A Tale of Two Futures for the New World

Over the past century, the Americas have experienced a period of tremendous economic growth. Today, this region possesses numerous strengths that could make it a formidable power in the global economy – most notably fully developed economies in North America and emerging economies in South America that are growing at phenomenal rates. Translating those strengths into success on a global stage, however, is another matter. How will the Americas fare in a 21st century global economy? Will we thrive and prosper, or find ourselves eclipsed by other economic powerhouses and emerging regions? I see two possible futures for our hemisphere -- one more promising than the other.

The first future is one that positions the Latin American countries and our entire hemisphere, for that matter, as leaders in a global economy -- specifically in the area of global services exports. To enable this future, we must begin with recognition that competitors to the Americas, and Latin America in particular, can come from anywhere in the world. More importantly, government and business leaders must recognize that the vast majority of the global market is outside Latin America, and even outside our hemisphere.

Only about 13 percent of the world’s population lives in the Americas, which account for less than 30 percent of the global economy. And from a Latin American perspective, over 91 percent of the world’s population lives outside the region, accounting for less than 8 percent of global GDP. With these economic realities in mind, the first future I see for our hemisphere requires us to leverage the integration of our collective strengths as a stepping stone to broader participation in the global marketplace. In fact, with current global networks and information technology capabilities, we should view Asia – with over 60 percent of the world’s population – not as a threat but as an important market for services exports from the region. This is where the key requirements of success – scale, skills and integration – come into play.

The global marketplace provides the scale necessary to achieve economies of scale and global competitiveness. While a local perspective may enable some service providers to better meet their customers’ needs, providers of many business services simply won’t be able to compete with companies that serve the worldwide market, especially in knowledge- intensive services. A provider that serves a wider market benefits from greater opportunities to explore and test innovations – with diminishing business risk and greater potential for differentiating reward. Service providers that sell to customers around the world may develop a skills advantage by gaining experience with global best practices and by meeting demands of a varied customer base. Finally, providers to the global market have the benefit of integration – integration as part of a global supply chain and market that result in greater opportunities through access to customers, suppliers, knowledge and talent from around the world.

In this first future, the nations of our hemisphere, given our elaborate infrastructures and varied assets, can become leaders in services exports. And with this vision of markets and investors from outside our hemisphere, new and different kinds of partnerships can emerge as well. For example, partnerships along the line of what has been developed by IBM, with Hitachi and Sanmina-SCI in Guadalajara campus, offer a new view of electronics manufacturing.

Hitachi provides wafer fabrication for hard disk drive components while Sanmina-SCI performs server manufacturing services for IBM. This Guadalajara facility has become a success story in Jalisco and we have done it with the important and active partnership of the state government. I have no crystal ball, but with private and public sectors working creatively together in this future, I can envision IBM, for example, expanding its investments and its workforce dramatically in Latin America over the next five years to serve both regional and global customers. This will happen only if leaders in our hemisphere embrace integration as a positive force for change.

Being a pragmatic business leader, I also must consider a second future for our hemisphere – one of respectable growth but also one with less of a commitment to integration and more of a propensity to “go it alone.” This is a future in which enterprises and governments may not grasp fully the broad implications of globalization, well beyond regional borders. They may not invest sufficiently for a knowledge-based economy including high tech skills and training. They may not develop appropriately robust national agendas to encourage innovation, investment and open markets.

Again, I have no crystal ball, but employment growth could be considerably less promising in this second, alternate future. This future would fail to provide the scale, skills or integration of a future based on a global vision for Latin America.

The ultimate choice between the two divergent futures that I have described here will rest on whether the governments throughout our hemisphere, as well as those of us in the private sector, adopt the more global view and pursue policies that support integrated markets and competition. If we do, I see a very bright and practical future -- one that ultimately will promote economic growth and encourage services exports for the information-driven, innovation-based economy that we are experiencing today.

Marc Lautenbach is General Manager of IBM Americas. He is responsible for the company’s business in the U.S., Canada and Latin America. This viewpoint is based on a speech given recently to the Council of the Americas in Washington, D.C.

ABOUT VIEWPOINTS AMERICAS
ViewPoints Americas is a publication of the Americas Society and the Council of the Americas. It helps Council member companies achieve their business goals by stimulating thoughtful debate on the most pressing issues facing Latin America. The positions and opinions expressed in this publication are those of the authors or guest commentators and speakers and do not represent those of the Americas Society and the Council of the Americas or its members or the Board of Directors of either organization. No part of this publication may be reproduced in any form without permission in writing from the Americas Society and the Council of the Americas.

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