Culture In Latin America Notes.docx

26/09/2018 2. FACTS & FIGURES - Latin America is formed by 48 COUNTRIES - Central America: Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica… - Caribbean Island: 700 1. SOCIAL STATISTICS (graphs interpretation) A. POPULATION The vast majority of the people lives in Latin America  High geographical fragmentation Brazil is an outlier as more population is distributed in that area compared to Mexico, Colombia, and Argentina… Population growth rate is declining in both Latin America and the Caribbean. Age of population: Population is young. The group around 15-34 prevails over those of 35<65 years… The birth rate is really high in both Latin America and Caribbean. However the mortality rate is lower in Latin American countries. Both areas have similar fertility rates. Lower life expectancy for Caribbean countries, women have longer life expectancy than men. Migration rate is increasing considerably in Caribbean countries compared to Latin American ones. B. LABOR MARKET Economic participation: Inequality in economic participation: men participates more in socioeconomic aspects than women. KEY FINDINGS             

High geographical fragmentation Brazil is an outlier High population concentration in a few countries Transition towards a more modern demographic behavior and households structure High and growing degree of urbanization General positive evolution in socioeconomics but Latin Americas takes the lead Critical region for International Labor Mobility Analysis Almost a world away between rural areas and urban areas Household size increase as level of income is lower, to compensate shortage of economic resource Low activity rate, especially among women. Structural change in labor specialization: from commodities, mining and manufacturing to services Moderate level of unemployment, but high on the youngest Excessive employment in low-productive activities and informal sector

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Strong gender bias in labor market Small reward to investment in education Mismatch between qualifications and labor requirements

KEY FINDINGS – by teacher      

Latin America is an urbanized region. Mobility within the country from rural areas to city usually in the north direction ( from south to north America) The poorest families have more children Gender segmentation of the actual market. The level of income is lower for the women. A critical worldwide problem!! Level of unemployment is not very high but the main problem Usually the level of salaries increases as years of schooling increase but this is not exactly the case in many Latin American countries.

C. EDUCATION 

EDUCATION- Graph 1st The level is high There is no symmetry Lower performance in central American countries. But in general the level of literacy is high.

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NET ENROLENT RATE %- Graph Here 2 very interesting results: 1. The level of primary education, more than 90%. 2. Positive evolution in terms of involvement in the education system. 3. The evolution is not a homogeneous evolution. Not everywhere.

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SCHOOL ATTENDANCE BY PER CAPITA HOUSEHOLD INCOME (% 20-24 Years)- Graph

Depending on the level of income of households. There is a very big segmentation according to this level of Bachelor’s participation. 

POPULATION 25-29 BY YEARS OF SCHOLARSHIP (%)- Graph

Things have improved but not at the same rate at each country. 

YOUNG PEOPLE 15-24 & NOT IN EDUCATION OR EMPLOYEMENT (%)

Picture of young people outside educational system and work market. -

Rural areas El Salvador, Guatemala, Honduras and Nicaragua: Central America

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PUBLIC EXPENDITURE ON EDUCATION (%GDP) Strong investment on educational system, strong investment on human capital (H) in Latin America. The stock of skills, knowledge, capabilities, competences that one individual is able to use in a workplace to successfully perform tasks (h). When we are talking on human capital it depends on qualification derived from educational system and skills or competences derived from experience and the type of jobs developed. But this is just qualification part (graph). Then, we have to grade skills and capabilities also.

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%URBAN GENDER WAGE RATIO Gender bias do exist. It’s about 20-25%. But even it does exist we talk about women with high education degree, it does not depend education of women…

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D. HEALTH AND BASIC SERVICES Child Malnutrition: Central America high malnutrition Infant Mortality : positive evolution % Population using drinking

E. INCOME DISTRIBUTION 

Latin America: % Income distribution % poor and indigent population 1. Improvement in the rate of extreme poverty 2. Situation is worse in rural areas both in poverty and extreme poverty.

Working poor: people with a salary below the rate of poverty Central America has huge rate of working poverty.  

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Latin America: distribution of national Income The poorest get 3% of national Income. Income distribution: GINI COEFFICIENT: takes the income of each individual of the country and compare the results globally. 1. Level of inequality is using during integration, going back. 2. Inequality is higher in the rural areas. 3. No real difference between the pattern of distribution between cities and rural areas. The unique difference is the level of poor people in the rural areas is higher. Latin America: Feminity Index of Indigene and Poverty The level of poverty is higher among women

KEY FINDINGS The role of Human capital: Education, Labor skills and Health employability, labor productivity, absorption capacity Clear political support to investment in education sector  increasing contribution of private agents Asymmetrical distribution: Caribbean and Latin America fall behind Dramatic inequality in the access to higher education according to income levels

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20-25% young population removed from education system and labor market in lowincome countries and rural areas Efficiency and usefulness of public policies: investment in education not always mean better results  wage premium?  Migration of skilled workers Poor quality of workplaces makes more difficult growth in human capital Gender Bias in income, even in the best jobs  Increasing feminization of indigence and poverty Large scarcity in the provision of health resources and services in Haiti and Central America Average Values hidden very dissimilar social realities in the region Close connection between poorness and economic activity in rural areas High degree of childhood poorness Very low quality of jobs in Central America Very unequal income distribution between cities & countryside

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DUTCH DISEASE- ESSAY When economist ran this analysis it was a positive period for commodities. Brazilian companies, Dilma Russet . When the context changes, political & economical, the situation changes also. If u re specialized in commodities (agricultural products, raw material & energy) Risk for specialization: -

Volatility

At that moment the price of oil in international 150/barrel of oil $. Today 70$. Three years ago 30$. Volatility. -

Risk of corruption as many companies are public.

Crowding out effect: suddenly you discover something that will become a commodity and because you increase the availability of one specific resource you will enter to international market as one of the big players. You have the opportunity of increase your exports. But if all the people of the country know it and want to exploit it, investment goes there and the movement of capital and labour will move there. For this reason, when we are talking about capital intensive.. Talented people go there. Capital The problem is when it takes place every year. If the production of this new natural resource is made by public company it is more money for the public sector. Otherwise, this is something that create cumulative causation: I increase the production, more pf, more lab go there because the salary increase. If the gov is doing this kind of setting policies or compensation policies to offset this phenomenon, in few years people do not want to invest because the 1. Profitability is lower and 2. The expenditure increase by all the products and

inflation takes pace. This appreciation of the currency will not improve the competitiveness of the production of the rest of the country. Solution to this problem  CHIL If I want to attract investors I have to try to get a very profitable performance. Otherwise, people will prefer to invest in other sectors.

COMMODITIES –TOPIC 

60S- 80S: EMERGING ECONOMIES OPTED FOR TWO DIFFERENT DEVELOPMENT STRATEGIES A. The substitution of imports  promote national production. It means that I need active industrial policy, the government shall to do things. - Trade barriers protectionism - Promotion national  active industrial policies (national champions) *International market for manufactured products *Insertion in international markets through energy and raw materials. B. EXPORT ORIENTATION (SEA)  no experience, but let’s attract capital from abroad removing trade barriers. Need skills, money capital…. Ex: tiger countries. - FDI attraction - Open markets New orientation adopted 90s-2000. Because: 1. Influence of globalization 2. Emergence of global Value chains 3. External debt crisis (economic & political pressure)  LONG-LASTING PROBLEMS 1. Do not control the price in international market – that Latin American economies was price takers, they do not have the capacity of controlling the price of exports in international markets. It is a problem because in an economy if the price of imports compared to that of exports decrease constantly it is bad for the economic development. 2. Growing gap in productivity/efficiency industry - No control the price of their products in international markets. If you open your market to international rate you benefit, the problem is the distribution of income, not the globalization. Take pf of your comparative advantage, but depending of your exports your benefit will vary. Why? REASONS  PERSISTENT TREND TO DECREASE TERMS OF TRADE 1. LOWER CONSUMPTION, DEMAND: Industrial processes go more efficient, more productive, demand lower and prices go down. Our industries in Europe and ww are more efficient. - Irruption of substitute products (synthetics materials, renewable energy…). We are not using raw material coming from natural resources. We use materials from the chemical sector. 2. Direct competition from developed countries (non- tariff barriers, subsidies)  INCREASE SUPPLY.

Not in the case of energy, but for sure in the case of food and agriculture. 3. Vertical integration strategies ( takeovers)  DECREASE INTERNATIONAL PRICE  Impact of transfer pricing policies This companies are not only producing and distributing products. They are also producing and obtaining raw materials in that emerging economies. The same transnational has the property of all the value chain. The objective is to low input cost. Ex: Nesspreso is a brand from Nestlé, a Swiss company, this company are involved in vertical integration strategies (raw material, production & distribution). When they get coffe on the forest of Ecuador it’s a cost for the company. If you want to maximize you pf you need to minimize your cost, the lowest as possible. When nestle is exporting coffe from Ecuador, the interest of the company is the export price was low. But that is not possible making it by its own way. 3/10/2018 There is a tendency to trade deficit. This problem means that external debt is increasing. Very serious debt crisis because all these countries were finally highly indebted. The World Bank and the International Monetary Fund, as international organization, told that the strategy shall be changed. International Monetary Fund injected money to help that economies until they gave then an ultimatum. 90s-2000: New orientation  1. Influence of Globalization 2. Emergence of global value chains 3. External debt crisis ( economic & political pressure)  They changed its strategy because the International Monetary Fund gave them an ultimatum. As it is expected, new orientation in the region benefited better access to external markets, capture of FDI, technological… But it was not a very successful strategy because: 1. High dependence 2. Weaknesses in external position 3. Volatility of international prices (communization: role of $ plus options & future markets) 4. Very high fragmentation of production and distribution (in hands of multinational corporations, which were

EXTERNAL KEY FACTOR FOR LATIN AMERICA PROGRESS IN 2000S?  China’s integration in the global economy 1. As a huge and fast-growing market ( demand-push) 2. As a source of FDI ( primary 3. As an investor in securities. You have a deficit do not worry, I’ll pay for it. China was the first active investor in the Latin America securities market. China’s positive influence  renewed interest in commodities in the region but not such a successful story. A very sensitive and fragile strategy because of:

Commented [ISM1]:

1. 2. No diversification. Risk of crowding out efforts (Dutch disease) CHANGE OF POLICIES INVOLVE 1. Privatization and liberalization processes If you are promoting privatization with no competition, it does not work. 2. New approach… 3. Challenge of a better and more innovative performance in the whole economy because of the increasingly global competition….

DUTCH DISEASE  Crowding-out effect on non-resource sectors ( other sectors) - Attraction and division of capital & labor because profits & salaries are higher. - Increase € (national currency appreciation) ONLY in some cases: 1. If the price of this natural resources in International market is named in a national currency. 2. Depending on the size on internal market. If this market is very important in that resource. - Decrease competitiveness Manufacturing non-using this input. - Double consequence 1. Resource movement capital & labor movement 2. Spending and cost effect. That sector have to spend more money to produce the same.  Paradox of resource-driven economies ( of natural resources driven economies) Some kind of difficulties. Reasons: 1. Dutch disease 2. Volatility in prices. Ex: price of oil 10 years ago has fluctuate a lot. 3. Rent-seeking behavior. Corruption, if you are opening the market and not promoting competition. The public sector will invest on controlling some private sectors. The risk of appropriation of this rents from part of the government is high. 4. Lesser stock of skills. The main problem of a very small diversification is you have a lower stock of knowledge. You are losing the advantage of developing new knowledge. This is critical because human capital and increasing labor productivity are affected. EXCEPTION: CHILE  Successful story. One of the most specialized commodities economy. In Copper.

INTERNATIONALIZATION – CURRENT SITUATION 1ST Why 2014? Financial crisis started in 2007-2008. But emerging economies suffered the impact in that year because the price of commodities finally goes down. The situation:

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Agriculture, mining, energy… Its export of primary products. Exception: Mexico had no specialization on commodities. Because is the border of USA. Mexico is in the north, the proximity of the US.  They still specialized in the export of commodities. Which products? Crude oil before refining. 2nd motor cars in Mexico & Brazil. Terms of trade: Price of exports compared to price of imports has decreased in 3 years. Price index of export commodities: General fall in commodities caused by the financial crisis. Result, the external or current account balance in deficit. Then you have to finance by 3 possible ways FDI, Debt…. The need of funding. The problem is that the level of savings was lower than the level of investment ( X-M)= (S-I) CURRENT Account. Maybe that can solved with Net current transfer in form of money. But that’s not enough, but there is another problem, the need of External funding is higher. Multinationals are good because they provide skill, money, capital.. but that’s not transfer is a business. And when multinationals gave profits they have to pay dividends. Also a high qualified migration. Net FDI: the region change the strategy and they receive the FDI. But it is highly concentrated in just one country  Brazil Then, DEBT ( External debt)  currently again some countries suffer from external debt. About the markets (intraregional exports, trade among  very small (less than 20%). Bigger between Central American countries. Because in the region there are several agreements of regional integration. Energy Intensity of GDP: How efficient are this countries in energy. The less efficient countries are the poorest ones.

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Leading in exports is Mexico because of NAFTA

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There is a general fall in term of trade. Whatever

CASE COFFE MARKET -

High volatility in terms of price levels. If you look prices fluctuation Small-scale producers’  dilemmas? Price- Takers. Reasons? A: Volatility (prices, incomes, exchange rates of nat.currency compared to $,cost & productions connected to changes in weather conditions…) B: Pressure to decrease the main input in terms of cost ( labor cost)  To reduce that impact in lab cost they have to Invest, Increase (I) (mechanization, modernization, diversification)  Alternative? Product differentiation so also become a more sustainable activity TO TRY THAT THE MARKET PERCEIVE ‘’ something different’’, it is important because we are looking for a more sustainable activity  looking for market niche so as to provide premium derived from a higher selling price, then increasing profits. It is much better you have to pay a higher price for this FOR MAKING MORE PROFITABLE THESE SMALL-SCALE PRODUCERS, at the end.

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KEYPOINTS: Perception of quality You have to convince the market you are offering quality. Challenges: 1. Certification. Someone has to say that your product is higher quality. 2. Distribution. The big distribution channels are not highly committed with this kind of production of small-scale producers. Why? Because of direct competition. 3. Direct Competition. 4. Scale (Investment) you need to invest money. That’s why small-scale producers are creating cooperatives.

8/10/2018 CHILE CASE- Commodities narrow country whose capital is focused on services. Reverse the curse-maximizing the potential of resource-driven economies  From natural resources wealth to economic development? The result of the specialization is not good. Why? There is a kind of paradox ( wealth-limitations) called the Resource curse Resource driven economies? Those economies where the oil, gas and mineral sectors play a dominant role -

Resources account for more than 20% of exports. Resources generate more than 20% of fiscal revenue. Resource rents are more than 120% of economic output.

The resource paradox has largely been explained by a mixture of economic, crowding-out effects, volatility and rent seeking arguments. There are two main frameworks: 1. One emphasizing the economic effects - Crowding- out effect : displacement of resources, capital and labor. Increase in the cost and spending effects. - High volatility: International price of commodities increasing and decreasing, for 2 reasons:  First because the supply of this commodity in the short run is an Inelastic, when demand increases you can double the production of the coffee, but in commodities, the supply is not elastic. The other reason is the high dependence on external demand ( exports)  Connected to income of public sectors. More of taxes rely on that commodity sector. When there is a problem in the price of commodity, the income of public sector goes down and volatility of public investment also appears.  Finally, connected to the resistance of specialization. Limitations: 1. Learning by doing, when you are involved in a process of economic transformations, you are starting new activities all the time. At the beginning you are not being efficient. However, you are learning step by step. As you are transforming the economy lower than other emerging countries, as structural transformation is low, then lower learning economies. 2. If you are always the providing part, you don’t get skills and technology from another parts of the supply chain, just providing inputs. The connection to another part of the production chain is weak. 3. Technological catch-up: the rate of tech development is very slow in

commodity sector. Although they are improving they are not doing it as fast as another economies. The technological distance is increasing.

2. The other focusing on political economy mechanism- Institutions A new opportunity of making money is emerging from the discovery of a new commodity. Depending on the quality of institutions it could be a very big opportunity for entrepreneurship & innovation or otherwise, for rent-seeking behavior. In those countries in which institutions are unreliable and have not a good accountability process, very weak or poor quality, the consequence is corruption and appropriation of new income both for public and private sector ( corruption, lobbying…). This is happening in some countries, not all the regions. The outstanding exception was Chile, a successful case. Chile’s strategies: -

Macroeconomic management: Chile has been since 1950 the major exporter of copper. They suddenly learn that they could be very rich or poor when prices goes up or down. They didn’t control the evolution of the price. They were also price takers although they were the leaders. Then, they look for steady development. First thing, they have to keep the control of the industry. Through a public company they did that, Codelco. If this is a public companies, that supposes revenues to the government. ‘’I do not control the price but I have the opportunity to get that income’’ (government). 1. Macroeconomic management: 1.Cautious fiscal policy. When the price increases in International market I will have a surplus. However, I am not going to spend it. When I have a lot of money I will create Economic & social stabilization, the second it is about employment fund and the third is about retirement pensions. When the price is going down ( deficit) I will use the accumulated money from social and economic stabilization and spend it on employment and on investment on red, education… 2. Industrial policy main objective: Diversification. They are concerned about natural resource limitation of copper. Then, they try to increase the level of diversification through and active industrial policy that is going to focus on 1, 2,3,4… economic sectors. First, the performance of the leading industry is consolidated. And , then, the country is going to focus on increase the competitiveness, the know-how…. Of other specific industries in the countries. Attracting multinational and FDI. On the base of cooperation, the agreement to jointly develop activities, and technological transfer. Even they open part of R&D programs of Codelco to private hands. Now they are exporting gold, fish ( salmon), & increasingly services. When they become highly competitive, they open to International markets and FTA.  Sterilization strategy: you will limit the limit of changes in the international price of your commodity. PRODUCTIVITY PROBLEM Persistent income gap Lag 1. YL 2. TPD Structural reasons

1. Sauvages investments  Funding ( S-I) 2. Kind of economic activity 3. Business Impact Infrastructure Taxes & regulations Market competition Financial markets An excessive specialization in commodities is a problem. There are many theories that explain what is happening. There is not a problem of growth, the problem that we are all the time comparing that economies ( Latin American) with other emerging economies as South East & Asia, and in that case, right, it exist an income gap. The level of PCI we see that Latin America & Caribbean economies grow, but the problem is the limitation of a higher level of growth. Why these economies are not growing faster. A second theory called  LAC: A CASE OF MIDDLE-INCOME TRAP. A problem that economies are facing when they have a successful development but they cannot reach the next step. They are not poor economies but at an specific moment they stop developing because they have to change economic model and they are not very successful in do that. They need a model more base in knowledge and skills. Economic development is marked by reassignment of production factors among activities  this process is encouraged by liberalization of international trade  gains in productivity and competitiveness  increase in incomes. It doesn’t mean that everyone will benefit of it but the whole economy will do that Once a country reaches middle- income level, the continuity of this development is pu at risk  Growing pressure in labour markets -> labour costs increase without extraproductivity gains -> price competitiveness falls  New forms of competitiveness are require: higher quality of outputs & outputs more suited to consumer preferences . If you all the time are thinking about cost, there is only one solution. You reach the cheapest country where the salaries are very low. You have to develop something else which is perceived as different by the market. Something that the market is willing to pay even it is more expensive ( DIFFERENTIATION) NEED OF ECONOMIC TRANSITION. It usually means that production structure must be oriented towards more knowledge and technology-intensive activities. You have to invest in technology, in skills( set of knowledge attributes and capacities that enable individuals to successfully perform and activity human capital is formed by the set of skills). One of the most important requirements for this transimition are skills  a large stock of more diverse skills raise efficiency and labour productivity knowledge and innovation-intensive activities demand a higher quality and complexity of skills ( cognitive& social…) Why LAC region is particulary badly affected by the middle-income trap?  Because structural transformation has not been directed towards knowledge-intensive activities

 inefficient allocation of resources & substantial and persistent gap in quality of education, although great investment in education a lot of people is working in poor activities or informal sector which are not learning a lot in the workingplace PRODUCTIVITY GAP VS ADVANCED ECONOMIES But there is a new problem, China and India entry into he global economy, suddenly since the 90s all emerging economies have to speed up the improvement of the skills of workforce and the structural transformation process & investing in education. In india we are talking about industries and technology. China, textile(low technology) and electronics (high technology). They are increasing very fast the level of human capital. Latin America also invest a lot, however the important key is QUALITY. There is a problem in the 2 side of the market in the demand & supply side. Demand- side problem China and other ( asia) fast growing emerging economies increase the demand of commodities. That means that countries with endowment in natural resources move away from knowledge-intensive activities. They see China expansion as an opportunity. But the set of skills are very limited ( bananas, oil, copper…) specialization in economic activities with less complex skill requirements. Then, incomplete structural transformation with a now-skill-intensive production model. Supply side problem LAC’s commodity sector has little capacity to create high-qualified jobs or production linkages. Coexist with a limited manufacturing sector exposed to strong competition from abroad and a highy informal services sector whose human capital is poorly qualified. Globalization and technological change foster fragmentation of production activities -> Global Value Chain …. In LAC supply and demand for skills collide  MISMATCH TRAINING VS SKILLS Firms with a major constraint on their operations due to inadequately educated worforce. The difficulties in finding skills acts as a barrier to development. Automotive…. Technical skills and soft skills ( linked to creativity)  It is growing more that 50% and at the biggest countries. In regions with poor skill levels, technical and vocational education and training is particularly important. Usually is related to the knowledge and skills linked to the workplace -> complementing and updating the training offered by the education system… In LAC 40% of firms offer usually training programmes but this is not the case in most small and medium-sized companies and training is provided to high skilled workers -> increase skill gap among members of the workforce. Besides the coverage… In many developing countries wage premium have risen continuously but in LAC ( despite the growing and unmet demand of skills) wage premiums have been narrowing since 2000 and for all levels of education. Having negative incentives for lower- skilled young people and workers to study. How is it possible that this is working in LAC? 1- Larger supply of better- educated workers has affected performance? 2- Employers require lower- quality and less sophisticated skills -> role of commodityexports sector and tertiarization of region’s economies?

3- Context of widespread fall in wages in recent years? 4- Lower quality due to the changes in labour composition -> people qith less social and cultural capital …

Building some common ground: the global value chain Global value chain- how the value is distributed along all the production process. There are many stages in production, from r and d to final products. First who is producing what and second who gets the value. Or in which country is elaborated and second if the value generated in this production remains in the country or not. Ten years ago we focus on made in our country. Nowadays this is not important, because that only means where we are finishing the product. Last thirty years has been international fragmentation in production called OFFSHORING, externalizations involving foreign firms and at the beginning we have OUTSOURCING. That increase in offshoring is caused by: 1. The opening of markets. We have removed trade barriers and the trade cost is lower.Removed barriers about free movement of capital, you can invest everywhere with much less barriers than twenty years ago. 2. Technological and digital evolution. IT or ICT have reduced many cost such as cost of distance, the cost of communication and the cost of control and coordination, you do not need to be there to know what is happening in a factory. 3. Technological advances in transport and communication. Reduced the cost of transporting many industrial and agricultural products. 4. Increase in the world demand. Some emerging markets boom. The very fast growing of that economies means that they are becoming very important markets and make them a good location for stay there. So as to achieve efficiency and huge profits you have to be involved in the global value chain.

Exports emerging from global value chains -graph From 1995 this is the share of exports in global value chain has increased much more in the emerging economies.

Inputs from foreign countries Mexico Costa Rica, Chile, Argentina, Brasil,Peru, Colombia - link between inputs and exports. around the world the share in this case this involvement is less than in Europe and Asian countries. Why?

Participation of imports in exports The involvement is less but increasing over time. Not a so important activity of the global value chain but this activity is increasing in recent years.

Relationship between international trade and GdP There is a high interdependence between economies and what happens in one economy affects the other.

In Latin American countries is important the interdependence. But is International Markets the same for Mexico, United stated and Canada (NAFTA)? No, USA have a huge Internal Market. But is very important for Central American area and Caribbean economies. Even more important than Souther Latin American economies.

Participation of intermediate inputs in exports If I am involved in a global value chain I need inputs (intermediate) normally from foreigners. Intraregional means within Latin America and caribbeans. Comparing with Asian economies and European Union the integration is very slow. We have more involvement but it is difficult because of the position of Latin American countries in the value chain.

Participation of intermediate inputs in intra and extra regional trade The links are more important in the case of intra regional economies.

Summary Very unequal participation in GCC, some economies are very active. Assimetry. Mexico and Central American economies are active member in several GVC because they are closely linked with USA markets. Souther America and the Caribbean display a less complex management of the production networks. But Brasil is a world away, because it is so big and the average can be missing what happens in some small regions. Determining factors: -

Exogenous: not depend on the decision of the market. Geography, size of domestic market, endowment in natural… Endogenous: depend on the government ( domestic policies)

Recent experience --> decisive elements        

Proximity Fiscal policies in terms of taxing FDI. Are u providing some advantages, is your economy one to FDI. Quality of transport and communication system. Human capital Availability of natural resources, Business friendly ( surrounding factors for doing business – business milieu). Economic integration agreements. Quality of sanitary-phytosanitary norms.

Position of some Latin American countries in some value chains.