Thank you, Ricardo. It is both a pleasure and challenge to speak alongside distinguished presidents and entrepreneurs who have not only talked about building competitive economies and companies, but have actually done it, and I salute you for that.
And thank you Secretary Gutierrez, for joining us today and bringing the U.S. perspective on competitiveness and wealth creation. Your presence and involvement in this important discussion raises the bar for our performance and I hope that we succeed.
I want especially to compliment the political leaders who grace this meeting today. Facing three difficult challenges in Spain, Mexico, and Peru, Presidents Aznar, Fox, and Toledo performed with courage, intelligence and excellence. The recent progress seen in each of those countries would not have happened without them.
Georgetown University President John DeGioia, Dean George Daley and Professor Ricardo Ernst are to be congratulated for hosting this conference on competitiveness in Latin America. It is timely.
I have been thinking a lot about how to make improvements in the competitiveness of Latin America by providing access to the tools of wealth creation to its 200 million poor people.
No one is happy with the facts of Latin American poverty over the last twenty years. We’ve got to perform better. That means producing results. That means poor people must become wealth producers.
The public sector does not produce wealth, but taxes it, which is its legitimate role. In contrast, society’s private sector has produced extraordinarily successful results.
Since 1800, society has increased GDP per capita by 5.4 times in the poor countries and 19 times in the rich countries. That rapid growth, however positive for the 6.4 billion people it now sustains on earth, also created the gap between rich and poor nations. And that gap is increasing.
Prior to 1800 the world was caught in the Malthusian trap, as Gregory Clark describes it in “A Farewell to Alms.” In that trap, population and economic growth proceeded at only one-thirtieth of the modern rate.
For thousands of years, people got used to no growth, just like we in the developed world got used to lots of growth in only eight generations since 1800.
Globally, the major beneficiaries of rapid growth have included billions of people, not just the few at the top. These are known economic facts.
But what of the bottom billion that is still stuck in the Malthusian trap where the rate of growth is dismal or nonexistent and where populists use class warfare to sharpen the deadly teeth of the trap?
The obvious solution to poverty is wealth creation. But how to get the tools in the hands of the poor is the problem. I believe the private sector can help.
The tools are education, private property, enterprises, credit, information and management skills – or ownership skills. Of these, education is the parent of all the others and has the highest priority.
We can provide access to tools the same way we go about developing any successful business. Let me give you some examples.
Muhammad Yunus of the Grameen Bank produced $7 billion dollars of new wealth in Bangladesh by making loans that average $200 dollars per loan to borrowers who became the owners of the bank. That gave birth to the micro-credit revolution. And it proved that modern capitalism can work wonders for the poor.
Chile, Costa Rica, Mexico, Peru and Brazil among others have implemented competitive economic strategies that reduced poverty while lifting people in a rising tide of economic freedom. Their common strategy was to engage globalization, use national advantages, and equip whole populations to compete in the modern world. But in every one of those countries let’s recognize that there are populists fighting against that progress.
Television and the cell phone are widely available to the poor in Latin America. Once the personal computer is in poor households, the key information tools for wealth creation will be present, limited only by our imagination. So let’s put our imaginations to work.
In the words of Carlos Fuentes, “The techno-informational revolution can radically alter living conditions (for the poor)… We Latin Americans must wield our pencils as if they were daggers…to liberate the personal talents and abilities of citizens who in no way are condemned to ignorance and destitution.”
We are trying to do what Fuentes says in our own small way. The ACTUALIZACION DE MAESTROS EN EDUCACION (A.M.E.) initiative of FUNDACION CISNEROS is on the forefront of distance learning for tens of thousands of teachers all over Latin America.
Along with CL@SE, which is the world’s first pan-regional, commercial-free educational TV channel, we are reaching 30,000 schools, 1.5 million students and 7.2 million potential viewers so far. CL@SE just signed an agreement with President Alan Garcia to transmit in Peru’s schools, making it the eleventh nation where Cl@se operates.
We hope for a day when those programs are in every home in Latin America that needs them.
The private sector can also make a great contribution by engaging the 200 million poor of Latin America in clusters of service companies formed around tourism destination sites and natural resource development areas. We have to shift from selling only commodities to value-added services that create more wealth.
India did it. Latin America can do it too.
I believe that poor Latin Americans are waiting for us to engage them in what the private sector knows about the tools of wealth creation. They know their relatives have already done it.
Forty five million Hispanic-Americans produced over one trillion dollars of income in 2006. That’s about the same income as the sixty million people of Spain. They all succeeded by using tools that the poor cannot easily access in Latin America. In the United States and in Spain, you have access to the internet, you have access to credit and you have access to two of the most active commercial environments and educational systems in the world.
In fact, Hispanic-American remittances totaled 62.3 billion dollars in 2006. Making those remittances more efficient and effective is one of the first challenges the private sector should engage.
To succeed in any business, you have to get the business model right.
The right model is win-win wealth-creation in an open society and true democracy – as in the United States, or Spain or Chile.
The wrong model is zero-sum wealth-destruction in a closed society and false democracy, as you had in the Soviet Union, as you have in Cuba and as the populists are trying to impose in Latin America today.
The right business model includes both the private interest and the public interest. Both are essential to the business model.
The private interest is to create shareholder value and business competitiveness. Do that, and business growth and profits will flow.
The public interest is to create employee income, community benefits, government revenue and sustainable development. Do that, and business will be a community asset.
The public and private interests in a business have a mutual value. They are totally linked.
The private interest brings knowledge, technology, finance and management skills to the table.
The public interest brings the community and employees to the table.
Once they are joined together in a business, then governments and multilateral institutions can play a constructive role.
If the poor become wealth producers, Latin America becomes competitive. And if they don’t become producers, Latin America won’t be competitive.
It’s time for the private sector to sit down at the table with the 200 million poor people of Latin America and talk business. Every one of them is a potential entrepreneur.
It’s time for the private sector to do what it does best with the Latin American poor as partners, as shareholders, as employees, as managers and as consumers.
The private sector is there. The poor are there. But the time for putting the tools there may be running out.
That’s why last September, at the Miami Herald Americas Conference, I called for a summit against poverty in Latin America, led by the private sector, to show how the tools of wealth creation can be placed in the hands of the poor of Latin America.
I’m thinking of a best practices workshop that shows specific cases and how they impact poverty.
I’m convinced that we can make the difference for Latin America if we share what we know.
I offer the idea for our discussion today. I look forward to hearing your insights on how we can go about this.
Thank you.