What with all these news stories about Americans flocking down to Brazil, the purported Land of Opportunity, and Forbes magazine publishing its new Rich List, in which Mexican Carlos Slim Helú increased his wealth by $20bn last year, taking his filthy lucre total to over $70bn, it seems hard to refute the notion that South America's moment has finally arrived.
Hard to refute if you don't live here and like to view things through rose-tinted spectacles. What struck me as I watched a recent Bloomberg TV interview with Señor Slim (who isn't very), was how embarrassingly old-school he was. The Bloomberg interviewer vainly imagined he would be as forthcoming and interesting as a Warren Buffet; that he would have fascinating things to say about hot new areas to invest; and that he would have no problem sharing at least some of his great financial wisdom.
But not a bit of it. He just sat there giving inconsequential, repetitive, dull as ditchwater answers, one after another, giving nothing away but, more importantly, not having much to give away. After all, he and his web of Latin American companies have somehow elbowed their way to the top of the dung heap. But did they do this through brilliant innovation or consumer-friendly pricing ? Ha ha ha (that was a hollow laugh, by the way).
His companies, such as Brazil's cell phone operator Claro, charge the usual arm and a leg, blissfully unconcerned by the possibility of any real competition and safe in the knowledge that their customers will keep on swallowing the bitter pill of punitive tariffs just so that they can remain part of the connected twenty-first century. The pill is apparently most bitter for Slim's Mexican compatriots. (See section titled "Criticism" for more on this.)
It's a sad indictment of today's economically messed up world that people like Slim are hailed as the new pin-ups of capitalism. Free enterprise ? I don't think so. South American businesses and consumers would have a much better shot at free enterprise if the oligarchs and governments would stop imprisoning them with uncompetitive prices, on the one hand, and high tax and red tape on the other.
PS: This article talks about the lack of local competition in Israel, calling the cartels a "cozy little swamp of mediocrity". In which case, South America's lack of local competition might similarly be described as a "vast oilslick of mediocrity." Key quote from the article: "What's government's role, then? To be a catalyst and challenger ... to spur companies to raise their aspirations and improve their competitive performance." Is that too much to ask of Brazil's disgracefully overpaid politicians ? Apparently it is.
PPS: Can't resist adding more key quotes, so relevant to Brazil and Latin America: "Stifling competition by coddling government monopolies or controlling processes stifles innovation, rendering the industry less dynamic and less able to produce good products. Privatization and abolishing controls won't help unless they are accompanied by vigorous local competition, which requires strong, consistent antitrust policy."
And:
"Israel's economy is riddled with cartels, monopolies and players that bend over backwards not to compete with one another and not to tread on their rivals' turf. It's a cozy little swamp of mediocrity and shallowness in which companies can generate profits, sky-high executive pay and power without innovating, competing or straining. That's exactly how to create an economy that can't compete, says Porter. Society needs to seek out pressures and challenges, not avoid them."
And:
"Companies should seek out the most demanding buyers and purchase from the most advanced suppliers, not seek out peaceful stability, subservient customers, dependent suppliers and dormant competitors. If they do that they'll stagnate and ultimately fail."
And finally:
"Most of the biggest companies on the Tel Aviv Stock Exchange operate domestically and have no real competition. Most don't operate abroad and if they do, their results tend to be miserable ... Who will rise up and tell the Israeli people the truth? What politician, regulator or business leader will say what it really takes to make Israel's economy competitive? Or are we doomed to wallow in our swamp of mediocrity, patting ourselves on the back and telling ourselves how wonderful we are?" Well, Brazil, are we ?
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