ECLAC Proposes Structural Reforms to Latin American Economies

Commodities are sweet little things in Latin America. Indeed, Brazil should be excited then, because recent weather data helped forecast a strong coffee crop and high prices for 2013. For Brazil and its neighbors, the past decade has seen a thumping commodities boom thanks to China’s appetite for industrialization. One might think the region’s leaders would be smiling and kicking back, enjoying the good old decade.

But they are not.

Instead serious faces worn by leaders and representatives of Latin American and Caribbean states turned toward El Salvador, where a dramatic pivot in economic policy for the region was discussed last week. The reason for serious attention is because ECLAC, a UN economic policy organization, introduced a proposal detailing a range of structural changes to Latin American economies that intend to defend against looming external business cycle shocks with new productivity reforms, which aim to bring high-value-added industry to the region. The idea here is to close the region’s painfully wide wealth gap.

Soy, oil, minerals and coffee, it seems, are no longer hot kitsch.

“History suggests that developing countries that have succeeded in converging with the more advanced countries have done so through the accumulation of technological capacity, innovation and knowledge, not on the basis of rents from natural resources,” ECLAC told Reuters.

ECLAC (Economic Commission for Latin America and the Caribbean) holds a summit every other year, where its representatives discuss economic policy for the region. This year, the structural proposal emerged from a concern that over-specialization on low-productivity commodities and emphasis on import-substitution action has put a drag on the region’s economic performance dating back to the 1970s.

ECLAC means well. And its proposal sounds good in theory. Latin American states wrestle with wealth inequality and a new model for encouraging productivity and capacity building could contribute to closing the gap between rich and poor. One of the region’s biggest challenges, however, is how to agree on a proposal like this. For a roster of states obeying increasingly polarized political postures, there will likely be a handful of states, such as Brazil, Colombia, Chile and Mexico, that have an appetite for the UN’s new economic proposal. Others however, like Venezuela, Cuba and even Argentina, might just as well chew it up and spit it out as if it were a bitter seed.

Auret Van Heerden Tries to Fix Foxconn’s Labor.

Auret Van Heerden, leader of The Fair Labor Association, took a penetrating look at three Foxconn factories in China. He wanted to see whether or not the real picture of Chinese factory labor lives up to the standards confirmed by massive audits conducted by Apple, which contracts with Foxconn for producing your iPhones, your iTouches, and other cool gadgets.

Since he was 18, Van Heerden has dedicated himself to defending workers’ rights around the world. At Foxconn he facilitated commitments from workers, managers, owners and buyers to make a series of changes to labor conditions ranging from health and safety issues to representation issues. Van Heerden is 56 years old and feels a sense of achievement about his work. No one says he shouldn’t. He has figured out a separate audit method that brings to the surface fine detail that has been historically left out in previous audits. That is valuable for all parties.

What makes Van Heerden successful is his choice of how to get things done. Instead of entering the political arena and wrestling with policy-makers, he goes straight to the companies that own and manage labor. Right now, as a representative of 20 outfits that want to make progress on their labor practices, that’s where he spends the bulk of his time: he puts together committees of workers and conducts training programs in China, Thailand and Honduras. His solution is more practical and engaging, and less political.

Of Dragons, Fire and Shaky Optimism

When you are a young kid sitting around a crowded, crackling campfire in a small, lonely American town, it is easy to feel that the hot coals flickering out from underneath a pile of six or seven chunks of firewood is enough to ward off the darkness surrounding you.

But a flickering campfire is not enough for the Chinese people when it comes to showing off their optimism for the new year.  From New York to Beijing some 1.3 billion Chinese citizens set off fireworks to usher in the Year of the Dragon, part of a celebration that will last fifteen days. For the past 5,000 years fireworks have been used to ward off evil spirits in China.
This is in fact the Year of the Water Dragon, a year that signals optimism and growth, but only swings around every 60 years on the Chinese lunar calendar. Optimism will be a tricky thing to share though. No matter the hopeful astrological signals and thundering growth, members of China’s Communist Party will have to find a way to make growth not the malaise, but instead make it the treatment for episodes of China’s swelling unrest, like this recent steelworker’s strike in Sichuan province.