What's Wrong with Latin America?

As our vice president continues to ponder the root causes of illegal immigration, The Economist magazine inadvertently offers something resembling an explanation. Assuming that most migrants are coming from Latin America, the magazine explains that our neighbors south of the border are notably inefficient and ineffective. Latin America is something of an economic basket case, for one. For another, its illegal migrant citizens are as likely as not to bring their bad habits to America. 

There is little if any reason to believe that people who could not function in a modern economy in Latin America are suddenly going to become world beaters once they are put on the American welfare system. Coming here for opportunity sounds good. But, you cannot profit from opportunity if you do not have sufficient education and good work habits.

Compared to Eastern Asia, Latin America has become a world class economic laggard:

In 1962 Latin America’s income per person was three times that of East Asia. By 2012 both regions had the same level. By 2022 East Asia’s was roughly 40% higher than Latin America’s (see chart 1). When the differences in purchasing power are taken into account, Latin Americans’ GDP per person has been stuck at little more than a quarter of that of their neighbours in the United States for the last three decades. According to the World Bank, between 2010 and 2020 Latin America was the world’s slowest-growing regional economy.

Clearly, it pains the magazine’s writers to suggest that Latin Americans have failed because they are lazy and ineffective. They call it a lack of productivity.

Instead, the problem appears to be that those workers are not terribly productive. Economists find productivity fiendishly difficult to measure, but most of their attempts show Latin America lacking. The World Bank’s effort places Latin American workers as the second-least productive in the world, behind the Middle East. Mexico is consistently the least productive in the OECD, a club mostly of rich countries. Annual productivity growth in the region has languished between 0.2% and 0.5% since 2000, according to the World Bank. By contrast East Asia’s productivity has increased by more than 2% every year.

When you start dreaming about how wonderful it will be when we shift industrial production from Asia to Mexico-- aka friendshoring-- keep these numbers in mind.

Among the causes of the Latin American dysfunction is the lack of education. Imagine this-- these countries, like certain parts of America, locked their schools down for extended periods of time during the pandemic. Now, the report explains, the chances of their making up for lost learning are poor, to say the least. They were not doing very well before the pandemic. Now they do not have a chance.

Instead, several long-term trends contribute to Latin America’s productivity problem. One is education. Before covid-19 Latin American 15-year-olds were, on average, three years behind their peers in the OECD on science, maths and English tests. This gap is likely to be worse now: according to UNICEF, the UN’s children’s fund, schools in Latin America and the Caribbean had some of the longest lockdowns, remaining fully closed for 158 days from March 2020 to February 2021, compared with the global average of 95 days.

As for computer literacy, it is just as bad as in America’s inner cities. If a company is looking for IT workers it will go East, not go South:

The OECD reckons less than half of Latin Americans have the ability to perform basic tasks with a computer. That is likely to send firms which are looking for cheaper IT workers to Asia and Africa instead. American tech companies recruiting from Guatemala and Chile complained at a summit last year that they could not find workers to fill the jobs they were offering.

And then there is the bureaucracy, along with the social programs that have turned these countries into quasi-socialist states. Thereby, they have crippled economic growth.

In much of the region the high costs of hiring people—in the form of bureaucracy, social-security contributions and minimum wages—put off small- and medium-sized businesses from employing people formally. In some places, such as Argentina, strict labour laws make it nearly impossible to fire employees. According to the World Bank the minimum wage in Colombia is higher than in most OECD countries, relative to median income levels.

One thing that the magazine does not find is reason for optimism. Rather than trouble the feeble mind of our vice president with an exploration of root causes, we ought to ask ourselves what migrants from these countries are bringing to America.

If they are more likely to become Democrat voters and to expand the Nanny state, then perhaps inviting them in is one of our greatest current follies. Rather than imagine that they are all going to become great computer scientists, and will do jobs that even Americans cannot do, we should think that they are bringing us their own bad work habits.

As the old saying goes, you can take the boy out of the Bronx, but you cannot take the Bronx out of the boy.

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