure that the entrepreneurs have access to finance, education, capital, technology…”

Gustavo Cisneros, head of one of the largest privately held media, entertainment, telecommunications and consumer products organizations in the world, also stressed the importance of putting tools of wealth creation” in the hands of the 200 million poor people in Latin America,” stating plainly that, “If the poor do not become wealth producers, Latin America will never be competitive, and that, “We need to make capitalism work for the poor.” (Note: our The Next 4 Billion report puts the size of the Latin American BoP at 361 million citizens).

Every single speaker put education among his top concerns. Each also alluded to social stability as an important element of competitiveness, and one that must receive more attention. Even in view of Latin America’s overall democratic stability, increasing numbers of free trade agreements, and positive regional growth rates averaging above 4% annually since 2003, there is a palpable fear that Latin America remains at risk for more populist backlashes if the poor and other struggling? classes are not included, and soon.

bAmong the panelists–at least at first–it seemed to go without saying that the alternative is Venezuela. Then, toward the end, Venezuela was brought up directly and then outrightly condemned as now “at zero or below zero competitiveness, and getting worse.” Fox put it this way: “This is the use of oil as a political weapon, for building authoritarian governments, we have to be pretty well aware that things are moving in that direction–people are being given the fish, not being taught how to fish–and even worse, they are being given a fish that is not really theirs.” (See rentier state, or resource curse, for more on this concept)

This was where I finally realized what had been nagging at the back of my mind throughout the entire event. That fish metaphor, no matter how over-used, is exactly what I’ve been trying to get at in explaining my deep fears about Hugo Chavez to a few of my more idealistically-minded friends. And yet, everyone at this Georgetown event seemed to pigeon-hole the situation in Venezuela as a worst-case scenario–the tragic disaster to be avoided, but not engaged.

It is my fervent hope that Venezuela is an isolated case. Imagine trying to create BoP business models (tricky to begin with, and often higher-risk than average) if there are governments hell-bent on killing off private investment mechanisms and property rights!

But, what do other Latin American citizens believe? Is the idea of “making capitalism work for the poor” one that the majority buys into?

(The Inter-American Development Bank certainly thinks so; they’ve promised a 5-year, $1 billion commitment to “Opportunities for the Majority” – that’s the bank’s way of saying BoP investment and technical assistance.)

The enthusiastic support and admiration captured by Chavez and his promise of a permanent socialist state, not only among large swaths of his own population but among many people in other countries as well, is not an accident. It is deeply revealing of one-sided conversations on both sides.

The panel, and the launch of the GCG journal, was for and by a highly educated and particular set of leadership and intellectual elite–those who share a relatively similar view of the world that seems very rational and pro-growth and pro-poverty reduction when expressed to each other, and to their international peers. And don?t get me wrong, this exchange of ideas and leadership based on intellectual rigor is extremely important.

Yet, these conversations, no matter how intelligent or compassionate or well-meaning, do very little to convince people on the ground that the proverbial “free fish” is an unsustainable and dangerous route.

There needs to be a connection made between macro pro-market policy and the power of enterprise at the micro level–and it needs to be one that shows people that private sector mechanisms will bring more freedoms of choice, dignity, and prosperity.

But to see this happen, there must be those who will roll up their sleeves and take this difficult communication leap – not just to convince, but to listen, adapt solutions, and produce hard evidence. This means a recognition that numbers showing macro success may be a good way of convincing foreign investors, but they are far less effective at convincing people who believe that they have been left behind.

It also has a lot to do with the need for humility, which Jocelyn Wyatt described so well in her recent posting, and which I believe is often in severely short supply when it comes to conversations about the needs, competitiveness, and the potential of Latin America’s BoP.