Last week, I thoroughly enjoyed a piece in Americas Quarterly on Latin America’s failure at globalization. The article concludes that “a vital but overlooked factor [for Latin America’s stagnation] is the lack of regionalization… within Latin America itself.”
Regional integration is supposed to help individual countries collaborate with their neighbors to shore up their deficiencies and project their strengths. In Latin America, it has taken many forms, but the most common one that comes to mind is that of physical supply chains; building parts in one country, moving them across borders for burly workers (and increasingly robots) to assemble, repackage or refine, and then moving them off to another country.
The issue with this sort of regionalization is that less-developed markets end up in the lower-value end of the scale. Mexico became an exporting powerhouse from the North American Free Trade Agreement, but it mostly exported products that were merely assembled in the country, adding relatively little value, thanks to cheap labor costs.
But what about technological integration? Countries geared towards technology tend to add more value (and keep more of it) than those focused on assembly.
It might be easier to explain technological integration by looking at a particular app. Hugo, Central America’s biggest startup, is based in El Salvador, but a hefty amount of its programming is done in Honduras. It operates across Central America and parts of the Caribbean, with many of its functions distributed across its key markets.
What does this look like on a country level? Chile is probably the best example. Its tech companies, especially its famous foodtechs, are expanding across the Americas, setting up shop in those markets while keeping some degree of operations in Santiago. Chile’s digital ecosystem is thriving, and by playing host to the headquarters of companies with a regional reach, expands the country’s influence over a wider part of the continent’s tech community.
But one country taking over a region can’t be called integration. For Latin America’s future success as a tech power, it’ll have to start taking a leaf out of Chile’s book – instead of waiting for Chile to come over and do the work for them.
