To Excel in Latin America, Bet on Small Fish

Don’t obsess with Mexico, Brazil or Argentina. Focus instead on Ecuador, Bolivia, Costa Rica and Nicaragua. The World Economic Forum ranks Latin American countries as follows:

Chile is the heading regional power, ranking at 34th global position, followed by Panama (40), Barbados (47), Costa Rica (54), Mexico (55), Brazil (56), Peru (61), Colombia (69), Ecuador (71), Uruguay (85), Guatemala (86), El Salvador (97), Bolivia (98), Nicaragua (99) and Argentina (104). At the bottom we find the less qualified countries, Venezuela (134) and Haiti (143), from a total of 148 evaluated countries.

Trends are crucial for the World Economic Forum Global Competitiveness Report, released annually. And this year we find three different drivers: first, Chile, which keeps leading Latin America in terms of macroeconomic stability and investment opportunities -reaching the world’s Top 10 in Foreign Direct Investment, with a total of US$30.000 (32% growth from last year) for the first time.

Panama can also be included in the pole. It only went up by 1 position, but year after year it confirms its solid will to become an open, driven by innovation and a good investment environment economy.

The second trend is starred by those growing small fishes: Ecuador jumps 15 positions thanks to a good use of public resources, low indebtedness and low tax rates. Nicaragua goes up 9 positions, with executives surveyed valuing the country’s judicial independence, good quality of sea and air transport, and business innovation.
Bolivia jumps 7 positions thanks to its fiscal surplus, high national saving rates and good access to credit. El Salvador jumps 6 positions, due to a good mobile phone network, an open trade policy and an international markets orientation. Other interesting countries are Costa Rica (goes up 3 positions), Dominican Republic (goes up 1 position) and also Guatemala (goes down 1 position, a sign of stability).

Finally, the report points out to a harsh reality: the engines of Latin America are either clogged or, even worst, broken. Mexico and Brazil keep a steady path compared with 2012, barely changing their ranks, which, although not specially worrying, is definitely not good news.

Argentina is a much worse scenario, falling 10 positions from last year due to economic and political uncertainty. A problem shared by Venezuela, which has fallen 8 positions to the bottom of the rank, behind Sub-Saharan Africa countries.

“Latin America faces many challenges in terms of competitiveness, particularly compared to high income countries,” said Lawrence Pratt, director for Latin American Center for Competitiveness and Sustainable Development. “There are important gaps in some areas, very especially in the quality and reliance of institutions, infrastructures, and innovation. Those are the three main problems Latin America has to solve if the region wants to rank higher in the competitiveness index and compete with the reference countries” such United States and Europe,” he concluded.

*Illustration by Frits Ahlefeldt.