Connecting the Americas For Prosperity
The Summit of the Americas is an opportunity to tackle inequality.
Past President of the Canadian International Council (CIC).
In the global economic turmoil since the last Summit of the Americas in 2008, Europe has navigated upheavals that threatened its hard-won economic union and the U.S. has faced tumult that meted out social and economic adjustment. Canada has fared reasonably well, but Latin America appeared to exhibit particular resilience in the face of global economic disorder. The Economist lauded the region a few months ago for weathering the storms relatively unscathed, and for producing relatively strong growth trajectories of about 5 per cent annually.
But don’t be fooled. While recent decades have seen significant development of infrastructure and institutions, political reforms and an explosion in the numbers of people moving up to the middle class, much of the recent hardiness of the region is due to unsustainable factors such as access to cheap money from rich countries, and record high prices for natural resource and commodity exports, fuelled chiefly by strong demand from Asia.
- Jennifer Welsh on the opportunity of Latin America for Canada.
- John Hancock on the dangers of relying high commodity prices for economic growth.
Despite their apparent escape from the financial turmoil experienced in Europe and the U.S., Latin America and the Caribbean remain among the regions with the highest economic inequality levels in the world. In Colombia, the host country of this year’s summit, per capita income of the richest 10 per cent of Colombians is 25 times higher than that of the poorest 40 per cent. While widening differentials are explained by the fact that increases in wealth far outpace increases in poverty, it remains true that, although recent growth in the region has benefited the poor, it has benefited the rich more.
To achieve long-term economic sustainability, Latin America needs to confront the challenge of maintaining economic gains while addressing the persistent high levels of poverty and inequality. Commodity price fluctuations are inevitable, but reliance on natural resource revenues, even as they ebb and flow, tends to stymie investment in the human capital needed to further develop the economies of resource-exporting countries. Meantime, as inequality persists or increases, the potential for social, political and economic disruption escalates, dampening the appetite of international capital for that country that may be buoyed in times of high commodity prices, but quickly evaporates when prices fall.
Traditional production structures in the economic systems of natural resource-endowed developing countries make it difficult for those industries to move up the value chain. Without the significant investment in education and technology it would take to develop the economies of many Latin American countries, gaping inequality threatens to remain a feature of many of the region’s resource-based economies.
Leaders meeting this weekend in Cartagena would thus be wise to address two of the summit’s key challenges – inequality and access to technologies – in tandem. Summit participants, from the business forum to the civil society groups, should consider the importance of integrating value and production chains in order to develop a variety of industries – high-tech to community based – that work in relation to natural resource industries, raising demand for human capital in resource-related services.
This year’s Summit of the Americas – Connecting the Americas: Partners for Prosperity – offers a practical, logical and convenient forum for discussing co-operation, partnership and integration tactics that would take advantage of today’s revenues from natural resources to relieve future vulnerabilities caused by inevitable commodity price fluctuations; invest in human capital while creating programs for worker training and education; and develop science, technology and research partnerships that bring the resources of wealthier countries together with the ambition and enterprise of less developed ones.
Creating programs that design frameworks for integration and co-operation that are flexible and anticipate change, development and evolution of societies throughout the Americas is the route to connecting the Americas in partnership for prosperity.
This essay originally appeared in the Globe and Mail. Photo courtesy of Reuters