THINKING SMALL
Jan 1st, 2008 - 4 Comments
Some small countries think big.
Central America for the most part consists of small countries, which think small.
No other region of the world is made up of so many tiny economies, with such a low level of integration.
If Central America had a higher level of economic cooperation, it would become a more efficient market, capable of creating more (and better-paying) jobs, while reducing consumer costs.
Now if regional businesses would only promote the integration concept, it might actually happen.
Individually, each Central American economy is tiny, ranging from Guatemala in 66th place in the latest World Bank ranking, to Nicaragua at 134.
Even taken together, Central America’s six main economies (including Panama but not Belize) have an annual purchasing power of only about $100 billion.
This is less than the national income of 48 other countries, 20 of which either belong to or are associated with a highly integrated economic zone – the European Union.
That leaves another 28 economies, which are not closely integrated with their neighbors.
On the other hand, even the smallest of these, New Zealand, has an economy more than three times the size of Guatemala’s and 22 times bigger than Nicaragua’s.
Central America has a free trade agreement, which allows most products originating in any one country to be imported into any other country without barriers.
But a lot has changed since the agreement came into force in 1964.
In those days, no bank had operations in more than one Central American country.
Today, a Citi subsidiary has banks throughout the region.
HSBC operates in four countries, Scotiabank in three.
Regional telecommunications and insurance companies have likewise become dominant.
But any business operating in these and several other sectors must deal with local regulators in each country in which it operates.
This costs money.
So does moving goods across local borders, which confront shippers with an infernal combination of limited working hours, semi-collapsed systems and Byzantine procedures, including different tariffs in each country.
If Central America had a single set of rules for the financial-services, telecommunications and other sectors, as well as for border operations, many regional businesses could significantly cut costs and pass savings on to consumers.
A single currency would help, too (see It’s Dollar Time, published on this site in November 2007).
Since regulations in these areas are substantially similar throughout the region, unification would not reduce consumer-protection standards.
In this case, economic integration should be at the top of the agenda of Central American consumer groups – except these are weak in several countries and non-existent in others.
That leaves industry and trade chambers to push for greater regional efficiency – except they still operate almost entirely at the national level.
The region’s economies may be tiny.
But as business increasingly becomes regional, companies need to take the lead in representing their interests – and those of their customers – by creating Central American associations that can think big.
As a business manager involved in the region, I understand that its all politics. These small countries need to protect their turf. Unfortunately, its the consumer & business operators who suffers thru higher costs. I agree with you completely.
Los procesos de Integración. Los beneficios de la globalización comercial y la integración de países que conformen áreas de libre comercio que aprovechen las economías de escala versus el beneficio que obtenga un país individual en una mesa de negociaciones sobre comercio global es una tentación para que se consoliden estos bloques de países. Sin embargo, plantear el concepto de integración en forma teórica o peor, en abstracto como un enunciado que afirma que es beneficiosa por definición y para insertarse mejor en el comercio mundial es peligroso. Aquellos bloques que han sido exitosos en la conformación de áreas de libre comercio y aquéllos que están en ese proceso, nos han enseñado que no basta con la integración aduanera, el libre tránsito de sus ciudadanos o la desarancelización para que el proceso de integración sea exitoso; aún más, hemos aprendido que en este proceso de globalización ni siquiera hace falta ser vecinos para insertarse exitosamente en el comercio mundial. Si lo que buscamos es el crecimiento económico de los países y la generación de empleo por medio del comercio, creer que la integración es el primer paso para el logro de estos objetivos es un error. Tan cierto es lo anterior que hemos aprendido también, que el proceso de integración podría producir como consecuencia la integración de la pobreza o de la riqueza, depende de cómo lo hagamos o con quién lo hagamos. Queremos negociar con aquéllos que nos generen un valor agregado si no ¿para qué? Un bloque económico debe conformarse cuando sus integrantes cumplan con una cantidad de requisitos macroeconómicos y políticos que hagan sostenible cualquier iniciativa y si no fuera así veamos como hay países en lista de espera, incluída Costa Rica, para ingresar a ese exclusivo club que se llama la región Asia Pacífico o la Unión Europea; o veamos el éxito de países como Singapur, Chile o Irlanda, entre otros, que empezaron por ordenar su casa, pero no para integrarse con otros sino para generar riqueza para sus pueblos y así generar valor agregado que es lo que al final cuenta en la mesa de negociaciones de los Tratados de Libre Comercio. Un tratado de integración como el Mercado Común Centroamericano firmado hace tantos años no ha funcionado porque los índices de desarrollo humano, en cuenta el poder adquisitivo de sus habitantes se ha deteriorado demasiado. Además, las guerras internas terminaron de darle el tiro de gracia a las buenas intenciones; más aún, los gobernantes de países como Nicaragua que firmaron un tratado de libre comercio con Estados Unidos no creen en el libre comercio; lo anterior no demerita el hecho de que todos queremos una Centroamérica integrada y fuerte, al menos en lo económico, pero de eso a decir que las condiciones están dadas para que la Integración Centroamericana se dé de hecho y de derecho es, como dicen nuestros campesinos, poner los bueyes detrás de la carreta.
En efecto aquí se piensa siempre en pequeño. Estos países creen que con economías más pequeñas que las de muchas ciudades de los EE UU pueden subsistir y competir. Nada más lejos de la realidad. Lo que habría que enseñarles a los políticos es que la integración económica no deviene en integración cultural y que ellos no van a perder poder, al menos en gran medida. Excelente artículo.
I agree with all of what you say. The possible exception may be what the women of India have accomplished in the High Tech arena. I notice you did not visit Bangalore. While the larger older cities, Mumbai and Dehli continue to face huge infrastructure issues, Bangalore has put in place a reasonable infrastructure which has attracted huge investment from the global high tech companies. Women have taken a large share of the jobs in high tech. There are many women managers and leaders. While there are still archaic cultural protocols of how women address men higher in the company order, they are definitely a huge force in the economy.
Embracing English is an interesting and very important idea. If English were a “second language” like it is to most educated Indian people, then Latin America would become more competitive in many fields, including high tech and call centers.
I wonder if Chinese is another language you may want to consider. While the need for outsourcing in China remains a long way off; there may be a need for multi-lingual business centers for the Multi-National companies that do business in China. Here in Singapore English and Chinese are the business languages.
It is hard to let go of local power for the greater good of the region. It doesn’t require a visionary to see the benefits of letting down national barriers and having a common currency (just look at Europe).
By the way, ten years ago India suffered from massive fractionalization with state borders real obstacles to commerce. Much progress has been made here. But there are stll problems. It will take a master politician like Cavour to bring regional countries together. But it is a good idea to have a lot of people talk about it.
Good luck