[Viewpoint] Dynamic approach to Latin AmericaWhile the U.S. and European economies were suffering from recessions prompted by fiscal crises over the past three years, Asian and Latin American economies played a role in reviving the global economy. In the past four decades, Latin American countries have often been the direct or indirect causes of financial crises, but they have overcome that reputation to recently become the driving force of global economic recovery along with Asia.
Last year alone, $153 billion, or 10 percent of direct foreign investment from around the world, focused on Latin America. Brazil, a key player in the region, rose as the world’s sixth-largest economy as of late 2011, bypassing England.
Latin American countries were able to do so because they were raw material export-driven economies, and they complement the economic structures of emerging economies in Asia. Most Latin American countries, therefore, are making massive investments in infrastructure, science and technology education as well as research and development to improve their national competitiveness in order to prepare for the possible plunge in raw material prices.
The region is a growing market for Korean companies because their middle classes are expanding day by day. They are also key sources for mineral and energy resources, which Korea lacks. The countries are also emerging markets for infrastructure construction and plant exports.
But a sign of abnormality is seen in the region, as the growth of the Chinese economy has slowed down. The trend became increasingly clear that foreign companies in Argentina, Bolivia, Venezuela and Ecuador are being nationalized again. The Bolivian government on May 1 announced the expropriation of the Transportadora de Electricidad, the local utility affiliate of Spain’s Red Electrica de Espana.
On May 3, the Argentine Congress voted 208-32 to move forward with a bill presented by President Cristina Kirchner to approve the expropriation of YPF, the country’s biggest oil company, from the Spanish-invested energy giant Repsol. The ghost of statism appears to have returned.
In the history of the region’s economic policies of the 20th century, the trends of nationalization and privatization took turns roughly every two decades. One thing that is different this time around is that the measures of nationalization are taking place in only a number of countries, not in the entire region.
It showed that a government policy or corporate strategy built based on the perception that Latin America is a single bloc of common historic and cultural background could be wrong. The political characteristics of each country in the region are growing more and more distinguishable. Mexico, Chile, Colombia and Panama are increasingly opening up, while Brazil and Peru are becoming centrists that pay special attention to the resolution of the widening wealth gap and to achieve balanced growth. In contrast, Argentina, Venezuela and Ecuador are becoming more and more leftist nationalists.
Korea, therefore, must meticulously create different strategies for each country for its interests in Latin American markets. With the countries that are opening up, the government must not miss the opportunities to sign free trade agreements by beginning negotiations and strengthening cooperative ties.
For the centrist countries, it is better for Korea to use the channels of academic dialogue to share expertise in development and to build the framework of long-term cooperation. For the leftist countries, the government must have multilevel contacts and strategic links to corporate investors in order to build trust and guarantee the stability for Korean businesses in the country.
Today, Korea has a far larger number of policy tools that can be used to cooperate with Latin American nations - development assistance provisions, multilateral financial support and human exchanges - than it did in the past. The problem, however, is that the tools are scattered around among the various ministries and government offices, and the country lacks the mechanisms to strategically organize them to maximize national interest.
The government will host the 2012 High-Level Forum on Korea-Latin American Continent Partnership next Tuesday by inviting ministerial officials from major countries of the region. The two sides’ economic cooperation, resources, infrastructure and green growth collaboration will also be discussed. Expectations are high that the Korean government and companies will find wisdom to improve their ways to enter the Latin American markets.
*The author is the dean of the Graduate School of International and Area Studies at the Hankuk University of Foreign Studies and the secretary general of the Korean Council of Latin America and the Caribbean.
By Kim Won-ho