[Viewpoint] Korea: A model partner

When the people of Latin America and the Caribbean think of Asia, one country that never fails to inspire is the Republic of Korea. The story of Korea’s remarkable transformation over the past half century, from a war-ravaged, inward-looking, underdeveloped country, into a prosperous, dynamic and innovative economic powerhouse, serves as evidence that the right combination of hard work and smart policy making can produce substantial improvements in a society’s wellbeing. Korea is truly emblematic of what some have called the Asian century.

When Korea opened its economy to the world in the 1960s, firmly embracing export-oriented development, most of the 26 countries in Latin America and the Caribbean kept their economies tightly shuttered, even though an import-substitution model they had adhered to for years was showing signs of exhaustion. In the mid-1980s, when Korea’s reforms were bearing fruit, much of our region was mired in hyperinflation, recession, over-indebtedness and poverty. Little wonder we refer to that time as the “Lost Decade.” Yet, those difficult years served as the necessary catalyst for far-reaching changes in the way we run our economies.

Now, as I wrote in my new book earlier this year, I firmly believe we are entering “The Decade of Latin America and the Caribbean.” According to our economists at the Inter-American Development Bank, if we continue to average 4.7 percent annual growth, as we have for most of the past seven years, we can double our per capita incomes by 2030.

At a time when the international economy is struggling, with analysts warning of a double-dip recession in the United States and the debt crisis threatening the euro zone, Korea and Latin America stand out among the world’s brighter spots. Both regions’ growing middle classes are fueling demand for natural resources and for manufactured goods. Korean companies, recognizing the potential of this promising new market, have refocused on exporting to our region.

Opportunities abound

Energy security is emerging as a priority for Latin American and Caribbean countries that face soaring domestic demand for electricity and transportation fuel. The United Nations estimates that the region will need to invest around $55 billion per year through 2030 to meet anticipated growth in energy demand. This will translate into numerous opportunities for companies such as Hyundai Heavy Industries, already a leading provider of turbines for hydroelectric and wind power facilities.

Technology for energy efficiency is also a growth sector. Latin America has become a major importer of energy-efficient home appliances such as refrigerators, clothes washers and air-conditioning units from Korea. If Latin America’s average per capita income continues to grow at the current pace, by 2030 there could be 500 million middle class people in the region who also want these conveniences in their homes. This year, Korean automobile manufacturers are on track to export more than 400,000 vehicles to Latin America and the Caribbean - around 20 percent more than last year. Kia recently began exporting its first flex-fuel car to Brazil to capitalize on that country’s affordable and sustainable biofuels. In the future, the market for fuel-efficient vehicles is expected to explode in Latin America, and Korea will be well-positioned to expand its market share.

As Latin America and the Caribbean consolidate their economic gains, naturally we would like to see more of those factories located on our shores, and a number of Korean companies have already had the vision to make that commitment, manufacturing everything from televisions in Mexico to garments in Central America and Haiti. To facilitate investment, Korea signed free trade agreements with Chile in 2004, with Peru this year and is negotiating FTAs with Mexico and Colombia. And these FTAs work: Chile-Korea trade has grown on average 22.3 percent a year since the agreement took effect seven years ago.

We want to go beyond trade and investment, however. In many ways, Korea serves as a development model for many countries in Latin America and the Caribbean. We believe we can learn much from Korea’s strong commitment to quality education, which is amply reflected in outstanding math and science test scores among the country’s 15-year-olds. We recognize that we must invest more in research and development to achieve the kind of cutting-edge innovation that Korea’s leading corporations and universities have contributed to the country’s “knowledge economy.”

Since joining the Inter-American Development Bank in 2005, Korea has contributed not just financial resources, but highly valued technical expertise and advice on how Latin America and the Caribbean can marshal its natural and human resources to rise up the development ladder. Four Korean trust funds administered by the IDB are channeling $200 million dollars to select projects throughout the region aimed at poverty reduction; fostering innovation, science and technology; implementing mobile banking and e-government; and supporting renewable energy projects.

In recent years, an increasingly prosperous Korea has become the second-largest Asian contributor after Japan of overseas development assistance to Latin America and the Caribbean. We highly value those efforts, but we’re particularly appreciative of Korea’s readiness to share with us its “lessons learned” from its long, but ultimately successful development quest. A well-known Korean academic now at Cambridge University, Dr. Ha-Joon Chang, wrote a widely-read book on economic development strategies. In it, he argued that countries that achieve development often kick away the ladder once they’ve reached the top, making it difficult for still-developing countries to follow. In the case of Korea, that could not be farther from the truth.

*The writer is president of the Inter-American Development Bank.

By Luis Alberto Moreno