The new commercial paradigms have taken many businessmen and academics of our continent by surprise, and even today, a decade later, voices can be heard shouting out of date, wrong and dangerous slogans, in which they ponder the devastation of the market. and its productive apparatus at the hands of the predatory external forces, when the truth is much more serious and possibly… more cruel.
The foregoing does not imply despair, quite the contrary, there is hope and there is a future for the Latin American peoples, but to achieve this virtuous spiral, the active participation of the forces of society is necessary, and that is what the status quo fears. Absurd for others, but the ineptitude of our governments and the aging of our states show us that it is not blaming others as we will get ahead, but destroying the ineffectiveness of a society accustomed to subsidy and mediocrity.
The competition gentlemen… that is the horizon, the competitiveness… that is the route.
1. The payment of the external debt is an impediment to the development of the countries: But as it is possible that we believe that paying the debts is an immoral and dishonest question, when precisely the opposite is true, if the debts are not paid, it is incurred in a crime with a very ugly name.
But let's see where all this comes from, it is supposed that a loan is acquired to invest it in something and with part of the dividends to cover the interests and the requested capital, anyone knows that, to borrow money to pay other debts is suicide and borrowing to consume and not to produce is a sovereign stupidity…. which was precisely how all this started.
So the problem is not the interests or the capital, but the lousy administration of the resources that we obtained in other times and the sum of the interests of our unfulfilled obligations. Now, do you still think that the bad guys are the creditors? You can not even say that the interest rate is high or usurious, it is below 10 percentage points, so what happens ?.
It happens that when the Latin American countries danced in millions in the 70s, the only thing they did was excessive imports of consumer goods, they did not plan, they managed huge public deficits and when they woke up from that dream, only the payments were left everywhere.
It is obvious that if we now face a payment of the external debt it will be quite painful for our societies, but that does not justify telling us lies. We had the opportunity and we wasted it, or rather, the governments on duty and the collective unconsciousness of past generations have condemned us to live paying their debts.
2. The terms of trade are always unfavorable for the country: It is common to hear that a few years ago you could buy a truck for the value of so many quintals of rice, but now you need double or triple. Those kinds of salon conversations should be dismissed by economists and knowledgeable people.
First, it turns out that prices change over time, but the direction may be downward. That is, if you take base years that the rice was very well paid and now it is no longer so well paid, it is possible that the observation is correct, but if we compare with another time when rice was very poorly paid and in the Nowadays you pay much better… so where is the evidence?
Many times they talk and argue with inconsistent data.
Second is the issue of quality. Do not think that we are producing high quality goods. What's more, the quality of many of our products has decreased, so it is also our responsibility, since if we offer a second quality to our clients they will pay us less than twice.
Finally there is the simple fact that comparing capital goods with consumer goods is not so logical, rice is a good that its value is directly related to its immediate utility, instead, the truck must be measured by what it can occur with it over the years. Also, there are always new models.
I am not saying that we always win, because that is not the case, but it is not true that we always lose, and it is less true if it is about trying an example like the one we have just presented. The irresponsible manipulation of data is common in our media, be more insightful and do not allow them to cajole you with false arguments, demand the exhibitors, so they will also show you much more elaborate versions and consistent with reality.
In our indefatigable search for truth, we find countless false propositions that try to divert our attention, which in fact corrupt our thinking and distort our knowledge, leading us to make deductions that although apparently correct, are based on entirely false assumptions. Those are the myths and unfortunately in the modern economy they are very numerous, mainly due to the lack of economic culture of those who have the power to communicate and also, why not say it, because of the decision of the same economists, who we have preferred in many cases. to keep our knowledge as if it were only worthy of the technocrats and politicians, when in reality it is the entire people (understood inhabitants of the country),He who needs to know what is really happening and what the economic policy decisions are made and why they are made.
On this occasion I make a call to sanity and social responsibility for the profession, so that, as far as possible, we are active agents in the education of our peoples, so that it is easier to promote the reforms that we so badly need. for development.
A nation ignorant of its economy walks the edge of a gorge blindfolded, unaware that next to it is a safe and fertile valley.
Many half-haired oligarchs have fun conversations about people's ignorance and, as if it were not enough, they assure that "the brighter the better…" or worse, their stupidity goes to the extreme of concluding that "why explain to them if the final they will not understand… "that is not to think as a leader, that is to think as a brute with power… while the people are ignorant, the more difficult it will be to take the flight towards development horizons, people must be able to understand what their rulers want to do, in order to support them.
Pretending to govern ignorance is a crime that must be denounced and punished.
Let us now look at two new myths in international economic relations.
3. The prices of the country's primary products must be fixed and protected to defend our stability:
From the point of view of the market economy this is a mistake and even a utopia. Our economy claims to be market, and how is it that we expect a bureau of technocrats to decide on what the price of goods should be.
Prices in the economy are achieved by the free relationship between supply and demand, not by the willingness or order of a government or by the opinions of some experts on what the behavior of these variables will be. These experiments distort the efficiency of the economy through disinformation to the production system, so with externally setting prices we would only achieve excesses or defects in supply.
There are strategies to make better use of the moments of the economy and the product cycle. It may be that country X has a power of influence over product Y, so if it wants higher prices, it can define a policy of decreasing production or supply of the product abroad, which would raise the price. But then it may be that the demand for substitutes increases or that the benefit of the price increase does not offset all the benefits that were obtained when more was produced (employment, taxes, presence in the market, industrialization, etc.). It may also be that, attracted by high prices, new competitors want to enter the market and if the barriers are not strong enough, it can lose all its power in a second.
The situation of the fluctuation of prices as a result of the interaction of supply and demand, also shows the way in which products must be developed. In other words, if we manipulate the prices and give this false stability to the sectors, we are only raising “silly children” who will never emerge from their confinement, producers must understand that their natural environment is the market and that their objective is to satisfaction of customer needs. Price control, as proposed, is to slow progress.
But there is a way to win in this complicated game. We can diversify production, so as not to depend on the situation of a single product. That is important. Mono-production is guilty of the agricultural situation in our countries along with other causes that can be counteracted with correct planning. Another option is to increase exports with added value, that is, of manufactured products, those markets are more stable and profit levels are more attractive.
The final proposal is the obvious one, but one that many entrepreneurs fear. Let's export quality. The market rewards quality with higher demand and better prices, mediocre products go to the bottom of the shelf, while good ones rotate faster and are more commercially attractive.
4. The devaluation of the currency has not had a positive effect on exports:
This comment is false. Both from a theoretical point of view and in practice, what happens is that comparisons must be made correctly and not lightly.
It happens that many attack the devaluation policy saying that while it has multiplied by dozens, export levels do not reach a small percentage. Apparently it is true, the exports of the Latin American countries have not increased much, but what happens is that they do not take into account internal inflation.
Now, if we compensate the level of internal inflation with the levels of devaluation, we find that indeed the levels of exports have increased to a very similar extent. So there is a positive and consequent effect.
Another point that should be clarified is that the devaluation aims to stimulate non-traditional sectors of national production. Here the positive effect of the devaluation is clearer. We can see that more of these goods are being exported and that new productive sectors are being strengthened, but under healthy policies that promote development.
Today, when several countries in South America are dollarized or moving towards dollarization, we should be concerned about the loss of this policy tool. In fact, it is common that now that it has been lost, many of those who previously attacked the devaluation, lament their own lack of vision and action when it was still available.
It is now clearer to see how countries with lower inflation rates and that still retain their currencies, can compete openly against the offer of those who have adopted dollarization and exhibit higher inflation rates. For dollarized countries, the only way is to reorient their production system towards more competitive strategies and control their inflation rates. Otherwise their economies will suffer more rigorously the sanction of the international market.
This has been an electoral year in several Latin American countries and, as in so many other years, politicians have gone out and continue to take to the streets to clean up their bad name with incendiary speeches and impossible promises.
Colombia, Ecuador, Brazil, Bolivia, are some of the countries in which, in 2002, the leaders and legislators have been elected for the coming years, many of them are the same as always, those who reach the "seat" thanks to the political machinery that supports them, they are the "lords of the vote", but they are never the "lords of development".
Many of them made speeches and reasoned in the squares, in front of thousands of citizens, about the problems of the region, the country, the entire continent…. and? ….. the same thing always happens, they are the same absurd and wrong reasoning that keep looking for culprits abroad, when those responsible are right here.
In order not to go too far, I suggest that the reader remember or attend - depending on the case - a demonstration by these ex-populists and listen to what they have to say about international economic relations and their impact on our economies. You will see that over and over again they repeat the same myths that we are discovering in this short series of articles GestioPolis.com, I hope that after reading this information you do not fall into that trap, even if the verbiage of these manipulators tempts you to believe them.
Today we will see a myth that seems very interesting to me, not only because it is one of the most widespread, but because for decades it has been the workhorse of many political parties and innumerable popular movements.
I clarify that in no way am I against the popular classes, or expressions of disagreement with the system, I myself am a nonconformist and a denouncer of economic and social injustice, but if I am against false, weak and nonsense, that many leaders skillfully manage to mobilize the masses, after promises of equity and opportunities for all.
Democracy must be used to advance, not to engage in absurd discussions, which become sophisms of distraction, while what is truly important vanishes in the arranged laws and in the prevailing corruption. Let's be more critical and smart.
5. Our foreign relations are the cause of our underdevelopment and the enrichment of developed countries:
False a thousand times, as it is possible that decades and decades of Latin American politics were based on such an incorrect thesis. Is it that our intellectuals did not find anything better to say? Is it that our professors could not teach ?.
Theoretically, the insertion of developing economies into the international apparatus can be very delicate, but with strategy and policies promoted by intelligent leaders and followed by committed peoples, they definitely end with a happy ending.
Historically, we have seen how small countries that were in worse situations than ours (Asians after the Second World War) have come to have living standards much higher than ours, thanks to their insertion into the international market and their multiple alliances. with other countries. Logically, Latin America is a vast territory with a significant population, but our international weight barely manages to manage 4 or 5% of world trade…. It sounds hilarious to think that developed countries develop because we do not develop, clearly this does not work that way… everyone is interested in having good business partners and that also means development. Another thing is the negotiation of aid and the conditioning of credits.
If you want to understand international relations to put them in our favor or at least take advantage of them, then it is better that the correct theses are handled.
a) the international terms of trade are not governed by absolute advantages, that is, there is always something that we can produce relatively better and cheaper than others, we can always insert ourselves positively into the market. The case is to know what that product is and in some way develop the sector so that added value is exported and not just input.
Fortunately we can count on several relatively competitive products, not just one. At this point we can fight for more credits for research and productive investment. Instead of asking for credits to pay inefficient payrolls.
b) Relatively the size of the countries also determines the profits, that is to say that the smaller the country the greater these are. In this case we are talking about a strategy decision and a calculated and controlled risk. The proposal cannot be to close the economies to develop them, (we already tried and we only raised "silly children") that policy worked for other countries in other times, the option is to take the risk and insert ourselves into the world economy to get the best benefit, but following a laid out plan, serious and democratic. So why not fight for more beneficial and stable international agreements? (long term).
c) International trade does not conflict with the economic system of the countries, both in the market economy and in the planned one, it is possible to carry out trade exchange policies with the rest of the world, another thing is if you decide to do it with the countries of the same order and not with the others. The difference lies in the productive apparatus. It is obvious that the productive apparatus of a market economy will be able to react more quickly to market requirements without the need for a central order. In other words, a centralized and planned productive apparatus is at a competitive disadvantage with one with a market economy, due to the simple fact of the flow of information and rapid decision-making.
d) To balance the balance in its proper measure it is necessary to clarify that at no time is the theory of competitive advantages a magic, simple and safe formula. It is not true that the fact of discovering the country's competitive advantages and advancing specialization processes in these areas ensures the country's development. The situation is much more complex. As I mentioned at the beginning, the participation of the entire society is necessary so that the process is not rigid but flexible to fluctuations in the environment and the internal situation, which will be positive for everyone. It is useless to reconcentrate wealth in a poor country, nor is it useful to open trade without state support, since decisions must be made for the long term.
Previously, we removed the veil that covered the falsehood in various aspects of international economic relations, but the most interesting thing in the current Latin American economy is that it seems that the extremes are being abandoned and a more promising future is in sight, but it will not be possible if what we do is demonize independent thinking.
I have seen with amazement various editorials in the newspapers in Latin America that speak of a certain prevailing Neo-populism in the region. But they do not show it as a possible option, but as a disastrous shadow of misfortunes.
First of all I do not agree with populism (of populists, free us sir), but I do not find sufficient reasons to speak of something like that, it is necessary that the language is moderated a little and can be seen beyond the nose.
What I believe is that there is a reaction to policies that have been imposed and meekly accepted for decades. In many cases, the political power of the republics is passing into the hands of the people, represented by men who have revealed themselves to the system in the past, in one way or another.
In other words, while in Latin America there is an abandonment of extreme economic models, there is also a polarization against the status quo. Something very special and very dangerous for some.
I only hope that we take advantage of this situation to strengthen the region and grow towards the entire world, likewise, I hope that the plans of our presidents do not disappoint our hopes and that they know how to govern, taking advantage of the opportunities and imposing our criteria of sovereign nations. Many times it has been said that the people do not know how to govern themselves; Let us show the whole world that it is possible and let us do it now.
6. Foreign investment, has very high rates of return, does not contribute to development and depreciates our natural resources: To our great regret, the statement is false, and I say very regretfully, because the studies that affirm this, have not realized that if it is true, that the profitability of foreign investors exceeds 100%, then we would be the most industrialized and developed countries in the world.
If we were to accept the results of these studies, we would be faced with a contradiction of titanic dimensions. It is very simple, reflect, if our countries were so profitable, then we would drown in a sea of investors, from all over the world. Foreign capitals would fight to come to the Latin American continent, to gladly deposit their wealth here, while markets such as Asia, Europe and, not to mention North American, would be second options in the face of the succulent South American market… don't happen, if we are supposedly so profitable.
Just a few years ago, foreign direct investment in the region has been given the importance it deserves, since it does not exceed 5% of GDP, compared to the Asian market, where levels reach around 10% of GDP, and remember that the GDP of the eastern countries is much higher than ours.
Now, what do we get, with oceans, forests, minerals, thermal floors, biodiversity, etc., if we have not been able to exploit them? Think about it, goods do not have an intrinsic value, but they do so once they are on the market, that is, when supply and demand act on those goods, likewise, natural resources achieve their value in the commercial environment.
It is a pity that we do not have enough funds to promote ourselves, the exploitation of said goods or resources, because it is not only about exploiting what nature has given us, but an added value must be incorporated into the product, either by service or by processing.
If at any given moment, an investor arrives and risks his capital to develop an economic activity in the country, that will generate development, because it will create employment and will pay the state, in addition, that surely a part of the product will remain in the internal market, with what which, the offer of available goods will be expanded or varied.
Something that studies do not quantify is the transmission of knowledge. It is very common that when these companies arrive in the country, they look for local labor, but likewise, over time, the same company ends up teaching its employees how to do things (know-how), it is not true that they only get to hire freighters and exploit the masses. Let the multinational employees say so, to see if they are not the best paid. In addition, if you do not have the academic level to assimilate said information, to later become independent or outsource to a larger company, it is not the fault of the foreign investor, but of the internal educational and credit system.
There are many experiences, in the transmission of knowledge, that have functioned as springboards for developing economies. But this has only been possible, with the support of the state and the political will of the governments, to give way to long-term purposes and incentives to the investors themselves to teach their local strategic partners, how nationals make themselves known. who work on these projects.
Now, if, in principle, the ownership of these resources belongs to the nation and it is this nation that gives its authorization, for that capital to enter and develop, it should also ensure that it is played under its rules or laws. And most importantly, competitive markets are sought, where investors measure their strength, for the benefit of the country's economy and the quality of life of its inhabitants, that is, that contracts should not be exclusive, but democratic. Thus, we avoid creating monopolies.
Bibliography
Myths Fallacies And New Paradigms, Notes On Modernity. Corral, Freund, Lucio-Paredes. Ed. Santiago Jervis Simmons. Quito, Ecuador. 1992
