So far the twenty-first century Argentina, Brazil, México, and Colombia have been the four countries that provide 80% of the production of the region.
Furthermore, their total and industrial GDP has had a similar behavior up to now and also suffered from the effects of the international economic crisis of 2008 and that of the commoditiesmarket which began back in 2013.
The industrial activity lived its golden era during the 1950-1980 period exhilarated by the industrialization strategy for import replacement promoted by Economic Commission for Latin America and the Caribbean, but when it was abandoned for the sake of free trade, the industry lost GDP participation and the employment it had produced, both in the region as in the four main countries.
The void left by the industry was substituted by extractive activities, services (particularly financial) and trade.
The structure of the industrial production of the region show a predominance of intensive natural resources activities which include between 45 and 70% of the total; inclusively, the most industrialized countries such as Brazil and Mexico, have diminished their technological intensity as well as Colombia.
It is evident that the production of knowledge-intensive goods (high and mid-technology) continue to be a remote interest to corporate and public policy of the region, although Brazil –given its inheritance of developmental administrations– and Mexico –devoted to maquila (manufacturing operation, where factories import certain material and equipment on a duty-free and tariff-free basis) for the United States –, are the victors in this area.
The technological lag of the regional industry is demonstrated in a decrease of apparent worker productivity to levels below of those of the year 2000, with the exception of Colombia, which showed a growing trend during most of the 2000-2015 period.
As a result, the industry work productivity of Argentina, Brazil, Mexico, and Colombia, compared with the remainder of Latin America extended to 1.5 times with regards to the United States.
The preceding is especially serious in times of the coming of the “fourth industrial revolution”, which refers to digital transformation (robotics, artificial intelligence sensors, 3-D printing, nanotechnology and quantic information) which promises quick growth rates for countries that can ride the wave at the precise moment.
Therefore the region does not build productivity based on increased productivity but from occupational repression, which leads to low salary hourly costs, more evident in Mexico and Colombia (close to US $5.00), as in Argentina and Brazil salary costs increased slightly during the second decade of the current century (from US $10 to $20). It is worth mentioning that during this period, salary costs in the U.S. have increased five times that of the average of the four countries.
Consequently, worker salaries have been inferior to their productivity, particularly in Colombia and México, with margins up to 20%. Workers in Brazil had better earnings between 2008 and 2012, as a result of the redistribution policies of the Luiz Inácio “Lula” da Silva and Dilma Rousseff administrations
With respect to foreign trade, México continues to be, by far, the most open country (exports and imports in regards to the GDP) of the four countries analyzed, while the performance of Brazil, which has a greater internal market, is the most closed.
The end of the commoditiessuper-prices directly impacted the exchange rates in Argentina, Brazil, México, and Colombia, although at different levels, according to their internal policies.
For instance, during 2007-2012, Colombia and Brazil, had a strong devaluation, which in Colombia translated into a disincentive for productive activities, in other words a steep drop, which is known as the “Dutch disease”, a term used in economy to identify the negative consequences in a country when there is an unexpected inflow of foreign currency for primary exports.
Argentina as an exceptional case, suffered a large devaluation by eliminating “purchasing power parity” in 2002 (300 %), and later what was known as the “dollar clamp” due to an increase of “capital flight” making the administration of Cristina Fernández de Kirchner to restrict the sale of dollars inside Argentina.
In December of 2015, Argentinian President Mauricio Macri ended the clamp and devaluation topped 30%. However, Argentina did not have a trade surplus in almost the entire period (one of the elements of its crisis recovery of 2000), while Mexico and Colombia had deficits of up to 7% of the GDP.
In regards to industrial exports, Mexico had growth and seemed to react positively to the exchange devaluation stimulus while in Argentina and Colombia, reality shut the door on the official theory which proclaims automatic adjustment of market mechanisms.
Regarding the destination of exports, China´s international power play is evident; in fact in 2015 it was the main export destination of Brazil (first) and Argentina (fourth), while the Mexican reliance on the North American Free Trade Agreement (NAFTA) is evident with a stifling 90% of its exports directed to the United States.
Colombian suffers a similar situation where the U.S. market continues to be the main destination of its exports while Venezuela sells to the European Union as its second trade partner.
Another scenario is the emphasis on extractive activities in Latin American, which is verified by primary exports, with exception of Mexico, which filled the gap of industrial sales since 2008.
In summary, all points to if there is not a strong readjustment of productive policies of the Latin American countries, the possibilities of the region to achieve industrial activity as a leading growth force will be limited.