Capital flight and capital influx may have marked the economic experiences of Latin American countries for decades at a time, but it is another type of deficit that will determine the future of the region in the long run.
Realistically, there are two options for Latin America right now. The first is what I will call the Asia Option. The Asia Option implies growth, exports, investment and a growing presence on the global stage. Conversely, the second, far less preferable option, would imply stagnation and economic crises, a decaying of democratic systems and perhaps even violence and bloodshed.
In evaluating the Asia Option, one must recognize that the important difference between Asia and Latin America is a question of education. An Inter-American Development Bank study has shown that a mere one in three Latin Americans manages to complete a high school education. In Southeast Asia it's 80 percent. Similarly, the average Latin American worker has 4.8 years of education, while their Asian counterpart has 6 years.
It gets worse. A 2003 test administered by the OECD ranked Brazilians last in mathematics among 40 countries (Uruguay was the highest-ranked in the region, placing 35th). Notably, Latin American students showed particularly poor results in the problem solving sections. This should not surprise anyone who has been exposed to the region's educational systems that emphasize memorization and the regurgitation of facts.
It was amusing to be in Latin America when China began to talk about un-pegging the yuan. Theory held that high demand of Chinese goods would drive the yuan upwards, making Latin American goods cheaper by comparison, and therefore more desirable. The result would be that China would adopt policies to avoid currency fluctuations, while Latin America would be left to dwell on other economic issues. The key for growth in the long term is productivity, which stems directly from the education that workers can attain.
The workers that are being churned through the educational systems of Latin America tend to be far behind those in the more advanced parts of the world. Focus here has been mostly on absolute numbers of students attending school, with little regard for the quality of education that they receive. Thus, even though more kids are in school than ever before, they are essentially as unprepared as ever for the cutthroat competitiveness that our globalized world has to offer.
Public schools should be the first challenge to be confronted. Teachers' unions are powerful and have been demanding increases in their salary. To call attention to their plight, they often strike, forcing public universities to close their doors for weeks at a time. (Just ask anyone who was studying in the University of Buenos Aires last fall!)
Moreover, underpaid teachers are often forced to look for a second job, thereby decreasing their value in the classroom. Measuring teacher effectiveness should become the norm in Latin America, and teachers should be held accountable for the quality of learning that takes place in their classrooms.
At the high school level, class hours are too rigid for the average student. It is hard for a family of limited means to see the benefits in education when their sons and daughters are blocked from working during the day. Classes should be offered at better times, so that students have the option to work during the day if they have to.
Despite budget deficits and fiscal crises, education has to figure more prominently on governments' balance sheets. In recent years, Latin American countries invested, on average, 4.5 percent of their gross domestic products on education. Peru, El Salvador and Guatemala have been particularly inept at financing their futures: they have been allocating around 2.5 percent of their GDPs for education. Meanwhile, military expenditures on the continent remain inordinately high, often surpassing the education budgets by a factor of two or three.
There is no way Latin American can keep up with China at this pace. For the time being, agricultural products, cheap manufacturing and good exchange rates may buoy local economies, but the economic gap will only continue to widen, leaving Latin America further and further behind. There will almost certainly be a painful period of adjustment, but if countries there don't start sacrificing for education in the very near future, I fear that the region will soon find itself in permanent state of disarray.
