What's Latin America worth?

Carlos Alberto Montaner

There's an old saying that children come to the world with a loaf of bread under an arm. It's the other way around. Every creature who opens his eyes, in any society in the world, immediately receives a virtual gift. Potentially, a certain amount of accumulated capital awaits him. What does that capital amount to? Naturally, it depends on the country.

The World Bank has dared to quantify it, utilizing a team of fine economists who researched 120 countries. They called their report ''Where Is the Wealth of Nations?'' It is worth reading.

According to the study -- and the premise is persuasive -- wealth comprises three key elements: the natural capital (forests, minerals, aquifers, fertile land, etc.), the produced capital (factories, industrial and urban infrastructure, services, machines, etc.) and the intangible capital (education, quality of the institutions, the rule of law, transparency, stability, beliefs and attitudes, etc.)

Of those three factors, the decisive one is the intangible capital, the equivalent of four-fifths of the total capital. Why? Because it allows the conversion of natural wealth into created wealth. An oil well is worthless if managed by a group of incompetent people in a chaotic society.

A potentially wealthy country with a huge natural capital, such as Venezuela, nevertheless is home to a poor society, because its intangible capital is minimal and is gradually reduced by every stupidity committed by its rulers.

The nation that has accumulated the most capital per capita in the world is Switzerland with $648,241. The poorest is Ethiopia, with only $1,965.

Switzerland is followed by Denmark ($575,138), Sweden ($513,424), the United States ($512,612) and Germany ($496,447).

Nine of the world's 10 most miserable nations are African.

Accumulated percapita wealth in Latin America is most notable in the southern cone: Argentina ($139,932), Uruguay ($118,463), Brazil ($86,922) and Chile ($77,726). (In Paraguay, however, it drops to $35,600). But although these countries -- with the exception of Paraguay -- are the wealthiest in Latin America, they're barely one half of what Spain is worth per capita: $261,205.

The Andean strip is even poorer: Venezuela, $45,196 (three times less than Argentina, a fact that fails to explain why President Hugo Chávez bought $5 billion worth of Argentine debt bonds to help its mismanaged neighbor); Colombia, $44,660; Peru, $39,046; Ecuador, $33,745, and Bolivia, the poorest country in South America, barely $18,141. That figure casts doubt on Evo Morales' assertion that in a decade (or did he say two?) his country would be at the level of Switzerland.

Three Mesoamerican countries have a level of wealth that's higher than the Andean region but lower than the southern cone: Mexico ($61,872), Costa Rica ($61,611) and Panama ($57,663). But the other Central American countries are remarkably poor: Guatemala ($30,480), Nicaragua ($13,214) and Honduras ($11,567).

In the Caribbean, the Dominican Republic ($33,410), although a nation with little accumulated per-capita capital, holds four times the wealth of Haiti ($8,235), the Western Hemisphere's failed country. That relationship guarantees a constant illegal migratory flow from the most wretched corner of the island to the most buoyant.

In general, when comparing the economic fate of the territories colonized by Britain -- other than the United States and Canada -- with the situation in countries with a Spanish tradition, we find that the economic results are somewhat better on the British side. Barbados, with $146,737 of accumulated capital per capita, surpasses Argentina, the most developed country in Spanish America, while almost all the British-background islands are wealthier than the independent, Spanish-speaking Antilles (Cuba and the Dominican Republic, inasmuch as Puerto Rico is a U.S. commonwealth.)

Although Cuba does not appear on the study, because of the scant reliability of its statistical data and the paranoid secrecy of its government, it is believed that its accumulated capital today is smaller than its counterparts in the Dominican Republic and Jamaica ($47,796).

From the World Bank study we also derive some valuable lessons: the value of savings, the role of investment in education, the importance of plugging into the great commercial and financial circuits and the imperative need to strengthen institutions and property rights if we want to advance in the direction of progress.

Nothing this study says can surprise us, other than the elegant and well-reasoned manner in which it documents its arguments and confirms the intuition of giants like Adam Smith. In 1776, this brilliant Scot, an observer and moralist, wrote his memorable An Inquiry into the Nature and Causes of the Wealth of Nations. The World Bank has finally attached numbers to it.

November 13, 2007

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