Could the ancestral home of the potato ever turn out stereos?
PERU, ancestral home of the potato, has to import spuds. Next door, Bolivia has whittled a 45,000 percent inflation rate down to near zero, but is not out of the woods yet economically.
With this year half over, it looks as if Mexico's total product may decline by perhaps 5 percent. Perplexingly, South Korea, with a roughly similar debt load, is expected to continue its rapid growth, at perhaps 7 percent or more. That 12 percent spread makes an enormous difference in economic -- and personal -- terms.
Three of the five Pacific Rim supertrading nations each export more than all of South America put together.
These striking symbols of Latin America's growth problems are provided by Prof. Jeffrey Sachs, a Harvard economist and specialist on South America. They are attention-getters that leap from his meticulous growth/debt/tax/exports/population studies like a volcano bursting from a Mexican corn field.
Attention-getters are needed for a region perennially ignored by many US policy planners. United Statesians (as Americans are known south of Laredo) do pay sporadic attention to the less than 3 million Nicaraguans. But, except for those living in states bordering Mexico, Americans are amazingly resistant to attempts to focus their attention on the 78 million Mexicans next door.
US trade and US attention are like a compass with three points: East across the Atlantic, West across the Pacific, and North to the biggest trading partner, Canada.
The saga of Argentina's dramatic comeback against debt and inflation (and current risk of slipping back into the whirlpool again) is little noticed except by specialists. As is the dramatic rise of Brazil to big-power status (despite a continuing debt problem). Even the extraordinarily good news that almost all of South America (minus Chile and Paraguay) has been swept by a wave of democracy remains unknown to most Americans.
When Paul Volcker, the tallest American folk-hero not wearing a Celtics or Oilers uniform, disclosed a recent secret visit to Mexico to wrestle with that country's increasingly tough talk about not paying interest on its debt, there was little stir. Nor was much attention paid to the subsequent unexpected resignation of the man he visited, finance minister and potential future Mexican president, Jes'us Silva Herzog Flores.
Gramm-Rudman Washington is not the place to propose a Marshall Plan for Latin America, or a renewal of the short-lived Alliance for Progress of the early '60s.
The ruling plan of the moment is the far less sweeping concept of US Treasury Secretary James Baker. His scheme moves beyond the International Monetary Fund's formula of debt repayment through strict austerity. It calls for banks and governments to keep enough new loan money flowing in to permit some export growth to help repay interest. But Professor Sachs' studies make it clear that big exports are needed if Latin America is to emulate East Asia.
Big problems remain for Mexico, Argentina, Peru (and at least 15 African countries), several of which would be in Chapter 11 bankruptcy proceedings if the world were so organized.
Fortunately, the major Western nations (and banks) have muddled through long enough to have written off much of the shakiest nations' debt on their books.
But none of this ranks as the kind of far-sighted architecture that brought back Europe and Japan in the '50s and '60s and gave the US its two-ocean trade explosion (and current gap).
Marshall Plans are out, as already noted. Chapter 11 doesn't exist. Depressed commodity prices aren't easily rescued when America's rust belt and grain belt are also affected and don't relish added Latin competition.
Nevertheless, some answers exist.
Overall, it should be remembered that two or three decades ago many US officials and specialists lamented that Koreans and Taiwanese (and Malaysians and Thais) would never develop a work ethic and modern technological skills. Now, look at all those Hyundais rolling out of showrooms and Taiwanese hi-fis blasting out Mahler and Madonna in American living rooms.
That ought to suggest that the gulf between the growth rates of Mexico and South Korea is not forever fixed.
The biggest part of the answer has to emphasize growth. To get that, investment will be needed -- in new equipment for old industries and in totally new enterprises. If the big international banks are mainly funding interest payments to themselves, much of the investment will need to come from two sources: multinational firms and wealthy sources of capital within each country.
Both are difficult. Traditional Latin suspicion of Yankee (and Western) multinational investment is matched by corporate wariness about profitability, unskilled labor, bureaucracy, and the threat of nationalization. The penchant of wealthy Latins to invest in Miami condos, Swiss bank accounts, and assorted stock markets results in about $100 billion in capital flight -- perhaps $30 billion from Mexico.
Future bargaining under the Baker plan ought to concentrate on ways in which US, European, and Japanese investors could have more real impact in modernizing Latin export businesses. That might include turning more debt into equity in such enterprises. It ought to encourage more subcontracting of the kind the big-three US automakers have already done in Mexico. And it should emphasize creating enough signs of profitability to lure that huge capital flight home. There's no point in billions of savings from the north flowing into the south in order to let scores of billions flee north.
Earl W. Foell is editor in chief of The Christian Science Monitor.